The Madras High Court has held that a writ petition under Article 226 of the Constitution is not maintainable against an arbitral award passed by a Micro and Small Enterprises Facilitation Council under Section 18 of the MSMED Act, once the aggrieved party has invoked and exhausted the statutory remedy under Section 34 of the Arbitration and Conciliation Act, 1996. The Division Bench affirmed that the exclusive recourse thereafter is an appeal under Section 37 of the 1996 Act, and a party cannot approbate and reprobate by treating the Council's order as an award for one purpose and a nullity for another.
Background & Facts
The Dispute
The appellant, Tamil Nadu Medical Services Corporation Limited (TNMSC), a state government undertaking, issued a purchase order on 20.05.2009 to the second respondent, Atul Generators Pvt Ltd, for the procurement, supply, and installation of 130 Diesel Generator sets across various Primary Health Centres in Tamil Nadu. A repeat order for 4 additional Diesel Generator sets was placed on 22.10.2009. Upon completion of supplies, the second respondent raised bills for the full value. However, the appellant deducted an amount of Rs. 19,71,049 by way of liquidated damages, citing delayed delivery schedules.
Key Facts
- 20.05.2009: Purchase order issued for 130 DG sets
- 22.10.2009: Repeat order issued for 4 additional DG sets
- Claim Petition No. 26 of 2012: Filed by second respondent before the Uttar Pradesh State Micro and Small Enterprises Facilitation Council (first respondent) under Section 18 of the MSMED Act, aggrieved by the unilateral deduction
- 28.11.2016: Council rendered arbitral award directing refund of withheld principal along with statutory compound interest under Section 16 of the MSMED Act
- Arbitration Miscellaneous Case No. 274 of 2023: Appellant challenged the award under Section 34 of the Arbitration Act read with Section 19 of the MSMED Act before the Commercial Court at Kanpur Nagar, Uttar Pradesh
- 30.10.2023: Commercial Court dismissed the Section 34 challenge on merits
- W.P. No. 10688 of 2024: Appellant filed writ petition under Article 226 before the Madras High Court seeking quashment of the award
- 18.10.2024: Learned Single Judge dismissed the writ petition
- 16.07.2025: Division Bench of Madras High Court stayed further proceedings on the award
- 24.09.2025: Stay extended until further orders
- 29.10.2026: Present Letters Patent Appeal decided
Procedural History
The litigation traversed the following forums:
- 28.11.2016: Arbitral award passed by UP State Micro and Small Enterprises Facilitation Council in Claim Petition No. 26 of 2012
- 30.10.2023: Commercial Court, Kanpur Nagar dismissed Section 34 challenge (Arb. Misc. Case No. 274 of 2023)
- 18.10.2024: Single Judge, Madras High Court dismissed writ petition (W.P. No. 10688 of 2024)
- 29.10.2026: Division Bench dismissed Letters Patent Appeal (W.A. No. 2187 of 2025)
Relief Sought
The appellant sought setting aside of the Single Judge's order dated 18.10.2024, quashment of the arbitral award dated 28.11.2016 passed in Claim Petition No. 26 of 2012, and a declaration that the proceedings before the Council suffered from jurisdictional flaws and procedural infirmities.
The Legal Issue
The central questions were: (i) Whether a writ petition under Article 226 of the Constitution is maintainable against an arbitral award passed under Section 18 of the MSMED Act after an unsuccessful challenge under Section 34 of the Arbitration Act; and (ii) Whether a party can bypass the statutory appellate remedy prescribed under Section 37 of the Arbitration Act by invoking the extraordinary writ jurisdiction of the High Court.
Arguments Presented
For the Appellant
Learned Additional Advocate General Mr. P.V. Balasubramaniam contended that the proceedings before the Council suffered from jurisdictional flaws and procedural infirmities, rendering a writ petition under Article 226 maintainable to correct fundamental jurisdictional errors regardless of the statutory arbitration remedy. It was further submitted that the Section 34 petition was dismissed solely on grounds of delay and not on merits. Reliance was placed on Tamil Nadu Cements Corporation Ltd. v. Micro and Small Enterprises Facilitation Council (SLP (C) Diary No. 3776 of 2023, order dated 22.01.2025), where the Supreme Court referred to a Larger Bench the issues concerning maintainability of writ petitions against Council orders and whether a Council that conducts conciliation can subsequently act as an arbitrator. The appellant pleaded that the award be kept in abeyance pending the Supreme Court's reference.
For the Respondent
Learned Senior Counsel Mr. Sathish Parasaran submitted that an arbitral award under Section 18(3) of the MSMED Act carries the status of an award under the 1996 Act. Once a Section 34 application has been filed and decided, the statutory remedy is an appeal under Section 37 of the 1996 Act, and a writ petition under Article 226 cannot bypass this statutory scheme. The appellant had participated in conciliation and arbitration, filed a reply, and raised a jurisdiction objection. Having invoked Section 34 and lost, the appellant cannot now claim the Council's order is not an award - this constitutes approbation and reprobation. The award has merged into the Commercial Court's order. The Supreme Court reference in Tamil Nadu Cements was distinguishable as it involved instances where the Council issued a decree for payment immediately upon failure of conciliation, leaving no recourse other than a writ petition, unlike the present case where full arbitration proceedings occurred.
The Court's Analysis
The Division Bench, comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan, examined the statutory framework of the MSMED Act and the Arbitration Act. Under Section 18(3) of the MSMED Act, upon failure of conciliation, the Facilitation Council either takes up the dispute for arbitration itself or refers it to an institution, whereupon the provisions of the 1996 Act apply as if there was an arbitration agreement. Section 18(4) contains an overriding non-obstante clause vesting the Council with statutory jurisdiction to act as an arbitral tribunal, and any decision or award rendered possesses identical legal status, efficacy, and binding force as an arbitral award under the 1996 Act.
The Court emphasized that the 1996 Act is a self-contained code designed to minimize judicial intervention in arbitral matters. Section 34 provides a robust judicial review mechanism to set aside an award on limited grounds, while Section 37 provides a specific statutory appeal against an order granting or refusing to set aside an arbitral award. In this case, the appellant consciously filed a petition under Section 19 of the MSMED Act read with Section 34 of the 1996 Act before the competent Commercial Court at Kanpur Nagar. The appellant also raised a ground under Section 29A of the Act, which stipulates the time limit for arbitral award and applies only to an arbitral award. The Court held: "A party cannot call the order an award for one purpose and a nullity for another." Having suffered an adverse order on 30.10.2023, the appellant's legal recourse was exhaustively confined to filing an appeal under Section 37 of the 1996 Act.
The Court invoked the foundational tenet that where a statute creates a special right or liability and provides an exhaustive machinery for its enforcement and redressal, a party cannot bypass that statutory hierarchy by invoking the extraordinary discretionary writ jurisdiction under Article 226. Permitting a writ petition against an award that has merged into the order passed by the Commercial Court, particularly when the statutory remedy is an appeal under Section 37, would subvert the legislative intent of speedy resolution embedded in both the 1996 Act and the MSMED Act.
"A party cannot call the order an award for one purpose and a nullity for another. Having suffered an adverse order on 30.10.2023, the appellant's legal recourse was exhaustively confined to filing an appeal under Section 37 of the 1996 Act."
The Court distinguished the Supreme Court's reference in Tamil Nadu Cements, noting that the present case involved full arbitration proceedings after conciliation failure, not a summary decree upon conciliation failure.
The Verdict
The appeal was dismissed. The Division Bench confirmed the order dated 18.10.2024 passed by the learned Single Judge in W.P. No. 10688 of 2024. The Court held that the appellant cannot invoke the extraordinary writ jurisdiction under Article 226 as a substitute for a statutory appeal under Section 37 of the Arbitration Act. There shall be no order as to costs. Connected miscellaneous petitions (C.M.P. Nos. 16737 of 2025 and 14192 of 2026) were closed, and the interim stay order granted on 16.07.2025 and extended on 24.09.2025 was vacated.
What This Means For Similar Cases
Statutory Remedy Is Exclusive After Section 34
Once a party invokes Section 34 of the Arbitration Act against an MSMED Council award and the application is decided on merits, the statutory hierarchy is exhausted at that level. The exclusive remedy is an appeal under Section 37. Practitioners must advise clients that filing a Section 34 petition constitutes an election of remedy that precludes a subsequent writ petition under Article 226 challenging the same award.
No Approbation and Reprobation on Award Character
A party that treats a Council order as an "award" for the purpose of filing a Section 34 challenge - including raising grounds specific to arbitral awards such as Section 29A (time limit for award) - is estopped from later contending that the order is not an award but a nullity amenable to writ jurisdiction. The Court's reasoning reinforces the principle of consistency in legal positions.
Merger Doctrine Reinforces Finality
The arbitral award merges into the order of the Commercial Court deciding the Section 34 application. A writ petition thereafter seeks to reopen a settled dispute. The judgment clarifies that the merger doctrine applies with full force to MSMED Council awards, and the legislative intent of speedy resolution under both the MSMED Act and the Arbitration Act would be subverted by allowing collateral writ challenges.
