[Section 18 MSMED Act] Facilitation Council Located In Supplier’s Place Of Business Alone Has Jurisdiction To Resolve Dispute: Kerala HC

While rejecting the submission made by the Petitioner that because of the 42nd Amendment in Article 226, the powers of the High Court have enlarged and hence it can exercise its jurisdiction powers because some portion of the cause of action arose within its territorial limits, the Kerala High Court invoked the doctrine of forum conveniens and held that as Section 18(4) of the Micro, Small and Medium Enterprises Development Act, 2006 starts with a non-obstante clause and specifically provides that for resolution of a dispute referred to in Section 18, only the Facilitation Council located in the place where the supplier's (Respondent) business is located alone will have jurisdiction to entertain a claim.

A Single Judge Bench of Justice Viju Abraham further observed that “Going by Section 18(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.”

Advocate N.K. Subramaniam appeared for the Petitioner, whereas Central Government Counsel B. Ramachandran appeared for the Respondent.

Going by the background of the case, the Petitioner is a buyer of certain goods and the second Respondent is the supplier of such goods. Petitioner was issued a notice by the first Respondent (Micro and Small Enterprises Facilitation Council) that the Petitioner has failed to pay the second Respondent an amount of Rs.77,21,127/-. In the counter-claim to the notice, the Petitioner contended that the second Respondent owes him Rs.1,38,50,972/-. Subsequently, the issue came before the Kerala High Court and vide its interim orders, all further proceedings have stayed. Later, the second Respondent filed to vacate the interim order while also contending that the Kerala High Court did not have jurisdiction as per Act, 2006.

After considering the submission, the High Court perused relevant section of the Act, 2006 and observed that Section 18 of the Act, 2006 specifically states to refer to the Micro and Small Enterprises Facilitation Council, with respect to the amount to due under Section 17 and hence, the Council upon receiving such reference, shall try the dispute itself or provide a Centre of alternative dispute resolution.

The High Court further examined Section 18 and noted that jurisdiction is only available at the place where the supplier is located and hence any order issued by the Facilitation Council can be challenged before the High Court of that jurisdiction. (Karnataka High Court in this case).

While considering the definition of the term ‘court’ considering the facts of the present case, the Bench stated that according to Section 34 read with Section 2(e) of the Arbitration and Conciliation Act, 1996, the principal civil court of original jurisdiction in the district shall have jurisdiction to entertain an application for setting aside the arbitral award.

After considering the submissions of the Petitioner that because some supply of the goods took place in Kerala, thus Kerala High Court can also have jurisdiction, the Bench held that “the claim of the petitioner that this Court has jurisdiction to entertain this writ petition has to be rejected based on the doctrine of forum conveniens. The seat of the Facilitation Council and the supplier, 2nd respondent herein, is in the State of Karnataka and any award passed as per Section 18 of the Act 2006 which is deemed to be an award as per the provisions of the Arbitration and Conciliation Act, 1996 is to be challenged before the Principal Civil Court which is also located in the State of Karnataka.”

Finally, stating that a complaint can be filed only before the Facilitation Council located within the area of operation of the Supplier business, the Bench dismissed the petition.

Cause Title: M/S. Shreyas Marketing v. Micro and Small Enterprises Facilitation Council and Anr.

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