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TMI Blog2023 (3) TMI 1494X X X X Extracts X X X X X X X X Extracts X X X X ..... Act shall necessarily be in terms of Section 34 of the Act of 1996 and surely the principles as governed under the Act of 1996 shall apply to such challenge. It may be stated here that a learned Single Judge of this Court in the case of AHLUWALIA CONTRACTS (INDIA) LTD. VERSUS OZONE RESEARCH APPLICATIONS (I) PVT. LTD. AND ORS. [ 2023 (1) TMI 1377 - DELHI HIGH COURT] , is of the view that the seat of arbitration shall be the place where Facilitation Council is situated (Nagpur in that case). Hence, a petition filed before this Court under Section 34 of the Act of 1996, shall not be maintainable. The impugned order passed by the learned District Judge rejecting the petition filed by the appellant herein under Section 19 of the MSMED Act read with Section 34 of the Act of 1996, on the ground that the Court has no territorial jurisdiction is contrary to the settled position of law and the same is liable to be set aside. The objections filed by the appellant, are restored on the file of the learned District Judge (Commercial Court), Shahdara, Delhi, for adjudication of the same on merits in accordance with law. - Hon'ble Mr. Justice V. Kameswar Rao And Hon'ble Mr. Justice Anoop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actual tax paid by it under Clause 5.2 of the Conditions of Contract (entered between the parties herein). This fact was also clarified by the appellant by submitting its reply dated March 08, 2017, wherein it sought proof of tax having been paid by the respondent for the said amount. 2.5 Aggrieved by not receiving of the said amount, the respondent lodged its claim with Micro and Small Enterprises Facilitation Council, on December 11, 2018. Specifically, it had raised a claim of ₹36,49,707/- towards deduction qua Liquidated Damages and ₹33,53,694.15/- towards interest thereon. 2.6 It is further stated that conciliatory process had failed and thus the matter was further referred to arbitration in September 2019. 2.7 Thereafter, vide award dated January 09, 2022, an award amounting to ₹63,35,077/- was passed in favour of the respondent and against the appellant. 2.8 To challenge the afore-said award passed against the appellant, the appellant filed a petition under section 19 of the MSMED Act read with section 34 of the Act of 1996, bearing No. OMP (COMM) No.01/2022, before the District Judge, Commercial Court, Shahdara, Karkardooma, Delhi. 2.9 Aggrieved by the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 19 of the MSMED Act does not grant territorial jurisdiction, is without any basis and suffers from flaw of interpretation. He substantiated this submission by contending that the words any court inserted by the Legislature under Section 19 of the MSMED Act, is not merely a surplusage. In order to emphasis on its interpretation and to contend that whilst interpreting a statute, efforts should be made by the Courts to give effect to each and every word used by the legislature, reliance has been placed upon the judgment of the Constitutional Bench of the Supreme Court in the case of Nath Devi vs. Radha Devi Gupta, (2005) 2 SCC 271. In order to further substantiate this submission, reliance was also placed upon the recent judgment of the Supreme Court in the case of Noor Mohammed vs. Khurram Pasha, 2022 SCC OnLine SC 956. 3.5 If the District Court had no jurisdiction to entertain the subject petition then as a corollary it could not have exercised its jurisdiction to direct the release of the pre-deposit to the respondent as well. It was his submission that the District Court s reliance on the order dated July 06, 2021 passed in the FAO (COMM) 103 of 2021 titled as Bhartia Non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge procedure given in Section 19 of the MSMED Act. So, it is his submission that the MSMED Act will definitely have precedence over the Act of 1996. g. Even otherwise, the concept stipulated under Section 24 of the MSMED Act makes it clear that the provisions of the MSMED Act, override any other provision which is found to be inconsistent with them. h. So, it was his submission that the jurisdiction for adjudication of the disputes arising out of the facts of the instant FAO should be governed by the provisions of the MSMED Act, specifically, Section 19 of the same, which stipulates that any Court having the jurisdiction can entertain an application filed under it for setting aside a decree, award or order. 4. So, on the basis of the afore-mentioned grounds, the appellant is seeking that the impugned order be set aside. 5. On the other hand, the submissions made by Mr. Vilas Sharma, learned counsel appearing on behalf of the respondent, before the learned District Judge, have been reiterated in the following manner: 5.1 That the agreement executed between the parties herein, does not have the arbitration clause. 5.2 That since the supplier/respondent herein, is located in Kanpur a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is entirely covered by the said Judgment inasmuch as the jurisdiction of the Facilitation Council which overrides the agreement executed between the parties is only with regard to the conduct of proceedings of the Facilitation Council and in no way shall affect the jurisdiction of Courts in Delhi to entertain a petition challenging the award under Section 34 of the Act of 1996, in view of clear stipulation in the agreement wherein the parties have conferred exclusive jurisdiction to the Courts in Delhi. 10. The plea of the learned counsel for the respondent is otherwise, inasmuch as the Facilitation Council being based in Kanpur, it would be the exclusive jurisdiction of the Court in Kanpur to entertain a petition under Section 34 of the Act of 1996. This he says, on the premise, the award has been rendered by the Facilitation Council based in Kanpur. In other words, it is his plea, the cause of action having arisen within the jurisdiction of Kanpur, it is the Court in Kanpur which shall have a jurisdiction to entertain a petition challenging the arbitral award. He submits that the learned District Judge has rightly relied upon the judgments of the Supreme Court in the case of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, we reproduce paragraph 23 of the said judgment as under: 23. Undoubtedly, the MSME Act is a special legislation dealing with Micro, Small and Medium Enterprises and would have precedence over the general law. There are decisions of several Courts holding that the provisions of MSME Act would override the provisions of the Contract between the parties. However, we are not engaged with the said controversy and, in fact, we had made it clear to the learned counsel for the Appellant, during the course of arguments, that the questions relating to the jurisdiction of the MSME Council to act as an Arbitrator and other similar issues will not be examined by us, as the learned Single Judge has not considered any of those aspects and has decided the objection petition only on the ground of territorial jurisdiction. However, this does not mean that the jurisdiction clause agreed between the parties has to be given a go-by. The overriding effect of the MSME Act, cannot be construed to mean that the terms of the agreement between the parties have also been nullified. Thus, jurisdiction of the MSME Council which is decided on the basis of the location of the supplier, would only determine the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /SC/0654/2013 : (2013) 9 SCC 32 and Indus Mobile Distribution Pvt. Ltd. Vs. Datawind Innovations Pvt. Ltd. MANU/SC/0456/2017 : (2017) 7 SCC 678 laid down that even though the venue of Arbitration may be different from the place of Arbitration agreed between the parties, the challenge to an Arbitration Award shall be entertained only by the Court having jurisdiction over the place of Arbitration. It was held that the place of Arbitration would be determined on the basis of agreement between the parties, including an agreement to exclusively provide for jurisdiction in a particular Court. 15. It is relevant that the Hon'ble Supreme Court in the case of Indus Mobile Distribution Pvt. Ltd. Vs. Datawind Innovations Pvt. Ltd.(supra), in the context of exclusionary jurisdiction clause contained in an arbitration agreement held as follows: 19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon'ble Supreme Court in case of Gujarat State Civil Supplies Corporation Ltd. Vs. Mahakali Foods Pvt. Ltd. (supra) and it does not eclipse the agreement between the parties of foisting exclusive jurisdiction on a particular Court. In law, it is that place which is covered under the exclusive jurisdiction of the Court agreed between the parties, which continues to be the place of Arbitration, thereby determining the Court that shall have territorial jurisdiction to entertain a petition under Section 34 of the Arbitration Act, to challenge the award passed by the Facilitation Council under the MSMED Act. 17. In the present case, there is no dispute about the fact that the parties agreed that the Courts at Mumbai shall have exclusive jurisdiction. Therefore, the place of Arbitration continues to be Mumbai, although the venue of Arbitration was Madurai, where the Facilitation Council under the MSMED Act passed the impugned award. Thus, this Court finds that there is no substance in the preliminary objection raised on behalf of the Respondent regarding territorial jurisdiction of this Court to entertain the present petition. (emphasis supplied) 15. It may be stated here tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s accepted, the very purpose of enacting the MSMED Act, 2006 would get frustrated. 28. There cannot be any disagreement to the proposition of law laid down in various decisions of this Court, relied upon by the learned counsel for the buyers that the Court has to read the agreement as it is and cannot rewrite or create a new one, and that the parties to an arbitration agreement have an autonomy to decide not only on the procedural law to be followed but also on the substantive law, however, it is equally settled legal position that no agreement entered into between the parties could be given primacy over the statutory provisions. When the Special Act i.e., MSMED Act, 2006 has been created for ensuring timely and smooth payment to the suppliers who are the micro and small enterprises, and to provide a legal framework for resolving the dispute with regard to the recovery of dues between the parties under the Act, also providing an overriding effect to the said law over any other law for the time being in force, any interpretation in derogation thereof would frustrate the very object of the Act. The submission therefore that an independent arbitration agreement entered into between th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of the law laid down by the Supreme Court in the case of Gujarat State Civil Supplies Corporation Ltd. (supra). (v) The same does not eclipse the agreement between the parties of foisting exclusive jurisdiction on a particular Court. 17. In view of our above discussion, we are of the view that the impugned order passed by the learned District Judge rejecting the petition filed by the appellant herein under Section 19 of the MSMED Act read with Section 34 of the Act of 1996, on the ground that the Court has no territorial jurisdiction is contrary to the settled position of law and the same is liable to be set aside. 18. Insofar as the judgments in the case of BGS SGS SOMA JV (supra) and Hindustan Construction Company Ltd. (supra), relied upon by the learned District Judge and the counsel for the respondent are concerned, they also hold that the seat as designated by the parties by an agreement shall govern the territorial jurisdiction of Courts to entertain a challenge to the award, which is what, we have held in the above paragraphs, except that in the case in hand, the proceedings held at Kanpur, where facilitation council is situated has been held as a venue which is diffe ..... 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