Orissa High Court
M/S. Hindustan Copper Ltd vs State Of Odisha And Ors. .... Opposite ... on 20 September, 2025
Author: Sanjeeb K Panigrahi
Bench: Sanjeeb K Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 25-Sep-2025 16:24:46
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No. 26911 of 2024
(In the matter of an application under Articles 226 and 227 of the
Constitution of India, 1950).
M/s. Hindustan Copper Ltd., .... Petitioner (s)
Kolkata
-versus-
State of Odisha and Ors. .... Opposite Party (s)
Advocates appeared in the case through Hybrid Mode:
For Petitioner (s) : Mr. Gautam Mukherjee, Sr. Adv.
Along with associates.
For Opp. Party (s) : Mr. Saswat Dash, AGA
Mr. Gautam Mishra, Sr. Adv.
Along with
Mr. Ramesh Agarwal, Adv.
(for O.P.3)
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-18.07.2025
DATE OF JUDGMENT:-20.09.2025
Dr. Sanjeeb K Panigrahi, J.
1. The present Writ Petition has been preferred seeking quashing of the order/ award dated 30.07.2024 passed by the Opposite Party No.2/ Micro Small and Medium Enterprises Facilitation Council, Rourkela in MSEFC Case No.24 of 2010.
I. FACTUAL MATRIX OF THE CASE:
2. The brief facts of the case are as follows:
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Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46
(ii) That, the Petitioner is a Government of India enterprise engaged in manufacturing activities.
(iii) The Petitioner floated a tender for 700M/Ts of Iron Balls and the present Opposite Party No. 3 was selected as a supplier in accordance with the terms of notice. A purchase order was, accordingly, issued in favour of O.P. No. 3.
(iv) It is alleged that due to non-supply of Iron Balls within the scheduled period, the extraction of ore and subsequent delivery to potential buyers was delayed. The same caused financial losses to the present Petitioner and accordingly, the present Petitioner delayed the release of certain payments to O.P.No. 3.
(v) Aggrieved, O.P.No. 3 approached the MSEFC Council alleging delay in payments, and the matter was registered as MSEFC Case No. 24 of 2010. Accordingly, the present Petitioner received notice on 13.9.2011. The present Petitioner filed a preliminary objection raising the issue of jurisdiction, but the MSEFC proceeded with the matter.
(vi) The present Petitioner had approached this Court in W.P.(C) No. 10041 of 2015 challenging the vires of the MSMED Act, 2006 and additionally sought quashing of proceedings in MSEFC Case No. 24 of 2010. Vide order dated 3.6.2015, this Court in W.P.(C) No. 10041 of 2015 had stayed further proceedings in MSEFC Case No. 24 of 2010.
(vii) However, it appears that despite the stay order, the MSEFC Council had passed final order dated 1.3.2016 in MSEFC Case No. 24 of 2010 directing the Petitioner to pay interest on delayed Page 2 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 payment subject to vacation of stay or disposal of W.P.(C) No. 10041 of 2015.
(viii) When this order was brought to the knowledge of this Court, this Court vide order dated 27.7.2023 was pleased to quash the order dated 1.3.2016 in MSEFC Case No. 24 of 2010 and remitted the matter for reconsideration after affording an opportunity of hearing to the Petitioner.
(ix) In the meanwhile, it is also pertinent to note, the present Petitioner had invoked the arbitration clause of the contract between the Parties and approached the Chairman-cum-Managing Director for appointment of Arbitrator to adjudicate upon the dispute existing between the Parties. An Arbitral Tribunal was constituted. O.P. No. 3 approached the Madhya Pradesh High Court at Jabalpur in W.P.(C) No. 13550 of 2014 challenging initiation of arbitration. However, vide order dated 1.4.2016 in W.P.(C) No. 13550 of 2014, the Madhya Pradesh High Court at Jabalpur was pleased to dismiss the Writ Petition. Thereafter, both parties participated in the Arbitration Proceeding. However, vide award dated 4.6.2022, the Ld. Tribunal was pleased to arrive at the conclusion that neither of the parties have any claim alive against each other.
(x) Consequently, the present Petitioner has approached this Court in Review Petition No. 469 of 2023 arising out of W.P.(C) No. 10041 of 2015, to bring to this Court's notice that an award has been passed by the Ld. Tribunal, which is still pending.
(xi) Qua the MSEFC Council proceeding, it appears that after the matter was remanded for reconsideration by this Court, the MSEFC Page 3 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 Council on 4.10.2023, directed O.P. No. 3 to file a copy of the original claim petition along with supporting documents. Thereafter, the matter was transferred from MSEFC, Cuttack to MSEFC, Rourkela and directed to be 'reheard'.
(xii) On the next date of hearing, i.e. on 30.11.2023, the MSEFC Council advised the parties to go for a mutual settlement.
(xiii) On 28.3.2024, the MSEFC Council records that the present Petitioner is not interest in conciliation and as such arbitration starts under Section 18(3) of the MSMED Act, 2006. The Parties were directed to adduce additional affidavits if any to start arbitration.
(xiv) On the next date of hearing, i.e. on 30.7.2024, the present Petitioner requested the MSEFC Council to direct O.P. No. 3 to submit a calculation statement. O.P. No. 3 produced a statement calculated up to 30.7.2024. On the self-same day, award was passed directing the present Petitioner to pay interest amount of Rs.6,80,78,336/- u/s 16 of the MSMED Act, 2006 and the case was disposed of.
(xv) Aggrieved, the present Petitioners have approached this Court in the present Petition challenging the order and final award dated 30.7.2024 for having been passed without affording a proper opportunity of hearing to the present Petitioner. (xvi) Now that the facts leading up to the instant Appeal has been laid down, this Court shall endeavour to summarise the contentions of the Parties and the broad grounds that have been raised. Page 4 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 II. PETITIONER'S SUBMISSIONS:
3. The Ld. Counsel for the Petitioner submits that the impugned order dated 30.7.2024 cannot be termed an arbitral award within the meaning of Section 31 of the A & C Act, 1996. No pleadings were exchanged, no opportunity for oral hearing was afforded, and the decision was rendered summarily on the same day a calculation statement was filed by O.P. No. 3. Such a process is contrary to the A&C Act and violates principles of natural justice. Since there was in fact no arbitration, the statutory remedy under Section 34 of the A&C Act is inapplicable, and recourse under Article 226 is both proper and necessary.
III. OPPOSITE PARTIES' SUBMISSIONS :
4. Per contra, the Ld. Counsel for the Respondent submits that the MSMED Act provides a self-contained statutory mechanism, including arbitration under Section 18 and a remedy of challenge under Section 34 of the A&C Act, subject to Section 19's pre-deposit requirement. The present writ petition is a device to circumvent the mandatory pre-
deposit and defeat the legislative scheme intended to protect small enterprises through expeditious enforcement. Even assuming procedural deficiencies, such issues fall within the scope of Section 34, not Article 226. The High Court's jurisdiction under Article 226, though wide, should be exercised sparingly, and cannot be invoked to bypass the statutory framework enacted by Parliament.
IV. ISSUE FOR CONSIDERATION:
5. Having heard the parties and perused the materials available on record, this court here has identified the following solitary to be determined: Page 5 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 A. Whether a writ petition under Article 226 of the Constitution of India is maintainable against an order styled as an "arbitral award"
passed by the Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act, 2006, when such order is alleged to have been made without adherence to the mandatory procedure prescribed under the Arbitration and Conciliation Act, 1996, and is therefore contended to be a nullity in law?
V. ISSUE A: WHETHER A WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA IS MAINTAINABLE AGAINST AN ORDER STYLED AS AN "ARBITRAL AWARD" PASSED BY THE MICRO AND SMALL ENTERPRISES FACILITATION COUNCIL UNDER SECTION 18 OF THE MSMED ACT, 2006, WHEN SUCH ORDER IS ALLEGED TO HAVE BEEN MADE WITHOUT ADHERENCE TO THE MANDATORY PROCEDURE PRESCRIBED UNDER THE ARBITRATION AND CONCILIATION ACT, 1996, AND IS THEREFORE CONTENDED TO BE A NULLITY IN LAW?
6. This Court notes that the MSMED Act, while creating a beneficial scheme for protecting the interests of micro and small enterprises, does not override the fundamental procedural safeguards enshrined in the A&C Act. Once conciliation fails under Section 18(2), the Facilitation Council assumes the role of an Arbitral Tribunal. At that stage, it is not free to adopt a truncated or summary process but is bound to follow the procedural framework of arbitration. Their omission, therefore, cannot be brushed aside as inconsequential but goes to the root of jurisdiction. An order made without adherence to these safeguards is not an award but an administrative fiat, incapable of legal sanctity.
7. Section 18 of the MSMED Act reads as under:
Page 6 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 "18. Reference to Micro and Small Enterprises Facilitation Council.--(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under Section 17, make a reference to the Micro and Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of Section 7 of that Act.
(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.
(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference."
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8. From a reading of Sections 18(2) and 18(3) of the MSMED Act it is clear that the Council is obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and stands terminated, the dispute between the parties can be resolved by arbitration. The Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said section. It is open to the Council to arbitrate and pass an award, 'after' following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996.
9. The seminal issue which arises for consideration in the present appeal is whether a writ petition under Article 226 of the Constitution would be maintainable against an order passed by the MSEFC in exercise of power under Section 18 of the MSMED Act, and if yes, under what circumstances.
10. A two-Judge Bench of the Apex Court in Jharkhand Urja Vikas Nigam Ltd. v. State of Rajasthan1, after interpreting the provisions of the MSMED Act, including the powers of MSEFC under sub-sections (2) and (3) of Section 18, had observed:
"14. From a reading of Sections 18(2) and 18(3) of the MSMED Act it is clear that the Council is obliged to conduct conciliation for which the provisions of Sections 65 to 81 of the Arbitration and Conciliation Act, 1996 would apply, as if the conciliation was initiated under Part III of the said Act. Under Section 18(3), when conciliation fails and 1 (2021) 19 SCC 206 Page 8 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 stands terminated, the dispute between the parties can be resolved by arbitration. The Council is empowered either to take up arbitration on its own or to refer the arbitration proceedings to any institution as specified in the said section.
It is open to the Council to arbitrate and pass an award, after following the procedure under the relevant provisions of the Arbitration and Conciliation Act, 1996, particularly Sections 20, 23, 24 and 25.
15. There is a fundamental difference between conciliation and arbitration. In conciliation, the conciliator assists the parties to arrive at an amicable settlement, in an impartial and independent manner. In arbitration, the Arbitral Tribunal/arbitrator adjudicates the disputes between the parties. The claim has to be proved before the arbitrator, if necessary, by adducing evidence, even though the rules of the Civil Procedure Code or the Evidence Act may not apply. Unless otherwise agreed, oral hearings are to be held.
16. If the appellant had not submitted its reply at the conciliation stage, and failed to appear, the Facilitation Council could, at best, have recorded the failure of conciliation and proceeded to initiate arbitration proceedings in accordance with the relevant provisions of the Arbitration and Conciliation Act, 1996, to adjudicate the dispute and make an award. Proceedings for conciliation and arbitration cannot be clubbed."
11. Thereupon, referring to the facts in the case, the Apex Court had struck down the order dated 6.8.2012 passed by MSEFC as being nullity and contrary to the provisions of the MSMED Act and the mandatory provisions of the A&C Act. The Apex Court observed that the order under challenge was not an award in the eye of the law and hence the recourse to Section 34 of the A&C Act was not required. The writ petition was held to be maintainable notwithstanding the objections on account of delay and laches.
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12. A three-Judge Bench of the Apex Court in India Glycols Ltd. v. S.R. Technologies2, referring to the judgment in Gujarat State Civil Supplies Corpn. Ltd. v. Mahakali Foods (P) Ltd.3, held that a writ petition under Articles 226/227 of the Constitution was not maintainable as Section 18 of the MSMED Act provides for recourse to a statutory remedy for challenging an award under Section 34 of the A&C Act. A particular reference was made to Section 19 of the MSMED Act which states that no application for setting aside a decree, award or order made by MSEFC/institution/centre providing for alternate dispute resolution services shall be entertained by a court unless the appellant (not being a supplier) has deposited with it seventy-five per cent of the amount in terms of the decree, award or order in the manner as directed by the court.
13. This is a case of statutory arbitration that is mandatory. It is possible to argue that it bars a party from moving the court of law under Section 9 of the Code of Civil Procedure, 1908 (for short "CPC"). Section 18 also overrides the principle of party autonomy when they enter into an arbitration agreement which prescribes the procedure for the appointment of an arbitrator and conduct of arbitral proceedings. The statute further prescribes an undoubtedly high rate of interest--three times the Reserve Bank rate of interest--presently 6.5% i.e. 19.5%. The interest is compounded with monthly rests.
14. Lastly, an order or award can be challenged by "the buyer" [ Section 2(d) of the Msmed Act defines "buyer" as--"2. (d) "buyer" means 2 (2025) 5 SCC 780 3 (2023) 6 SCC 401 Page 10 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 whoever buys any goods or receives any services from a supplier for consideration;"] only on deposit of seventy-five per cent of the awarded amount, thereby restricting the right to challenge the order/award passed except on compliance of stringent conditions, which are not prescribed when an appeal is preferred under the CPC. Pre-deposit is a condition for hearing a decision on the objections to the award.
15. The issue therefore which arises and needs consideration is whether there would be an absolute and complete bar to invoke writ jurisdiction under Article 226 of the Constitution even in exceptional and rare cases where fairness, equity and justice may warrant the exercise of writ jurisdiction.
16. The access to High Courts by way of a writ petition under Article 226 of the Constitution of India, is not just a constitutional right but also a part of the basic structure. It is available to every citizen whenever there is a violation of their constitutional rights or even statutory rights. This is an inalienable right and the rule of availability of alternative remedy is not an omnibus rule of exclusion of the writ jurisdiction, but a principle applied by the High Courts as a form of judicial restraint and refrain in exercising the jurisdiction. The power to issue prerogative writs under Article 226 of the Constitution is plenary in nature and the same is not limited by any provision of the Constitution and cannot be restricted or circumscribed by a statute. Reference may be made in this regard to Whirlpool Corpn. v. Registrar, Trade Marks4; L. Chandra 4 (1998) 8 SCC 1 Page 11 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 Kumar v. Union of India5; S.N. Mukherjee v. Union of India6 and Union of India v. Parashotam Dass7.
17. It has been well-settled through a legion of judicial pronouncements of this Court that the writ courts, despite the availability of alternative remedies, may exercise writ jurisdiction at least in three contingencies
-- (i) where there is a violation of principles of natural justice or fundamental rights; (ii) where an order in a proceeding is wholly without jurisdiction; or (iii) where the vires of an Act is challenged. Noticeably, MSEFC as a statutory authority performs a statutory role and functions within the four corners of the law.
18. Following the aforesaid dictum, the Supreme Court in Harbanslal Sahnia v. Indian Oil Corpn. Ltd.8 , had taken notice of the fact that the High Court had referred to the arbitration clause which the writ petitioner could take recourse to, to hold that the rule of exclusion of writ jurisdiction is a rule of discretion and not of compulsion. In an appropriate case, in spite of availability of alternative remedy, the writ courts can exercise its jurisdiction at least in three contingencies, as referred to above. In the facts of the said case, this Court interfered observing that there were peculiar circumstances as the dealership had been terminated on an irrelevant and non-existence cause. Therefore, there was no need to drive the parties to initiate arbitration proceedings. 5 (1997) 3 SCC 261 6 (1990) 4 SCC 594 7 (2025) 5 SCC 786 8 (2003) 2 SCC 107 Page 12 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46
19. The Apex Court in Radha Krishan Industries v. State of H.P.9 laid down the following principles :
"27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well. 27.2. The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where :
(a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution;
(b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion.
27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with."
9 (2021) 6 SCC 771 Page 13 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46
20. Thus, it would be true to say that the existence of the statutory remedy does not affect the jurisdiction of the High Court to issue a writ. Nevertheless, the writ jurisdiction being discretionary by policy, the writ courts generally insist that the parties adhere to alternative statutory remedies, as this reinforces the rule of law. However, in exceptional cases, writ jurisdiction can still be exercised as a power to access the court for justice and relief.
21. The Supreme Court has held in above judgment of India Glycols Ltd. v. Micro and Small Enterprises Facilitation Council (supra) that the petition under Articles 226/ 227 of the Constitution of India should not be entertained to challenge the "award" under Section 18 of the MSMED Act, as the Act provides for statutory remedy of challenging the award under Section 34 of the Arbitration Act. The petition under Articles 226/ 227 should not be entertained in order to obviate compliance with the requirement of predeposit under Section 19, and would defeat the object and purpose of the special enactment made by Parliament.
22. The Supreme Court in Jharkhand Urja Vikas Nigam Ltd.(supra), held that if Facilitation Council has passed final order/award while the conciliation proceedings are in progress without undertaking the arbitration proceedings which were necessary to be undertaken under Section 18 of the Act then the award is ex facie illegal and, accordingly, set aside the award/order of the Facilitation Council and the matter was remanded back for reconsideration to the arbitration tribunal/Facilitation Council.
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23. The Supreme Court in Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd.10 while considering the power of this Court to entertain petition under Articles 226 and 227 of the Constitution of India challenging an arbitral award under the Arbitration Act, at paras 11, 18 and 19, has observed as under :
"11. Having heard both parties and perusing the material available on record, the question which needs to be answered is whether the arbitral process could be interfered under Articles 226/227 of the Constitution, and under what circumstance?"
∗∗∗ "18. In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a Constitutional right. In Nivedita Sharma v. Cellular Operators Assn. of India13, this Court referred to several judgments and held : (SCC p. 343, para 11)
11. We have considered the respective arguments/submissions. There cannot be any dispute that the power of the High Courts to issue directions, orders or writs including writs in the nature of habeas corpus, certiorari, mandamus, quo warranto and prohibition under Article 226 of the Constitution is a basic feature of the Constitution and cannot be curtailed by parliamentary legislation L. Chandra Kumar v. Union of India14. However, it is one thing to say that in exercise of the power vested in it under Article 226 of the Constitution, the High Court can entertain a writ petition against any order passed by or action taken by the State and/or its agency/instrumentality or any public authority or order passed by a quasi-judicial body/authority, and it is an altogether different thing to say that each and 10 (2022) 1 SCC 75 Page 15 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 every petition filed under Article 226 of the Constitution must be entertained by the High Court as a matter of course ignoring the fact that the aggrieved person has an effective alternative remedy. Rather, it is settled law that when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation."
"19. In this context we may observe Deep Industries Ltd. v. ONGC15 wherein interplay of Section 5 of the Arbitration Act and Article 227 of the Constitution was analysed as under : (SCC p. 714, paras 16-17) '16. Most significant of all is the non obstante clause contained in Section 5 which states that notwithstanding anything contained in any other law, in matters that arise under Part I of the Arbitration Act, no judicial authority shall intervene except where so provided in this part. Section 37 grants a constricted right of first appeal against certain judgments and orders and no others. Further, the statutory mandate also provides for one bite at the cherry, and interdicts a second appeal being filed. [See Section 37(2) of the Act].
17. This being the case, there is no doubt whatsoever that if petitions were to be filed under Articles 226/227 of the Constitution against orders passed in appeals under Section 37, the entire arbitral process would be derailed and would not come to fruition for many years. At the same time, we cannot forget that Article 227 is a constitutional provision which remains untouched by the non obstante clause of Section 5 of the Act. In these circumstances, what is important to note is that though petitions can be filed under Article 227 against judgments allowing or dismissing first appeals under Section 37 of the Act, yet the High Court would be extremely circumspect in interfering with the same, taking into account the statutory policy as adumbrated by us herein above so that interference is restricted to orders that are passed which are patently lacking in inherent jurisdiction.' "Page 16 of 26
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24. Considering the above judgments, the law on the subject of entertainment the petition by the High Court under Articles 226/227 of the Constitution of India to challenge an "award" or orders passed by the Facilitation Council/Arbitral Tribunal under the MSMED Act is summarised as under:
a. The jurisdiction of the High Court under Article 226 of the Constitution of India to issue writs, directions, or orders forms part of the basic structure of the Constitution and, therefore, cannot be curtailed, abrogated, or excluded by any parliamentary legislation, including special statutes such as the MSMED Act. This power is intended as an extraordinary constitutional remedy to ensure that justice is not defeated by arbitrary, illegal, or ultra vires actions of statutory or quasi- judicial authorities. The High Court will however, exercise this jurisdiction only sparingly, in rare and exceptional circumstances, where interference becomes imperative to prevent gross miscarriage of justice. Such situations may arise, for example, when the Facilitation Council acts wholly without jurisdiction or passes an order that is manifestly perverse or contrary to the fundamental principles of natural justice, or where the order impugned does not even qualify as an "award" as contemplated under Section 18 of the MSMED Act. b. The decision in India Glycols Ltd. (supra) does not overrule Jharkhand Urja Vikas Nigam Ltd. (supra). Rather, it must be understood as laying down a stricter threshold for invoking writ Page 17 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 jurisdiction under Articles 226/227. This Court clarifies that allowing a writ petition merely to bypass the mandatory pre- deposit requirement under Section 19 of the MSMED Act would frustrate the very object and purpose of this special legislation enacted by Parliament.
c. Where the Facilitation Council/Arbitral Tribunal passes an "award" while exercising its vested jurisdiction, any challenge to the correctness or validity of such an award--however erroneous it may appear--must be pursued strictly under Section 34 of the Arbitration and Conciliation Act, 1996. The High Court cannot exercise its writ jurisdiction merely to relieve a party from the obligation of depositing 75% of the award amount, as mandated by Section 19 of the MSMED Act.
25. An arbitral award, within the meaning of Section 31 of the A&C Act, 1996, is not merely a conclusion but a reasoned determination of rights and liabilities. The law mandates that an award must contain findings based on evidence, coupled with reasons explaining how the tribunal arrived at its decision. This requirement is not a mere formality but an essential safeguard, ensuring transparency, fairness, and judicial accountability. Without reasons, an award is stripped of its character as an adjudicatory instrument and cannot be said to constitute an "award" in the eyes of law.
26. In the present case, the proceedings before the MSEFC reveal glaring deficiencies. After remand by this Court, the MSEFC, Cuttack, on 4.10.2023 directed O.P. No. 3 to file a copy of the original claim petition Page 18 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 with supporting documents, and thereafter transferred the matter to MSEFC, Rourkela for rehearing. On 30.11.2023, the Council merely advised the parties to explore settlement. Subsequently, on 28.3.2024, when the Petitioner expressed unwillingness to participate in conciliation, the Council noted that arbitration under Section 18(3) of the MSMED Act, 2006 would commence and called upon the parties to file additional afÏdavits.
27. On 30.7.2024, the Council directed O.P. No. 3 to submit a calculation statement, which was immediately produced on the same day. Shockingly, on that very day itself, the Council passed an order directing the Petitioner to pay a sum of Rs.6,80,78,336/- towards interest under Section 16 of the MSMED Act, 2006, and disposed of the case.
28. The so-called award contains no discussion of facts, no examination of evidence, and no articulation of reasons. It is nothing more than a mechanical order of payment. Such an order, devoid of reasoning, cannot qualify as an arbitral award within the meaning of Section 31 of the A&C Act, and stands vitiated in law.
29. This Court also finds it necessary to underline the difference between an irregular award and an order that is a nullity. An irregular award is one in which the Tribunal, having properly assumed jurisdiction, may have erred in the conduct of proceedings or in appreciating evidence. Such an award remains an award in the eye of law and must be challenged under the statutory remedy of setting aside. In contrast, where the Tribunal never follows the mandatory procedure prescribed, where no pleadings are exchanged, no hearing takes place, and no determination of essential procedural matters occurs, the so-called Page 19 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 award is bereft of arbitral character. It cannot be dignified with the nomenclature of an award and hence cannot be subjected to the ordinary restrictions on judicial review.
30. This Court is also mindful of the distinction between conciliation and arbitration. Conciliation is a consensual, facilitative process where the neutral assists parties to voluntarily resolve their differences. Arbitration, however, is adjudicatory in character, requiring evidence, submissions and application of law. Section 18 of the MSMED Act consciously separates these two stages. Once conciliation fails, arbitration commences afresh, governed by the strictures of the Arbitration Act. The Council cannot import the informality of conciliation into arbitration. If it does so, it collapses the statutory distinction, depriving parties of their rights. This Court finds that such conflation is not a curable irregularity but a fundamental illegality, vitiating the entire proceedings. Where the Council proceeds as though it were still in the process of hearing parties, yet pronounces a binding decision without affording any real opportunity of being heard, that outcome is nothing but a null act in law.
31. Section 23 of the A & C Act is the foundation of any adjudicatory process. The claimant must present a clear statement of claim, setting out facts, reliefs, and supporting documents. The respondent must then be afforded a reasonable opportunity to submit a statement of defence. Only through such exchange does the Tribunal obtain a crystallised understanding of disputes. If this statutory stage is bypassed, the very identification of issues remains absent. Adjudication without pleadings is akin to deciding in a vacuum, depriving parties of notice and Page 20 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 opportunity to contest. The absence of a defence statement deprives the respondent of participation and converts the process into unilateral determination. This Court holds that any order delivered in such circumstances cannot be dignified as an award but stands vitiated by denial of natural justice, amounting to an order wholly without jurisdiction.
32. Section 24 of the Arbitration Act ensures that oral hearings are the norm, unless both parties expressly agree to dispense with them. Oral hearings are integral, as they allow for arguments, clarifications, examination of witnesses, and effective testing of evidence. The Council, in its role as arbitrator, cannot proceed mechanically without offering parties the opportunity of a hearing. This Court finds that arbitration conducted on paper alone, is not arbitration at all. It is instead a unilateral decision made in breach of statutory duty. The absence of oral hearings in such circumstances renders the process not merely irregular but fundamentally void. A decision so obtained does not qualify as an arbitral award for purposes of statutory remedy and remains open to judicial review under writ jurisdiction.
33. The principles of natural justice permeate all adjudicatory processes, including arbitration. Notice, opportunity to respond, and an impartial adjudicator are the irreducible minimums of fairness. If any of these are missing, the resulting decision is not a judicial or quasi-judicial act but an arbitrary determination. This Court finds that where the Council fails to call for pleadings, denies hearing, or dispenses with evidence, the entire process falls below the threshold of natural justice. The resultant order is therefore not merely voidable but void ab initio. The Page 21 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 constitutional guarantee of fairness cannot be excluded even by statutory mandate, and certainly not by administrative omission. A decision contrary to natural justice cannot command obedience as law.
34. This Court further observes that expedition, though desirable, cannot be pursued at the cost of fairness. Section 18(5) of the MSMED Act enjoins the Council to decide matters within ninety days. This is an enabling provision designed to ensure speedy relief, but it does not empower the Council to short-circuit statutory procedures.
35. The role of the Facilitation Council as arbitrator requires it to transition from a conciliatory posture to an adjudicatory one. This transition is critical, as it marks the shift from voluntary settlement to binding adjudication. Failure to effect this shift results in a hybrid process, neither true conciliation nor true arbitration. This Court finds that the Council's failure to change roles leads to decisions that lack legal basis. An award can emerge only after evidence is tested, arguments advanced, and mind applied to rival contentions. Where no such process occurs, the so-called award is merely a wolf in a sheep's clothing
- clothed as adjudication, but having no substance. This renders the order void.
36. This Court is conscious that every decision made by the Facilitation Council carries consequences for both suppliers and buyers across India. Such decisions must, therefore, inspire confidence in their fairness and legality. A process bereft of pleadings, hearings and evidence erodes this confidence. It diminishes not only the rights of the immediate parties but also the legitimacy of the entire mechanism. To Page 22 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 preserve the integrity of the statutory scheme, it is imperative that Councils follow the Arbitration Act in letter and spirit.
37. This Court must also address the argument of alternative remedy.
Ordinarily, where an arbitral award is passed, the party aggrieved must pursue its statutory remedy of setting aside, subject to conditions imposed by the MSMED Act. However, this presupposes that there is in fact an arbitral award rendered in accordance with law. Where the very act is without jurisdiction and contrary to mandatory procedure, it cannot be called an award. The principle of alternate remedy does not compel a party to challenge a nullity under a statutory mechanism designed for awards. This Court finds that to deny judicial review in such circumstances would amount to endorsing a void act and leaving a party remediless. Thus, the bar of alternative remedy does not operate against intervention where the so-called award is no award in law.
38. This Court is of the considered opinion that the statutory incorporation of the Arbitration Act into the MSMED Act is deliberate and comprehensive. The Legislature did not intend to create a parallel adjudicatory system with relaxed norms. Instead, it required the Council, once acting as arbitrator, to adopt the discipline of arbitration law. The safeguards of Sections 20 to 25 are therefore not optional guidelines but mandatory prescriptions. Non-compliance renders the decision ultra vires. A decision rendered without jurisdiction cannot assume the character of an award simply because it is labelled as such. Labels cannot confer legality. The absence of statutory compliance strips the order of legitimacy. Hence, this Court cannot be persuaded that Page 23 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 such an order is immune from correction under Article 226 of the Constitution.
39. This Court reiterates that judicial review under Article 226 is a basic feature of the Constitution, incapable of being ousted by statute. While legislative provisions may regulate remedies, they cannot insulate null acts from scrutiny. Where an order is void ab initio, no statutory bar can prevent this Court from exercising its constitutional duty. In such cases, interference is not an encroachment but a restoration of legality. To refuse intervention would amount to endorsing illegality, a course this Court cannot countenance.
40. This Court also emphasises the principle that justice must not only be done but must manifestly be seen to be done. In the present statutory framework, parties repose faith in the Facilitation Council as an impartial adjudicator. Where the Council proceeds mechanically, without notice or participation, the appearance of fairness is lost. Such processes not only harm the litigants but also diminish public faith in statutory adjudication. This Court finds that failure to adhere to procedure erodes legitimacy to the extent that the resultant order cannot be recognised as law.
41. This Court further clarifies that errors of law or fact within an arbitral process are not grounds for writ intervention. Such matters must be addressed under statutory remedies. The present case is distinguishable because the errors are not within the arbitral process but in the absence of such process itself. Where there is no arbitration, there can be no arbitral award. The Council's decision, lacking the essentials of arbitration, cannot attract the statutory regime for awards. Page 24 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 VI. CONCLUSION:
42. In conclusion, this Court holds that the Facilitation Council, once conciliation fails, is bound by the procedure prescribed under the Arbitration and Conciliation Act. Decisions rendered without pleadings or proper hearings are not arbitral awards but nullities. Such orders violate natural justice and cannot be sustained. The bar of alternative remedy does not apply, as there is in truth no award to be challenged under Section 34. This Court therefore affirms its jurisdiction under Article 226 to interfere with orders of this nature, not to rewrite the statutory scheme but to ensure that justice, fairness and legality are preserved.
43. This Court cannot ignore the growing trend of Facilitation Councils rendering so-called awards which are bereft of reasoning, passed in undue haste, and without compliance with the discipline of the Arbitration and Conciliation Act. An award is not a mere direction to pay/not to pay; it is a solemn adjudication which must record the rival claims, weigh the evidence, and set forth reasons that disclose the pathway of thought from contention to conclusion. Where reasoning is absent, what is produced is not adjudication but fiat, a diktat that undermines the credibility of the statutory mechanism itself. Expediency can never be allowed to supplant legality; speed without substance erodes the very promise of justice which the MSMED Act was designed to secure.
44. The law is emphatic that every arbitral award must contain reasons.
This requirement is not ornamental but indispensable, for reasons are the lifeblood of justice, the bridge between the decision-maker's mind Page 25 of 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:46 and the parties' understanding. A reasoned award inspires confidence, allows scrutiny, and affirms the transparency of the process; an unreasoned award breeds arbitrariness, invites suspicion, and corrodes faith in statutory adjudication. The Council, as a quasi-judicial authority, cannot abdicate its duty to provide reasoned determinations under the guise of efficiency. The trend of unreasoned orders, if permitted to persist, will reduce the statutory arbitration framework into a hollow ritual, where the form of justice is preserved but its substance lost. This Court must, therefore, remind all MSEFCs that the discipline of reasons is not optional but the very essence of lawful adjudication.
45. In light of the discussion above, the Petition stands allowed. Order dated 30.07.2024 passed by the Opposite Party No.2/ Micro Small and Medium Enterprises Facilitation Council, Rourkela in MSEFC Case No.24 of 2010 is set aside. The matter is remanded for fresh hearing. Giving the efflux of time, the matter may be heard expeditiously within a period of 3 months, after giving reasonable opportunity to both the parties to present their case. The Council shall keep in mind this Court's observations with regard to the essential requirements of the final order/award when arriving at its decision.
46. Interim order, if any, passed earlier stands vacated.
47. No order as to costs.
(Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the 20th September, 2025/ Page 26 of 26