A company tried to bypass a 75% pre-deposit by filing a writ. The Supreme Court said no.

A company owed Rs 40 lakh to a small supplier. Instead of paying 75% upfront to challenge the award, it filed a writ petition. The Supreme Court just shut that door.

India Glycols Limited owed a micro enterprise — S R Technologies (Unit II) — roughly Rs 40.30 lakhs plus interest. The Micro and Small Enterprises Facilitation Council in Medchal-Malkajgiri had passed an award in the supplier's favour. India Glycols did what many large companies do when they don't like an arbitration award: it skipped the statutory appeal route and went straight to the High Court with a writ petition under Articles 226 and 227 of the Constitution (the High Court's power to review decisions of lower tribunals and government bodies). The company's goal was simple — avoid the mandatory 75% pre-deposit (the requirement to pay three-fourths of the award amount upfront before the court will even hear the challenge).

The Supreme Court just made clear that this strategy no longer works.

When the Council passed the award

S R Technologies (Unit II) is a micro or small enterprise registered under the Micro, Small and Medium Enterprises Development Act, 2006 — the MSMED Act. Parliament enacted this law specifically to protect small suppliers from large buyers who delay payments. Under Section 17 of the Act, a buyer must pay within the agreed period. If they don't, interest starts running at a rate three times the bank rate notified by the Reserve Bank. The award letter from the Council, signed and sealed, stated the exact sum — a figure that, for a micro enterprise, could mean the difference between staying afloat and shutting down.

When India Glycols did not pay, S R Technologies approached the Micro and Small Enterprises Facilitation Council — the body set up under Section 18 of the MSMED Act to resolve such disputes quickly. On October 28, 2021, the Council passed an award directing India Glycols to pay approximately Rs 40.30 lakhs with interest. The cheque that should have arrived after that award never materialised.

India Glycols did not like that award. But instead of challenging it under Section 34 of the Arbitration and Conciliation Act, 1996 (the provision that allows a party to apply to court to set aside an arbitral award), the company filed a writ petition in the High Court of Telangana.

The writ that tried to skip the 75% deposit

The reason India Glycols chose a writ petition over a Section 34 application was straightforward. Under Section 19 of the MSMED Act, any party challenging a Facilitation Council award must deposit 75% of the award amount with the court before the court will even entertain the challenge. That is a steep upfront cost — roughly Rs 30 lakhs in this case. The court file, when it landed on the judge's desk, carried no such deposit receipt.

A writ petition under Articles 226/227 does not carry such a pre-deposit condition. So by filing a writ, India Glycols could get the award reviewed without putting a single rupee in court.

A Single Judge of the Telangana High Court initially set aside the award on the ground that it was barred by limitation (filed too late). But S R Technologies appealed to a Division Bench (a two-judge panel). The Division Bench reversed the Single Judge, holding that the writ petition itself was not maintainable — meaning the High Court should never have entertained it in the first place. The proper remedy, the Division Bench said, was a Section 34 application under the Arbitration Act, with the 75% pre-deposit intact.

India Glycols appealed to the Supreme Court.

What each side argued

The core question before the Supreme Court bench — Chief Justice Dr Dhananjaya Y Chandrachud, Justice J B Pardiwala, and Justice Manoj Misra — was this: can a party bypass the statutory remedy under Section 34 of the Arbitration Act, along with its mandatory 75% pre-deposit, by filing a writ petition under Articles 226/227 of the Constitution? The courtroom fell silent as the arguments began, the only sound the rustle of paper as counsel opened their briefs.

India Glycols argued that the Facilitation Council's award was not really an arbitral award under the Arbitration Act, so Section 34 did not apply. The company also argued that the writ petition was maintainable because the Council had acted without jurisdiction.

S R Technologies countered that Section 18(3) of the MSMED Act explicitly makes the Arbitration and Conciliation Act, 1996 applicable to disputes referred to the Facilitation Council. Once the Arbitration Act applies, the only way to challenge the award is through Section 34 — and that means the 75% pre-deposit under Section 19 of the MSMED Act kicks in.

Why the court said the writ door is closed

The Supreme Court examined the scheme of the MSMED Act. Section 18(3) says that when a Facilitation Council takes up a dispute, it shall either conduct a conciliation or, if that fails, refer the matter to arbitration. Section 18(4) says that the provisions of the Arbitration and Conciliation Act, 1996 shall apply to such arbitration as if the arbitration was under that Act.

Once the Arbitration Act applies, the court reasoned, the award is an arbitral award. And the remedy to challenge an arbitral award is Section 34 of the Arbitration Act — not a writ petition. The bench's silence during this part of the reasoning was telling; the judges were not interrupting, they were listening intently, weighing every word.

The court also looked at Section 19 of the MSMED Act, which says that no application to set aside a Facilitation Council award shall be entertained unless the applicant deposits 75% of the award amount. This pre-deposit is not a procedural technicality, the court held. It is a deliberate safeguard designed by Parliament to protect micro and small enterprises from large buyers who might otherwise drag them through endless litigation without paying a rupee. The file containing the award felt thin — a few pages of paper that represented months of waiting for a small supplier.

If a company could bypass this pre-deposit by filing a writ petition, the entire protective framework of the MSMED Act would be defeated. The court cited its own recent judgment in Gujarat State Civil Supplies Corporation Limited v. Mahakali Foods Private Limited (Unit 2) and Another — (2023) 6 SCC 401 — which had already held that a writ petition against a Facilitation Council award is not maintainable.

In that precedent, the Supreme Court had examined a similar situation: a large buyer challenging a Facilitation Council award via writ to avoid the 75% pre-deposit. The court in that case had firmly shut the door, holding that the statutory scheme under the MSMED Act must be respected. The present bench found no reason to deviate. The precedent sat on the judges' table like a warning sign for every future litigant thinking of taking the writ shortcut.

The ruling: pay 75% or don't challenge

On November 6, 2023, the Supreme Court dismissed India Glycols' appeal. The bench affirmed the Division Bench's finding that the writ petition was not maintainable. The court did not go into the merits of the dispute — whether the award was correct or whether it was barred by limitation. Once it concluded that the writ petition could not be entertained, the court said it was unnecessary to examine the merits.

The appeal was disposed of, and the Division Bench's judgment stood. India Glycols was left with the option of filing a Section 34 application — if it was willing to deposit 75% of the Rs 40.30 lakh award. The smell of old paper and ink in the courtroom seemed to settle as the order was read out — final, unambiguous, and binding.

What this means for every company that deals with small suppliers

For practitioners advising corporate clients, the message is clear. If your client receives an adverse award from a Micro and Small Enterprises Facilitation Council, do not file a writ petition. The High Court will not entertain it. The only valid remedy is a Section 34 application under the Arbitration Act, and that application will not be heard unless your client deposits 75% of the award amount upfront.

This ruling applies even if your client believes the award is fundamentally flawed — on limitation, on jurisdiction, or on merits. The Supreme Court has closed the writ route entirely.

Consider a hypothetical: a large manufacturer receives a Facilitation Council award for Rs 1 crore. The company believes the award is patently wrong — the Council had no jurisdiction, the claim was time-barred. Under the old thinking, the company might file a writ petition and get the award set aside without paying a rupee. After this judgment, that path is gone. The company must deposit Rs 75 lakhs before any court will even hear its challenge. That is the trap the pre-deposit creates — it forces the buyer to put real money on the table before it can argue its case.

For the micro enterprise, this is justice. The pre-deposit ensures that the small supplier is not left chasing a judgment debtor through years of litigation. The money sits in court, safe, while the legal battle unfolds. If the buyer loses, the supplier gets paid without further delay. If the buyer wins, the money is returned. Either way, the small enterprise is not left holding a paper victory.

THE PLAY: Before challenging any Facilitation Council award, calculate 75% of the award amount and arrange the funds — because no court will hear your challenge without that deposit.

The Rs 40 lakh award sits where it always was. The company that owed it has run out of detours. The cheque that never arrived now has a court order behind it, and the only way to stop it is to pay 75% of the amount into court. The Supreme Court has spoken, and the message is unmistakable: the writ door is closed.