Micro, Small and Medium Enterprises Act, 2006 – s.18 and s.2(n) r/w s.8 – Contract / agreement between appellant- a firm engaged in consultancy services to foreign medical equipment companies, and respondent No.1- a company registered under the laws of Switzerland, having its office in Switzerland and engaged in manufacturing and supply of critical care ventilation solutions – Dispute between appellant and respondent no.1 – Jurisdiction of Micro and Small Medium Enterprises Facilitation Council to entertain the dispute – Held: On facts, in terms of the contract /agreement in question, the parties were governed by the laws of India prevailing/applicable at the time when the contract was executed – When the contract / agreement was entered into, the appellant was not a registered MSME – Appellant was registered as MSME only after the contract / agreement was executed – The parties, therefore, would not be governed by the MSME Act – The Micro and Small Medium Enterprises Facilitation Council, thus, had no jurisdiction to entertain the dispute between appellant and respondent no.1, in exercise of powers u/s.18 of the MSME Act. Dismissing the appeal, the Court
HELD:1.1. In terms of the contract / agreement entered between the parties, 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. [Para 8.2][778-E-F]
1.2. 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 sub-section (1) of Section 8. Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority 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 High Court holding the Council would have no jurisdiction with respect to Respondent No.1 is not required to be interfered with. [Para 8.2][778-F-H; 779-A-B]
2. 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 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 M/s Shilpi Industries case arising under the provisions of MSME Act and Shanti Conductors Pvt. Ltd. case wherein a similar provision under the Small Scale and Ancillary Industries Undertakings Act,1993 came up for consideration before this Court. [Para 8.3][779-B-E]
M/s Shilpi Industries v. Kerala State Road Transport Corporation, C.A. No.1570-78 of 2021 [2021 SCC Online SC 439] and Shanti Conductors Pvt. Ltd. v. Assam State Electricity Board, (2019) 19 SCC 529 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.