In a recent judicial pronouncement, the Supreme Court of India delivered a significant ruling elucidating the maintainability of writ petitions against awards issued by Facilitation Councils under the Micro, Small, and Medium Enterprises Development Act of 2006. The apex court, comprising Chief Justice DY Chandrachud, Justice JB Pardiwala, and Justice Manoj Misra, highlighted that the correct legal recourse against such awards lay under Section 34 of the Arbitration and Conciliation Act, 1996, rather than through a writ petition under Article 226 of the Indian Constitution.
The case in question involved a challenge to an award issued by a Micro and Small Enterprises Facilitation Council concerning a company governed by the provisions of the MSMED Act. Initially, a single judge of the High Court of Telangana set aside the Facilitation Council’s award, citing limitation as grounds for the claim. However, a subsequent Division Bench of the High Court overturned this decision, asserting that challenging the award through a writ petition under Article 226 was impermissible. Instead, the appellant should have pursued remedies under Section 34 of the Act of 1996.
Upon meticulous review, the Supreme Court referenced Section 19 of the MSMED Act, noting that courts cannot entertain an application to set aside a Facilitation Council’s award unless the appellant deposits seventy-five percent of the amount specified in the award. Furthermore, as per Section 18(4) of the MSMED Act, when a Facilitation Council arbitrates a dispute, the provisions of the Act of 1996 apply to the dispute. Therefore, the remedy provided under Section 34 of the Act of 1996 governed the award issued by the Facilitation Council in this instance.
The Court explained that the condition to deposit 75% of the awarded amount under Section 19 serves as a protective measure for enterprises covered by the MSMED Act. Failure by the appellant to pursue remedies under Section 34 of the Act of 1996, by not depositing the stipulated amount, rendered the petition unfeasible. Attempting to bypass the obligation of depositing 75% of the awarded amount through the jurisdiction under Articles 226/227 of the Constitution was impermissible, emphasized the Court.
The judgment underscored that entertaining a petition under Articles 226/227 to avoid complying with the pre-deposit requirement set by Section 19 would defeat the legislative intent behind the special enactment formulated by Parliament. Upholding the Division Bench’s decision, the Court affirmed that the petition under Articles 226/227 instituted by the appellant was not maintainable.
The case titled “M/s India Glycols Limited and Another v. Micro and Small Enterprises Facilitation Council, Medchal – Malkajgiri and Others” sets a significant precedent, affirming the necessity to adhere to the procedural requisites stipulated under the MSMED Act and clarifying the appropriate jurisdiction for challenging awards issued by Facilitation Councils.
This ruling reiterates the importance of procedural compliance and the appropriate legal recourse while dealing with awards issued by Facilitation Councils under the MSMED Act, upholding the integrity of the legislative framework and ensuring the protection of rights within the purview of the law.