Orissa High Court
Indian Oil Corporation Ltd. General vs M/S. Adarsh Nobel Corporation Ltd. .... ... 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 16:24:47
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.30966 of 2024
(In the matter of an application under Articles 226 and 227 of the
Constitution of India, 1950).
Indian Oil Corporation Ltd. General .... Petitioner (s)
Manager (Project), Paradip Refinery
& Anr.
-versus-
M/s. Adarsh Nobel Corporation Ltd. .... Opposite Party (s)
Advocates appeared in the case through Hybrid Mode:
For Petitioner (s) : Mr. Sunil J. Mathews, Adv.
For Opp. Party (s) : Mr. Sidharth Shankar Padhy, Adv.
CORAM:
DR. JUSTICE SANJEEB K PANIGRAHI
DATE OF HEARING:-17.07.2025
DATE OF JUDGMENT:-20.09.2025
Dr. Sanjeeb K Panigrahi, J.
1. The present Writ Petition has been preferred seeking setting aside of the award dated 10.07.2023, passed by the Facilitation Council, Cuttack in MSEFC Case No. 56 of 2022.
I. FACTUAL MATRIX OF THE CASE:
2. The brief facts of the case are as follows:
(i) The Petitioner has filed the present Petition to correct a jurisdictional error committed by the MSEF Council, vide its Award dated 10.7.2023 Page 1 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 and has challenged the impugned order on the ground of lack of inherent jurisdiction by the Council.
(j) The Petitioner awarded the work of "Provision of Additional VR Tank at Paradip Refinery" to the Opposite Party vide Letter of Award(LOA) dated 29.11.2017 for a contract value of Rs.20,86,26,058.50/-, which was to be completed within a period of 18 months from the date of the LOA.
(k) However, on 11.6.2018, the Opposite Party stopped work on the site.
Despite multiple correspondence dated 29.6.2018, 23.7.2018 and 11.8.2018, work did not resume and thereafter it is alleged that the present Petitioner terminated the contract with the Opposite Party on 13.12.2018.
(l) A word order was issued to another contractor on 9.4.2019 for completion of the balance work.
(m) As the matter remained thus, the present Opposite Party obtained it's registration as an MSME on 28.1.2021. The following year, on 12.8.2022, the Opposite Party filed MSEFC Case No. 56 of 2022 under Section 18 of the MSMED Act, 2006 seeking Rs. 6,65,97,975/- towards principal amount and interest calculated up to 18.5.2022 for alleged illegal termination of the contract.
(n) On 18.11.2022, the present Petitioner issued an email to block payments towards the Opposite Party on account of risk and cost recovery from the Opposite Party. The Opposite Party filed an interim application for staying the operation of the email dated 18.11.2022 before the MSEFC.
Page 2 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47
(o) While the I.A. was pending, the new contractor completed the work and a letter regarding the recovery amount was issued by the Petitioner to the Opposite Party on 22.3.2023.
(p)The operation of the email dated 18.11.2022 was stayed by the MSEFC on 2.5.2023. On 10.7.2023, MSEF Council passed the impugned final order directing the Petitioner - IOCL to pay a sum of Rs.2,43,14,318.00/- to the Opposite Party -ANCL along with future interest (compounded interest with monthly rests payable at the rate of 3 times of the bank rate as notified by the Reserve Bank of India from time to time). IOCL was further directed to release the bank guarantee and not to block vendor's account code and vendor purchase code.
(q) On 20.12.2023, the Opposite Party filed Enforcement Petition being EXP. No. 585 of 2023 before the Senior Civil Judge, Commercial Court, Bhubaneshwar seeking enforcement of the impugned final order.
(r) The Senior Civil Judge, Commercial Court, Bhubaneswar issued ex- parte ad-interim direction on 22.3.2024 to the Petitioner not to lake any coercive action in respect of Vendor Payment Status Report till the next date. The said interim order continues till date.
(s) On 28.3.2024, the Petitioner filed an application under Section 34 of the Arbitration & Conciliation Act, 1996 challenging the award and final order dated 10.7.2023. However, the same was withdrawn on 21.10.2024. Thereafter, the present Petition was filed by the Petitioner. Page 3 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47
(t) 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. II. PETITIONERS' SUBMISSIONS:
3. The Ld. Counsel for the Petitioner submits that the Purported Award is unenforceable in law being a nullity and is void ab initio on account of lack of inherent jurisdiction in MSMEFC to adjudicate any disputes arising from the work contract dated 29.11.2017 and it could not have made reference to arbitration as the subject contract dated 29.11.2017 is a work contract. Since the scope of work was indivisible and composite in nature i.e. construction of one number of VR tank on lump sum basis including design, engineering, construction including civil, electrical, instruments, dyke wall all jobs within the dyke wall, works contract forms a completely different and distinct genre than a contract for supply of goods or for that matter a contract for providing services and does not fall within the ambit of the MSMED Act.
4. It was further strenuously contended that in the present case MSMEFC, Cuttack could not have seisin of the case because the subject matter was wholly foreign to its jurisdiction. The MSMEFC lacked inherent jurisdiction over the subject matter of the dispute i.e. work contract and also lacked the jurisdiction over the parties as the registration of the Award holder/Petitioner under the MSMED Act, 2006 is subsequent to the date of the contract and even beyond the date of termination of the contract.
Page 4 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 III. OPPOSITE PARTY'S SUBMISSIONS:
5. Per contra, the Ld. Counsel for the Respondent submits that the Opposite Party was registered as an SSE in 2015 and as the contract was entered into and the supplies were made by it after that date, the MSEFC rightly entertained its claim. It is submitted that therefore, there is no lack of inherent jurisdiction and the present matter may be dismissed.
6. Furthermore, it is argued that this court ought not to interfere in a matter pertaining to the MSMED Act in exercise of its writ jurisdiction.
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. The present Petitioner having withdrawn its Section 34 petition, ought not to be allowed to forum shop.
IV. ISSUE FOR CONSIDERATION
7. Having heard the parties and perused the materials available on record, this court here has identified the following solitary to be determined:
A. Whether the present Opposite Party's registration date as a MSME being after the date of the contract would have any bearing on the matter at hand?
Page 5 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 B. Whether the present contract is a works contract and if so, could the MSEFC have entertained a claim arising out of a works contract? C. Whether a writ petition under Article 226 of the Constitution of India is maintainable against an order 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 inherent jurisdiction?
V. ISSUE A: WHETHER THE PRESENT OPPOSITE PARTY'S REGISTRATION DATE AS A MSME BEING AFTER THE DATE OF THE CONTRACT WOULD HAVE ANY BEARING ON THE MATTER AT HAND?
8. A perusal of the Act of 2006 would go to show that the said Act has been enacted for the purpose of promotion and development and enhancing the competitiveness of micro, small and medium enterprises. Section 2(m)(g) and (h) defines small enterprise, medium enterprise and micro enterprise on the basis of the classification as given in section 7 of the said Act. A perusal of section 7 of the said Act stipulates when an enterprise would be a micro enterprise, small enterprise and medium enterprise depending upon the investments it has made. Section 8 stipulates the manner in which a registration is be done and for doing so it is required that the said person and the enterprise shall file a memorandum with such authority as may be specified by the State Government under sub-section (4) or the Central Government under sub-section (3) of section 8. Sub-section (2) of section 8 stipulates the form of memorandum, the procedure of its filing and other matters incidental thereto as may be notified by the Central Government after Page 6 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 obtaining the recommendation of the Advisory Committee as appointed under section 7(2) of the said Act. In terms of sub-section (3) of section 8 in the case of medium enterprise the memorandum has to be filed before the authority as notified by the Central Government. In terms of sub-section (4) of section 8 of the said Act micro or small enterprises needs to file their memorandums before the authority as notified by the State Government'. The manner in which the registration is to be carried out is in terms with the procedure notified, by the Central Government.
9. The text of Section 18 is clear and categoric. The words employed herein are "any party to a dispute". The text, "any party to a dispute", cannot be read as a "supplier" by adopting a process of interpretation, by first referring to Section 17, then to Sections 15 and 16 and thereafter, in search of the definition of supplier, to Section 2(n) and finally stopping at Section 8 to hold that "any party to a dispute" will only be an Enterprise which is registered under Section 8 of the Act. This meaning- making process to metamorphosis the clear text "any party" to "a supplier" is not the legal method to understand the true meaning of words employed by the legislature. The age-old principle, referred to as the Golden Rule of Interpretation, is that "words of a statute have to be read and understood in their natural, ordinary and popular sense". [State of A.P. v. Linde (India) Ltd.1; Grid Corpn. of Orissa Ltd. v. Eastern Metals & Ferro Alloys2] The choice of the words "any party to a dispute" in Section 18 of the Act is deliberate. The legislative device of employing 1 (2020) 16 SCC 335 2 (2011) 11 SCC 334 Page 7 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 different expressions in successive provisions of the same statute is well known and intended to effectuate the desired purpose of the Act. If Parliament had intended that "any party" must be confined only to a "supplier", or even a buyer, which expression is also defined, it would as well have used that or those very expressions. The Court cannot substitute the expression "any party" with "supplier" and change the text and, consequently, the scope and ambit of Section 18 altogether.
10. From a plain reading of Section 2(n), it is clear that the definition of a supplier is relatable only to a micro or a small enterprise and does not encompass a medium enterprise. Supplier not only means a micro or small enterprise, "which have filed a memorandum with the authority referred to under sub-section (1) of Section 8", but also includes : (i) NSIC, (ii) SIDC, and (iii) company, cooperative society, trust or a body engaged in selling of goods produced by micro or small enterprise and rendered services which are produced by such enterprise. In other words, a supplier will also be an entity engaged in selling goods or rendering services, produced or provided by a micro or small enterprise. All such entities, irrespective of filing of the memorandum will be suppliers. Thus, the definition of a supplier encompasses not only those who have filed a memorandum, but also those who have not filed. The reason for keeping the definition is not difficult to imagine. This is still an unorganised industry, growing, evolving and many of them are at start-up levels. The reason for keeping the definition wide is supported by an Expert Committee.
11. This Court will now examine Section 8 of the Act relied on by the Petitioners to contend that filing of a memorandum by micro, small and Page 8 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 medium enterprises is mandatory. Section 8 is extracted herein for ready reference:
"8. Memorandum of micro, small and medium enterprises.--
(1) Any person who intends to establish,--
(a) a micro or small enterprise, may, at his discretion, or
(b) a medium enterprise engaged in providing or rendering of services may, at his discretion; or
(c) a medium enterprise engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951) shall file the memorandum of micro, small or, as the case may be, of medium enterprise with such authority as may be specified by the State Government under sub-section (4) or the Central Government under sub-section (3):
Provided that any person who, before the commencement of this Act, established--
(a) a small scale industry and obtained a registration certificate, may, at his discretion; and
(b) an industry engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951 (65 of 1951), having investment in plant and machinery of more than one crore rupees but not exceeding ten crore rupees and, in pursuance of the Notification of the Government of India in the erstwhile Ministry of Industry (Department of Industrial Development) number S.O. 477 (E) dated 25-7-1991 filed an Industrial Entrepreneurs Memorandum, shall within one hundred and eighty days from the commencement of this Act, file the memorandum, in accordance with the provisions of this Act. (2) The form of the memorandum, the procedure of its filing and other matters incidental thereto shall be such as may be notified by the Central Government after obtaining the recommendations of the Advisory Committee in this behalf.Page 9 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 (3) The authority with which the memorandum shall be filed by a medium enterprise shall be such as may be specified by notification, by the Central Government.
(4) The State Government shall, by notification, specify the authority with which a micro or small enterprise may file the memorandum.
(5) The authorities specified under sub-sections (3) and (4) shall follow, for the purpose of this section, the procedure notified by the Central Government under sub-section (2)."
12. Section 8(1)(a) provides that, "a micro or a small enterprise may, at his discretion" and even a medium enterprise engaged in providing or rendering services, also "may at his discretion" file a memorandum with the authority as may be specified by the Government. This important feature of the statute recognising and vesting of the discretion has not been noticed. There is also a logical follow-up to this choice or discretion vested in the micro or small enterprise and the medium enterprise engaged in rendering services for filing a memorandum in sub-section (4) of Section 8 and also proviso (a) to Section 8(1). As the said sub- section (4) of Section 8 relates to micro or small enterprises, the State Government shall by notification, specify the authority with which such micro or small enterprise may file a memorandum. Considering the choice and discretion specifically provided to these enterprises, it becomes very clear that there is no mandatory prescription of filing a memorandum.
13. There are three clear features in the statutory regime. To start with, Section 18 of the Act does not use the expression "supplier", instead employs the phrase, "any party to a dispute, may". This Court has also noted that the definition of the expression "supplier" is not confined to Page 10 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 a micro or a small enterprise which has filed a memorandum under Section 8(1) but also includes companies or other entities engaged in selling goods or rendering services by an enterprise. Thirdly, Section 8 grants a discretion to a micro or a small enterprise in filing a memorandum with the authority.
14. Further, it is noteworthy that a "micro" [Section 2(h)], "small" [Section 2(m)] or "medium enterprises" [Section 2(g)], formation and existence is simply on the basis of their investment as provided in Section 7 relating to classification of an Enterprise. They subsist without any formal "recognition", "consent" or "registration". The Act uses the expression filing of a "memorandum". That is all. That too, at the discretion of the micro and small enterprises. The cumulative account of these four features is compelling and leads us to the conclusion that an application by a micro or a small enterprise to the Facilitation Council under Section 18 cannot be rejected on the ground that the said enterprise has not registered itself in Section 8, much less that on the date of contract, it was not registered under Section 8.
15. This Court is of the considered view that the legislative scheme of the MSMED Act, 2006 does not make registration under Section 8 a condition precedent for invoking the jurisdiction of the Facilitation Council under Section 18. The classification of enterprises under Section 7 rests solely upon the quantum of investment, and the legal existence of a micro or small enterprise flows from that statutory classification rather than from filing of a memorandum. The use of the phrase "any party to a dispute" in Section 18 is deliberate, and the Court cannot substitute the expression with "supplier" or any other narrower term. Page 11 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 In order to hold otherwise would be to rewrite the statute. The discretion vested in enterprises under Section 8 fortifies this view, making it clear that the object of the Act is to extend protection to MSMEs irrespective of whether they have chosen to file a memorandum.
16. This Court therefore opines that rejection of an application under Section 18 merely on the ground that the enterprise was not registered under Section 8 would amount to a misreading of the statutory framework. Such a narrow interpretation would defeat the very purpose of the Act, which is to provide expeditious redressal of delayed payments to MSMEs, many of which remain in the informal or evolving sector. The wide definition of "supplier" under Section 2(n), encompassing even entities not filing a memorandum, supports this purposive approach. The scheme of the Act thus makes it evident that the Legislature intended to protect micro and small enterprises at all stages of growth, whether registered or not, so long as they fall within the investment thresholds prescribed. Accordingly, this Court holds that an enterprise cannot be denied access to the Facilitation Council under Section 18 on the mere ground of delayed registration as a MSME.
17. Moreover, in the present case the Opposite Party had filed its memorandum as a Small Scale enterprise on 13.12.2015. It was also holding a valid NSIC Government Purchase Enlistment Certificate on the date of entering into the contract. Therefore, the mere registration as MSME being after the date of the contract would have no bearing on the present matter. However, given the nature of the contract, could the Council have entertained the claim - remains to be discussed. Page 12 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 VI. ISSUE B: WHETHER THE PRESENT CONTRACT IS A WORKS CONTRACT AND IF SO, COULD THE MSEFC HAVE ENTERTAINED A CLAIM ARISING OUT OF A WORKS CONTRACT?
18. Arbitration is often projected as a cost-efficient mechanism for resolving commercial disputes, but in practice, it can be prohibitively expensive for smaller entities. Arbitrator fees, advocate fees, and related administrative expenses make the process burdensome. Micro, small, and medium enterprises (MSMEs), which typically function with constrained budgets, find themselves disadvantaged against large corporations with vast resources. To mitigate this inequity, the Micro, Small and Medium Enterprises Development Act, 2006 ("MSMED Act") introduced statutory arbitration under Section 18. This provision empowers MSMEs to approach state Facilitation Councils, which in turn initiate arbitration or conciliation proceedings. A distinctive feature of this framework is the lower fee structure, prescribed by state councils, ensuring affordability for MSMEs. However, an important question arises: can all disputes involving MSMEs be submitted to this special arbitration regime, particularly disputes arising from "works contracts"? The answer, as previous judicial pronouncements reveal, is far from straightforward.
19. A central point of debate is the precise legal nature of "works contracts."
The term is frequently misinterpreted as being synonymous with construction contracts. However, statutory definitions reveal a broader scope. Under Section 2(119) of the Central Goods and Services Tax Act, Page 13 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 2017, a works contract encompasses agreements for building, fabrication, installation, repair, improvement, or commissioning of movable and immovable property. The definition extends well beyond traditional construction arrangements. Courts have elaborated on this scope in several decisions. In K. Raheja Development Corporation v. State of Karnataka3, the Supreme Court examined the Karnataka Sales Tax Act, which contained a parallel definition. The Court clarified that the ambit of works contracts is "very wide" and cannot be restricted to conventional understanding. This interpretation was later reaffirmed in Larsen & Toubro Ltd. v. State of Karnataka4, cementing the composite nature of such contracts.
20. The Supreme Court, in Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu5, delivered a landmark judgment on the legal character of works contracts. A Constitution Bench rejected the earlier "dominant nature test," which had previously been applied to classify contracts based on their predominant purpose. Instead, the Court held that a works contract, once it satisfies statutory characteristics, retains its dual nature irrespective of additional obligations incorporated. Importantly, such contracts are indivisible in reality but deemed divisible by legal fiction into components of goods and services. This reasoning underscores that works contracts are sui generis and cannot be conflated with ordinary contracts for sale or service. The Court also emphasized examining the "substance over form" of agreements, highlighting that the true object 3 (2005) 5 SCC 162 4 (2014) 1 SCC 708 5 (2014) 7 SCC 1 Page 14 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 of the contract is determinative. Thus, works contracts occupy a unique position, distinct from ordinary procurement arrangements.
21. In Kone Elevators (supra), the Supreme Court observed that the main object of the transaction, the prevailing circumstances, and the customary practices of trade provide critical guidance. It stressed that works contracts inherently combine both goods and services, and even where goods predominate, the contract does not lose its character as a works contract. This dual nature complicates their treatment under statutes designed with binary classifications of buyers and sellers, such as the MSMED Act. Unlike pure sale transactions, works contracts defy simple categorization, creating friction with the structure of statutory arbitration under the MSMED Act. Consequently, while MSMEs benefit from preferential treatment in procurement policies, whether these benefits extend to disputes arising out of works contracts remains contentious.
22. The MSMED Act aims to facilitate growth of small enterprises through preferential procurement. Several government policies grant MSMEs priority in public tenders. However, a practical dilemma arises when such preferences result in award of works contracts. Can an MSME, after receiving such a contract, invoke the MSMED Act's dispute resolution framework? The Delhi High Court addressed this in Shree Gee v. Union of India6. In that case, Indian Oil Corporation had granted preference to an MSME bidder, but the Court held that the MSME Procurement Policy, 2012, did not apply to works contracts. The Court 6 2015 SCC OnLine Del 12822 Page 15 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 quashed the award of the contract, clarifying that MSME preferences cannot override the statutory nature of works contracts. This judgment revealed a judicial hesitation to extend the MSMED Act's arbitration benefits to disputes involving composite contractual arrangements, setting the stage for further conflicting interpretations.
23. A similar stance was taken by the Allahabad High Court in Rahul Singh v. Union of India7. The Court categorically ruled that works contracts fall outside the ambit of the MSMED Act. The case concerned disputes where MSME suppliers attempted to claim benefits under Section 18 of the Act by categorizing works contracts as simple supply transactions. The Court rejected this approach, holding that the MSMED Act is designed to govern buyer-seller relationships of goods and services, not composite works contracts involving both. The Allahabad High Court's decision reinforced the principle that statutory arbitration under the MSMED Act is restricted and cannot extend to every form of commercial arrangement involving MSMEs. This judgment aligned with the earlier Delhi High Court ruling, thereby strengthening the judicial view that works contracts are misfits under the MSMED Act's dispute resolution scheme.
24. The most influential judgment on this question emerged from the Bombay High Court in P.L. Adke v. Wardha Municipal Corporation8. The dispute concerned an MSME contractor who alleged non-payment for work performed under a works contract and sought to invoke arbitration through the MSME Facilitation Council. The High Court, 7 2017 SCC OnLine All 1714 8 2021 SCC OnLine Bom 5531 Page 16 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 however, dismissed the appeal, relying on Shree Gee (supra) and Rahul Singh (supra). It held that works contracts, being sui generis, cannot be equated to simple supply transactions and thus fall outside the purview of the MSMED Act. The Court relied on Larsen & Toubro (supra) and Kone Elevators (supra) to affirm the legal nature of such contracts.
25. Following P.L. Adke (supra), several High Courts have consistently refused to extend the MSMED Act's arbitration provisions to works contracts. The lack of a Supreme Court stay has given Adke (supra) authoritative value across jurisdictions. As a result, MSMEs engaged in composite contracts increasingly find themselves excluded from invoking Section 18 arbitration. This trend has narrowed the scope of disputes that Facilitation Councils may adjudicate, relegating MSMEs in works contracts to regular arbitration under the Arbitration and Conciliation Act, 1996. Although the final pronouncement of the Supreme Court in the Adke appeal is awaited, judicial consensus currently treats works contracts as incompatible with the MSMED Act. This prevailing interpretation underscores the judiciary's cautious approach in extending statutory benefits to categories of contracts not explicitly contemplated under the MSMED Act, even if such exclusion disadvantages small enterprises.
26. The Bombay High Court revisited this issue in National Textile Corporation Ltd. v. Elixir Engineering Pvt. Ltd.9. The dispute concerned contracts for design, fabrication, and commissioning of industrial piping systems. The MSME contractor approached the Facilitation 9 2023 SCC OnLine Bom 653 Page 17 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 Council, which passed an award partly in its favour. On challenge under Section 34 of the Arbitration and Conciliation Act, the Court held that the Facilitation Council lacked jurisdiction since the underlying contracts were works contracts. Citing P.L. Adke (supra), the Court reasoned that arbitration initiated under the MSMED Act in such cases is a "stillborn exercise." The award was declared void for want of jurisdiction. The Court emphasized that jurisdictional defects strike at the root of arbitral proceedings and cannot be cured, even considering the narrow grounds available for judicial interference post-2015 amendments. Thus, the award was set aside as patently illegal.
27. In National Textile Corporation (supra), the Bombay High Court elaborated that the Facilitation Council's jurisdiction is statutory and limited. Works contracts, being distinct in nature, do not fall within this statutory jurisdiction. The Court distinguished between errors within jurisdiction and the absence of jurisdiction, noting that the latter renders proceedings void ab initio. This reasoning drew upon the Supreme Court's decision in Ssangyong Engineering & Construction Co. Ltd. v. NHAI10. The Court held that lack of jurisdiction constitutes a patent illegality, warranting judicial intervention. This reinforces the judicial consensus that statutory arbitration under the MSMED Act is confined to specific contractual relationships and cannot be extended to works contracts by interpretative expansion.
28. The Delhi High Court in Tata Power Company Ltd. v. Genesis Engineering Company11, was faced with competing claims of 10 (2019) 15 SCC 131 11 2023 SCC OnLine Del 2366 Page 18 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 arbitration. Tata Power issued a notice invoking arbitration under Section 21 of the Arbitration and Conciliation Act, 1996, while the MSME contractor approached the Facilitation Council under the MSMED Act. The Court examined the underlying work orders, which involved composite works, and applied the precedents set in P.L. Adke (supra) and National Textile Corporation (supra). It concluded that disputes arising out of works contracts cannot be adjudicated by MSME Facilitation Councils. Consequently, the Court upheld the maintainability of a Section 11 petition and appointed a sole arbitrator under the Arbitration Act. This judgment affirmed that works contracts fall squarely outside the MSMED Act's purview, directing MSMEs to pursue conventional arbitration rather than statutory remedies.
29. In Tata Power (supra), the Delhi High Court observed that the legal position on works contracts has been consistently settled by multiple High Courts. The Court stressed that works contracts, regardless of their specific subject matter, are indivisible agreements involving both goods and services. As such, they do not create the seller-buyer relationship contemplated under the MSMED Act. The Court rejected the MSME's argument that participation in Facilitation Council proceedings by the respondent constituted acquiescence. Jurisdictional limits, the Court emphasized, cannot be conferred by consent or waiver. Ultimately, the Court allowed the Section 11 petition and referred the dispute to arbitration under the general framework. This decision further entrenched the principle that while MSMEs enjoy statutory support under the MSMED Act, those benefits do not extend to works Page 19 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 contracts, thereby creating a caveat for small enterprises entering such arrangements.
30. The Micro, Small and Medium Enterprises Development Act, 2006 was introduced with the object of protecting smaller enterprises from delayed payments and to provide a quick forum for resolution through Facilitation Councils. These councils function as quasi-judicial authorities with powers to conciliate or arbitrate disputes between MSMEs and their buyers. The legislative intent was to empower MSMEs by creating a cheaper and faster forum than conventional arbitration. However, when contracts go beyond mere supply of goods or rendering of services and instead involve integrated obligations such as design, construction, installation, and operation, a serious jurisdictional issue arises. Such composite agreements, legally categorized as works contracts, do not neatly fit into the scheme of the MSMED Act. Courts have therefore consistently grappled with the question of whether disputes arising out of works contracts can be submitted to the MSEFCs for adjudication or arbitration.
31. A works contract, under Section 2(119) of the CGST Act, 2017, has a specific statutory definition. It covers agreements for building, fabrication, completion, erection, installation, modification, repair, or commissioning of immovable property wherein transfer of property in goods is involved.
32. The jurisprudence emerging from the rulings discussed above demonstrates a consistent thread: works contracts are not amenable to the MSMED Act framework. The reasoning rests on statutory interpretation, commercial realities, and legislative intent. Section 18 Page 20 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 presupposes a dispute arising from supply of goods or rendering of services, not from indivisible composite agreements involving engineering, construction, and operation. Facilitation Councils were designed as quick forums for delayed payments, not for supervising intricate, continuous obligations. Therefore, judicial pronouncements stress that applying the MSMED Act to works contracts would stretch the statute beyond its legitimate scope. This principle ensures a balance:
MSMEs are protected in straightforward supply transactions but must seek remedies under arbitration clauses or ordinary civil processes when engaging in works contracts. Courts have deliberately drawn this boundary to preserve legislative coherence.
33. The overall judicial approach reflects a careful balance between protecting MSMEs and respecting the complex nature of works contracts. By excluding such contracts from the MSMED Act, courts prevent misuse of an expedited mechanism meant for simple supply disputes. At the same time, by recognizing the primacy of arbitration clauses, courts ensure that parties to works contracts are not left remediless. The common reasoning is that works contracts involve technical supervision, continuous obligations, and indivisible performance, which cannot be adjudicated summarily by MSEFCs. This reasoning was first strongly articulated in Kone Elevator (supra) and has been consistently applied by High Courts. The result is a stable jurisprudential framework that separates simple MSME supply disputes from complex contracts, thereby safeguarding both legislative intent and commercial certainty. Accordingly, this Court also agrees with this view that works contracts are outside the purview of MSEFC. Page 21 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47
34. The scope of work mentioned in the Special Conditions of Contract Part II entered into by the present Parties is reproduced hereinbelow:
"1.0 GENERAL Design, Detailed Engineering, Supply, Transportation, Storage. Fabrication. Installation, radiography, inspection, pointing, testing. calibration, inducing all materials, equipment, appurtenances of VR storage tanks (203-TK-012) of 30000 KL nominal capacity at Paradip Refinery as per API-650 latest edition, specifications, scope of work and other related documents attached or referred to. This also includes design. engineering supply. fabrication. installation, painting, testing in all respect as per codes and Standards and Scope of work. Steam coil pipe fitting supply and erection, Civil works like execution of Tank Pad Foundation including soil investigation required for design purpose and all electrical works like, cathodic protection, earthling system comprising earth pits with earth electrodes, earth strips cable trays etc. as per codes and standard and scope of work (Part-A) Construction of Tank dyke area, Underground services (OWS/ CRWS), surface drainage of tank dyke, Barricading as per requitement. pipe supports/ platforms inside tank dyke and other civil works inside tank dyke (Part-B) are also covered in the tender.
Sr. Description Tag No. No. Type
1 VR Storage Tank 203-TK- 1 (One) Fixed
012 roof
Tank
35. The definition of the word "Works" in the Tender Document is also mentioned as 'Individually or collectively all engineering, materials, equipments, services and documentation either expressly or by implication required under the terms of the Contract". Page 22 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47
36. Applying the tests as indicated in the judgments of the Supreme Court, this Court finds in the present case that the contracts in question were indeed works contracts. The details of the scope of works quoted hereinabove demonstrates beyond a shadow of doubt that the scope of the contract involved both goods and services and therefore, the contracts in question is a works contract. It is thus held that the provisions of the MSMED Act could not have been invoked by the Opposite Party. This resultantly shows that the initiation of the statutory arbitration under the provisions of the MSMED Act on the part of Opposite Party in the context of contracts in question before the Facilitation Council, was a stillborn exercise and that the Facilitation Council could not have exercised jurisdiction to conduct the arbitration proceedings. This renders the impugned awards without jurisdiction. VII. ISSUE C: WHETHER A WRIT PETITION UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA IS MAINTAINABLE AGAINST AN ORDER 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 INHERENT JURISDICTION?
37. In Balvant N. Viswamitra. v. Yadav Sadashiv Mule (dead) through Irs.12 The Apex Court held as follows:
"14. Suffice it to say that recently a Bench of two Judges of this Court has considered the distinction between null and void decree and illegal decree in Rafique Bibi v. Sayed Waliuddin [(2004) 1 SCC 287]. One of us (R.C. Lahoti, J., as His Lordship then was), quoting with approval the law laid 12 (2004) 8 SCC 706 Page 23 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 down in Vasudev Dhanjibhai Modi[(1970) 1 SCC 670 :
(1971) 1 SCR 66] stated : (SCC pp. 291-92, paras 6-8) "6. What is 'void' has to be clearly understood. A decree can be said to be without jurisdiction, and hence a nullity, if the court passing the decree has usurped a jurisdiction which it did not have; a mere wrong exercise of jurisdiction does not result in a nullity. The lack of jurisdiction in the court passing the decree must be patent on its face in order to enable the executing court to take cognisance of such a nullity based on want of jurisdiction, else the normal rule that an executing court cannot go behind the decree must prevail.
7. Two things must be clearly borne in mind. Firstly, 'the court will invalidate an order only if the right remedy is sought by the right person in the right proceedings and circumstances. The order may be "a nullity" and "void" but these terms have no absolute sense : their meaning is relative, depending upon the court's willingness to grant relief in any particular situation. If this principle of illegal relativity is borne in mind, the law can be made to operate justly and reasonably in cases where the doctrine of ultra vires, rigidly applied, would produce unacceptable results.' (Administrative Law, Wade and Forsyth, 8th Edn., 2000, p.
308.) Secondly, there is a distinction between mere administrative orders and the decrees of courts, especially a superior court. 'The order of a superior court such as the High Court, must always be obeyed no matter what flaws it may be thought to contain. Thus a party who disobeys a High Court injunction is punishable for contempt of court even though it was granted in proceedings deemed to have been irrevocably abandoned owing to the expiry of a time-limit.' (ibid., p. 312)
8. A distinction exists between a decree passed by a court having no jurisdiction and consequently being a nullity and not executable and a decree of the court which is merely illegal or not passed in accordance with the procedure laid down by law. A decree suffering from illegality or irregularity of procedure, cannot be termed inexecutable by the executing court; the remedy of a person aggrieved by such a decree is to Page 24 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 have it set aside in a duly constituted legal proceedings or by a superior court failing which he must obey the command of the decree. A decree passed by a court of competent jurisdiction cannot be denuded of its efficacy by any collateral attack or in incidental proceedings."(emphasis is ours)
38. Accordingly there is a difference between inherent lack of jurisdiction and the procedural impropriety. In the present case evidently by virtue of section 15, 16, 17 and 18 read with Section 2(b)(1), Explanation (i) and
(ii), Facilitation Council clearly did not have jurisdiction in the subject matter in dispute and therefore the present case is a case of inherent lack of jurisdiction.
39. This Court has already held time and again that 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 Marks13; L. Chandra Kumar v. Union of 13 (1998) 8 SCC 1 Page 25 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47 India14; S.N. Mukherjee v. Union of India15 and Union of India v. Parashotam Dass16.
40. 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.
41. In the present case, the award is passed by the Facilitation Council lacking inherent jurisdiction. The Supreme Court, in India Glycols Ltd. v. Micro and Small Enterprises Facilitation Council17, has held that a petition under Articles 226/227 of the Constitution of India ought not to be entertained to assail an "award" rendered under Section 18 of the MSMED Act, since the statute itself provides a specific remedy of challenge under Section 34 of the Arbitration and Conciliation Act. However, in the present case, having regard to Sections 15, 16, 17 and 18 read with Section 2(b)(i) and Explanations (i) and (ii), it is manifest that the Facilitation Council lacked jurisdiction over the subject matter in dispute. The issue, therefore, is one of inherent lack of jurisdiction, and not merely an erroneous exercise of jurisdiction warranting recourse under Section 34.
14 (1997) 3 SCC 261 15 (1990) 4 SCC 594 16 (2025) 5 SCC 786 17 (2025) 5 SCC 780 Page 26 of 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 25-Sep-2025 16:24:47
42. Since this Court has specifically found that the provisions of the MSMED Act could not have been invoked in the facts and circumstances of the case, the impugned awards are rendered without jurisdiction and hence, liable to be set aside on that ground alone. In such light of the matter, this Court finds it an appropriate matter to exercise its writ jurisdiction.
VIII. CONCLUSION:
43. In light of the discussion above, the Writ Petition stands allowed.
Award dated 10.07.2023, passed by the Facilitation Council, Cuttack in MSEFC Case No.56 of 2022 is set aside. The Parties are at liberty to pursue any remedy available in law.
44. Interim order, if any, passed earlier stands vacated.
45. No order as to costs.
(Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the 20th September, 2025/ Page 27 of 27