Full Judgment Text
[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1892 OF 2022
M/s. Vaishno Enterprises ..Appellant
Versus
Hamilton Medical AG & Anr. ..Respondents
J U D G M E N T
M. R. Shah, J.
1. 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 IntimationcumNotice dated 22.10.2020 and
Signature Not Verified
Notices dated 04.11.2020 and 12.11.2020 issued by Micro
Digitally signed by R
Natarajan
Date: 2022.03.24
16:28:13 IST
Reason:
and Small Medium Enterprises Facilitation Council
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(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 respondentCompany 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
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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
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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,
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(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 USD 304,964/ equivalent to Rs.2,23,56,910/
towards the Proforma invoice dated 21.10.2020 towards
balance 25% commission payable in respect of 1158
ventilators pursuant to the Consulting Agreement dated
24.8.2020,
(e) that the Opposite party is liable to pay the petitioner
interest as per Section 16 of the MSMED Act 2006 as
enumerated in FormI of this Application till date of
payment.”
3. On 22.10.2020 itself an intimation was sent by the
Council to the respondent. That on receipt of the said
notice, the respondent addressed a letter to the Chairman of
the Council and contended that they are a company that is
based in Switzerland and therefore MSME Act shall not be
applicable to companies located outside country. It was
also stated that the respondent has no office in India more
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particularly in New Delhi as mentioned in the
complaint/notice. On 04.11.2020 the Council sent Form 2
notice calling for statement of defence to the Respondent
herein. One another notice dated 12.11.2020 was sent by
the Council. Thereafter a notice for a conciliation meeting
dated 23.11.2020 was served upon the respondent and the
meeting was scheduled on 28.11.2020. Thereafter the
respondent filed Writ Petition No. 21623 of 2020 before the
High Court challenging the legality and validity of the
aforesaid notices. By judgment and order dated 20.04.2021,
the learned Single Judge allowed the said writ petition and
set aside the notices issued by the Council by observing
that the Council has no jurisdiction to resolve the dispute
between the parties. That the appellant herein challenged
the judgment and order passed by the learned Single Judge
in Writ Appeal No. 201 of 2020 before the Division Bench.
By the impugned judgment and order the Division Bench of
the High Court has dismissed the said appeal and has
confirmed the judgment and order passed by the learned
Single judge. The impugned judgment and order passed by
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the Division Bench is the subject matter of the present
appeal.
4. Learned Counsel appearing on behalf of the appellant
has vehemently submitted that in the facts and
circumstances of the case, both, the learned Single Judge
as well as the Division Bench of the High Court have erred
in holding that the Council has no jurisdiction to entertain
the dispute between the appellant and the respondent.
4.1 It is submitted that, both, the learned Single Judge as
well as the Division Bench have erred in holding that in the
present case as the supplier was outside the territorial
jurisdiction of India, considering Section 18 of the MSME
Act, the Council has no jurisdiction to entertain a dispute
between the supplier located outside the jurisdiction. It is
submitted that as such the initial agreement dated
10.02.2020 between the parties was executed at Delhi, the
second Agreement dated 24.08.2020 was also executed in
New Delhi and the services were rendered by the appellant
in India and even the respondent was conducting its
business in India through its registered service centres at
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New Delhi, Mumbai, Kolkata, Bangalore and it had
appointed a power of attorney holder/Special Agent who is
based in Delhi, to act on his behalf, and therefore the cause
of action can be said to have arisen in India and no part of
cause of action has arisen in Switzerland, the Council is
vested with the jurisdiction to entertain the claim petition
filed by the appellant. It is submitted that therefore the
appellant rightly approached the Council to resolve the
dispute under the MSME Act and the Council assumed the
jurisdiction vested under Section 18 of the MSME Act.
4.2 It is further submitted by learned counsel appearing
on behalf of the appellant that even otherwise considering
the objects and purpose of the Act as the MSME Act being a
beneficial legislation enacted for facilitating promotion,
development for enhancement of the competitiveness of
micro, small and medium enterprises and for resolving the
incidental and ancillary matters related thereto, the High
Court ought not to have entertained into the writ petitions
against the notice issued by the Council and ought to have
relegated the Respondent No.1 – original writ petitioner to
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appear before the Council for conciliation and thereafter on
failure for arbitration and the issue with respect to
jurisdiction ought to have been left to the Arbitrator.
5. Shri Shyam Divan, learned Senior Advocate appearing
on behalf of the respondent has supported the judgment
and order passed by the learned Single Judge as well as
that of the Division Bench holding that with respect to the
dispute between the appellant and the Respondent No.1 the
Council has no jurisdiction under Section 18 of the MSME
Act.
5.1 Shri Divan, learned Senior Advocate has taken us to
the various definitions under Section 2 of the MSME Act
more particularly the definition of “buyer” and “suppliers”.
He has also taken us to Section 18 of the MSME Act.
5.2 Relying upon the above provisions it is vehemently
submitted by Shri Divan, learned Senior Advocate appearing
on behalf of Respondent No.1 that in the present case the
Respondent No.1 – buyer is having registered office in
Switzerland. It is submitted that even the address of the
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Respondent No.1 mentioned in both the Agreements dated
10.02.2020 and 24.08.2020 is also Switzerland. It is
submitted that therefore it is rightly held that as the
Respondent No.1 – buyer being located outside India, the
Council would have no jurisdiction to entertain the dispute
between the appellant and the Respondent No.1.
5.3 It is further submitted by Shri Divan, learned Senior
Advocate for Respondent No.1 that even otherwise
considering the relevant provisions of the Arbitration
Agreement the parties to the Agreement shall not be
governed by the MSME Act. It is submitted that in the
present case the date of contract was 24.08.2020. The
appellant herein is registered as MSME on 28.08.2020 i.e.
after the execution of the contract on 24.08.2020. It is
submitted that as per the Arbitration Agreement the parties
shall be governed by the law applicable in India which shall
be the law prevailing at the time of the execution of the
contract. It is submitted that for that reason also the
parties shall not be governed by the MSME Act and
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therefore the Council would have no jurisdiction to entertain
the dispute between the appellant and the Respondent No.1.
6. In rejoinder learned counsel appearing on behalf of the
appellant has submitted that as the dispute arose
subsequently i.e. subsequent to 28.08.2020 and therefore at
the time when the dispute arose the appellant was the
registered MSME and therefore, for the dispute between the
appellant and the respondent which has arisen subsequent
to 28.08.2020, the Council would have jurisdiction.
7. Heard learned counsel for the respective parties at
length.
8. The short question which is posed for consideration
before this Court is the jurisdiction of the Council under the
MSME Act with respect to the dispute between the appellant
and the respondent.
8.1 It was the case on behalf of Respondent No.1 – Buyer
that as the Respondent No.1 buyer is located outside India
and is having its registered office at Switzerland the Council
would have no jurisdiction to enter into the dispute between
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the appellant and the respondent. On the other hand, it is
the case on behalf of the appellant that the agreements were
executed between the parties at Delhi and the services were
rendered by the appellant in India and even the Respondent
No.1 is conducting its business in India through registered
service centres at New Delhi, Mumbai, Kolkata, Bangalore
and it had appointed a power of attorney/special agent
which is based in Delhi, and after having availed the
services rendered by the appellant and doing business in
India, thereafter it will not be open for Respondent No.1 to
contend that with respect to the dispute between the
appellant and the respondent, the Council would have no
jurisdiction under the MSME Act. However, while
considering the main issue whether the parties shall be
governed by the MSME Act or not, the relevant clause under
the Agreement is required to be considered which reads as
under:
“9. CHOICE OF LAW
This Agreement and the rights of the
parties hereunder shall be governed by and
construed in accordance with the laws of
India. The parties agree to resolve their
differences, disputes, if any, mutually, within
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30 days of the initiation of the dispute which
can be extended by the mutual consent of the
parties, if necessary. In the event the parties
are not able to resolve the differences by way
of the said mutual dialogues, they are at a
liberty to initiate appropriate actions as per
law.”
8.2 It is not in dispute that the contract/agreement
between the appellant and the respondent has been
executed on 24.08.2020. Therefore, the laws of India
applicable at the time of contract/agreement shall be
applicable and therefore the parties shall be governed by the
laws of India prevailing/applicable at the time when the
contract was executed. It is admitted position that the date
on which a contract/agreement was executed i.e. on
24.08.2020 the appellant was not registered MSME.
Considering the relevant provisions of the MSME Act more
particularly Section 2(n) read with Section 8 of the MSME
Act, the provisions of the MSME Act shall be applicable in
case of supplier who has filed a memorandum with the
authority referred to in subsection (1) of Section 8.
Therefore, the supplier has to be a micro or small enterprise
registered as MSME, registered with any of the authority
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mentioned in subsection (1) of Section 8 and Section 2(n) of
the MSME Act. It is admitted position that in the present
case the appellant is registered as MSME only on
28.08.2020. Therefore, when the contract was entered into
the appellant was not MSME and therefore the parties
would not be governed by the MSME Act and the parties
shall be governed by the laws of India applicable and/or
prevailing at the time of execution of the contract. If that be
so the Council would have no jurisdiction to entertain the
dispute between the appellant and the Respondent no.1, in
exercise of powers under Section 18 of the MSME Act.
Therefore, in the aforesaid peculiar facts and circumstances
of the case, more particularly the terms of the Agreement,
the order passed by the learned Single Judge confirmed by
the Division Bench holding the Council would have no
jurisdiction with respect to Respondent No.1 is not required
to be interfered with.
8.3. However, at the same time, the 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
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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 and the judgments of this Court
in the case of M/s Shilpi Industries vs. Kerala State Road
Transport Corporation, C.A. No.157078 of 2021 [2021
SCC Online SC 439] arising under the provisions of MSME
Act and
Shanti Conductors Pvt. Ltd. Vs. Assam State
Electricity Board, (2019) 19 SCC 529 in which case a
similar provision under the Small Scale and Ancillary
Industries Undertakings, Act, 1993 came up for
consideration before this Court.
9. In view of the above and for the reason stated above,
we are in agreement with the ultimate conclusion
reached/arrived at by the learned Single Judge confirmed
by the Division Bench that with respect to the dispute the
appellant and the Respondent No.1 the Council would have
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no jurisdiction under Section 18 of the MSME Act. Under
the circumstances, the present appeal deserves to be
dismissed and is accordingly dismissed.
There shall be no order as to costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(B. V. NAGARATHNA)
New Delhi,
March 24, 2022
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