M/s. Vaishno Enterprises vs Hamilton Medical AG - Supreme Court Case 2022

M/s. Vaishno Enterprises vs Hamilton Medical AG - Supreme Court Case 2022

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


[REPORTABLE]
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1892 OF 2022
M/s. Vaishno Enterprises         ..Appellant 
Versus
Hamilton Medical AG & Anr.      ..Respondents
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment 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 Intimation­cum­Notice dated 22.10.2020 and
Notices dated 04.11.2020 and 12.11.2020 issued  by Micro
and   Small   Medium   Enterprises   Facilitation   Council
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(hereinafter   referred   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
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   in   India,   who   facilitate   the   installation   of   their
equipment and undertake related ancillary work.   That the
appellant   herein  which   provides   consultancy   services,
approached the respondent­Company and requested to be
associated with  the Company  in  implementation  of their
projects in India.  One HLL Infra–Tech Services Limited, a
Nodal Agency of the Government of India, floated a tender
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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 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
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 legal notice dated 09.09.2020 was
3
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   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:
(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   USD   104,205/­   equivalent   to   Rs.   76,26,073/­
towards Invoice No.6 dated 7.9.2020, 
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(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.
(d) that the Opposite party is liable to pay the Petitioner a
sum   of   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   per   Section   16   of   the   MSMED   Act   2006   as
enumerated   in   Form­I   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 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
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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
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,
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   dismissed   the   said   appeal   and   has
confirmed the judgment and order passed by the learned
Single judge.  The impugned judgment and order passed by
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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, 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   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
in   India   and   even   the   respondent   was   conducting   its
business in India through its registered service centres at
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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 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.
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 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
8
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.
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.
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 by Shri Divan, learned Senior Advocate appearing
on behalf of Respondent No.1 that in the present case the
Respondent   No.1   –   buyer   is   having   registered   office   in
Switzerland.   It is submitted that even the address of the
9
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 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 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   governed   by   the   MSME   Act   and
10
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 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.
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 registered office at Switzerland the Council
would have no jurisdiction to enter into the dispute between
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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 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 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 
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
12
30 days of the initiation of the dispute which
can be extended by the mutual consent of the
parties, if necessary. 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.”
8.2 It   is   not   in   dispute   that   the   contract/agreement
between   the   appellant   and   the   respondent   has   been
executed   on   24.08.2020.     Therefore,   the   laws   of   India
applicable   at   the   time   of   contract/agreement   shall   be
applicable and therefore the parties shall be governed by the
laws of India prevailing/applicable at the time when the
contract was executed.  It is admitted position that the date
on   which   a   contract/agreement   was   executed   i.e.   on
24.08.2020   the   appellant   was   not   registered   MSME.
Considering the relevant provisions of the MSME Act more
particularly Section 2(n) read with Section 8 of the MSME
Act, the provisions of the MSME Act shall be applicable in
case of supplier who  has filed a memorandum with the
authority   referred   to   in   sub­section   (1)   of   Section   8.
Therefore, the supplier has to be a micro or small enterprise
registered as MSME, registered with any of the authority
13
mentioned in sub­section (1) of Section 8 and Section 2(n) of
the MSME Act.  It is admitted position that in the present
case   the   appellant   is   registered   as   MSME   only   on
28.08.2020.  Therefore, when the contract was entered into
the   appellant   was   not   MSME   and   therefore   the   parties
would not be governed by the MSME Act and the parties
shall be governed by the laws of India applicable and/or
prevailing at the time of execution of the contract.  If that be
so the Council would have no jurisdiction to entertain the
dispute between the appellant and the Respondent no.1, in
exercise   of   powers   under   Section   18   of   the   MSME   Act.
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   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
14
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   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
Transport  Corporation,  C.A.  No.1570­78  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.
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
15
no jurisdiction under Section 18 of the MSME Act.  Under
the   circumstances,   the   present   appeal   deserves   to   be
dismissed and is accordingly dismissed.  
There shall be no order as to costs.
…………………………………J.
         (M. R. SHAH)
…………………………………J.
                                              (B. V. NAGARATHNA)
New Delhi, 
March 24, 2022
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