Source: Supreme Court

Why in News?

A bench of Chief Justice of India DY Chandrachud, Justice JB Pardiwala and Justice Manoj Misra held that a Facilitation Council under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 would not be maintainable.

• The Supreme Court gave this judgment in the case of M/s India Glycols Limited and Another v. Micro and Small Enterprises Facilitation Council, Medchal - Malkajgiri and Others.

What is the Background of M/s India Glycols Limited and Another v. Micro and Small Enterprises Facilitation Council, Medchal - Malkajgiri and Others Case?

• The present case pertained to the challenge of an award of a Micro and Small Enterprises Facilitation Council, involving a company governed by the provisions of MSMED Act.
• The award passed by the Facilitation Council was set aside by a single judge of the High Court of Telangana on the ground that the claim was barred by limitation.
• This order was reversed by a Division Bench of the High Court. The Division Bench held that the petition challenging the award was not maintainable as the appellant should have pursued remedies under Section 34 of the Arbitration and Conciliation Act, 1996 (Act of 1996) instead of filing a writ petition under Article 226 of the Indian Constitution.

What were the Court’s Observation?

• The entertaining of a petition under Articles 226/227 of the Constitution, in order to obviate compliance with the requirement of pre-deposit under Section 19, would defeat the object and purpose of the special enactment which has been legislated upon by Parliament.
• So, the petition under Articles 226/227 of the Constitution instituted by the appellant was not maintainable.

What is Micro, Small and Medium Enterprises Development (MSMED) Act, 2006?

• This is an act for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therein or incidental thereto.
• The Act was published in gazette of India on 16^th June 2006. However, it came into from 2^nd October 2006, the birth- date of the father of the nation.
• Meaning of MSMED:
  • In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act in 2006, the enterprises are classified into two divisions.
    • Manufacturing Enterprises – engaged in the manufacturing or production of goods in any industry
    • Service Enterprises – engaged in providing or rendering services.
• Features of MSMEs:
  • MSMEs are known to provide reasonable assistance for improved access to the domestic as well as export markets for businesses.
  • MSMEs support product development, design innovation, intervention, and packaging elements of a business.
  • MSMEs support the upgrading of technology, infrastructure, and the modernization of this sector as a whole.
  • MSMEs provide employment opportunities and loans.
  • MSMEs provide credit limits or funding support to various banks in the country.