Writ petitions challenging MSEFC awards remain maintainable where denial of due hearing violates natural justice.

The petitioners challenged orders dated 30 December 2020 passed by the Micro and Small Enterprises Facilitation Council, Cuttack (“MSEFC”) under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”) in three separate proceedings, namely MSEFC Case Nos. 23 of 2019, 21 of 2018 and 25 of 2018, arising from claims raised by the respective supplier-opposite parties for payment and interest.

The suppliers objected to the maintainability of the writ petitions on the ground that the impugned awards had to be challenged under Section 34 of the Arbitration and Conciliation Act, 1996, subject to the 75% pre-deposit requirement under Section 19 of the MSMED Act.

The petitioners contended that the MSEFC had violated natural justice by proceeding with the final hearing in their absence. Their previously engaged counsel had died after the hearing on 23 September 2020, following which an adjournment was sought to engage a new counsel. The next hearing was fixed for 30 December 2020, but notice was allegedly dispatched only on 29 December 2020 and received on 31 December 2020, after the hearing and passing of the impugned orders.

The petitioners also stated that they had deposited the award amounts pursuant to interim orders of the High Court and were not attempting to evade the statutory pre-deposit requirement.

1. Whether the MSEFC violated the principles of natural justice by concluding the proceedings and passing the impugned orders on 30 December 2020 without granting the petitioners due or effective notice and opportunity of hearing?

2. Whether, despite the availability of the statutory remedy under Section 34 of the Arbitration and Conciliation Act, 1996, the writ petitions under Articles 226 and 227 of the Constitution were maintainable on the ground of violation of natural justice?

Section 18 of the MSMED Act provides for reference of disputes to the MSEFC, conciliation, and, upon failure of conciliation, arbitration governed by the Arbitration and Conciliation Act, 1996 as though there were an arbitration agreement under Section 7 of that Act.

Section 19 of the MSMED Act requires a party seeking to set aside an MSEFC award under Section 34 of the Arbitration and Conciliation Act to deposit 75% of the award amount.

In India Glycols Ltd. v. Micro and Small Enterprises Facilitation Council, (2025) 5 SCC 780, the Supreme Court held that writ jurisdiction could not be invoked merely to avoid the Section 19 pre-deposit requirement.

However, the established exceptions to the alternative-remedy rule permit writ intervention where there is a violation of natural justice, a lack or excess of jurisdiction, or a challenge to the vires of legislation, as recognised in Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1, Harbanslal Sahnia v. Indian Oil Corporation Ltd., (2003) 2 SCC 107, and Radha Krishan Industries v. State of Himachal Pradesh, (2021) 6 SCC 771.

The Court also relied on Bhaven Construction v. Executive Engineer, Sardar Sarovar Narmada Narmada Nigam Ltd., (2022) 1 SCC 75, which holds that although writ jurisdiction over arbitral proceedings must be exercised sparingly, constitutional jurisdiction remains available in cases of patent lack of jurisdiction or exceptional circumstances.

The Court noted that Tamil Nadu Cements Corporation Ltd. v. Micro and Small Enterprises Facilitation Council, (2025) 4 SCC 1, had referred to a larger Bench questions concerning the extent of the bar created by the alternative remedy and the maintainability of writ petitions against MSEFC orders.

The Court found, prima facie, that the petitioners’ absence from the final hearing was not attributable to deliberate default. The death of their counsel on 23 September 2020 was undisputed, and the record showed that notice for the 30 December 2020 hearing was dispatched only on 29 December and received on 31 December 2020, after the hearing had already taken place.

Although the suppliers argued that the petitioners had participated in earlier hearings and had filed their replies, the Court held that a fair opportunity was particularly necessary on the date when the hearing was concluded and the orders were passed.

The Court distinguished the present case from a writ petition filed merely to circumvent Section 19. The petitioners had deposited the award amounts pursuant to the High Court’s interim orders, demonstrating that they were willing to comply with the statutory pre-deposit requirement.

Since the challenge was based on an apparent denial of natural justice, the availability of the Section 34 remedy did not constitute an absolute bar to writ jurisdiction.

The Court further considered that the petitions had remained pending since 2021 and that the award amounts had already been deposited, making it unjust to reject the petitions solely on the ground of alternative remedy after nearly five years.

The Court did not finally adjudicate the merits of the disputes or set aside the impugned awards at this stage.

Instead, all three writ petitions were directed to be listed on 2 September 2026 for hearing on merits.