Case Note & Summary
The dispute originated from a Consulting Agreement dated 24.08.2020 between an Indian registered partnership consultant, acting as a supplier, and a Swiss company, acting as a buyer, for consultancy services related to medical equipment procurement in India. The appellant, registered under the Micro, Small and Medium Enterprises Development Act, 2006 on 28.08.2020, raised invoices for services rendered, leading to a termination of the agreement by the respondent and subsequent non-payment claims. The appellant approached the Micro and Small Medium Enterprises Facilitation Council under Section 18 of the MSME Act, seeking relief for unpaid invoices and damages. The Council issued notices to the respondent, who challenged the Council's jurisdiction via a writ petition in the High Court, arguing that as a foreign buyer located outside India, the MSME Act did not apply. The High Court, both at the single judge and division bench levels, quashed the Council's notices, holding it lacked jurisdiction. The appellant appealed to the Supreme Court, contending that the Council had jurisdiction because the agreements were executed in India, services were rendered there, and the respondent conducted business in India through agents. The respondent countered that the buyer's location outside India precluded Council jurisdiction under Section 18, and that the appellant's MSME registration post-dated the contract, thus the Act did not govern the dispute. The Supreme Court considered the definitions of 'buyer' and 'supplier' under Section 2 of the MSME Act and the territorial scope implied by Section 18. The court reasoned that the MSME Act, while a beneficial legislation, does not extend jurisdiction to disputes involving buyers located outside India, as the Council's authority is territorially limited. Additionally, the court noted that the appellant's registration after the contract execution meant the Act did not apply to that agreement. Consequently, the Supreme Court dismissed the appeal, upholding the High Court's decision that the Council lacked jurisdiction to entertain the dispute.
Headnote
A) Commercial Law - MSME Act Jurisdiction - Territorial Applicability to Foreign Buyers - Micro, Small and Medium Enterprises Development Act, 2006, Section 18 - Dispute involved a registered MSME supplier in India and a foreign buyer company based in Switzerland - The Supreme Court examined whether the MSME Council had jurisdiction under Section 18 when the buyer was located outside India - Held that the Council lacks jurisdiction as the buyer being outside India falls outside the territorial scope of the Act, and the dispute cannot be entertained (Paras 8-9). B) Contract Law - MSME Registration Timing - Applicability to Pre-existing Contracts - Micro, Small and Medium Enterprises Development Act, 2006 - Appellant registered as MSME on 28.08.2020 after executing Consulting Agreement on 24.08.2020 - Court considered argument that MSME Act applies only if registration precedes contract execution - Held that since registration occurred after contract date, the parties are not governed by the MSME Act for disputes arising from that contract (Paras 5.3, 6).
Issue of Consideration
Whether the Micro and Small Medium Enterprises Facilitation Council has jurisdiction under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 to entertain a dispute between a registered MSME supplier in India and a foreign buyer located outside India.
Final Decision
Supreme Court dismissed the appeal, upholding the High Court's decision that the Council has no jurisdiction under Section 18 of the MSME Act to entertain the dispute as the buyer is located outside India
Law Points
- Jurisdiction of Micro and Small Medium Enterprises Facilitation Council under Section 18 of Micro
- Small and Medium Enterprises Development Act
- 2006
- Territorial applicability of MSME Act to foreign buyers
- Interpretation of 'buyer' and 'supplier' definitions under Section 2 of MSME Act
- Beneficial legislation principles
