The case delves into the intricate legal analysis of jurisdiction under the MSME Act in an international consultancy dispute. The court’s scrutiny of the MSME Act’s applicability in cases involving parties in different countries sheds light on how jurisdiction is determined in such scenarios. The analysis not only focuses on the specific case at hand but also sets a precedent for future disputes of a similar nature. The court’s evaluation of jurisdictional issues provides insight into the complexities of international business dealings and legal frameworks governing them.
Facts
- The appellant, a registered partnership consultant providing consultancy services to foreign medical equipment companies, appealed against the High Court’s decision to dismiss their appeal.
- The High Court confirmed the order quashing the notices issued by the Micro and Small Medium Enterprises Facilitation Council, leading to the present appeal.
- The appellant’s services involve liaising with hospitals and government entities for medical equipment procurement.
- The High Court’s original decision was challenged in a writ petition, leading to the learned Single Judge setting aside the notices issued by the Council.
- The Single Judge determined that the Council lacks jurisdiction to resolve disputes between the parties.
- The appellant prayed for the payment of USD 711,845/- towards Invoice No.5 dated 22.6.2020 and USD 104,205/- towards Invoice No.6 dated 7.9.2020.
- The termination letter dated 2.10.2020 issued by the Opposite Party was challenged as illegal and void.
- The appellant replied to the termination notice with a reply dated 16.11.2020.
- A notice for a conciliation meeting dated 23.11.2020 was served upon the respondent, scheduled for 28.11.2020.
- The dispute arose between the parties as the tender was awarded in favor of Medelec Solutions.
- The appellant approached the Council on 22.10.2020, and the case was registered as Reference No.1581/MSEFC/2020.
- The Consulting Agreement dated 10.02.2020 expired on 10.08.2020, leading to a fresh Consulting Agreement on 24.08.2020 for six months.
- The appellant got registered under the MSME Act on 28.08.2020.
- A legal notice dated 09.09.2020 was sent by the appellant calling for payment along with damages of Rs.50 lakhs.
- The respondent participated in the tender through M/s Medelec Health Care Solutions, its authorized local agent.
- The impugned judgment and order passed by the Division Bench is under appeal.
- The appellant challenged the judgment passed by the Single Judge in Writ Appeal No 201 of 2020 before the Division Bench.
- The respondent terminated the Consulting Agreement dated 24.08.2020 with the termination letter dated 22.10.2020.
- The appellant provided consultancy services and requested to be associated with the respondent-Company for project implementation.
- HLL Infra–Tech Services Limited floated a tender on 20.08.2018 for the purchase of ventilators and medical equipment.
- The appellant and the respondent entered into a Consulting Agreement on 10.02.2020 for a term of six months.
- The appellant raised invoices claiming certain amounts which were alleged to have been paid by the respondent.
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Arguments
- Learned counsel for the appellant argues that the MSME Act was enacted for the promotion and development of micro, small, and medium enterprises, and therefore the High Court should not have entertained the writ petitions against the notice issued by the Council.
- The appellant’s counsel contends that the dispute should have been referred to the Council for conciliation and arbitration, and the issue of jurisdiction should have been left to the arbitrator.
- The respondent’s counsel, on the other hand, supports the judgment stating that the Council has no jurisdiction over the dispute between the parties as the buyer is located outside India.
- The respondent’s counsel points out that the buyer has a registered office in Switzerland, making the Council’s jurisdiction inapplicable.
- The appellant asserts that the Council has jurisdiction as the agreements were executed in India, services were rendered in India, and the respondent conducted business in India through various service centers.
- The appellant’s counsel strongly argues that both the Single Judge and Division Bench of the High Court erred in holding that the Council lacked jurisdiction in this case.
- The Respondent argues that they should not be governed by the MSME Act as the date of the contract was 24.08.2020.
- According to the Arbitration Agreement, the parties are to be governed by the law applicable in India at the time of contract execution.
- The Respondent claims that since the contract was executed before the registration of the Appellant as an MSME on 28.08.2020, the MSME Act should not apply.
- In rebuttal, the Appellant contends that as the dispute arose after 28.08.2020 when they were registered as an MSME, the Council would have jurisdiction over the dispute.
- The Appellant registered as an MSME on 28.08.2020, which was after the contract was executed on 24.08.2020.
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Analysis
- The jurisdiction of the Council under the MSME Act is in question with respect to the dispute between the parties.
- The laws of India applicable at the time of contract execution govern the parties.
- The appellant was not registered as MSME at the time the contract was executed on 24.08.2020.
- The respondent argues that the Council lacks jurisdiction due to their location outside India in Switzerland.
- The parties will be governed by the laws of India applicable at the time of contract execution.
- For the MSME Act to be applicable, the supplier must be registered with the authority mentioned in Section 8.
- The appellant claims jurisdiction under the MSME Act as the agreements were executed and services rendered in India.
- The Agreement includes a clause stating parties can initiate actions as per law if differences cannot be resolved through mutual dialogues.
- The appellant became registered as MSME only on 28.08.2020.
- The Council would have no jurisdiction to entertain the dispute between the appellant and Respondent No.1 under Section 18 of the MSME Act.
- The order passed by the learned Single Judge, confirmed by the Division Bench, stating that the Council would have no jurisdiction over Respondent No.1, does not require interference.
- Larger questions/issues regarding the applicability of the MSME Act in cases where the buyer is located outside India but has availed services in India, executed the contract in India, or done business in India with an Indian supplier are left open for consideration in future cases.
- The jurisdiction of the Council in cases where the supplier is subsequently registered as an MSME is also left open for consideration, taking into account Section 18 and Section 8 of the MSME Act, and relevant judgments.
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Decision
- Petitioner claims the Opposite party is liable to pay USD 304,964/- equivalent to Rs.2,23,56,910/-
- Claim is towards 25% commission for 1158 ventilators per the Consulting Agreement dated 24.8.2020
- Interest as per Section 16 of the MSMED Act 2006 is sought as per Form-I till the date of payment
- Respondent contended they are based in Switzerland, thus MSME Act does not apply to them
- Respondent stated they have no office in New Delhi as mentioned in the complaint/notice
- Council sent Form 2 notice to the Respondent for statement of defense on 04.11.2020
- Parties agree to resolve differences within 30 days of initiation of the dispute, no costs awarded
Case Title: M/S VAISHNO ENTERPRISES Vs. HAMILTON MEDICAL AG (2022 INSC 341)
Case Number: C.A. No.-001892-001892 / 2022
