Case Note & Summary
The case involves a reference to a Larger Bench of the Bombay High Court to resolve a conflict between two Single Judge decisions regarding the jurisdiction for filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an award passed under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006. The petitioner, Gammon Engineers and Contractors Pvt. Ltd., had an agreement with the respondent, Rohit Sood, a MSME unit, which contained an exclusive jurisdiction clause in favor of courts at Mumbai. Disputes arose, and the respondent invoked Section 18 of the MSMED Act, leading to arbitration before the Facilitation Council at Shimla, where the respondent was located. The Council passed an award against the petitioner. The petitioner challenged the award under Section 34 of the Arbitration Act before the Bombay High Court. The respondent raised a preliminary objection that the Bombay High Court lacked jurisdiction because the award was passed at Shimla, and the Section 34 petition should be filed there. The Single Judge noted conflicting decisions: in Gammon Engineers and Contractors Pvt. Ltd. v. Sahay Industries, it was held that the Section 34 application must be filed as per the original agreement's exclusive jurisdiction clause; in Microvision Technologies Pvt. Ltd. v. Union of India, it was held that the challenge must be filed where the supplier is located. The issue referred was whether the jurisdiction is governed by the non obstante provision in Section 18(4) of the MSMED Act or by the arbitration agreement. The petitioner argued that the MSMED Act does not provide for challenge to awards, so the Arbitration Act applies, and the original agreement's jurisdiction clause revives after the award. The respondent argued that the MSMED Act is a special Act with a non obstante clause that overrides the agreement, and the proper court is at Shimla. The Larger Bench analyzed the provisions and held that Section 18(4) of the MSMED Act contains a non obstante clause which overrides any agreement between the parties, including an exclusive jurisdiction clause. Therefore, the jurisdiction for challenging the award under Section 34 of the Arbitration Act is at the place where the supplier is located, i.e., where the Facilitation Council passed the award. The court overruled the decision in Gammon Engineers and Contractors Pvt. Ltd. v. Sahay Industries and upheld the view in Microvision Technologies Pvt. Ltd. v. Union of India. The petition was directed to be placed before the appropriate bench for disposal in light of this decision.
Headnote
A) Arbitration Law - Jurisdiction - Section 34 Challenge to MSMED Act Award - Section 18(4) MSMED Act, Section 34 Arbitration Act - The question was whether the jurisdiction to challenge an award under Section 18 of the MSMED Act is governed by the non obstante provision in Section 18(4) of the MSMED Act or by the exclusive jurisdiction clause in the arbitration agreement. The court held that the non obstante provision in Section 18(4) overrides the agreement, and the Section 34 petition must be filed at the place where the supplier is located, i.e., where the Facilitation Council passed the award. (Paras 1-8) B) Arbitration Law - Statutory Arbitration - MSMED Act - Section 18(4) MSMED Act - The court analyzed that Section 18(4) of the MSMED Act contains a non obstante clause which overrides any agreement between the parties, including an exclusive jurisdiction clause. Therefore, the jurisdiction for challenging the award is at the place where the supplier is located, not where the agreement specifies. (Paras 8-15) C) Arbitration Law - Section 42 Arbitration Act - Applicability - Section 42 Arbitration Act, Section 18 MSMED Act - The court held that Section 42 of the Arbitration Act, which deals with jurisdiction of courts for applications under the Act, does not apply when the MSMED Act provides a different rule through its non obstante provision. The MSMED Act being a special Act, its provisions prevail. (Paras 16-20)
Issue of Consideration
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 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.
Final Decision
The Larger Bench held that the jurisdiction for filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an award under Section 18 of the MSMED Act is governed by the non obstante provision in Section 18(4) of the MSMED Act, and not by the exclusive jurisdiction clause in the arbitration agreement. The decision in Gammon Engineers and Contractors Pvt. Ltd. v. Sahay Industries is overruled, and the view in Microvision Technologies Pvt. Ltd. v. Union of India is upheld. The petition is directed to be placed before the appropriate bench for disposal in light of this decision.
Law Points
- Jurisdiction for Section 34 challenge to MSMED Act award is governed by Section 18(4) of MSMED Act
- not by exclusive jurisdiction clause in agreement
- Non obstante provision in Section 18(4) overrides arbitration agreement
- Section 34 petition must be filed at place where supplier is located
- MSMED Act is a special Act overriding agreement
- Section 42 of Arbitration Act not applicable when MSMED Act provides different rule
