M/S. VAISHNO ENTERPRISESversusHAMILTON MEDICAL AG & ANR.

                        [2022] 1 S.C.R. 771                             771


                 M/S. VAISHNO ENTERPRISES                               A
                                 v.
               HAMILTON MEDICAL AG & ANR.
                  (Civil Appeal No. 1892 of 2022)
                         MARCH 24, 2022                                 B
        [M. R. SHAH AND B. V. NAGARATHNA, JJ.]
      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
                                                                        C
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 /      D
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
                                                                        E
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
                                                                        F
      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]
                                                                        G
      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

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                                771
772            SUPREME COURT REPORTS                      [2022] 1 S.C.R.


A     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 sub-
      section (1) of Section 8 and Section 2(n) of the MSME Act. It is
B
      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
C     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
D
      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
E     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
F     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
G     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
H           – referred to.
M/S. VAISHNO ENTERPRISES v. HAMILTON MEDICAL AG & ANR.                           773


                          Case Law Reference                                     A
(2019) 19 SCC 529                   referred to              Para 8.3
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1892
of 2022.
       From the Judgment and Order dated 17.08.2021 of the High Court            B
for the State of Telangana at Hyderabad in Writ Appeal No.201 of 2021.
      M. Srinivas R. Rao, Sarath S. Janardanan, Abid Ali Beeran P.,
Advs. for the Appellant.
      Shyam Divan, Nakul Diwan, Sr. Advs., Atul Nagarajan, Ankit
Anandraj Shah, Rajat Gautam, Ms. Pallavi, Ajay Khanna, Saurabh Rajpal,           C
Advs. for the Respondents.
       The Judgment of the Court was delivered by
       M. R. SHAH, J.
        1. Feeling aggrieved and dissatisfied with the impugned judgment         D
and order passed by the High Court for the State of Telangana at
Hyderabad in Writ Appeal No. 201 of 2021 by which the High Court has
dismissed the said appeal and has confirmed the order passed by the
learned Single Judge quashing the Intimation-cum-Notice dated
22.10.2020 and Notices dated 04.11.2020 and 12.11.2020 issued by Micro
and Small Medium Enterprises Facilitation Council (hereinafter referred          E
to as ‘the Council’), the original applicant has preferred the present appeal.
       2. That the appellant is a registered partnership consultant which
provides consultancy services to foreign medical equipment companies
in the form of liaisoning services with hospitals and government
departments and entities for procurement of medical equipment like               F
ventilators. That Respondent No.1 herein is a company registered under
the laws of Switzerland, having its office at Bonaduz, Switzerland and is
a manufacturer and supplier of critical care ventilation solutions for a
variety of patient segments, applications and environments across the
world. According to the respondent, it has its own consultants, engaged          G
in India, who facilitate the installation of their equipment and undertake
related ancillary work. That the appellant herein which provides
consultancy services, approached the respondent-Company and
requested to be associated with the Company in implementation of their
projects in India. One HLL Infra–Tech Services Limited, a Nodal Agency
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774            SUPREME COURT REPORTS                           [2022] 1 S.C.R.


A     of the Government of India, floated a tender dated 20.08.2018 to
      purchase/procure 1186 high end ventilators and other medical equipment
      to be supplied to various hospitals/medical colleges/departments across
      India. The respondent also participated in the said tender by offering its
      bid through its authorized local agent, M/s Medelec Health Care Solutions.
      The tender was awarded in favour of the said Medelec Solutions. That
B
      thereafter the appellant and the respondent entered into a Consulting
      Agreement on 10.02.2020, with a restricted term of six months, agreeing
      that the appellant herein shall act as a consultant for the respondent –
      Company. That thereafter the appellant raised various invoices claiming
      certain amounts. The same were alleged to have been paid by the
C     respondent. That the earlier Consulting Agreement dated 10.02.2020
      expired on 10.08.2020, the appellant and the respondent entered into a
      fresh Consulting Agreement on 24.08.2020 for a period of six months.
      That the appellant herein got registered under the Micro, Small and
      Medium Enterprises Act, 2006 (hereinafter referred to as, ‘MSME Act’)
      on 28.08.2020. That thereafter the dispute arose between the parties. A
D
      legal notice dated 09.09.2020 was sent by the appellant calling upon the
      respondent to pay the amounts covered by Invoice No. 5 dated 22.06.2020
      and Invoice No. 6 dated 07.09.2020 and one another along with damages
      of Rs.50 lakhs. In the said notice, the appellants informed that it was
      registered under the MSME Act. The respondent terminated the
E     Consulting Agreement dated 24.08.2020 vide termination letter dated
      22.10.2020. That the appellant herein replied to the termination notice
      vide reply dated 16.11.2020. That as the dispute arose between the parties,
      the appellant herein approached the Council on 22.10.2020 which case
      was registered as Reference No.1581/MSEFC/2020. The appellant
      prayed for the following reliefs:
F
            (a) That the opposite party is liable to pay the petitioner a sum of
      USD 711,845/- equivalent to Rs.5,21,85,357/- towards Invoice No.5 dated
      22.6.2020,
            (b) that the Opposite Party is liable to pay the Petitioner a sum of
G     USD 104,205/- equivalent to Rs. 76,26,073/- towards Invoice No.6 dated
      7.9.2020,
           (c) That the termination letter dated 2.10.2020 issued by the
      Opposite Party is illegal, void and contrary to the terms of the Consulting
      Agreement dated 24.5.2020.
H
M/S. VAISHNO ENTERPRISES v. HAMILTON MEDICAL AG & ANR.                           775
                    [M. R. SHAH, J.]

      (d) that the Opposite party is liable to pay the Petitioner a sum of       A
USD 304,964/- equivalent to Rs.2,23,56,910/- towards the Proforma
invoice dated 21.10.2020 towards balance 25% commission payable in
respect of 1158 ventilators pursuant to the Consulting Agreement dated
24.8.2020,
       (e) that the Opposite party is liable to pay the petitioner interest as   B
per Section 16 of the MSMED Act 2006 as enumerated in Form-I of
this Application till date of payment.”
       3. On 22.10.2020 itself an intimation was sent by the Council to
the respondent. That on receipt of the said notice, the respondent
addressed a letter to the Chairman of the Council and contended that             C
they are a company that is based in Switzerland and therefore MSME
Act shall not be applicable to companies located outside country. It was
also stated that the respondent has no office in India more particularly in
New Delhi as mentioned in the complaint/notice. On 04.11.2020 the
Council sent Form 2 notice calling for statement of defence to the
Respondent herein. One another notice dated 12.11.2020 was sent by               D
the Council. Thereafter a notice for a conciliation meeting dated
23.11.2020 was served upon the respondent and the meeting was
scheduled on 28.11.2020. Thereafter the respondent filed Writ Petition
No. 21623 of 2020 before the High Court challenging the legality and
validity of the aforesaid notices. By judgment and order dated 20.04.2021,       E
the learned Single Judge allowed the said writ petition and set aside the
notices issued by the Council by observing that the Council has no
jurisdiction to resolve the dispute between the parties. That the appellant
herein challenged the judgment and order passed by the learned Single
Judge in Writ Appeal No. 201 of 2020 before the Division Bench. By the
impugned judgment and order the Division Bench of the High Court has             F
dismissed the said appeal and has confirmed the judgment and order
passed by the learned Single judge. The impugned judgment and order
passed by the Division Bench is the subject matter of the present appeal.
       4. Learned Counsel appearing on behalf of the appellant has
vehemently submitted that in the facts and circumstances of the case,            G
both, the learned Single Judge as well as the Division Bench of the High
Court have erred in holding that the Council has no jurisdiction to entertain
the dispute between the appellant and the respondent.
      4.1 It is submitted that, both, the learned Single Judge as well as
the Division Bench have erred in holding that in the present case as the         H
776             SUPREME COURT REPORTS                             [2022] 1 S.C.R.


A     supplier was outside the territorial jurisdiction of India, considering Section
      18 of the MSME Act, the Council has no jurisdiction to entertain a dispute
      between the supplier located outside the jurisdiction. It is submitted that
      as such the initial agreement dated 10.02.2020 between the parties was
      executed at Delhi, the second Agreement dated 24.08.2020 was also
      executed in New Delhi and the services were rendered by the appellant
B
      in India and even the respondent was conducting its business in India
      through its registered service centres at New Delhi, Mumbai, Kolkata,
      Bangalore and it had appointed a power of attorney holder/Special Agent
      who is based in Delhi, to act on his behalf, and therefore the cause of
      action can be said to have arisen in India and no part of cause of action
C     has arisen in Switzerland, the Council is vested with the jurisdiction to
      entertain the claim petition filed by the appellant. It is submitted that
      therefore the appellant rightly approached the Council to resolve the
      dispute under the MSME Act and the Council assumed the jurisdiction
      vested under Section 18 of the MSME Act.
D            4.2 It is further submitted by learned counsel appearing on behalf
      of the appellant that even otherwise considering the objects and purpose
      of the Act as the MSME Act being a beneficial legislation enacted for
      facilitating promotion, development for enhancement of the
      competitiveness of micro, small and medium enterprises and for resolving
      the incidental and ancillary matters related thereto, the High Court ought
E     not to have entertained into the writ petitions against the notice issued by
      the Council and ought to have relegated the Respondent No.1 – original
      writ petitioner to appear before the Council for conciliation and thereafter
      on failure for arbitration and the issue with respect to jurisdiction ought
      to have been left to the Arbitrator.
F            5. Shri Shyam Divan, learned Senior Advocate appearing on behalf
      of the respondent has supported the judgment and order passed by the
      learned Single Judge as well as that of the Division Bench holding that
      with respect to the dispute between the appellant and the Respondent
      No.1 the Council has no jurisdiction under Section 18 of the MSME Act.
G            5.1 Shri Divan, learned Senior Advocate has taken us to the various
      definitions under Section 2 of the MSME Act more particularly the
      definition of “buyer” and “suppliers”. He has also taken us to Section 18
      of the MSME Act.
           5.2 Relying upon the above provisions it is vehemently submitted
H     by Shri Divan, learned Senior Advocate appearing on behalf of
M/S. VAISHNO ENTERPRISES v. HAMILTON MEDICAL AG & ANR.                          777
                    [M. R. SHAH, J.]

Respondent No.1 that in the present case the Respondent No.1 – buyer            A
is having registered office in Switzerland. It is submitted that even the
address of the Respondent No.1 mentioned in both the Agreements dated
10.02.2020 and 24.08.2020 is also Switzerland. It is submitted that
therefore it is rightly held that as the Respondent No.1 – buyer being
located outside India, the Council would have no jurisdiction to entertain
                                                                                B
the dispute between the appellant and the Respondent No.1.
       5.3 It is further submitted by Shri Divan, learned Senior Advocate
for Respondent No.1 that even otherwise considering the relevant
provisions of the Arbitration Agreement the parties to the Agreement
shall not be governed by the MSME Act. It is submitted that in the
present case the date of contract was 24.08.2020. The appellant herein          C
is registered as MSME on 28.08.2020 i.e. after the execution of the
contract on 24.08.2020. It is submitted that as per the Arbitration
Agreement the parties shall be governed by the law applicable in India
which shall be the law prevailing at the time of the execution of the
contract. It is submitted that for that reason also the parties shall not be    D
governed by the MSME Act and therefore the Council would have no
jurisdiction to entertain the dispute between the appellant and the
Respondent No.1.
      6. In rejoinder learned counsel appearing on behalf of the appellant
has submitted that as the dispute arose subsequently i.e. subsequent to         E
28.08.2020 and therefore at the time when the dispute arose the appellant
was the registered MSME and therefore, for the dispute between the
appellant and the respondent which has arisen subsequent to 28.08.2020,
the Council would have jurisdiction.
      7. Heard learned counsel for the respective parties at length.            F
       8. The short question which is posed for consideration before this
Court is the jurisdiction of the Council under the MSME Act with respect
to the dispute between the appellant and the respondent.
       8.1 It was the case on behalf of Respondent No.1 – Buyer that as
the Respondent No.1 - buyer is located outside India and is having its          G
registered office at Switzerland the Council would have no jurisdiction
to enter into the dispute between the appellant and the respondent. On
the other hand, it is the case on behalf of the appellant that the agreements
were executed between the parties at Delhi and the services were
rendered by the appellant in India and even the Respondent No.1 is
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778            SUPREME COURT REPORTS                           [2022] 1 S.C.R.


A     conducting its business in India through registered service centres at
      New Delhi, Mumbai, Kolkata, Bangalore and it had appointed a power
      of attorney/special agent which is based in Delhi, and after having availed
      the services rendered by the appellant and doing business in India,
      thereafter it will not be open for Respondent No.1 to contend that with
      respect to the dispute between the appellant and the respondent, the
B
      Council would have no jurisdiction under the MSME Act. However,
      while considering the main issue whether the parties shall be governed
      by the MSME Act or not, the relevant clause under the Agreement is
      required to be considered which reads as under:
            “9. CHOICE OF LAW
C
                   This Agreement and the rights of the parties hereunder shall
            be governed by and construed in accordance with the laws of
            India. The parties agree to resolve their differences, disputes, if
            any, mutually, within 30 days of the initiation of the dispute which
            can be extended by the mutual consent of the parties, if necessary.
D           In the event the parties are not able to resolve the differences by
            way of the said mutual dialogues, they are at a liberty to initiate
            appropriate actions as per law.”
              It is not in dispute that the contract/agreement between the
      appellant and the respondent has been executed on 24.08.2020.
E     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
F     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
G     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
H     governed by the laws of India applicable and/or prevailing at the time of
M/S. VAISHNO ENTERPRISES v. HAMILTON MEDICAL AG & ANR.                           779
                    [M. R. SHAH, J.]

execution of the contract. If that be so the Council would have no               A
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 learned Single Judge confirmed by the Division Bench holding the
                                                                                 B
Council would have no jurisdiction with respect to Respondent No.1 is
not required to be interfered with.
       8.3. 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                     C
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 case of M/s Shilpi Industries vs. Kerala State Road            D
Transport Corporation, C.A. No.1570-78 of 2021 [2021 SCC
Online SC 439] arising under the provisions of MSME Act and Shanti
Conductors Pvt. Ltd. Vs. Assam State Electricity Board, (2019)
19 SCC 529 in which case a similar provision under the Small Scale
and Ancillary Industries Undertakings, Act, 1993 came up for consideration
before this Court.                                                               E

      9. In view of the above and for the reason stated above, we are in
agreement with the ultimate conclusion reached/arrived at by the learned
Single Judge confirmed by the Division Bench that 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. Under the                      F
circumstances, the present appeal deserves to be dismissed and is
accordingly dismissed.
       There shall be no order as to costs.

                                                                                 G
Bibhuti Bhushan Bose                                         Appeal dismissed.




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