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2022 (4) TMI 58 - SC - Indian LawsJurisdiction of the Council under the MSME Act - dispute between the appellant and the respondent - place of provision of services - HELD THAT - 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 mentioned in sub-section (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 - 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. Thus, with respect to the dispute the appellant and the Respondent No.1 the Council would have no jurisdiction under Section 18 of the MSME Act - appeal dismissed.
Issues Involved:
1. Jurisdiction of the Micro and Small Medium Enterprises Facilitation Council (the Council) under the MSME Act. 2. Applicability of the MSME Act to a foreign entity. 3. Validity of the termination of the Consulting Agreement. 4. Entitlement to payments and damages claimed by the appellant. Issue-wise Detailed Analysis: 1. Jurisdiction of the Micro and Small Medium Enterprises Facilitation Council (the Council) under the MSME Act: The primary issue for consideration was whether the Council had jurisdiction under the MSME Act to entertain the dispute between the appellant and the respondent. The appellant argued that since the agreements were executed in Delhi and services were rendered in India, the Council had jurisdiction. The respondent contended that as it was a company based in Switzerland, the MSME Act did not apply. The Court held that the relevant clause in the agreement stipulated that the laws of India applicable at the time of the contract would govern the parties. Since the appellant was not registered as an MSME at the time of the contract (registered on 28.08.2020, after the contract on 24.08.2020), the MSME Act did not apply, and thus, the Council had no jurisdiction. 2. Applicability of the MSME Act to a foreign entity: The respondent argued that the MSME Act was not applicable to foreign entities, as it was based in Switzerland. The Court noted that the respondent's registered office and the address mentioned in the agreements were in Switzerland. Therefore, the Council did not have jurisdiction over a dispute involving a foreign entity under Section 18 of the MSME Act. The Court also left open the larger issue of whether the MSME Act would apply if the buyer is located outside India but availed services in India, to be considered in an appropriate case. 3. Validity of the termination of the Consulting Agreement: The appellant challenged the termination of the Consulting Agreement dated 24.08.2020, claiming it was illegal and void. However, the Court did not delve deeply into this issue, as the primary focus was on the jurisdiction of the Council under the MSME Act. The termination notice and the subsequent reply were part of the factual matrix but did not alter the jurisdictional conclusion. 4. Entitlement to payments and damages claimed by the appellant: The appellant sought various payments and damages, including amounts covered by invoices and damages for termination. The Court's decision on jurisdiction rendered these claims moot under the MSME Act. The claims for payments and damages were not adjudicated upon, as the Council was deemed to lack jurisdiction. The Court's focus remained on the applicability of the MSME Act and the jurisdictional authority of the Council. Conclusion: The Supreme Court upheld the decisions of the Single Judge and the Division Bench of the High Court, confirming that the Council had no jurisdiction under the MSME Act to entertain the dispute between the appellant and the respondent. The appeal was dismissed, and no costs were awarded. The Court also kept open the larger issue of the MSME Act's applicability to foreign entities for future consideration.
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