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M/S Tamil Nadu Cements Corporation Limited v. Micro and Small Enterprises Facilitation Council

Civil Appeal · 2025 INSC 91Decided 22 Jan 2025
C.A. No.-001016-001016 - 2025 (arising from SLP(C) Diary No. 3776 of 2023)
Chief Justice Sanjiv Khanna · Justice Sanjay Kumar · Justice Manmohan

Background

Tamil Nadu Cements Corporation was in a payment dispute with a small enterprise that had been referred to the state's MSEFC under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006: a body that first tries conciliation and, if that fails, itself takes up arbitration. The core question was whether a High Court writ petition can be filed against an MSEFC order at all, given the Supreme Court has previously given conflicting signals: one ruling struck down an MSEFC order and allowed a writ despite an alternative remedy, while another ruling held the MSEFC's non-obstante powers largely insulate it, including letting the same body act as both conciliator and later arbitrator.

Decision Breakdown

After reviewing the conflicting precedents (including on whether a conciliator can also become the arbitrator in the same dispute, which the Arbitration and Conciliation Act ordinarily bars), the Court concluded this recurring and legally significant question could not be resolved by a two-judge/three-judge bench sitting in the shadow of divided prior rulings. Rather than deciding the appeal itself, the Bench referred three specific questions, whether writ petitions against MSEFC orders are barred outright, when the alternative-remedy bar does not apply, and whether MSEFC members who conducted conciliation can then sit as arbitrators, to a larger five-judge Bench for an authoritative answer, and directed the Registry to place the matter before the Chief Justice for constituting that Bench.

Lesson Learnt

When Supreme Court precedents genuinely conflict on an important, recurring question, like whether a business can go straight to the High Court to challenge an MSME dispute resolution body's order, the Court will pause and send the question to a larger bench rather than let uncertainty persist; parties in pending MSEFC disputes should watch for that larger-bench ruling before assuming either approach is settled law.

Official source (sci.gov.in)View Judgment (PDF)

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