High Court Cannot Render Findings On Merits Or Jurisdiction Under Section 18 MSMED Act Once Writ Petition Under Article 226 Is Held Non-Maintainable: Supreme Court

"We are also of the opinion that having held the writ to be not maintainable, the Division Bench of the High Court could not proceeded with and made the observations that it made in paragraph 21 to 29 thereof." Supreme Court has held that once a High Court determines that a writ petition is not maintainable under Article 226 of the Constitution of India due to disputed questions of fact in a contractual dispute, it cannot proceed to make substantive observations on the merits or record findings concerning statutory jurisdiction under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).

A Bench comprising Justice K.V. Viswanathan and Justice Arun Palli, while setting aside observations made by the Gauhati High Court regarding the applicability of Section 18 of the MSMED Act, clarified that jurisdictional and maintainability challenges must be independently determined by the competent statutory forum.

The dispute originated when the respondent sub-contractor filed a writ petition before the Gauhati High Court seeking a writ of mandamus for the release of contractual dues amounting to over eleven crore rupees from the National Highways and Infrastructure Development Corporation Limited (NHIDCL). A Single Judge allowed the writ petition, but the Division Bench reversed the decision on appeal, holding that writ jurisdiction was inapplicable to such contractual claims involving disputed facts. However, while setting aside the Single Judge's judgment, the Division Bench recorded extensive findings that a buyer-supplier relationship prima facie existed between the parties and directed reference to the Micro, Small and Medium Enterprises Facilitation Council under Section 18 of the MSMED Act, 2006.

Whether a High Court exercising jurisdiction under Article 226 of the Constitution of India, after holding a contractual writ petition to be non-maintainable, can enter into the merits and decide the existence of a buyer-supplier relationship under the MSMED Act, 2006?

Whether the determination of jurisdiction and maintainability of a reference under Section 18 of the MSMED Act must be left entirely to the Facilitation Council without preemptive judicial observations by a writ court?

Examining the findings of the Division Bench, the Supreme Court concurred with the view that the writ petition was not maintainable, affirming that contested monetary claims arising out of contractual arrangements involving disputed questions of fact cannot be adjudicated under Article 226.

Writ court cannot make observations on statutory remedies once the writ petition is dismissed as non-maintainable

The Court emphasized that the Division Bench exceeded its remit by proceeding to evaluate the underlying contractual relationship under the provisions of the MSMED Act after having already concluded that the extraordinary writ jurisdiction could not be exercised.

The Bench noted that the High Court ought not to have analyzed Sections 2(d), 2(n), 15, 16, 17, and 18 of the MSMED Act or pronounced upon the existence of a buyer-supplier relationship between the principal employer and the sub-contractor.

Statutory forums must independently adjudicate jurisdiction and maintainability uninfluenced by writ court remarks

Observing that conclusive findings on the jurisdiction of the Facilitation Council could prejudice the parties, the Supreme Court specifically expunged paragraphs 21 to 29 and paragraph 32 of the Division Bench's judgment.

The Court ruled that when statutory remedies are invoked, the concerned authority or forum must remain untrammeled by any prior judicial observations delivered in a proceeding that was itself held to be non-maintainable.

Addressing the fact that proceedings were already initiated before the MSMED Facilitation Council pursuant to the High Court’s liberty, the Supreme Court underscored that the employer's objections to the maintainability and jurisdiction of the Council remain entirely intact.

The Bench made it clear that all jurisdictional defenses, including whether the sub-contractor can maintain proceedings against the principal entity under the MSMED Act, must be decided afresh by the Council on their own merits.

In conclusion, the Supreme Court upheld the Division Bench’s judgment to the extent that it set aside the Single Judge's order and dismissed the writ petition as non-maintainable, but excised all observations pertaining to the MSMED Act. The Court granted liberty to the respondent to pursue lawful remedies before the Facilitation Council, directing the Council to adjudicate all issues, including jurisdiction, uninfluenced by any prior remarks, and to dispose of the dispute within six months.

Date of Decision: October 12, 2026