Jharkhand High Court
Bihar State Power Holding Company … vs The State Of Jharkhand Through The … on 24 June, 2026
Author: Sujit Narayan Prasad
Bench: Sujit Narayan Prasad
2026:JHHC:18734
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No.1593 of 2016
---------
Bihar State Power Holding Company Limited, a Company
incorporated and registered under the Companies Act,
1956, having office at Vidyut Bhawan, Bailey Road, P.O.
GPO, P.S. Kotwali, Town and District- Patna (Bihar),
through its Legal Supervisor, Shri Manoj Kumar, son of Sri
D.P. Chourasia, resident of Quarter No. D/18, New BSEB
Colony, P.O. & P.S.-Shashtri Nagar, Town and District-
Patna. (Bihar). ... ... Petitioner
Versus
1. The State of Jharkhand through the Deputy Director of
Industries, having office at Directorate of Industries,
Jharkhand Micro, Small Medium Enterprises Facilitation
Council, Nepal House, Doranda, P.O. & P.S. Doranda,
Town and District-Ranchi.
2. Jharkhand Urja Vikas Nigam Limited, through its
Chairman-cum-Managing Director, having office at
Dhurwa, P.O. & P.S. Dhurwa, Town and District-Ranchi.
3. M/s Gillooram Gauri Shankar, an unit of Anvil
Investments Private Limited, through its Director having
its administrative office at Sahid Ashram Road,
Baidyanath, P.O. & P.S. Deoghar, District-Deoghar.
… … Respondents
With
W.P.(C) No.1293 of 2018
———
Jharkhand Urja Vikas Nigam Limited, having its office at
Engineering Building, H.E.C. Colony, P.O. & P.S. Dhurwa,
District- Ranchi through its Law Officer Mithilesh Kumar,
aged about 52 years, Son of R.B. Choudhary, Resident of
Kusai Colony, P.O. & P.S.- Doranda, District- Ranchi,
Jharkhand. … … Petitioner
Versus
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2026:JHHC:18734
1. The State of Jharkhand through the Deputy Director of
Industries, having office at Directorate of Industries,
Jharkhand Micro, Small Medium Enterprises Facilitation
Council, Nepal House, Doranda, P.O. & P.S.- Doranda,
Dist. Ranchi.
2. Bihar State Power Holding Company Ltd., having office at
Vidyut Bhawan, Bailey Road, P.O.- GPO, P.S.- Kotwali,
Dist.- Patna.
3. M/s Gillooram Gauri Shankar, a unit of Anvil
Investments Private Limited, through its director, having
its administrative office at Sahid Ashram Road,
Baidyanath, P.O. & P.S. Deoghar, Dist. Deoghar.
… … Respondents
———
CORAM: HON’BLE MR. JUSTICE SUJIT NARAYAN PRASAD
———-
[WP(C) No.1593/2016]
For the Petitioner : Mr. Manoj Tandon, Advocate
: Ms. Neha Bhardwaj, Advocate
: Mr. Ritwik Raj, Advocate
For the Respondent : Ms. Amrita Sinha, Advocate
: Ms. Shweta Suman, Advocate
: Ms. Pragunee Kashyap, Advocate
[WP(C) No.1293/2018]
For the Petitioner : Mr. Sachin Kumar, Advocate
For the Respondent : Mr. M.S. Mittal, Sr. Advocate
: Ms. Amrita Sinha, Advocate
: Ms. Shweta Suman, Advocate
: Ms. Pragunee Kashyap, Advocate
———–
C.A.V. on 06.05.2026 Pronounced on 24/06/2026
1. Both the writ petitions have been heard together.
2. The writ petition being W.P.(C) No.1593 of 2016 is on
behalf of Bihar State Power Holding Company Limited and
W.P.(C) No.1293 of 2018 is on behalf of Jharkhand Urja
Vikas Nigam Limited. The respondent M/s Gillooram Gauri
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Shankar who was the petitioner before the MSME Council is
respondent no.3 herein in both the writ petitions.
3. Since, the writ petitioners, in both the writ petitions,
have questioned the Award passed by MSME Council
contained in Memo No.304 dated 25.01.2016 therefore, both
the instant petitions are being disposed of by this common
order.
Prayer
4. In the writ petition being W.P.(C) No.1593 of 2016 the
following prayer has been made:
“1.(i) To quash/set aside the order contained in memo no. 304
dated 25.1.2016 issued under the pen and signature of Deputy
Director of Industries, Directorate of Industries, Jharkhand Micro
Small and Medium Enterprises Facilitation Council, whereby and
whereunder, the petitioner has been directed to pay a sum of Rs.
26,92,957.00, as principal amount and interest to the respondent
no.3.
(ii) During the pendency of this writ petition, the operation of the
impugned order dated 25.1.2016 (signed on 21.1.2016) may
kindly be stayed.
(iii) For any other appropriate relief/reliefs to which the petitioner
is found to be entitled in the facts and circumstances of this case
as also to do conscionable justice to the petitioner.
(iv) For issuance of a writ of certiorari to quash and cancel the
Review order dated 15.07.2016 passed by the Jharkhand Micro,
Small and Medium Enterprises Facilitation Council in Case No.
JHMSEFC-04/2013″.
5. In W.P.(C) No. 1293 of 2018, the writ petitioner has
made the following prayer:
“1.(i) To quash/set aside the order contained in memo no. 304
dated 25.01.2016 (Annemure-3) issued under the pen and3
2026:JHHC:18734signature of Deputy Director of Industries, Directorate of
Industries, Jharkhand Micro, Small and Medium Enterprises
Facilitation Council, whereby and whereunder, the petitioner has
been directed to pay a sum of Rs. 2,48,748.00 as Principal
amount and interest to be computed by Chartered Accountant to
the respondent no.3.
ii. During the pendency of this writ petition, the operation of the
impugned order dated 25.01.2016 (signed on 21.01.2016) may
kindly be stayed.
iii. During the pendency of this writ petition, further proceeding of
Civil Execution Case No. 214 of 2017| 219 of 2017 before the
learned District and Sessions Judge, Patna for execution of the
impugned order in which, the notice has been issued to the
petitioner may kindly be stayed.
6. Thus, it is evident that the writ petitioners, in both the
writ petitions, have challenged the Award passed by MSME
Council contained in Memo No.304 dated 25.01.2016.
Factual Matrix:
7. The brief facts of the case as per the pleading made in
the writ petitions which requires to be enumerated herein,
are as under:
The case of Respondent No. 3 before the Jharkhand
Micro, Small and Medium Enterprises Facilitation Council
(herein referred to as ‘Council’) inter alia was that on
15.11.2000, Jharkhand State was created by taking out with
22 districts from Bihar. After few months, Government of
Jharkhand created Jharkhand State Electricity Board (now
known as ‘Jharkhand Urja Vikas Nigam Limited’).
In most of the purchase orders, out of 19 orders
mentioned in the claim, supply was to be made by the
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respondent no.3 in different districts of undivided Bihar. After
creation of Jharkhand, some supply was made in the districts
which are now in Jharkhand. The JSEB, the petitioner in
W.P.(C) No.1293/2018 has made one payment of Rs.
29,79,783.34 on 18.01.2003. For the balance amount, JSEB
is not entitled to make payment on the grounds that the
payment should be made by the BSEB (now known as Bihar
State Power Holding Company Limited).
It is further case of Respondent no.3 that BSEB is also
not making payment on the plea that the payment should be
made by JSEB. The respondent no.3, therefore, prayed for
payment of bill amounting to Rs. 11,55,881.52. The
respondent no.3 further claimed for refund of the penalty
deducted from the bills, which is to the tune of
Rs.57,70,570.18.
The respondent no.3 further claimed towards price
variation amount of Rs. 39,84,120.93, as also certain
ancillary interest, which is given in the application filed by
the respondent no.3 dated 04.11.2006 to the council.
Upon notice, BSEB/Bihar State Power Holding Co. Ltd.
appeared and filed a petition on 27.04.2015 before the
council and claimed for dismissal of the claim of the
respondent no.3 against BSEB on the ground that the alleged
dues are related to the payment of the place/territory which
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2026:JHHC:18734
now falls within the territorial jurisdiction of Jharkhand State
Electricity Board (now Jharkhand Urja Vikas Nigam Ltd.)
The JSEB came into existence w.e.f. 01.04.2001 and
thereafter a sum of Rs. 29,79,783.34 have been paid by the
JSEB to the applicant on 18.01.2003 as the applicant has
admitted in his representation dated 04.11.2006.
The Bihar State Electricity Board (now known as Bihar
State Power Holding Company Limited) by letter contained in
memo no. 2400 dated 13.07.2005 has already intimated the
JSEB to arrange for payment of the bills of the suppliers as
the materials were supplied in the central stores at Ranchi,
Dhanbad, Deoghar, Giridih, Dumka and Jamshedpur, which
have now fallen under the territorial jurisdiction of
Jharkhand State Electricity Board.
In this context, provisions have been made in Section 47
of the Bihar Reorganization Act, 2000, whereby the assets
and liabilities shall pass on to the state where the
undertaking is located. In the present case, therefore, JSEB
has to consider the claim and take a decision in the matter in
accordance with law.
It is the further case of the petitioner that in the
impugned order contained in memo no. 304/ Ranchi dated
25.01.2016, following observations were made by the
council:-
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2026:JHHC:18734
i. Initially, the petitioner has filed claim before the Industrial
Facilitation Council, Director of Industries, Patna on
04.11.2006 and was transferred to this council vide IFC
Bihar Letter no. 419 dated 16.03.2009 on the ground of
territorial location of the claimant unit which is at Deoghar,
Jharkhand. The claim was filed by the applicant before this
council on 09.02.2013.
ii. 16 nos. of Purchase order during 13.06.1997 to
10.07.2000 was issued by erstwhile BSEB and before the
bifurcation of the Jharkhand state on 15.11.2000 is payable
by BSEB, Bihar in terms of the contract wherein paying
authority is mentioned “Deputy Director Accounts (HQ),
BSEB, Patna.” The division of assets and liabilities in
between both the States is governed by Bihar Re-
Organization Act and is not relevant for this purpose.
iii. The remaining 3 nos. of purchase order were issued by
BSEB after bifurcation of states and the supply pertains to
Bihar State.
iv. The Applicant did not submit the copy of purchase order,
break up of 5% or 10% of retention money towards bank
guarantee separately against JSEB and BSEB.
It is stated that from bare perusal of the observation
made in the impugned order contained in memo no. 304
dated 25.01.2016, it is evident that the purchase order at
every instance was issued by erstwhile BSEB. Hence, claims
prior to 15.11.2000 is payable by BSEB, Bihar in terms of the
contract. Further, the remaining 3 nos. of purchase order
were issued by BSEB after bifurcation of states and the
supply pertains to Bihar State.
While determination of Principal outstanding, the
council has taken into consideration the deductions from
Suppliers bills towards the Bank Guarantee, penalties
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2026:JHHC:18734
imposed on the claimant and other deductions that has been
made. In this context, it is stated that such deductions have
been made by erstwhile BSEB and hence it shall be the sole
liability of BSEB to pay any such amount as deducted or
penalized by them.
Another writ petition being W.P.(C) No. 1593 of 2016
was filed Bihar State Power Holding Company Limited
wherein vide order dated 30.01.2018, the Hon’ble Court has
been pleased to stay the operation of the order dated
25.01.2016 passed by the Council in Case No. JHMSEFC-
04/2013.
8. It would be evident from order dated 22.04.2026 and
29.04.2026 passed by this Court that Mr. M.S. Mittal,
learned senior counsel appearing for the respondent no.3 has
raised the preliminary issue of maintainability of the present
writ petitions.
9. This Court has heard the learned counsel for the parties
on the issue of preliminary issue of maintainability.
10. This Court has thought it proper to decide the issue of
maintainability and depending upon its outcome, the issue
on merit will be taken into consideration.
Submission on behalf of the Petitioners:
11. As per the writ petitioner, the MSME Council was not
duly been formulated in terms of the statutory mandate as
contained under Section 21 of the Micro, Small and Medium
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2026:JHHC:18734
Enterprises Development Act, 2006 (hereinafter to be referred
to as the Act, 2006) which mandates that the Coram of the
Council will be in between 3 to 5 whereas the Coram of the
Council which has passed the Award is 8 in number. Hence,
the Council comprising of 8 members since has passed the
Award which is in the teeth of provision of Section 21 of the
MSME Act, 2006 and, as such, the said Award is void ab
initio.
12. The learned counsel in order to substantiate the
aforesaid settled position of law has relied upon the
Judgment of this Court in the case of Jharkhand Bijli
Vitran Nigam Limited vs Vexcel Upkram Pvt Ltd reported
in 2022 SCC Online Jhar 1459. It is submitted that against
the said judgment SLP Diary No. 10530/2023 filed by the
respondent Vexcel before the Hon’ble Apex Court has been
dismissed vide order dated 10.04.2023.
13. The learned counsel for the petitioners has submitted
that an award which is null and void can be challenged at
any stage even in a collateral proceeding and there is no need
to file an application u/s.34 of the Arbitration and
Conciliation Act, 1996. The learned counsel for the petitioner
in order to fortify this limb of argument has put his reliance
upon the Judgment of the Hon’ble Supreme Court in the case
of Electrosteel Steel Limited vs Ispat Carrier Private
Limited, reported in (2025) 7 SCC 773.
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2026:JHHC:18734
14. The learned counsel for the petitioners has submitted
that in view of the submissions made hereinabove, the award
dated 25.01.2016 and review order dated 15.07.2016 both
are fit to quashed and set aside being null and void
Submission on behalf of the Respondents:
15. Per contra, Mr. M.S. Mittal, learned senior counsel and
Ms. Amrita Sinha, learned counsel, representing the
respondents in both the writ petitions, have taken the ground
that even accepting the fact that the constitution of Council
was not as per the provision of Section 21 of the Act, 2006
and even accepting the jurisdictional error of the Council, the
only forum available to the writ petitioners are Section 34 of
the Arbitration and Conciliation Act, 1996.
16. It has been contended that the remedy is already
available under the Arbitration and Conciliation Act, 1996
wherein all the issues including the issues of jurisdiction can
be agitated, hence, the present writ petition is not
maintainable.
17. It is submitted that the challenge to composition of
Tribunal is well within the scope of Section 16 of the
Arbitration Act, wherein a party can challenge as to whether
the Arbitral Tribunal has been properly constituted. It is
therefore submitted that the Petitioner has waived its right to
challenge the constitution of the Arbitral Tribunal i.e.,
Facilitation Council. Hence Petitioner is not entitled to any
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relief in the present Writ Application. The learned counsel for
respondent no.3 has placed his reliance on the judgment
rendered by the Hon’ble Apex Court in the case of Bhaven
Construction v. Executive Engineer, Sardar Sarovar
Narmada Nigam Limited and Anr. [(2022) 1 SCC 75].
18. The learned senior counsel for the respondent no. 3 has
submitted that according to the Scheme of Arbitration Act, an
Award has to be challenged under Section 34 of the
Arbitration and Conciliation Act, 1996. Sub-Section 1 of
Section 34 emphasizes that recourse to Court against an
Arbitral Award may only by an application setting aside such
Award in accordance to Sub-Section 2 (2) (3) and Sub-Section
2(a)(v) contemplates that Award can be challenged on the
ground of composition of the Arbitral Tribunal as well. The
learned senior counsel has placed his reliance upon the
judgment rendered by the Hon’ble Apex Court in the case of
India Glycols Ltd. Vs. MSEFC, Medchal – Malkajgiri and
Ors., (2025) 5 SCC 780.
Response of the learned counsel for the petitioners
19. In response to the aforesaid argument, learned counsel
appearing for the writ petitioners has submitted that, so far
as the contention regarding the availability of remedy under
Section 34 of the Arbitration and Conciliation Act, 1996 is
concerned, the same is not available in the facts and
circumstances of the present case. It has been urged that
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where the very constitution of the Council is not in
pursuance of the statutory provision contained under Section
21 of the Act, 2006, such admitted fact obviates the necessity
of relegating the writ petitioners to raise the issue of
jurisdiction under Section 34 of the Arbitration and
Conciliation Act. Learned counsel has further submitted that
it is a settled position of law that even a right decision
rendered by a wrong forum is no decision in the eye of law, as
has been held by the Hon’ble Supreme Court in Pandurang &
Ors. v. State of Maharashtra [(1986) 4 SCC 436].
Accordingly, the objection as to the maintainability of the
present petitions is not fit to be accepted.
Issues for consideration
20. On the basis of the aforesaid factual aspects, this Court
is required to consider the following issues: —
(i) Whether the Award which has been passed by MSME
Council is void ab initio due to the constitution of
Coram of the Council being exceeding its number as
mandated under the Act, 2006?
(ii) Whether the issue of jurisdiction which is evident
from the face of the order needs to be raised at the
stage of Section 34 of the Arbitration and Conciliation
Act, 1996 or it can be entertained under Article 226
of the Constitution of India?
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Analysis
21. Both the issues are being taken up together since both
are interlinked with each other.
22. This Court, before considering the aforesaid issues,
needs to refer herein that the object and intent of the
Arbitration and Conciliation Act, 1996 is the expeditious
disposal of the commercial disputes without consuming
much time.
23. The Arbitration and Conciliation Act, 1996 is a self-
contained Code having provisions to raise all the issues
depending upon the terms and conditions of the contract. For
the purpose of resolution of dispute, as per the condition of
arbitration clause, if available in the contract, the application
is to be filed under Section 11(6) of the Arbitration and
Conciliation Act, 1996 for appointment of Arbitrator said to
be in terms of the contract. If the contract reflects that it will
be sole arbitrator, then the High Court exercising the power
under Section 11(6) of the Arbitration and Conciliation Act,
1996 will appoint the sole arbitrator but if the contract
reflects that the dispute is to be resolved by the Arbitration
Tribunal, then while exercising the power conferred under
Section 11(6) of the Arbitration and Conciliation Act, 1996,
the Court will appoint the Arbitration Tribunal.
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24. The Arbitrator while adjudicating the issue is supposed
to consider each and every aspect of the matter including the
issue of limitation and jurisdiction. After passing of the final
Award, the same is to be challenged under Section 34 of the
Arbitration and Conciliation Act, 1996 subject to availability
of condition as contained therein, for ready reference, Section
34 of the Arbitration and Conciliation Act, 1996 is being
referred herein :-
“34. Application for setting aside arbitral award.–(1)
Recourse to a Court against an arbitral award may be made
only by an application for setting aside such award in
accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court
only if–
(a) the party making the application establishes
on the basis of the record of the arbitral tribunal
that–
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for the
time being in force; or
(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration: Provided that, if the decisions on matters
submitted to arbitration can be separated from those14
2026:JHHC:18734not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to
arbitration may be set aside; or
(v) the composition of the arbitral tribunal
or the arbitral procedure was not in accordance
with the agreement of the parties, unless such
agreement was in conflict with a provision of this
Part from which the parties cannot derogate, or,
failing such agreement, was not in accordance
with this Part; or
(b) the Court finds that–
(i) the subject-matter of the dispute is not
capable of settlement by arbitration under the law for
the time being in force, or
(ii) the arbitral award is in conflict with the
public policy of India.
Explanation 1.–For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy
of India, only if,–
(i) the making of the award was induced or
affected by fraud or corruption or was in violation of
section 75 or section 81; or
(ii) it is in contravention with the fundamental
policy of Indian law; or
(iii) it is in conflict with the most basic notions
of morality or justice.
Explanation 2.–For the avoidance of doubt, the test
as to whether there is a contravention with the
fundamental policy of Indian law shall not entail a review
on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside
by the Court, if the Court finds that the award is vitiated by
patent illegality appearing on the face of the award:
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Provided that an award shall not be set aside
merely on the ground of an erroneous application of
the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after
three months have elapsed from the date on which the
party making that application had received the arbitral
award or, if a request had been made under section 33,
from the date on which that request had been disposed of
by the arbitral tribunal: Provided that if the Court is
satisfied that the applicant was prevented by sufficient
cause from making the application within the said period of
three months it may entertain the application within a
further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the
Court may, where it is appropriate and it is so requested by
a party, adjourn the proceedings for a period of time
determined by it in order to give the arbitral tribunal an
opportunity to resume the arbitral proceedings or to take
such other action as in the opinion of arbitral tribunal will
eliminate the grounds for setting aside the arbitral award.
(5) An application under this section shall be filed by a
party only after issuing a prior notice to the other party and
such application shall be accompanied by an affidavit by
the applicant endorsing compliance with the said
requirement.
(6) An application under this section shall be disposed of
expeditiously, and in any event, within a period of one year
from the date on which the notice referred to in sub-section
(5) is served upon the other party.”
25. The appeal against the order passed under Section 34 of
the Act, 1996 is to be filed under Section 37 depending upon
the availability of condition as referred therein, for ready
reference, Section 37 of the Act, 1996 is being referred
hereunder :-
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“37. Appealable orders.–(1) Notwithstanding anything
contained in any other law for the time being in force, an
appeal shall lie from the following orders (and from no
others) to the Court authorised by law to hear appeals from
original decrees of the Court passing the order, namely:–
(a) refusing to refer the parties to arbitration
under section 8;
(b) granting or refusing to grant any measure
under section 9;
(c) setting aside or refusing to set aside an
arbitral award under section 34.
(2) Appeal shall also lie to a court from an order of the
arbitral tribunal–
(a) accepting the plea referred to in sub-section
(2) or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim
measure under section 17.
(3) No second appeal shall lie from an order passed in
appeal under this section, but nothing in this section shall
affect or takeaway any right to appeal to the Supreme
Court.”
26. The aforesaid arrangement was available till enactment
of Commercial Courts Act, 2015 wherein the forum has been
provided after enactment of the Act, 2015 i.e., by filing appeal
under Section 13(1A) which is for the basic purpose of
expeditious disposal of the appeal.
27. The MSME Act, 2006 (Act 2006) has been enacted with
the sole object to have the security in the mind of small
entrepreneurs on the issue of the resolution of the
commercial dispute by way of expeditious disposal.
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28. The issue of dispute of the entrepreneurs who are being
covered under the Act, 2006 is to be dealt with under the
provision of Section 18 which is being referred herein :-
“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.
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(5) Every reference made under this section shall be
decided within a period of ninety days from the date of
making such a reference.”
29. Section 18 (1) provides that in case of any dispute, the
same is to be raised before the Council and the Council after
getting the dispute on its own or by nominating a Conciliator
is to resolve the dispute as per the provision made under
30. The conciliation, if failed, then the Council is to
adjudicate the dispute in view of the power conferred under
Section 18(3) of the Act, 2006.
31. The provision of appeal has been provided under Section
19 of the Act, 2006 having the second proviso that the party
aggrieved is to prefer appeal of an order passed under Section
18(3) of the Act, 2006 by the Council before the appellate
forum subject to deposit of 75% of the decree/award amount,
for ready reference Section 19 of the Act, 2006 is before
referred herein: –
“19.Application for setting aside decree, award or
order.–No application for setting aside any decree, award
or other order made either by the Council itself or by any
institution or centre providing alternate dispute resolution
services to which a reference is made by the Council, shall
be entertained by any 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, as the case
may be, the other order in the manner directed by such
court:
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Provided that pending disposal of the
application to set aside the decree, award or order,
the court shall order that such percentage of the
amount deposited shall be paid to the supplier, as it
considers reasonable under the circumstances of the
case, subject to such conditions as it deems
necessary to impose.”
32. The Act, 2006, therefore, is also a self-contained Code
but the Council before adjudicating the issue is to take help
of the Arbitration and Conciliation Act, 1996, as would be
evident from Section 18(2) wherein it has been mandated that
the Council on its own or by appointing a Conciliator is to
resolve the issue failing which the Council will adjudicate in
view of the provision of Section 18(3).
33. It is, thus, evident that while resolving the dispute
through conciliation mechanism, the provision of Arbitration
and Conciliation Act, 1996 is to be invoked by the Council
and in such situation, if the dispute is being resolved by the
Conciliator, then the same will attain its finality but in case of
non-resolution of the dispute by the Conciliator, the Council
is to adjudicate by passing an Award. Such Award is to be
passed by the Council.
34. The constitution of the Council has been provided under
Section 21 of the Act, 2006 as per which the members of the
Council is to be in between 3 to 5, for ready reference,
Section 21 of the Act, 2006 is being referred herein :-
20
2026:JHHC:18734
“21. Composition of Micro and Small Enterprises
Facilitation Council.–(1) The Micro and Small Enterprise
Facilitation Council shall consist of not less than three but
not more than five members to be appointed from amongst
the following categories, namely:–
(i) Director of Industries, by whatever name called, or
any other officer not below the rank of such Director,
in the Department of the State Government having
administrative control of the small scale industries
or, as the case may be, micro, small and medium
enterprises; and
(ii) one or more office-bearers or representatives of
associations of micro or small industry or enterprises
in the State; and
(iii) one or more representatives of banks and
financial institutions lending to micro or small
enterprises; or
(iv) one or more persons having special knowledge in
the field of industry, finance, law, trade or commerce.
(2) The person appointed under clause (i) of sub-section (1)
shall be the Chairperson of the Micro and Small
Enterprises Facilitation Council.
(3) The composition of the Micro and Small Enterprises
Facilitation Council, the manner of filling vacancies of its
members and the procedure to be followed in the discharge
of their functions by the members shall be such as may be
prescribed by the State Government.”
35. Section 21 of the MSMED Act is clear and unambiguous
in its terms, when it says that the Micro and Small
Enterprises Facilitation Council shall consist of not less than
three but not more than five members, to be appointed
amongst the categories detailed under that section. There is
21
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no scope of any inclusion of more members in the Council as
per Section 21 of the Act.
36. The factual aspect as available in the present case is
that the dispute arose in between the parties and when the
dispute has not been resolved, then the Council was
approached and accordingly the impugned order dated
25.01.2016 has been passed.
37. The question which has been raised on behalf of the
petitioners is that the Coram of Council is to be as per the
provision of Section 21 of the Act, 2006, i.e., in between 3 to
5 but the number of members of the Council who have
passed the said Award is 8 and, therefore, the Award has
been questioned by giving a declaration to that effect before
this Court that it is without jurisdiction being adjudicated by
the Council not in consonance with the provision of Section
21 of the Act, 2006.
38. Per contra respondent no.3 has contended that there is
no scope of challenge of the impugned Award on the ground
that the constitution of the Council was in teeth of Section 21
of the MSMED Act and accordingly, the only remedy left to
the petitioner was to challenge the Award before the
Commercial Court, under Section 34 of the Arbitration Act
and further the said issue has never been raised before the
council, therefore the present writ petitions are not
maintainable.
22
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39. In response, learned counsel for the petitioners has
submitted that since the issue of jurisdiction strikes at the
root of the matter, the Award is liable to be declared void ab
initio. It has been urged that such a legal issue can
appropriately be raised even at this stage. Furthermore, once
the Award is void ab initio, recourse to Section 34 of the
Arbitration and Conciliation Act, 1996 is not required,
therefore the contention of respondent no.3 about the
maintainability of the instant petition is not fit to be
accepted.
40. At this juncture, it needs to refer herein that the Rule 4
of the Jharkhand Micro, Small & Medium Enterprises
Facilitation Council Rules, 2007 was formulated in the year
2007 mandating therein that the Council shall consist of not
less than five and not more than nine members. The said
Rule, however, was challenged by filing a writ petition being
W.P.C. No. 3699 of 2015 on the ground that the number of
the members of the Council cannot exceed the number which
has been mentioned under Section 21 of the Act, 2006 on the
principle that the Rule cannot run contrary to the parent Act.
41. The Division Bench of this Court has passed an order
dated 05.03.2020 in W.P.C. No. 3699 of 2015 has observed
that Rule 4 of 2007 Rules was ultra-virus the MSMED Act, is
not only the contention of the petitioner, rather it is well
acknowledged even by the State Government, inasmuch as
23
2026:JHHC:18734
the State Government realized its mistake and has repealed
the 2007 Rules, bringing fresh 2017 Rules, bringing new Rule
4 therein, which is in consonance with Section 21 of the
MSMED Act. For ready reference the relevant paragraphs of
the said judgment are being quoted as under:
“24. Having heard the learned counsels for the parties and
upon going through the record, we find that Section 21 of the
MSMED Act is clear and unambiguous in its terms, when it
says that the Micro and Small Enterprises Facilitation Council
shall consist of not less than three but not more than five
members, to be appointed amongst the categories detailed
under that section. There is no scope of any inclusion of more
members in the Council as per Section 21 of the Act. Rule 4 of
the 2007 Rules was in clear contravention of Section 21 of the
MSMED Act, when it provided for the constitution of the
Council with not less than five and not more than nine
members in the Council, and in fact, pursuant to the said
Rule, the Council was even constituted by the State
Government with nine members. Clearly the constitution of
the said Council was in accordance with Rule 4 of the 2007
Rules, whereas in clear contravention of Section 21 of the
MSMED Act. In case, the petitioner is forced to challenge the
impugned Award before the Commercial Court, under Section
34 of the Arbitration Act, the only answer that is likely to
come from the Commercial Court is that the constitution of
the Council was in accordance with the Rules, which was
binding on the Commercial Court, and as there is no scope for
the Commercial Court to entertain the appeal on the ground
that Rule 4 of 2007 Rules was ultra-vires Section 21 of the
Act. Accordingly, no effective and efficacious remedy was
available to the petitioner before the Commercial Court.
Indeed there is no alternative remedy to the petitioner to
challenge the notices issued by the Council, as no appeal is
provided against the notice issued by the Council, either
under the MSMED Act, or under Section 37 of the Arbitration
Act. In that view of the matter, we are of the considered view24
2026:JHHC:18734that the arguments of the learned Additional Advocate General
and the learned counsel for the private respondent that it was
open for the petitioner to challenge the impugned Award
before the Commercial Court, though such remedy is
available, but it was not effective and efficacious in the sense
that the Commercial Court could not look into the virus of the
Rules.
26. In view of the settled law on the subject, we find that in
spite of the specific provision of appeal under Section 34 of
the Arbitration Act, these writ applications are quite
maintainable, in view of the fact that the impugned Award /
notices are challenged on the ground of competency of the
Council, constitution of which is ultra-vires Section 21 of the
MSMED Act. The fact that Rule 4 of 2017 Rules was ultra-
virus the MSMED Act, is not only the contention of the
petitioner, rather it is well acknowledged even by the State
Government, inasmuch as the State Government realized its
mistake and has repealed the 2007 Rules, bringing fresh 2017
Rules, bringing new Rule 4 therein, which is in consonance
with Section 21 of the MSMED Act.
27. In that view of the matter, we are of the considered view
that these writ applications of the petitioner cannot be thrown
away on the ground of availability of the alternative remedy
under Section 34 of the Arbitration Act, as the petitioner had
no effective and efficacious remedy before the Commercial
Court. Accordingly, the impugned Award communicated to the
petitioners under Memo No. 1954 dated 20.07.2015, as
contained in Annexure-11 to the W.P.C. No.3699 of 2015 and
the notices dated 31.01.2017 and 15.03.2017, as contained in
Annexures-1 and 2 in the other three writ applications, are
hereby, quashed.
28. The liberty is given to the Council, constituted under the
2017 Rules, to issue fresh notices to the petitioner and also to
adjudicate the matter afresh by passing a fresh Award in
accordance with law. 29. All these writ applications are
accordingly, allowed with the directions as above. The pending
Interlocutory Application also stands disposed of.
25
2026:JHHC:18734
42. It requires to refer herein that the another Division
Bench of this Court has also passed an order in the case of
L.P.A. No. 242 of 2022 (The Jharkhand Bijli Vitran Nigam
Ltd Vs. Vexcel Upkram Private Limited) on the same issue
wherein the Award was passed by the Council comprising of
8 members and this Court has come to the conclusive
finding holding the Award to be passed by the authority
having no jurisdiction being contrary to its constitution in the
teeth of Section 21 of the Act, 2006, for ready reference, the
relevant paragraphs of the order passed by the Division
Bench is being referred herein:-
11.–Thus, it is evident that where a Court lacks inherent
jurisdiction in passing a decree or making an order, a decree
or order passed by such court would be without jurisdiction,
non est and void ab initio. The defect of jurisdiction of the
court goes to the root of the matter and strikes at the very
authority of the Court to pass a decree or make an order.
Such defect has always been treated as basic and
fundamental and a decree or order passed by a Court or an
authority having no jurisdiction is a nullity. Validity of such
decree or order can be challenged at any stage, even in
execution or collateral proceedings.
13.—-Thus, it is evident that the provision of Section 21 of
the Act, 2006 provides composition of the Council cannot be
less than three or more than five members and if the Council
has been constituted of members having less than three or
more than five, it will be said to be contrary to the statutory
provision and the thing which is contrary to the statutory
provision will be said to suffer from a jurisdictional error.
14. In the case in hand, order which was passed by the
Council during the relevant time consists of eight members.
However, the constitution of Council consisting of eight
26
2026:JHHC:18734
members is contrary to the provision of Section 21 of the
MSMED Act, 2006.
15. It requires to refer herein that under the parent Act rule
was formulated in the year 2007, known as “Jharkhand Micro
and Small Enterprises Facilitation Council Rules, 2007,
wherein it was provided, as would be evident from Rule 4
(repeal rule) that the constitution of Council will not be less
than five and not more than nine members.
Subsequent to the aforesaid rule, an amended rule has
come in the year 2017 by which the provision as contained
under Rule 4 about composition of the Council by making it
strictly in terms of the provision of Section 21 of the Act,
2006, wherein it has been provided that maximum number of
members in the Council shall not be more than five.
16. Issue regarding constitution of Council fell for
consideration before Co-ordinate Bench of this Court wherein
award passed by the Council was questioned. The Co-ordinate
Division Bench of this Court in W.P. (C) No. 3699 of 2015 with
analogous case vide order dated 05.03.2020 has held that
constitution of coram of the Council being in the teeth of
provision of Section 21 of the Act, 2006 to be invalid by taking
into consideration the subsequent amendment by way of
Rules, 2017.
17. Further, this Court while dealing with the aforesaid issue
in L.P.A. No. 230 of 2019 [M/s Heavy Engineering
Corporation Limited Vs. The State of Jharkhand & Ors]
has dealt with the issue and interfered with the award mainly
on the ground that such award was passed by a Council
consisting of eight members, as would appear from paragraph
17 thereof, which reads as under:
“17.This Court, after considering the order passed by
Coordinate Division Bench of this Court on the validity of the
provision, more particularly regarding the Constitution of
Coram of the Council which was held to be invalid being
found to be in the teeth of Section 21 of the Act, 2006, so far it
relates to Rules, 2007 is concerned, is of the view that the
order passed by the Council is declared to be illegal since is27
2026:JHHC:18734passed contrary to the parent Act, which provides a provision
as under Section 21 of the Act, 2006 and the Rule of the year
2007, which has been held to be invalid. Admittedly, the State
Government has amended the provision of Rules, 2007 by
bringing the amended Rules, 2017 but the impugned order
which is the subject matter of the lis herein has been passed
during the period when the provision of Rules, 2007 was in
vogue and that is the reason, Mr. Manoj Tandon, learned
counsel for respondent no. 2 has taken an additional ground
that the Constitution of Council which was consisting of eight
members cannot be said to be invalid since was constituted in
terms of provision of Rules, 2007. However, the Co-ordinate
Division Bench of this Court has considered Rules, 2007 to be
invalid more so in the meanwhile amended Rule, 2017 has
come as also even the parent Act, 2006 under Section 21, the
composition of Coram of Council has been provided but
admittedly the constitution of Coram was not in terms of
Section 21 of the Act, 2006 and even then it was in terms of
Rules, 2007 but the constitution of Council in terms of
provision of Section 21 of the Act, 2006 cannot be said to be
in consonance with the statutory provision as contained
under the Act, 2006 as per the provision made under Section
21 thereof. Therefore, according to our considered view, the
constitution of Coram which admittedly was constituted of
eight members cannot be said to be in terms of Section 21 of
the Act, 2006 and as such the very constitution of Coram
since it is in the teeth of Section 21 of the Act, 2006, cannot
be said to be a proper constitution of Council, is held to be in
the teeth of Section 21 of the Act, 2006.
Since the Hon’ble Apex Court in Balvant N. Viswamitra & Ors
Vs. Yadav Sadashiv Mule (Dead) through LRs (supra) has held
that where a Court lacks inherent jurisdiction in passing a
decree or making an order, a decree or order passed by such
court would be without jurisdiction, non est and void ab initio.
A defect of jurisdiction of the court goes to the root of the
matter and strikes at the very authority of the Court to pass a
decree or make an order. Such defect has always been treated
as basic and fundamental and a decree or order passed by a
Court or an authority having no jurisdiction is a nullity.
28
2026:JHHC:18734
Therefore, according to our considered view the order passed
by the Council is held to be nullity in the eyes of law.”
18. However, another issue has been raised that in L.P.A. No.
230 of 2019 the State of Jharkhand was one of the
respondents and as such there was a response of the State of
Jharkhand regarding legality and propriety of the constitution
of Council but in the given case the State of Jharkhand is not
a party and hence the exact position of law i.e., the coram of
the Facilitation Council cannot be adjudicated since the
Facilitation Council has been constituted by the State of
Jharkhand and as such it is only the State of Jharkhand
which can give proper response regarding legality and
propriety of the Council as to whether it is in consonance with
the provision of Section 21 of the Act or not? 19. But we, after
appreciating the aforesaid argument, are not at all impressed
with the same reason being that the issue has already been
decided by the Co-ordinate 18 Division Bench of this Court in
W.P.(C) No. 3699 of 2015 wherein the validity of provision of
Rules, 2007 was under challenge which contains a provision
as under Rule 4 wherein provision has been made about the
Coram of the constitution but the provision of Rule 2007 has
been declared to be invalid having not been in consonance
with the provision of Section 21 of the MSMED Act, 2006, as
contained under paragraph 24 of the aforesaid judgment.
Therefore, the moment the provision of Rule 2007 which
contains a provision as under Rule 4 stipulates therein about
the number of coram of facilitation council since has been
declared to be invalid, therefore, it will be treated to be not in
existence from the date when it has been promulgated. As
such the implied meaning of the same will be that there is no
provision of Rule 2007 which contains a provision as under
Rule 4 stipulating therein about the number of coram of
facilitation council. Therefore, in absence of any rule having
not been formulated by the State of Jharkhand, the provision
of Rule 21 of the MSME Act, 2006 will automatically be
operative which provides the minimum as well as maximum
number of coram of the facilitation council.
29
2026:JHHC:18734
20. Even otherwise also if any law has been formulated and
the aforesaid law if is in the teeth of the parent Act as in the
given case, the law which is not in consonance with the parent
Act is required to be ignored. However, such situation is not
existing in the facts of the given case since herein provision of
Rule 2007 containing therein the number of coram of
constitution of facilitation council has already been declared
invalid and as such any decision taken by the Facilitation
Council, which is not in consonance with the provision
Section 21 of the MSMED Act, 2006, will be said be invalid
and void ab initio.
21. This Court, in view of the aforesaid discussion, is of the
considered view that since the similar issue has already been
decided by this Court and as such there is no reason to take
different view and therefore the award which is impugned in
this intra court appeal is required to be interfered with on the
ground of jurisdictional error of the Facilitation Council.
22. It also requires to refer herein that the issue of jurisdiction
of the Facilitation Council however was not agitated before the
learned Single Judge and as such the said issue has not fell
for consideration and in that view of the matter, the learned
Single Judge has taken the ground to hold the writ petition
not maintainable on the ground of statutory remedy available
under law which cannot be said to suffer from patent
illegality. But the issue of jurisdiction based upon the
quorum-non-judis is the thrust of argument in the instant
intra-court appeal, which we have already considered in L.P.A.
No. 230 of 2019, based upon the judgment passed by Co-
ordinate Division Bench in W.P. (C) No. 3699 of 2015 &
Analogous Cases, this Court has got no option but to interfere
with the impugned order. Accordingly, the instant intra-court
appeal stands allowed.”
43. It needs to refer herein that the order passed by the
Division Bench of this Court on the point of jurisdiction of the
MSME Council in the said L.P.A. No. 242 of 2022 (The
Jharkhand Bijli Vitran Nigam Ltd Vs. Vexcel Upkram
30
2026:JHHC:18734
Private Limited) has been assailed before the Hon’ble Apex
Court but vide order dated 10-04-2023 the same was
dismissed as withdrawn.
44. Heavy reliance has been placed upon the aforesaid
judgments passed by this Court by the learned counsel
appearing for the writ petitioners.
45. While on the other hand, learned senior counsel
appearing for the respondentnp.3, have relied upon the
judgments for the purpose of strengthening the argument
that the point of jurisdiction is one of the issues which can
well be agitated before the forum under Section 34 of the Act,
1996. Reliance has been placed upon the judgment rendered
by the Hon’ble Apex Court in the case of India Glycols Ltd.
v. MSEFC(supra).
46. The factual background of the said case is that on 28-
10-2021, the Facilitation Council decreed the claim in the
principal sum of Rs 40,29,862, on which interest with
monthly rests at three times the bank rate prevailing as on
the date of the award was granted under Section 16 from the
appointed day till final payment.The award of the Facilitation
Council was challenged in a petition under Articles 226/227
of the Constitution. By a judgment and order dated 14-9-
2022 a Single Judge of the High Court of Telangana allowed
the writ petition and set aside the award on the ground that
the claim was barred by limitation.
31
2026:JHHC:18734
47. In an appeal by the second respondent, the Division
Bench by its judgment dated 21-3-2023, reversed the view of
the Single Judge. The Division Bench has come to the
conclusion that the writ petition instituted by the appellant
was not maintainable in view of the specific remedies which
are provided under the special statute. The High Court held
that the appellant ought to have taken recourse to the
remedy under Section 34 of the Arbitration and Conciliation
Act, 1996 (“the 1996 Act”) and having failed to do so, a writ
petition could not be entertained.
48. The Hon’ble Apex Court while considering the scope of
Section 18 and 19 of the Act 2006 has observed that in
terms of Section 19, an application for setting aside an award
of the Facilitation Council cannot be entertained by any court
unless the appellant has deposited seventy-five per cent of
the amount in terms of the award. In view of the provisions of
Section 18(4), where the Facilitation Council proceeds to
arbitrate upon a dispute, the provisions of the 1996 Act are
to apply to the dispute as if it is in pursuance of an
arbitration agreement under sub-section (1) of Section 7 of
that Act. Hence, the remedy which is provided under Section
34 of the 1996 Act would govern an award of the Facilitation
Council.
32
2026:JHHC:18734
49. The applicability of the said judgment in the light of the
argument that the issue of jurisdiction which is the subject
matter of the present writ petitions can well be raised under
Section 34 of the Act, 1996. There is no dispute upon the
settled position of law that the Facilitation Council proceeds
to arbitrate upon a dispute, the provisions of the 1996 Act
are to apply to the dispute as if it is in pursuance of an
arbitration agreement under sub-section (1) of Section 7 of
that Act. Hence, the remedy which is provided under Section
34 of the 1996 Act would govern an award of the Facilitation
Council.
50. In the instant case, the core issue is whether, if the
Award passed by the Council is itself void ab initio owing to
lack of jurisdiction, the jurisdiction of the High Court under
Article 226 of the Constitution of India would nonetheless
stand excluded merely on account of the availability of an
alternative remedy under Section 34 of the Arbitration and
Conciliation Act, 1996.
51. It is settled position of law that the power of the High
Court under Article 226 of the Constitution of India to issue
writs/directions is a basic feature of the Constitution and
cannot be curtailed by parliamentary legislation. However,
the High Court under Articles 226 of the Constitution of India
would interfere rarely in exceptional circumstances in the
arbitral proceedings, when the order passed by the
33
2026:JHHC:18734
Facilitation Council/Arbitral Tribunal is perverse and
patently lacking in inherent jurisdiction and, when there is
no semblance of “Award” as contemplated under Section 18
of the MSMED Act.
52. This Court is not in dispute that the issue of jurisdiction
is based upon the mixed question of law and fact which is to
be agitated under Section 34 of the Act, 1996 for the purpose
of its adjudication by leading evidence under Section 34 of
the Act, 1996.
53. But the question herein is that as to whether the
constitution of forum if found to be not in consonance with
the statutory mandate as provided under Section 21 of the
Act, 2006, will it be said to be mixed question of law and fact
involving the jurisdictional issue.
54. This Court is of the view that there is wide difference in
between the mixed question of law and fact involving the
jurisdictional issue and the constitution of the forum if the
specific provision has been provided under the Act.
55. The constitution of Council whether it is to be in
consonance with the Act 2006 is the main plank of the
argument of the writ petitioners.
56. The law is well settled that the constitution of Council is
to be as per the mandate of the statute. It has been mandated
34
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under Section 21 of the Act, 2006 that the number of the
members of the Council will be in between 3 to 5.
57. The State of Jharkhand although has exceeded its
jurisdiction by constituting the Council comprising of 8
members which has been held to be in the teeth of Section 21
of the Act, 2006, meaning thereby, the statute which has
been formulated by the State by constituting the Council
comprising 8 members, has been held to be not in
consonance with Section 21 of the Act, 2006. The order dated
17.11.2022 passed in L.P.A. No. 242 of 2022 also clarifies the
situation that the coram of the Council must be in
consonance with the statutory mandate.
58. The same can be understood in the way that in a case
where the Arbitrator is to be appointed it must be strictly in
terms of the contract. If the contract provides that the
Arbitrator will be the sole Arbitrator for adjudication then it
will comprise of only one Arbitrator. But, if the contract
provides that the adjudication is to be made by the
Arbitration Tribunal comprising of three members, then it
should comprise three members only, meaning thereby, the
constitution of Arbitrator is also on the basis of terms and
conditions of the contract is being agreed in between the
parties at the time of entering into the contract.
59. Here, although it is not a case of contract, but, it is
statutory mandate wherein there is no occasion of entering
35
2026:JHHC:18734
into the contract, rather to facilitate the small entrepreneurs,
the statutory mandate has been carved out for providing an
adjudicatory mechanism for which the Council has been
decided to be constituted as mandated.
60. The statue has also taken care that the Council will
comprise the members in between 3 to 5. Therefore, the
Council must comprise the members in between 3 to 5 and if
it is exceeding then the very constitution of Council will be
said to be in the teeth of law.
61. The judgment upon which reliance has been place by
the respondent no.3 is in the context of the arbitration
agreement and the law which has been laid down on the
basis of the observation made therein in the said judgment,
the jurisdictional issue is to be raised in the forum under
Section 34 of the Act, 1996, therefore, the judgment upon
which reliance has been placed by the Respondent No.3 is
not applicable in the facts of the present case wherein the
admitted position is that the coram of the Council is contrary
to the provision of Section 21 of the Act, 2006.
62. This Court, therefore, is of the view that the constitution
of Council itself is in the teeth of Section 21 of the Act, 2006
and the same has been taken into consideration by the
Division Bench of this Court in its judgment dated
17/11/2022 passed in L.P.A. No. 242 of 2022, as such, by
following the principle of judicial discipline, this Court is of
36
2026:JHHC:18734
the considered view that since the Award communicated
dated 25.01.2016 which has been passed by the MSME
Council is without jurisdiction, as such the said award is
void ab-initio therefore, the recourse of Section 34 of
Arbitration Act is not required to be adhered to.
63. Further, it needs to refer herein that it is true that
Article 226 of the Constitution of India being constitutional
provision would not be subject to rigor of Act 2006 but for the
application the Article 226 the circumstances should be
there. Article 226 of the Indian Constitution grants the High
Court broad jurisdiction to impose orders and writs on any
individual or entity but before the court can grant a writ or
issue an order, the party filing the petition must show that
his rights are being illegally violated. The High Court’s
authority to grant writs is also subject to a number of
limitations if the petitioner is entitled to pursue other equally
effective alternative remedies. The High court consider a
number of deliberations before using its extraordinary
constitutional jurisdiction and the High Court may refuse to
grant relief if there is a remedy available and send the party
to the proper forum to seek relief but it is a self-imposed
guideline rather than a jurisdictional one for considering writ
petitions.
64. Therefore, even though there is an alternative remedy
available, in extraordinary circumstances, a writ may be
37
2026:JHHC:18734
issued. Thus, merely because a statutory provision has been
made by the parliament by way of alternative forum, the
same cannot be construed to abridge the power conferred to
this Court under Article 226 of the Constitution of India in
order to secure the basic structure of the Constitution.
65. There is no dispute about the position of law that appeal
is required to be filed against an order passed by the
Facilitation Council by resorting to the provisions of Section
18 as provided under Section 19 of MSMED Act, 2006. The
writ petitioners, admittedly, have challenged the award
without taking recourse of the statutory remedy available
under law and has approached this Court by filing writ
petition invoking jurisdiction of this Court conferred under
Article 226 of the Constitution of India
66. There is no dispute as to the settled position of law that
once the procedure contemplated under Section 18(3) of the
Micro, Small and Medium Enterprises Development Act, 2006
is duly followed, the provisions of the Arbitration and
Conciliation Act, 1996 would apply. However, in the present
case, the jurisdiction of the Council which has passed the
Award is not in conformity with the mandate of Section 21 of
the Act, 2006. Consequently, the Award being void ab initio,
the availability of an alternative remedy under Section 34 of
the Arbitration and Conciliation Act does not arise.
38
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67. Further, it is settled position of law as to the jurisdiction
of the High Court in entertaining a writ petition under Article
226 of the Constitution, in spite of the alternative statutory
remedies, is not affected, especially in a case where the
authority against whom the writ is filed is shown to have had
no jurisdiction or had purported to usurp jurisdiction without
any legal foundation, reference in this regard be made to the
judgment rendered by Hon’ble Apex Court in the case of
Whirlpool Corporation Vs. Registrar of Trade Marks,
Mumbai and Others reported in (1998) 8 SCC 1. The
relevant paragraph of the aforesaid judgment is being referred
hereunder as :-
“”15. Under Article 226 of the Constitution, the High Court,
having regard to the facts of the case, has a discretion to
entertain or not to entertain a writ petition. But the High
Court has imposed upon itself certain restrictions one of
which is that if an effective and efficacious remedy is
available, the High Court would not normally exercise its
jurisdiction. But the alternative remedy has been
consistently held by this Court not to operate as a bar in at
least three contingencies, namely, where the writ petition
has been filed for the enforcement of any of the
Fundamental Rights or where there has been a violation of
the principle of natural justice or where the order or
proceedings are wholly without jurisdiction or the vires of
an Act is challenged. ——————–.”
68. The Hon’ble Apex Court in State of Tripura Vs.
Manoranjan Chakraborty & Ors., reported in (2001) 10 SCC
740, has observed that that if gross injustice is done and it
can be shown that for good reason the Court should interfere,
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then notwithstanding the alternative remedy which may be
available by way of an appeal, the Writ Court can in an
appropriate case exercise its jurisdiction to do substantive
justice, accordingly, in view of the fact that the constitution of
the Council was itself ultra-vires of Section 21 of the MSMED
Act, the alternative remedy cannot be taken as a bar for
entertaining the present writ applications.
69. The petitioners have moved this Court directly under
Article 226 of the Constitution of India, in view of the fact
that the impugned Award is void ab initio, for the fact that it
has been passed by a Council which was not competent to
pass award since the same has not been constituted as per
the mandate of the section 21 of Act 2006.
70. In view of the settled law on the subject, this Court find
that in spite of the specific provision of appeal under Section
34 of the Arbitration Act, these writ applications are quite
maintainable, in view of the fact that the impugned Award /
notices are challenged on the ground of competency of the
Council, constitution of which is ultra-vires of Section 21 of
the MSMED Act.
71. Accordingly, the Award passed by MSME Council as
contained in Memo No.304 dated 25.01.2016 is hereby
quashed and set aside.
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2026:JHHC:18734
72. In consequent thereto the order of review dated
15.07.2016 is also hereby quashed and set aside.
73. Accordingly, the matter is remitted to the MSME Council
for fresh consideration, with liberty to the parties to place all
relevant materials before the Council, which shall decide the
matter expeditiously in accordance with law.
74. The writ petitions stand disposed of.
75. Interlocutory application, if any, also stands disposed of.
(Sujit Narayan Prasad, J.)
Dated : 24/06/2026
Birendra/-A.F.R.
Uploaded on 29.06.2026
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