The jurisdiction to challenge an award under Section 34 of the Arbitration Act is governed by the exclusive jurisdiction clause in the parties' agreement, not by the MSMED Act.

JUDGMENT :

JITENDRA S. JAIN, J.

1. The following question is referred for the consideration of the Larger Bench on account of contrary views expressed by the two learned Single Judges of this Court in case of Gammon Engineers and Contractors Pvt. Ltd. Vs. Sahay Industries, 2023 SCC Online Bom 750 wherein it was held that Application under Section 34 of the Arbitration and Conciliation Act, 1996 [‘Arbitration Act’] in case of the award passed under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 [‘MSMED Act’] is to be filed as per original agreement between the parties at the place where exclusive jurisdiction is agreed upon and not at the place where the award under Section 18 was passed. The contrary view was taken in the case of Microvision Technologies Pvt. Ltd. Vs. Union of India, 2023 SCC Online Bom. 1848 wherein in paragraph No. 38, the learned Single Judge observed that the challenge to the award under Section 34 of the Arbitration Act is to be filed before the Court where the supplier is located:

“Whether the jurisdiction of the Court to hear a Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an Award in a statutory Arbitration under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”) would be governed by the non-obstante provision under Section 18(4) of the MSMED Act or would be governed by the Arbitration Agreement between the parties which has conferred the exclusive jurisdiction to a particular Court.”

2. Brief facts relevant for the present reference are as under:

Respondent is a Micro, Small and Medium Enterprises Unit [‘MSME Unit’] and has supplied goods and rendered services to the Petitioner. As per the original agreement between the Petitioner and the Respondent, the Courts at Mumbai would have exclusive jurisdiction for resolving the disputes between them. Disputes arose between the Petitioner and the Respondent, and since the Respondent was a MSME Unit, a reference was made under Section 18 of the MSMED Act to decide the disputes between them. The Micro, Small and Medium Enterprises Facilitation Council [‘Facilitation Council’] at Shimla, where the Respondent was located, adjudicated the disputes between the parties, and an award was passed against the Petitioner. The Petitioner has challenged the said award under Section 34 of the Arbitration Act by applying to this Court. The Respondent has raised a preliminary objection on the maintainability of the application under Section 34 of the Arbitration Act on the ground that since the Facilitation Council at Shimla has adjudicated the disputes between the parties under Section 18(4) of the MSMED Act, the Court at Mumbai do not have the jurisdiction and Section 34 application ought to have been filed in the Court at Shimla.

3. On 4 September 2023, the learned Single Judge (Justice R.I. Chagla) noted the conflict between the two decisions of this Court referred to above, namely Gammon Engineers and Contractors Pvt. Ltd. (supra) and Microvision Technologies Pvt. Ltd. (supra) and requested the Hon’ble Chief Justice of this Court to refer the issue to a Larger Bench.

Submissions of the Petitioner:

4. Mr. Sabnis, learned counsel appearing for the Petitioner, submitted that under the MSMED Act there is no provision dealing with challenge post passing the award and therefore the award has to be challenged as per the Arbitration Act of 1996. It is his submission that although under the original agreement it was agreed by the parties that Court at Mumbai would have exclusive jurisdiction but because of Section 18 of the MSMED Act, they had no option but to agree for reference of the dispute to Arbitration under the said Act at the Facilitation Council at Shimla. It is his submission that the moment the award came to be passed, the original agreement between the parties dealing with the exclusive Court having jurisdiction would revive and therefore the proper Court for filing app