Violation Of Natural Justice Overrides Bar On Maintainability Under Section 18 MSMED Act: Orissa High Court

"The availability of alternative remedy may not operate as a bar to exercise writ jurisdiction, where there is a violation of principles of natural justice or fundamental rights, or where an order in a proceeding is wholly without jurisdiction." Orissa High Court, in a significant ruling, held that a writ petition challenging an award passed by the Micro and Small Enterprises Facilitation Council (MSEFC) remains maintainable under Articles 226 and 227 of the Constitution if the petitioner demonstrates a clear violation of the principles of natural justice.

A bench of Justice B.P. Routray observed that the bar against entertaining such petitions, particularly when an alternative remedy under Section 34 of the Arbitration and Conciliation Act exists, cannot be applied rigidly when the petitioner has been denied a fair opportunity of hearing.

The petitioner-entity challenged orders passed by the MSEFC, Cuttack, which had been issued under Section 18 of the MSMED Act. The Council had proceeded ex-parte against the petitioners on December 30, 2020, following the death of the petitioner’s counsel. The petitioners contended that they were not served with adequate notice for the final hearing and that the Council had failed to grant a requested adjournment, effectively denying them an opportunity to present their case.

The primary legal issue before the Court was whether a writ petition is maintainable against an award of the MSEFC despite the existence of a statutory remedy under Section 34 of the Arbitration and Conciliation Act. Furthermore, the Court was tasked with determining whether the alleged violation of the principles of natural justice, specifically the lack of notice for a final hearing, constitutes a valid ground to bypass the pre-deposit requirement and statutory appeal process.

The Court meticulously examined the maintainability of the writ petitions in light of the Supreme Court’s decision in India Glycols Limited v. Micro and Small Enterprises Facilitation Council. While acknowledging that the Supreme Court has emphasized that the statutory remedy under Section 34 should generally be followed to ensure compliance with the pre-deposit requirements of Section 19 of the MSMED Act, the High Court clarified that this does not create an absolute bar against judicial review.

Violation of Natural Justice as a Ground for Writ

The bench observed that when a quasi-judicial body like the MSEFC fails to serve notice for a crucial final hearing, it violates the fundamental canon of natural justice. In the present case, the petitioners produced postal envelopes proving that the notice for the hearing on December 30 was only served on them on December 31. The Court held that this lack of due process distinguishes this case from those where a party simply attempts to evade statutory pre-deposit obligations.

"The petitioner was absent in the final hearing on 30th December 2020 without any fault on their part due to non-receipt of notice before time. When the petitioners have shown their bona-fideness in making deposit of the award amount before the Registry of this Court, it cannot be said that the petitioners in order to avoid the requirement of Section 19 of the MSMED Act have approached this court."

Application of Constitutional Power

The Court further noted that the power of the High Court to issue writs under Article 226 is a basic feature of the Constitution that cannot be curtailed by parliamentary legislation. While judicial restraint is necessary to prevent the derailing of the arbitral process, the Court held that it is obligated to interfere when an order is passed in total disregard of fair hearing requirements. The fact that the petitioners had already deposited the 75% award amount as an interim measure also bolstered their bona fide standing before the Court.

Significance of Delay in Adjudication

The Court emphasized that these petitions had been pending since 2021. Dismissing them now on the technical ground of alternative remedy would result in undue hardship and further delay, particularly after the petitioners had already complied with the financial conditions akin to those required under Section 19 of the MSMED Act. The court maintained that once the writ petition has been admitted and kept pending for five years, it is incumbent upon the Court to adjudicate the merits rather than relegate the parties to a fresh round of litigation.

"It cannot be also placed out of sight that these writ petitions are pending since 2021, where the petitioners have already deposited the award amount with an expectation to be heard on merit. Therefore, after keeping the writ petitions pending for around five years, it would not be justified for this court to refuse to entertain these on the question of maintainability to avail alternative remedy."

The High Court held the writ petitions to be maintainable and scheduled the matters for final hearing on September 2, 2026, to address the substantive disputes between the parties.

Date of Decision: 28 August 2026