2023 (1) TMI 1377 - HC - Indian Laws

Territorial jurisdiction in arbitration proceedings - Challenge to award rendered by the Micro and Small Enterprises, Facilitation Council, Nagpur. The objection is that the arbitration having been conducted under the MSMED Act in Nagpur and the award having been rendered in Nagpur, the seat of the arbitration in the present case was in Nagpur and, therefore, the challenge to the award would not lie before this Court. HELD THAT - The Division Bench of this Court in Indian Oil Corporation Ltd. vs. FEPL Engineering (P) Ltd. 2019 (9) TMI 1701 - DELHI HIGH COURT proceeds on an interpretation of Section 18(4) of the MSMED Act vis-a-vis the contractual provisions contained in the arbitration clause and the jurisdiction clause of the agreement. However, in the present case, the Purchase Order does not contain an arbitration clause at all. In such circumstances, it is, not possible to hold that the parties agreed to a particular seat of the arbitration which would vest jurisdiction in this Court despite the provisions of the MSMED Act. In any event, the judgment of the Supreme Court in Gujarat State Civil Supplies Corporation Ltd. 2022 (11) TMI 91 - SUPREME COURT makes it clear that the provisions of Chapter V of the MSMED Act would override the Arbitration Act and the contractual arrangement. Thus, the seat of the arbitration, conducted by the Facilitation Council, was in Nagpur and the petition filed before this Court is not maintainable. The petition, alongwith the pending application, is therefore dismissed as not maintainable.

Summary

Issues involved:
The issues involved in this judgment are related to territorial jurisdiction in arbitration proceedings conducted under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and the Arbitration and Conciliation Act, 1996.

Details of the Judgment:

Issue 1: Territorial Jurisdiction in Arbitration Proceedings
The petitioner challenged an award by the Micro and Small Enterprises Facilitation Council in Nagpur, claiming the arbitration seat was in Delhi based on a Purchase Order clause. The respondent objected to Delhi's jurisdiction due to the arbitration being conducted in Nagpur under the MSMED Act.

Issue 2: Interpretation of Jurisdiction and Seat of Arbitration
The Division Bench's judgment in Indian Oil Corporation Ltd. vs. FEPL Engineering (P) Ltd. highlighted that the jurisdiction clause designates the venue, not the seat of arbitration. The MSMED Act's Section 18(4) allows Facilitation Councils to act as arbitrators, impacting jurisdiction.

Issue 3: Conflict between MSMED Act and Arbitration Act
The Supreme Court's judgment in Gujarat State Civil Supplies Corporation Ltd. clarified that the MSMED Act's provisions override the Arbitration Act and contractual arrangements. The MSMED Act's Chapter V has an overriding effect on arbitration disputes involving micro and small enterprises.

Conclusion:
The Court dismissed the petition, ruling that the arbitration seat was in Nagpur, making the petition not maintainable in Delhi. The petitioner was granted liberty to file a petition in the appropriate court. The judgment was forwarded to the respondent's counsel due to their absence during the proceedings.