/2022 INSC 0229/
[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
Notices dated 04.11.2020 and 12.11.2020 issued   by Micro
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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