Bombay High Court
Rohit Sood vs Gammon Engineers And Contractors Pvt … on 16 October, 2024
Author: M. S. Sonak
Bench: M. S. Sonak
2024:BHC-OS:16438
Kishor 01-ARBP.L.28089.2022.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION (ARBP) (L) NO.28089 OF 2022
Gammon Engineers and Contractors Pvt. Ltd. .. Petitioner
Versus
Rohit Sood .. Respondent
WITH
INTERIM APPLICATION (L) NO.37553 OF 2022
IN
ARBITRATION PETITION (ARBP) (L) NO.28089 OF 2022
Gammon Engineers and Contractors Pvt. Ltd. .. Applicant
In the matter between:-
Gammon Engineers and Contractors Pvt. Ltd. .. Petitioner
Versus
Rohit Sood .. Respondent
....................
Mr. P. G. Sabnis - Advocate for Petitioner.
Mr. Abhijeet A. Desai a/w. Mr. Karan Gajra, Mr. Vijay Singh -
Advocate for Respondent.
...................
CORAM : M. S. SONAK AND
JITENDRA S. JAIN, JJ.
ARGUMENTS CONCLUDED ON : OCTOBER 9, 2024
JUDGMENT PRONOUNCED ON : OCTOBER 16, 2024
Judgment (Per Jitendra S. Jain, J.) :-
1. The following question is referred for the consideration of the
Larger Bench on account of contrary views expressed by the two
learned Single Judges of this Court in case of Gammon Engineers and
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Kishor 01-ARBP.L.28089.2022.docxContractors Pvt. Ltd. Vs. Sahay Industries 1 wherein it was held that
Application under Section 34 of the Arbitration and Conciliation Act,
1996 [‘Arbitration Act’] in case of the award passed under Section 18 of
the Micro, Small and Medium Enterprises Development Act, 2006
[‘MSMED Act’] is to be filed as per original agreement between the
parties at the place where exclusive jurisdiction is agreed upon and not
at the place where the award under Section 18 was passed. The
contrary view was taken in the case of Microvision Technologies Pvt.
Ltd. Vs. Union of India2, wherein in paragraph No. 38, the learned
Single Judge observed that the challenge to the award under Section 34
of the Arbitration Act is to be filed before the Court where the supplier
is located.
“Whether the jurisdiction of the Court to hear a Petition under Section 34
of the Arbitration and Conciliation Act, 1996 challenging an Award in a
statutory Arbitration under Section 18 of the Micro, Small and Medium
Enterprises Development Act, 2006 (“MSMED Act”) would be governed
by the non obstante provision under Section 18(4) of the MSMED Act or
would be governed by the Arbitration Agreement between the parties
which has conferred the exclusive jurisdiction to a particular Court.”
Brief facts relevant for the present reference are as under :-
2. Respondent is a Micro, Small and Medium Enterprises Unit
[‘MSME Unit’] and has supplied goods and rendered services to the
Petitioner. As per the original agreement between the Petitioner and the
1. 2023 SCC OnLine Bom 750
2. 2023 SCC Online Bom. 1848
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Respondent, the Courts at Mumbai would have exclusive jurisdiction for
resolving the disputes between them. Disputes arose between the
Petitioner and the Respondent, and since the Respondent was a MSME
Unit, a reference was made under Section 18 of the MSMED Act to
decide the disputes between them. The Micro, Small and Medium
Enterprises Facilitation Council [‘Facilitation Council’] at Shimla, where
the Respondent was located, adjudicated the disputes between the
parties, and an award was passed against the Petitioner. The Petitioner
has challenged the said award under Section 34 of the Arbitration Act
by applying to this Court. The Respondent has raised a preliminary
objection on the maintainability of the application under Section 34 of
the Arbitration Act on the ground that since the Facilitation Council at
Shimla has adjudicated the disputes between the parties under Section
18(4) of the MSMED Act, the Court at Mumbai do not have the
jurisdiction and Section 34 application ought to have been filed in the
Court at Shimla.
3. On 4 September 2023, the learned Single Judge (Justice R. I.
Chagla) noted the conflict between the two decisions of this Court
referred to above, namely Gammon Engineers and Contractors Pvt. Ltd.
(supra) and Microvision Technologies Pvt. Ltd. (supra) and requested
the Hon’ble Chief Justice of this Court to refer the issue to a Larger
Bench.
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Submissions of the Petitioner:-
4. Mr. Sabnis, learned counsel appearing for the Petitioner,
submitted that under the MSMED Act there is no provision dealing with
challenge post passing the award and therefore the award has to be
challenged as per the Arbitration Act of 1996. It is his submission that
although under the original agreement it was agreed by the parties that
Court at Mumbai would have exclusive jurisdiction but because of
Section 18 of the MSMED Act, they had no option but to agree for
reference of the dispute to Arbitration under the said Act at the
Facilitation Council at Shimla. It is his submission that the moment the
award came to be passed, the original agreement between the parties
dealing with the exclusive Court having jurisdiction would revive and
therefore the proper Court for filing application under Section 34 of the
Arbitration Act would be Bombay High Court. Mr. Sabnis, learned
counsel for Petitioner relied upon following decisions in support of his
contention that the Court at Mumbai only would have jurisdiction.
(i) Gammon Engineers and Contractors Pvt. Ltd. Vs. Shahay
Industries.3
(ii) Odisha Power Generation Corporation Ltd. Vs. Techniche
Consulting Services & Ors.4
3 2023 SCC OnLine Bom 750
4 IA No. GA 1 and GA 2 of 2023 in A.P.Com. 365 of (2024) (Cal.)
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(iii) Indian Oil Corporation Ltd. Vs. Fepl Engineering (P) Ltd.
& Anr.5
(iv) Ircon International Limited Vs. Pioneer Fabricators
Private Limited.6
Submissions of the Respondent:-
5. Per contra, Mr. Desai, learned counsel for the Respondent,
submitted that the MSMED is a Special Act and overrides the agreement
between the parties in so far as the agreement relating to conferring
exclusive jurisdiction by the parties is concerned. It is his submission
that on a conjoint reading of Section 18 and 24 of the MSMED Act and
Section 42 of the Arbitration Act, once having agreed to resolve the
dispute by the Facilitation Council at Shimla, further proceedings
relating thereto to challenge the award would also lie before the Court
at Shimla and not at Mumbai. It is his submission that the contract
between the parties conferring exclusive jurisdiction over the Courts at
Mumbai gets obliterated by virtue of the provisions of the MSMED Act,
and therefore, the appropriate Court to challenge the award would be
the Courts at Shimla and not at Mumbai. Mr. Desai relied upon the
following decisions in support of his submissions:-
(i) Microvision Technologies Private Limited Vs. Union of
India.75 2019 SCC OnLine Del 10265
6 2023 SCC OnLine Del 18115 of 42
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(ii) Marsons Electrical Industries Vs. Chairman, Madhya
Pradesh State Electricity Board and Anr.8
(iii) Gujarat State Civil Supplies Corporation Limited Vs.
Mahakali Foods (P) Ltd.9
(iv) Ahluwali Contract (India Limited) Vs. Ozone Research &
Applications.10
(v) Malaviya National Institute of Technology (MNIT) Vs.
Micro and Small Enterprises & Facilitation Council.11
(vi) Bharat Heavy Electricals Ltd. Vs. State of U.P.12
6. The counsel for the Petitioner and the Respondent has also
filed written submissions supporting their contentions.
7. We have heard learned counsel for the Petitioner and the
Respondent and noted the judgments brought to our notice.
ANALYSIS :-
8. Before we proceed to analyse the question posed for our
consideration, it is relevant to reproduce certain clauses of the
agreement between the Petitioner and the Respondent.
“5. GOVERNING LAWS :
“The Work Order / Subcontract shall be governed by the Laws of
India and Courts in Mumbai shall have exclusive jurisdiction over all
matters, arising out of or relating to this Work Order / Subcontract.
Notwithstanding the place where the Work Order/ Subcontract is
signed or the place where the work under the Work Order/
Subcontract is to be executed, it is mutually understood and agreed
by and between the Parties hereto, that this work order /7 2023 SCC OnLine Bom 1848
8 2023 SCC OnLine All 2675
9 (2023) 6 SCC 401
10 2023 SCC OnLine Del 518
11 Writ Petition No. 1236 of 2020 :
12 2014 SCC OnLine All 2895.
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Subcontract shall be deemed to have been entered into by the
Parties concerned in the City of Mumbai.”
17. ARBITRATION
“All and any disputes arising out of or in connection with this
Agreement, after written notice by either Party to the Contract, shall
be referred to the Sole arbitration of a person appointed by the
Chairman and Managing Director or Director of the Company. The
place of arbitration shall be Mumbai. The arbitration shall be
conducted in English language. The arbitration award shall be final
and binding. Subject as aforesaid, the provisions of the Arbitration
and Conciliation Act, 1996, or any statutory modification or re-
enactment thereof and the rules made thereunder and for the time
being in force shall apply to the arbitration proceeding under this
Clause.””
To a similar effect as that of the above, Clause 17 is Clause 33
of the agreement.
9. The relevant provisions of the MSMED Act which would be
relevant for our consideration are Sections 18 and 19, as amended by
the Act of 32 of 2023, which reads thus:-
“18. Reference to Micro and Small Enterprises Facilitation
Council.-
(1) Notwithstanding anything contained in any other law for the
time being in force, any party to a dispute may, with regard to any
amount due under section 17, make a reference to the Micro and
Small Enterprises Facilitation Council
(2) On receipt of a reference under sub-section (1), the Council
shall either conduct mediation itself or refer the matter to any
mediation service provider as provided under the Mediation Act,
2023.
(3) The conduct of mediation under this section shall be as per the
provisions of the Mediation Act, 2023.
(4) Where the mediation initiated under sub-section (3) is not
successful and stands terminated without any settlement between
the parties, the Council shall either itself take up the dispute for
arbitration or refer it to any institution or centre providing
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alternative dispute resolution services for such arbitration and the
provisions of the Arbitration and Conciliation Act, 1996 (26 of
1996), shall, then apply to the dispute as if the arbitration was in
pursuance of an arbitration agreement referred to in sub-section 1
of section 7 of that Act.
(5) Notwithstanding anything contained in any other law for the
time being in force, the Micro and Small Enterprises Facilitation
Council or the centre providing alternative dispute resolution
services shall have jurisdiction to act as an Arbitrator or mediator
under this section in a dispute between the supplier located within
its jurisdiction and a buyer located anywhere in India.
19. Application for setting aside decree, award or order. – No
application for setting aside any decree, award or other order made
either by the Council itself or by any institution or centre providing
alternate dispute resolution by the services to which a reference is
made by Council, shall be entertained by any/Court unless the
appellant (not being a supplier) has deposited with it seventy-five
per cent of the amount in terms of the decree, award or, as the case
may be, the other order in the manner directed by such Court:
Provided that pending disposal of the application to set aside the
decree, award or order, the Court shall order that such percentage
of the amount deposited shall be paid to the supplier, as it considers
reasonable under the circumstances of the case, subject to such
conditions as it deems necessary to impose.”
10. Prior to Act No. 32 of 2023, Section 18 of the MSMED read as
under :-
“18. Reference to Micro and Small Enterprises Facilitation Council-
(1) Notwithstanding anything contained in any other law for the
time being in force, any party to a dispute may, with regard to any
amount due under section 17, make a reference to the Micro and
Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council
shall either itself conduct conciliation in the matter or seek the
assistance of any institution or centre providing alternate dispute
resolution services by making a reference to such an institution or
centre, for conducting conciliation and the provisions of sections 65
to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996)
shall apply to such a dispute as if the conciliation was initiated
under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) is not
successful and stands terminated without any settlement between
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dispute resolution services for such arbitration and the provisions of
the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then
apply to the disputes as if the arbitration was in pursuance of an
arbitration agreement referred to in sub-section (1) of section 7 of
that Act.
(4) Notwithstanding anything contained in any other law for the
time being in force, the Micro and Small Enterprises Facilitation
Council or the centre providing alternate dispute resolution services
shall have jurisdiction to act as an Arbitrator or Conciliator under
this section in a dispute between the supplier located within its
jurisdiction and a buyer located anywhere in India.
(5) Every reference made under this section shall be decided within
a period of ninety days from the date of making such a reference.”
11. For our purpose the amendment would not be relevant since
pre and post 2023 our analysis to answer the question posed would be
same.
12. Section 7 of the Arbitration Act reads as under :-
“7. Arbitration agreement.-(1) In this Part, “arbitration agreement”
means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between
them in respect of a defined legal relationship, whether contractual
or not.
(2) An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in-
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication [including communication through electronic
means] which provide a record of the agreement; or
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(c) an exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not denied
by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract.”
13. Clause-5 of the agreement between the parties expressly states
that the work order / sub-contract shall be governed by the laws of
India and that courts in Mumbai would have exclusive jurisdiction over
all matters arising out of order relating to the said work order / sub-
contract. It is further agreed in the said clause that notwithstanding the
place where the work order / sub-contract is signed or the place where
the work is to be executed, it is mutually understood and agreed by the
parties that the said work order / sub-contract would be deemed to
have been entered into by the parties concerned in the city of Mumbai.
It is an admitted position that both the parties, i.e. the Petitioner and
the Respondent, had agreed to be governed by the Courts in Mumbai,
and Courts in Mumbai would have exclusive jurisdiction over all
matters arising out of work order / sub-contract.
14. Clause-17 of the General Conditions of the Work Order states
that all and any disputes arising out of order in connection with this
agreement shall be referred to the sole arbitrator to be appointed by the
Chairman / Managing Director / Director of the Petitioner and the place
of arbitration shall be Mumbai. It further states that provisions of the
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Arbitration and Conciliation Act, 1996 or any statutory modification or
re-enactment thereof and the Rules made thereunder and for the time
being in force shall apply to the arbitration proceedings under this
clause.
15. Clause No. 33 of the agreement deals with the mechanism of
dispute resolution and it is stated therein that in case of any difference
or dispute, parties would attempt to settle the difference amicably
before the commencement of arbitration. It further states that disputes
if not settled would be referred to the sole arbitration of a person to be
appointed by the Chairman / Managing Director / Director of Petitioner.
The said clause further states that the place of arbitration would be
Mumbai and it is further agreed that provisions of Arbitration Act would
apply to the arbitration proceedings under the said clause.
16. The object of the MSMED Act was to provide for facilitating
the promotion, development and enhancing the competitiveness of
micro, small and medium enterprises and for matters connected
therewith or incidental thereto.
17. Section 18(1) of MSMED Act provides that notwithstanding
anything contained in any other law for the time being in force, any
party to the dispute with regard of any amount due under Section 17 of
the MSMED Act may make a reference to Micro and Small Enterprises
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Facilitation Council. The Facilitation Council is established under
Section 20 by the State Government at such places and / or such areas
as may be notified. On receipt of the reference, the Facilitating Council
would try to resolve the dispute through mediation under 2023 Act and
through conciliation prior to 2023 amendment. Section 18(4) provides
that if the mediation is not successful and settlement between parties
could not take place, then the Facilitating Council shall either itself take
up the dispute for arbitration or refer it to any institution or centre
providing alternative dispute resolution services for such arbitration and
the provisions of the Arbitration Act shall then apply to the dispute as if
the arbitration was in pursuance of an arbitration agreement referred to
under Section 7(1) of the Arbitration Act.
18. The provisions of Section 18(4) of the MSMED Act referring
the matter for arbitration would apply in two cases. Firstly, where
parties to the dispute do not have an arbitration agreement as defined
under Section 7(1) of the Arbitration Act and therefore by virtue of
Section 18(4) an arbitration agreement is statutorily and contractually
deemed to have been entered into by the parties. Secondly, if there is an
arbitration clause in the agreement between the parties and it provides
certain mechanism for appointment of an Arbitrator, then in that
situation the said mechanism provided in the agreement gets
overridden by the provisions of Section 18(4) because said section
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provides that the Facilitation Council would take upon itself the dispute
for arbitration or refer the dispute to any institution or centre providing
dispute resolution services. The effect of Section 18(4) in the second
case would be that the mechanism provided under original agreement
between the parties gets superseeded by Section 18(4) in so far as the
issue of who should be the Arbitrator is concerned. It is in these two
scenarios, the provisions of Section 18(4) gets triggered. In the present
case, Clause 17 of the agreement between the parties dealing with the
mechanism to settle the dispute and for appointment of Sole Arbitrator
by the Chairman / Managing Director / Director of the Petitioner gets
obliterated by virtue of Section 18(4) of the MSMED Act. The original
agreement between the parties empowering the officers of the
Petitioner-Company to appoint the Sole Arbitrator also gets obliterated
by Section 18(4) of the MSMED Act in as much as now the Facilitation
Council would either be an Arbitrator itself or would refer dispute to
any institution or centre providing dispute resolution services
irrespective of what the original agreement between the parties was.
Therefore, Section 18(4) of the MSMED Act overrides original
agreement between the parties only to the extent of the mechanism
provided for resolution of dispute and appointment of Arbitrator is
concerned. In the instant case, by virtue of Section 18(4) of the MSMED
Act only the Clauses 17 and 33 of the original agreement gets
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overridden and substituted by Section 18(4) of the MSMED Act.
However, clause 5 of the agreement which provides for governing laws
and Courts in Mumbai having exclusive jurisdiction does not get
overridden by the provisions of Section 18(4) of the MSMED Act.
Section 18(4) of the MSMED Act does not provide that if parties have
agreed to exclusive jurisdiction of Courts in Mumbai, then such clause
would also get overridden and obliterated by the said provision.
Therefore, Clause 5 agreed between the parties in original agreement
conferring exclusive jurisdiction on Mumbai Courts, would continue to
govern even if the dispute is referred to Arbitration under Section 18(4)
of the MSMED Act.
19. Section 18(5) of the MSMED Act provides by non obstante
clause that the Facilitation Council or the centre providing dispute
resolution services shall have jurisdiction to act as an Arbitrator or
Mediator under Section 18 in dispute between supplier located within
its jurisdiction and a buyer located anywhere in India. The purport of
Section 18(5) of the MSMED Act is to identify which Facilitation
Council or centre providing alternative dispute resolution would decide
the dispute between the supplier and buyer and since the MSMED Act is
enacted for protecting supplier, the Facilitation Council located within
the jurisdiction of the supplier would be acting as an Arbitrator even if
buyer is located anywhere in India. The phrase ‘supplier located within
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its jurisdiction’ would mean that the Facilitation Council or any centre
providing dispute resolution services referred to by such Facilitation
Council at the place where the supplier is located would be the
Arbitrator. The phrase ‘jurisdiction’ interpreted in the context of its
setting in Section 18(5) of the MSMED Act would not mean that the
original clause agreed upon by the parties to govern its disputes by the
Courts in Mumbai would get overridden. The phrase ‘jurisdiction’ used
in Section 18(5) is only for the limited purpose for identification of the
Facilitation Council where the supplier is located who would be the
authority to whom the arbitration would be referred to or to any centre
providing dispute resolution services referred to by such Facilitation
Council. The objective is that in arbitration a trial takes place by leading
evidence and the convenient place for a trial would be the place where
the supplier is located. Looking at the intention and object of the
MSMED Act, the State Government in India have to establish
Facilitation Council under Section 20 of the MSMED Act. If any dispute
arose between the supplier located in one State and a buyer located in
another State and both the cities have Facilitation Council then which
Facilitation Council will act as an Arbitrator will be a subject matter of
dispute and it is to overcome that, keeping in mind the object of
MSMED Act, Section 18(5) of the MSMED Act provides that the
Facilitation Council located within the area of the supplier would be
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acting as an Arbitrator for the purpose of dispute resolution. It is for
that limited purpose provision of Section 18(5) has been engrafted. To
read provisions of Section 18(5) of the MSMED Act to mean that the
original agreement dealing with governing laws and conferring
exclusive jurisdiction to the Courts in Mumbai is overridden, in our view
would be contrary to the reading of Section 18(5) of the MSMED Act.
Section 18(5) would be pari materia to Section 20(3) of the Arbitration
Act and the place where the Council is located would be the venue of
the Arbitration. The exclusive jurisdiction clause is the ‘seat’ of
arbitration, which in the instant case is in Mumbai as per clause 5 of the
agreement between the parties.
20. Section 18(4) of the MSMED Act would apply if there is no
arbitration agreement between the parties. In such a case, Section 18(4)
states on failure of settlement, it will be deemed that there is an
arbitration agreement between the parties as defined by Section 7(1) of
the Arbitration Act. The scope of Section 18(4) ends at this stage and
cannot be extended to ascertain the appropriate Court to which the
application for setting aside can be made. Now coming to Section 18(5)
would come into effect in case after stage of Section 18(4) is over or if,
in the original agreement, parties have agreed to a “particular
arbitrator” or have agreed to a mechanism for the appointment of an
arbitrator then Section 18(5) provides that Facilitation Council or centre
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providing dispute resolution services having jurisdiction over the place
where supplier is located would be acting as an arbitrator. Section 18(5)
of the MSMED Act overrides only Section 11 of the Arbitration Act,
which deals with appointing an Arbitrator. Therefore appointment of
arbitrator is provided by Section 18(5) and nothing more. In our view,
to submit that by virtue of Section 18(5), the Courts at Shimla would
have jurisdiction would not be the correct reading of said section.
Therefore, in our view, clause 5 of the agreement between the parties
dealing with governing laws would not get overridden by the provisions
of Section 18(5) of the MSMED Act.
21. Section 20(3) of the Arbitration and Conciliation Act, 1996
states that unless otherwise agreed, the Tribunal may meet at any place
it considers appropriate for hearing, for inspection, etc. In our view,
provisions of Section 20(3) of the Arbitration and Conciliation Act,
dealing with place is replaced by Section 18(5) of the MSMED Act by
providing that the Facilitation Council or centre providing dispute
resolution service located at the place of the supplier will have
jurisdiction to act as an Arbitrator. The parties have agreed under
Clauses 5, 7 and 33 for seat of exclusive jurisdiction at Mumbai and,
therefore, under Section 20(1) of the Arbitration and Conciliation Act,
1996 Mumbai Court will be the Appropriate Court for challenging the
award. Therefore, in our view, the phrase “jurisdiction” used in Section
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18(5) is akin to a venue of arbitration, but it does not mean that the
jurisdiction to challenge the award would be before the Courts where
supplier is located by virtue of Section 18(5) of the MSMED Act.
22. Section 19 of the MSMED Act provides that no application for
setting aside any decree, award or other order made by the Council or
by centre providing dispute resolution services referred to by the
Council shall be entertained by any Court unless 75% of the amount
determined in terms of the decree or award is deposited. It is important
to note that Section 19 only provides for pre-deposit of certain amount
before any application for setting aside any decree, award or order are
challenged before the Court. Said Section 19 does not provide for the
proper forum before whom the application for setting aside the award is
to be made. Therefore, even by virtue of Section 19 of the MSMED Act,
Clause 5 of the agreement between the parties conferring exclusive
jurisdiction to Mumbai Courts is not overridden. The phrase ‘any Court’
used in Section 19 would be the Court having jurisdiction to entertain
the application for setting aside award or decree and such Court would
be the Court agreed upon by both the parties under original agreement,
which in the instant case, is Courts in Mumbai. Court is not defined
under the MSMED Act and since an Application has to be made under
Section 34 of the Arbitration Act, Section 2(e) of the said Act, which
defines Court, would be applicable. Since the parties have agreed to be
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governed by the Courts in Mumbai and the parties have agreed that the
work order / sub-contract is deemed to have been entered into in the
city of Mumbai, in our view, Courts in Mumbai would have the
jurisdiction to entertain application under Section 34 of the Arbitration
Act. The seat of Arbitration as per the parties is at Mumbai and Shimla
is only the venue for arbitration.
23. Section 19 of the MSMED Act provides that no application for
setting aside of any award made by the Council or any institution to
which the reference is made by the Council shall be entertained by “any
Court” unless pre-deposit in terms of the decree and as specified in
Section 19 is made. It is important to note the phrase “any Court”. If
the intention of the legislature was that the application under Section
34 of the Arbitration Act, 1996 was also to be filed at the place where
the supplier is located then in Section 19 they would have stated that
“Court having jurisdiction over the supplier or Court within whose
jurisdiction, the supplier is located”. This is in sharp contrast to Section
18(5) of MSMED Act which provides that the Council at the place
where the supplier is located would have jurisdiction as an Arbitrator.
This also indicates that post passing the award the Appropriate Court
before whom an application for setting aside the award is to be made
would be governed by the original agreement between the parties
which in the instant case is the Courts in Mumbai. It is also important
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to note Section 28 of the MSMED Act, which provides for jurisdiction of
Courts to try offence punishable under the Act. The legislature could
have very well made a provision with respect to the jurisdiction of
Courts at the place where the supplier is located or the place where the
Facilitation Council passes the award as a Court before whom “an
application for setting aside the award would lie”. No such provision
dealing with jurisdiction of Courts to entertain application for setting
aside the award is enacted in the MSMED Act.
24. It is important to note that provisions of the MSMED Act are
silent post-passing the award except to the extent of making a provision
in Section 19 for a pre-deposit as a pre-condition for entertaining the
Application. The MSMED Act does not provide any mechanism for
challenging the award passed under Section 18. The Arbitration Act
takes over once an award is passed under Section 18 of the MSMED
Act. Therefore, once the award is passed, the provisions of the
Arbitration Act would govern for the purpose of challenging the award
and ascertaining the Court before such an Application for setting aside
the award is to be made. In the instant case, the parties have agreed to
be governed by the Courts in Mumbai, and which, as observed by us
above is not overridden by any of the provisions of the MSMED Act, the
Courts in Mumbai would have jurisdiction to entertain Section 34
application for setting aside the award.
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25. The Hon’ble Supreme Court in the case of Swastik Gas Pvt.
Ltd. Vs. Indian Oil Corporation Ltd. Vs. Indian Oil Corporation Limited13
and Indus Mobile Distribution Pvt. Ltd. Vs. Datawind Innovations
Private Limited & Ors.14 has laid down that even though the venue of
the arbitration may be different from the seat of arbitration agreed
between the parties, the challenge to an arbitration award shall be
entertained only by the Courts having jurisdiction over the seat of the
arbitration and the seat of the arbitration would be determined on the
basis of the agreement between the parties including the agreement to
exclusively provide for jurisdiction in a particular Court. In the instant
case before us parties have agreed in the original agreement to confer
exclusive jurisdiction to the Courts in Mumbai. The place for conducting
arbitration under Section 18(4) read with Section 18(5) of the MSMED
Act would only constitute a venue keeping in mind the convenience of
the supplier during the course of trial leading to the award. However, by
virtue of clause 5, agreed upon by the parties conferring jurisdiction in
Mumbai, would not get disturbed or obliterate in so far as
maintainability of Application under Section 34 of the Arbitration Act
before Courts in Mumbai is concerned. Once an award is passed and the
trial is concluded, the convenience of the place of supplier at which the
trial took place gets satisfied and for the purpose of Section 34 the
13 (2013) 9 SCC 32
14 (2017) 7 SCC 678
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convenience of the supplier would thereafter not be a factor and
therefore, the MSMED Act has not provided that even for challenging an
award or decree the Courts having jurisdiction where the supplier is
located would be the appropriate Court. If the intention of the
legislature was to confer jurisdiction on the Courts where the supplier is
located, then nothing prevented them to make a provision similar like
Section 18(5) of the MSMED Act. In the absence of any such provision
and in the absence of any procedure being described in the MSMED Act
for challenging award passed under the said Act, it would be the
original agreement agreed upon between the parties conferring
exclusive jurisdiction which would govern the Courts before which an
Application for setting aside the award under Section 34 would be
applicable.
26. Section 24 of the MSMED Act provides that provisions of
Sections 15 to 23 shall have effect notwithstanding anything
inconsistent therein contained in any other law for the time being in
force. Therefore, for invoking provisions of Section 24 of the MSMED
Act, it is imperative that an exercise is to be done to find out the conflict
between the two Acts or two provisions and only in case of such a
conflict that Sections 15 to 23 of the MSMED Act will have preference.
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27. Section 24 of the MSMED Act provides for an overriding effect
with regard to Sections 15 to 23 of the said Act. It is crucial to analyse
this group of sections for ascertaining whether the contention of
Respondents with respect to the overriding effect qua agreement
between the parties to confirm jurisdiction Courts in Mumbai is
overridden. Section 15 deals with the credit period for payment to the
supplier by the buyer and the maximum period specified in the said
section would prevail, if the same is contrary to the agreement between
the parties. Section 16 deals with the rate at which the interest rate is
payable if the rate of interest agreed by the parties is contrary to the
rate provided in Section 16 then the rate as per Section 16 of the
MSMED Act would prevail. Section 17 provides for payment along with
interest would prevail if the agreement between the parties is not so.
Section 18 provides for the mechanism to resolve the dispute between
the parties on account of amount due to the supplier by the buyer. It
provides that it overrides the agreement between the parties with
respect to the Arbitration and the Facilitation Council at the place where
supplier is located would act as an Arbitrator. Section 19 provides for
pre-deposit of the amount specified therein as a condition president for
entertaining an application for setting aside the award. The said Section
19 overrides Section 36(3) of the Arbitration and Conciliation Act,
1996. Sections 20 to 22 deals with the establishment and composition
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of the Facilitation Council and disclosure with respect to unpaid amount
in the annual statement of accounts. Section 22 which provides to
specify unpaid amount with interest in the accounts of the buyer would
override the disclosure requirement under the Companies Act, 2013;
and Section 23 which provides that the amount of interest payable
under the MSMED Act shall not be allowed as deduction overrides the
provisions of the Income Tax Act. In our view, as analysed above,
provisions of Section 24 giving overriding effect is only restricted to the
above referred sections and the eventualities specified therein. Sections
15 to 23 nowhere provides for the Appropriate Court before whom an
application for setting aside the award passed under Section 18 is to be
challenged. Therefore, the contention that Section 24 overrides the
agreement between the parties with respect to conferring exclusive
jurisdiction to a particular Court is to be rejected.
28. In the instant case before us, we have already observed that
provisions of Sections 18(4), 18(5) and 19 of the MSMED Act does not
provide to determine which Court would have jurisdiction for
entertaining an Application for setting aside award under Section 34 of
the Arbitration Act. On the contrary, none of the provisions from
Sections 15 to 23 provides for a particular Court located at a particular
place for conferring jurisdiction to entertain Application for setting
aside the award. Therefore, there is no conflict between the provisions
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of the MSMED Act or any other Act in so far as the issue relating to
determining the appropriate Court to which the Application is to be
made for setting aside the award is concerned. Therefore, the
contention of the Respondent by relying upon the provisions of Section
24 of the MSMED Act in respect of its preliminary objection is
misconceived. The non-obstante clause does not mean that in any and
every case provision of such non-obstante clause engrafted would
prevail but it would be only in those situation where there is conflict
between two provisions or two Acts that provision contained in non-
obstante clause would prevail. Such non-obstante clauses cannot be
read in vacuum where there is no conflict between the two statutes or
provisions.
29. Section 42 of the Arbitration Act has been pressed into service
by the Respondent in support of their preliminary objection. Section 42
of the Arbitration Act provides that notwithstanding anything contained
in any other law for the time being in force where with respect to an
arbitration agreement any application has been made in a Court, that
Court alone shall have jurisdiction over the arbitral proceedings and all
subsequent applications arising out of that agreement and the arbitral
proceedings shall be made in that Court and in no other Court. In the
instant case before us, there cannot be two views that Facilitation
Council under Section 20 of the MSMED Act cannot fall within the
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meaning of the term ‘Court’ as defined under Section 2(e) of the
Arbitration Act. Therefore, we fail to understand as to how this
provision would apply to the facts of the present case and in support of
contention raised by the Respondent on maintainability.
30. Section 42 of the Arbitration and Conciliation Act, 1996
provides where with respect to an arbitration agreement any application
under this Part-I has been made in a Court, that Court alone shall have
jurisdiction over the arbitral proceedings and all subsequent
applications arising out of that agreement and the arbitral proceedings
shall be made in that Court and in no other Court. This section has
been relied upon by Respondents to contend that the jurisdiction would
be the Courts at Shimla and not at Mumbai which was the exclusive
jurisdiction conferred by the parties in the original agreement. To test
this proposition let us take an example that before invocation of Section
18 of the MSMED Act, a party for obtaining interim measures
approaches the Court under Section 9 of the Arbitration and
Conciliation Act, 1996. The Appropriate Court for filing the said
application would be the Court which was agreed upon by the parties to
have exclusive jurisdiction which in the instant case is Mumbai. After
this proceeding, provisions of Section 18 of the MSMED Act are invoked
and an award is passed. In this situation as per Section 42 of the
Arbitration and Conciliation Act, 1996, the application for setting aside
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the award would lie before the Court which was conferred exclusive
jurisdiction by the parties in the original agreement and before whom
Section 9 application was made. Therefore, the reliance placed by
Respondents on provision of Section 42 would support the case of the
Petitioner and not the Respondents and subsequent applications for
challenging the award would be in Courts at Mumbai only.
31. Whether a particular Act or provision is special or general has
to be examined based on the situation faced for ascertaining the same.
Same Act or provision may change its colour from special to general
and vice-versa based on the situation to which the provision is required
to be applied. Although MSMED Act is a special provision insofar as it
deals with the dispute resolution mechanism before the Arbitrator,
however, post making the award by the Arbitrator under Section 18,
there is no provision in the MSMED Act which provides for mechanism
to ascertain the Court to which the application for setting aside the
award is to be made. In that scenario, the only provisions which could
be made applicable would be the provisions of the Arbitration and
Conciliation Act, 1996 which becomes a special law for challenging the
award and for ascertaining the Appropriate Court to which such an
application is required to be made. In the instant case, the exclusive
jurisdiction as per the agreement between the parties is with the Courts
in Mumbai and, therefore, even on this count, application under Section
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34 of the Arbitration and Conciliation Act, 1996 would lie before the
Courts over which the parties have agreed to confer exclusive
jurisdiction.
32. Another way of looking at the issue is that the parties have
entered into agreement of exclusive jurisdiction to Mumbai Courts and
the resolution of disputes as per the Arbitration Act. This agreement is
entered into by the parties post enactment of the Arbitration Act and
also the MSMED Act. The parties were conscious that Arbitration clause
as per agreement would be superseeded by Section 18(4) of the
MSMED Act and the place of arbitration as per section 18(5) would be
at Shimla. Therefore assuming seat of arbitration would be at Shimla
and Courts at Shimla would have jurisdiction but at the same time as
per the agreement the work was deemed to have been executed at
Mumbai including execution of the agreement at Mumbai, thereby
conferring jurisdiction on Courts in Mumbai. Therefore at the time of
execution of agreement both parties were aware that Courts at Mumbai
as well as Shimla will have jurisdiction but they agreed to confer
exclusive jurisdiction to Court at Mumbai in exclusion to Shimla.
Therefore even on this Court Respondents today cannot turn around to
contend that they are not bound by exclusive jurisdiction clause which
was agreed by them. These observations and views expressed herein are
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on the basis that governing clause 5 is not overridden by any of the
provisions of the MSMED Act.
33. Therefore, in our view, the preliminary objection raised by the
Respondent that the Courts in Mumbai would not have jurisdiction
under Section 34 of the Arbitration Act is to be rejected.
34. We now propose to deal with the case laws relied upon by the
Petitioner.
35. The first decision relied upon by the Petitioner is the decision
of the learned Single Judge of this Court in case of Gammon Engineers
& Contractors Pvt. Ltd. (supra). The issue of which Court would have
jurisdiction to entertain Application under Section 34 of the Arbitration
Act arose in a very identical situation before the Court in this case. The
party raised a preliminary objection that since Facilitation Council at
Madurai has passed the award, application under Section 34 would not
lie before the Bombay High Court. The learned Single Judge by a
detailed order rejected the said contention. The relevant paragraphs of
the said decision are reproduced herein below :-
“15. It is relevant that the Hon’ble Supreme Court in the case of
Indus Mobile Distribution Pvt. Ltd. v. 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
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Kishor 01-ARBP.L.28089.2022.docxclause. 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, unlike the Code of Civil Procedure which applies to
suits filed in Courts, a reference to “seat” is a concept by which a
neutral venue can be chosen by the parties to an arbitration clause.
The neutral venue may not in the classical sense have jurisdiction
— that is, no part of the cause of action may have arisen at the
neutral venue and neither would any of the provisions of sections
16 to 21 of Civil Procedure Code be attracted. In arbitration law
however, as has been held above, the moment “seat” is determined,
the fact that the seat is at Mumbai would vest Mumbai Courts with
exclusive jurisdiction for purposes of regulating arbitral proceedings
arising out of the agreement between the parties.”
16. This Court is of the opinion that even though, in the case of
Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt.
Ltd. (supra), the Hon’ble Supreme Court has observed that statutory
Arbitration under section 18 of the MSMED Act, would override the
agreement between the parties, it necessarily applies to the agreed
procedure of Arbitration between the parties. It is clear that if
parties agreed for Arbitration by a sole Arbitrator or by an agreed
procedure of constituting an Arbitral Tribunal, the same would
stand obliterated by operation section 18 of the MSMED Act. But
once the Arbitration Award is pronounced, and there is an
exclusionary clause of jurisdiction agreed between the parties,
thereby agreeing upon jurisdiction of only one Court, in exclusion
to others, the challenge initiated by the aggrieved party under the
Arbitration Act, even against an award passed by the Facilitation
Council under the MSMED Act, will lie only before the Court upon
which the parties agreed to place exclusive jurisdiction. This Court
is in agreement with the view taken by the Division Bench of the
Delhi High Court in the case of Indian Oil Corporation Ltd. v. Fepl
Engineering (P) Ltd.. (supra), to the effect that Arbitration
proceedings undertaken before the Facilitation Council under
section 18 of the MSMED Act are undertaken at the venue where
the Facilitation Council is located. The place of the Arbitration
continues to be the place over which the Court has exclusive
jurisdiction, as agreed between the parties. By the operation of the
provisions of the MSMED Act, only the procedure of constitution of
the Arbitral Tribunal is overshadowed in terms of the law laid down
by the Hon’ble Supreme Court in case of Gujarat State Civil
Supplies Corporation Ltd. v. 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.
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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.”
36. We are in complete agreement with the decision and
judgment rendered by the learned Single Judge in the case of Gammon
Engineers & Contractors Pvt. Ltd. (supra).
37. The second decision relied upon by the Petitioner is of the
Delhi High Court in the case of Indian Oil Corporation Ltd. (supra). The
issue raised before the Delhi High Court was as to whether the Courts at
Thane where the Facilitation Council has passed an order would have
the jurisdiction or the Court in Delhi would have the jurisdiction and
the Delhi High Court in a very similar facts which is before us held that
the exclusive jurisdiction to entertain the petition under Section 34
would be the Court at New Delhi. The relevant paragraphs of the said
decision reads as under :-
“21. There is yet another aspect, which needs to be dealt with at the
present stage. Section 18 of the MSME Act provides that the
provisions of the Arbitration and Conciliation Act 1996 shall apply
to the dispute between the parties. Learned Single Judge has
decided the ‘SEAT’ of arbitration in the present case, on the basis of
Section 18 of the MSME and has held that exclusive jurisdiction
would be with the Courts at Thane.
22. Section 18 of the MSME Act, reads as under:
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Kishor 01-ARBP.L.28089.2022.docx“18. Reference to Micro and Small Enterprises Facilitation Council.
—
(1) Notwithstanding anything contained in any other law for the
time being in force, any party to a dispute may, with regard to any
amount due under section 17, make a reference to the Micro and
Small Enterprises Facilitation Council.
(2) On receipt of a reference under sub-section (1), the Council
shall either itself conduct conciliation in the matter or seek the
assistance of any institution or centre providing alternate dispute
resolution services by making a reference to such an institution or
centre, for conducting conciliation and the provisions of sections 65
to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996)
shall apply to such a dispute as if the conciliation was initiated
under Part III of that Act.
(3) Where the conciliation initiated under sub-section (2) is not
successful and stands terminated without any settlement between
the parties, the Council shall either itself take up the dispute for
arbitration or refer to it any institution or centre providing alternate
dispute resolution services for such arbitration and the provisions of
the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then
apply to the dispute as if the arbitration was in pursuance of an
arbitration agreement referred to in sub-section (1) of section 7 of
that Act.
(4) Notwithstanding anything contained in any other law for the
time being in force, the Micro and Small Enterprises Facilitation
Council or the centre providing alternate dispute resolution services
shall have jurisdiction to act as an Arbitrator or Conciliator under
this section in a dispute between the supplier located within its
jurisdiction and a buyer located anywhere in India.
(5) Every reference made under this section shall be decided within
a period of ninety days from the date of making such a reference.”
(Emphasis supplied).
“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
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Kishor 01-ARBP.L.28089.2022.docxdoes 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 ‘VENUE’, and not the ‘SEAT’
of arbitration. The ‘SEAT’ of arbitration would continue to be
governed in terms of the arbitration agreement between the parties,
which in the present case as per jurisdiction Clause No. 35 is New
Delhi. As a result, in terms of the decision of the Supreme Court in
Indus Mobile (supra), it would be the Courts at New Delhi that
would have exclusive jurisdiction to entertain the petition under
Section 34 of the Act.”
38. The above decision in the case of Indian Oil Corporation Ltd.
(supra) was also relied upon by the learned Single Judge of this Court
in the case of Gammon Engineers & Contractors Pvt. Ltd. (supra) which
we have agreed upon.
39. The third decision relied upon by the counsel for the
Petitioner is a decision of the Division Bench of the Delhi High Court in
the case of Ircon International Limited (supra). Before the Delhi High
Court, a similar issue was raised as to whether the Courts at Kanpur,
where the Facilitation Council passed the award, would have
jurisdiction to entertain the Section 34 petition or the Courts at Delhi,
which was agreed upon by the parties in the agreement. The Division
Bench of the Delhi High Court followed the decision in the case of
Indian Oil Corporation (supra) and held that the Courts in Delhi would
have the jurisdiction for challenging award passed under the MSMED
Act. The Division Bench of Delhi High Court in the case of Ircon
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International Limited (supra) have referred and relied upon the
decision passed by the learned Single Judge of this Court in the case of
Gammon Engineers & Contractors Pvt. Ltd. (supra). Said decision has
also considered the decision of the learned single Judge of Delhi High
Court in case of Ahluwali Contract (India Limited) (supra) which
Respondent has relied before us. We do not propose to reproduce the
relevant paragraph of this Judgment however, we reproduce the
paragraph No. 20 of the said decision which reads as under :-
“20. With respect, we are not in agreement with the view taken by
the learned Single Judge, for the reasons stated by the learned
Single Judge of the Bombay High Court in para 16 of the judgment,
which we have reproduced above, which we reiterate in the
following manner:
(i) Once the arbitral award is pronounced, and there is an
exclusionary clause of jurisdiction agreed between the parties,
thereby, agreeing upon the jurisdiction of only one court, in
exclusion to others, the challenge initiated by the aggrieved party
under the Act of 1996, even against an award passed by the
Facilitation Council under the MSMED Act, will lie only before the
court upon which the parties have agreed to place exclusive
jurisdiction.
(ii) Similar is the conclusion of the Division Bench of this Court in
Indian Oil Corpn. Ltd. case, to the effect that arbitration
proceedings undertaken before the Facilitation Council under
Section 18 of the Msmed Act, are undertaken at the “venue” where
the Facilitation Council is located.
(iii) The place of the arbitration continues to be the place over
which the court has exclusive jurisdiction, as agreed between the
parties.
(iv) By operation of the provisions of the MSMED Act, only the
procedure of constitution of the Arbitral Tribunal is obliterated in
terms of the law laid down by the Supreme Court in Gujarat State
Civil Supplies Corpn. Ltd. casell.
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(v) The same does not eclipse the agreement between the parties of
foisting exclusive jurisdiction on a particular court.”
40. The next decision relied upon by the Petitioner is a decision of
the Calcutta High Court in the case of Odisha Power Generation
Corporation Ltd. (supra) wherein once again, a very same issue was
raised before the learned Single Judge of the Calcutta High Court and
the Calcutta High Court by a detailed order held that the Courts where
Facilitation Council has passed an award would not have the
jurisdiction to entertain application under Section 34 of the Arbitration
Act but the Court at Bhubaneshwar would have the jurisdiction. The
learned Single Judge has observed in paragraph No. 26 that the
Arbitration agreement between parties pending adjudication by the
Facilitation Council is eclipsed, not obliterated. The learned Single
Judge of the Calcutta High Court has referred to the decision of the
Delhi High Court in the case of Indian Oil Corporation Ltd. (supra) and
also decision of the learned Single Judge of this Court in the case of
Gammon Engineers & Contractors Pvt. Ltd. (supra).
41. We once again, for the sake of repetition, observe that given
above, we are in complete agreement with the Judgment and decision
of the learned Single Judge of this Court in the case of Gammon
Engineers & Contractors Pvt. Ltd. (supra) on the issue of the
appropriate Court for entertaining petition under Section 34 of the
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Arbitration Act at Mumbai when the award of the Facilitation Council is
passed at a place outside the State of Maharashtra.
42. We now propose to deal with the decisions relied upon by the
learned counsel for the respondent.
43. The first decision relied upon is the decision in the case of
Microvision Technologies Private Limited (supra) and, more particularly,
paragraph No. 38 of the said decision wherein it is observed that since
the supplier was located at Nashik, the District Court at Nashik will
have jurisdiction with respect to the arbitral proceedings and any
challenge to the award by way of application under Section 34 of the
Arbitration Act is to be filed before that Court. It is this observation of
the learned Single Judge of this Court which resulted into a conflict
being arisen between decision in the case of Microvision Technologies
Private Limited (supra) and Gammon Engineers & Contractors Pvt. Ltd.
(supra) which led to issue being referred to the larger Bench.
44. The issue before the learned Single Judge in the case of
Microvision Technologies Private Limited (supra) was with respect to
appointment of an arbitrator under Section 11 of the Arbitration Act.
The issue before learned Single Judge was not as to which Court would
have jurisdiction to entertain an Application under Section 34 of the
Arbitration Act for setting aside the award. It is in the context of Section
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11 of the Arbitration Act and by relying upon provisions of Section 18 of
the MSMED Act and Section 11 of the Arbitration Act, the learned
Single Judge came to the conclusion that provisions of the MSMED Act
would prevail in so far as the appointment of the arbitrator is concerned
and since supplier was located at Nashik, by virtue of provisions of
Sections 18(4) and 18(5) of the MSMED Act, District Court at Nashik
will have the jurisdiction. However, by way of passing observation, the
learned Single Judge further observed that any challenge to the award
by way of petition under Section 34 would also lie before the District
Court at Nashik which is the Court where the supplier was located. In
our view, since the issue of the appropriate Court for entertaining
application under Section 34 of the Arbitration Act was not before the
learned Single Judge, any passing observation made therein would only
at the most be in the nature of the obiter.
45. The decision of Gammon Engineers & Contractors Pvt. Ltd.
(supra), decided on 27 January 2023, was not brought to the notice of
the learned Single Judge in the case of Microvision Technologies Private
Limited (supra), which was decided on 24 August 2023. We have
already, by our detailed reasoning, observed that the Courts at Mumbai
would have the jurisdiction and not the Courts where the Facilitation
Council or the supplier is located and therefore, for the reasons
mentioned herein above, we do not approve the observations made by
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the learned Single Judge in the case of Microvision Technologies Private
Limited (supra) that even application under Section 34 of the
Arbitration Act will have to be filed at the place where the supplier is
located.
46. The next decision relied upon by the Respondent is of a
learned single Judge of the Delhi High Court in the case of Ahluwalia
Contract (India Limited) (supra). The learned Single Judge of Delhi
High Court notes the decision of the Division Bench in the case of
Indian Oil Corporation Ltd. (supra) and observes that in the case of
Indian Oil Corporation Ltd. (supra), contractual provisions contained in
the arbitration clause and exclusive jurisdiction clause of the agreement
was considered by the Division Bench. However, in the case of Ahluwali
Contract (India Limited) (supra) the purchase order did not contain an
arbitration clause at all therefore seat of Arbitration was at Nagpur and
it is in these circumstances it was observed that Delhi High Court would
not have jurisdiction but the jurisdiction would be at Nagpur where the
Facilitation Council conducted arbitration which was the seat of the
arbitration. In our view, the said decision is not applicable to the facts of
the present case in as much as in the agreement entered into by the
parties before us there is an express contractual provision conferring
jurisdiction in the Courts at Mumbai and also as observed above the
seat of arbitration was at Mumbai. Therefore this decision is of no
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assistance and distinguishable on facts. In any case, we would prefer to
agree with two Division Bench of the Delhi Court, namely Indian Oil
Corporation (supra) and Ircon (supra), than the decision of the learned
Single Judge of that Court.
47. The next decision relied upon by the learned counsel for the
Respondent is the decision of the Allahabad High Court in the case of
Marsons Electrical Industries (supra). In this case the issue which was
raised in Appeal under Section 37 of the Arbitration Act was since the
parties have agreed to confer jurisdiction to the Courts at Jabalpur only
for resolving the disputes the Kanpur Facilitation Council had no
jurisdiction. It was in this context that the Allahabad High Court after
referring to Section 18 of the MSMED Act opined that by virtue of
Section 18(4) of the said Act the arbitrator located within the
jurisdiction of the supplier would have the jurisdiction and since the
supplier was located in Kanpur, award passed by Facilitation Council at
Kanpur had the jurisdiction. In our view, the issue before us is not with
respect to the jurisdiction of the Facilitation Council to decide the
arbitration, but the issue before us is which is the appropriate Court for
challenging the award passed by the Facilitation Council. Therefore, in
our view, the issue before the Allahabad High Court and the issue raised
for our consideration are totally different, and therefore, this decision is
not applicable to the facts of the present case. It is settled that a
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Judgment must be read in the context of the facts before the Courts and
the question raised in that context.
48. The learned counsel for Respondent has also relied upon the
decision of the Supreme Court in the case of Gujarat State Civil Supplies
Corporation Limited (supra) and more particularly paragraph Nos. 42
and 45. There is no dispute on the ratio of the said decision of the
Supreme Court that provisions of the MSMED Act being a special Act
would prevail over the Arbitration Act. However, it is to be noted that
the issue before the Supreme Court was whether the Arbitration
agreement as per the Arbitration Act between the parties would prevail
or whether the provisions of Section 18 of the MSMED Act dealing with
arbitration would prevail. The Supreme Court held that since the
provisions of the MSMED Act is a special provision, the mechanism for
resolving the disputes provided under Section 18 of the MSMED Act
would prevail over private agreement between the parties agreed as per
the Arbitration Act. The issue before the Supreme Court was not as to
before which Court, application under Section 34 would lie for setting
aside the award passed under Section 18 of the MSMED Act. Therefore,
the decision relied upon by the Respondent in the case of Gujarat State
Civil Supplies Corporation Limited (supra) would certainly be of no
assistance in support of the submission that Courts at Mumbai would
have no jurisdiction to entertain an application under Section 34 of the
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Arbitration Act. Similarly, the decision of the Allahabad High Court in
the case of Bharat Heavy Electricals Ltd. (supra) is also not applicable
since the issue of Section 34 was not before the said Court.
49. In our view, none of the decisions relied upon by the
Respondents has laid down that the application under Section 34 of the
Arbitration Act to challenge an award passed under Section 18 of the
MSMED Act would lie before the Court where the supplier is located or
where the Facilitation Council has passed an award when there exists an
exclusive jurisdiction clause conferring jurisdiction to a particular Court
by the parties.
50. In view of the above, we answer the question raised for our
consideration by holding that the jurisdiction of the Court to hear the
application under Section 34 of the Arbitration Act to challenge the
award passed under Section 18(4) of the MSMED Act would be
governed by the agreement between the parties which has conferred
exclusive jurisdiction to a particular Court, which in the instant case is
Courts in Mumbai.
51. We acknowledge the assistance of the counsel of both parties
rendered to this Court for deciding the present reference. We have
attempted to find the destination of the Section 34 application by
adopting various routes, but all the routes lead to Mumbai, as agreed
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upon by the parties, although Shimla is a very beautiful place, which
was only used for vacation to conduct the trial.
52. The Reference is answered accordingly, and the Interim
Application (L) No.37553 of 2022 and Arbitration Petition (L)
No.28089 of 2022 both are referred to the learned Single Judge for
further consideration.
[JITENDRA S. JAIN, J.] [M. S. SONAK, J.] Digitally signed KISHOR by KISHOR VISHNU VISHNU KAMBLE Date: KAMBLE 2024.10.16 11:09:10 +0530 42 of 42 ::: Uploaded on - 16/10/2024 ::: Downloaded on - 17/10/2024 00:26:29 :::