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SUPREME COURT OF INDIA
(From the High Court for the State of Telangana at Hyderabad)
M.R. Shah, B.V. Nagarathna, JJ.
M/s. Vaishno Enterprises – Appellant
Versus
Hamilton Medical AG & Anr. – Respondents
Civil Appeal No. 1892 of 2022
Decided on : 24-03-2022
Micro, Small and Medium Enterprises Development Act, 2006 – Section 18 – Jurisdiction of Council to resolve dispute – When contract was entered into appellant was not MSME and parties would not be governed by MSME Act and parties shall be governed by laws of India applicable and/or prevailing at the time of execution of contract – If that be so Council would have no jurisdiction to entertain dispute between appellant and Respondent no.1, in exercise of powers under Section 18 of MSME Act – Order passed by Single Judge confirmed by Division Bench holding Council would have no jurisdiction with respect to Respondent No.1 is not required to be interfered with – Appeal dismissed. (Paras 8.2 and 9)
Facts of the case:
Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court for the State of Telangana at Hyderabad in Writ Appeal No. 201 of 2021 by which the High Court has dismissed the said appeal and has confirmed the order passed by Single Judge quashing the Intimation-cum-Notice dated 22.10.2020 and Notices dated 04.11.2020 and 12.11.2020 issued by Micro and Small Medium Enterprises Facilitation Council, original applicant has preferred the present appeal. Short question which is posed for consideration before this Court is the jurisdiction of Council under MSME Act with respect to the dispute between the appellant and the respondent.
Findings of Court:
Larger question/issue whether in a case where the buyer is located outside India but has availed the services in India and/or done the business in India with the Indian supplier and the contract was executed in India the MSME Act would be applicable or not and/or another larger issue that in case the supplier is subsequently registered as MSME the Council would still have jurisdiction are kept open to be considered in an appropriate case bearing in mind Section 18 as well as Section 8 of the MSME Act.
Result : Appeal dismissed.
Key Points: - The MSME Council has no jurisdiction to entertain disputes when the contract was entered into and the supplier was not registered as MSME at that time (!) . - The parties are governed by the laws prevailing at the time of contract execution, not by the MSME Act, if the supplier was not registered MSME at that time (!) . - The jurisdiction of the MSME Council depends on whether the supplier was registered as MSME under Section 8 of the MSME Act at the time of contract (!) . - Larger questions about applicability of MSME Act where buyer is outside India but services were rendered in India are kept open for future consideration (!) . - The appeal is dismissed with no order as to costs (!) .
JUDGMENT
M.R. Shah, J.
Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court for the State of Telangana at Hyderabad in Writ Appeal No. 201 of 2021 by which the High Court has dismissed the said appeal and has confirmed the order passed by the learned Single Judge quashing the Intimation-cum-Notice dated 22.10.2020 and Notices dated 04.11.2020 and 12.11.2020 issued by Micro and Small Medium Enterprises Facilitation Council(hereinafter referred to as 'the Council'), the original applicant has preferred the present appeal.
2. That the appellant is a registered partnership consultant which provides consultancy services to foreign medical equipment companies in the form of liaisoning services with hospitals and government departments and entities for procurement of medical equipment like ventilators. That Respondent No. 1 herein is a company registered under the laws of Switzerland, having its office at Bonaduz, Switzerland and is a manufacturer and supplier of critical care ventilation solutions for a variety of patient segments, applications and environments across the world. According to the respondent, it has its own consultants, engaged in India, who facilitate the installation of their equipment and undertake related ancillary work. That the appellant herein which provides consultancy services, approached the respondent-Company and requested to be associated with the Company in implementation of their projects in India. One HLL Infra-Tech Services Limited, a Nodal Agency of the Government of India, floated a tender dated 20.08.2018 to purchase/procure 1186 high end ventilators and other medical equipment to be supplied to various hospitals/medical colleges/departments across India. The respondent also participated in the said tender by offering its bid through its authorized local agent, M/s Medelec Health Care Solutions. The tender was awarded in favour of the said Medelec Solutions. That thereafter the appellant and the respondent entered into a Consulting Agreement on 10.02.2020, with a restricted term of six months, agreeing that the appellant herein shall act as a consultant for the respondent - Company. That thereafter the appellant raised various invoices claiming certain amounts. The same were alleged to have been paid by the respondent. That the earlier Consulting Agreement dated 10.02.2020 expired on 10.08.2020, the appellant and the respondent entered into a fresh Consulting Agreement on 24.08.2020 for a period of six months. That the appellant herein got registered under the Micro, Small and Medium Enterprises Act, 2006 (hereinafter referred to as, 'MSME Act') on 28.08.2020. That thereafter the dispute arose between the parties. A legal notice dated 09.09.2020 was sent by the appellant calling upon the respondent to pay the amounts covered by Invoice No. 5 dated 22.06.2020 and Invoice No. 6 dated 07.09.2020 and one another along with damages of Rs. 50 lakhs. In the said notice, the appellants informed that it was registered under the MSME Act. The respondent terminated the Consulting Agreement dated 24.08.2020 vide termination letter dated 22.10.2020. That the appellant herein replied to the termination notice vide reply dated 16.11.2020. That as the dispute arose between the parties, the appellant herein approached the Council on 22.10.2020 which case was registered as Reference No. 1581/MSEFC/2020. The appellant prayed for the following reliefs:
(a) That the opposite party is liable to pay the petitioner a sum of USD 711,845/- equivalent to Rs. 5,21,85,357/- towards Invoice No.5 dated 22.6.2020,
(b) that the Opposite Party is liable to pay the Petitioner a sum of USD 104,205/- equivalent to Rs. 76,26,073/- towards Invoice No. 6 dated 7.9.2020,(c) That the termination letter dated 2.10.2020 issued by the Opposite Party is illegal, void and contrary to the terms of the Consulting Agreement dated 24.5.2020.
(d) that the Opposite party is liable to pay the Petitioner a sum of
MSME Council would have no jurisdiction to entertain dispute when contract was entered into appellant was not MSME.
The main legal point established in the judgment is that the Micro and Small Enterprises Facilitation Council must have jurisdiction to entertain applications and refer matters to the Arbitral Tribun....
Point of law: Where the Courts lack the inherent jurisdiction to try a particular case, they cannot act beyond the said powers or at the behest of the party and have to necessarily reject the applica....
The jurisdiction of the Micro Small and Medium Enterprises Facilitation Council is determined by the supplier's registered office location, overriding any contractual jurisdiction clauses.
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