Case Note & Summary
The petitioner, Dodal Electro Instruments, a proprietorship concern based in Pune, engaged in the manufacture and supply of electrical instruments, entered into commercial transactions with the respondent, Mexim Adhesive Tapes Pvt. Ltd., a manufacturer of self-adhesive tape based in Daman. The petitioner issued two work orders for the supply of self-adhesive tape and purchased material worth Rs.15,00,631 and Rs.14,88,789 respectively. Disputes arose regarding payment, and Mexim filed two references before the Micro and Small Enterprises Facilitation Council (MSEFC) at Daman under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006. The MSEFC passed an order on 7 March 2024 directing the petitioner to pay Rs.28,49,940 and Rs.42,35,504 respectively, along with interest under Section 16 of the Act. The petitioner challenged these orders by way of writ petitions before the Bombay High Court. The primary legal issues were whether the MSEFC had jurisdiction over the petitioner, who was not a 'supplier' under Section 2(n) of the Act, and whether the failure to file objections under Section 18(3) could confer jurisdiction. The petitioner argued that the Council lacked jurisdiction as the petitioner was a buyer, not a supplier, and that the territorial jurisdiction was with the court in Pune. The respondent contended that the petitioner had participated in the proceedings without raising objections and thus waived the right to challenge jurisdiction. The High Court analyzed the definitions under the Act, particularly Section 2(n) which defines 'supplier' as a micro or small enterprise having filed a memorandum with the District Industries Centre. The court noted that the petitioner was not registered as a supplier under the Act. The court held that the MSEFC's jurisdiction under Section 18 is limited to disputes between a supplier and a buyer, and since the petitioner was not a supplier, the Council had no jurisdiction. The court further held that the failure to file objections under Section 18(3) does not waive jurisdictional issues, as jurisdiction goes to the root of the matter. Additionally, the court found that the MSEFC at Daman had no territorial jurisdiction as the cause of action arose in Pune. Consequently, the court quashed the orders of the MSEFC and allowed the writ petitions.
Headnote
A) Jurisdiction - MSEFC - Definition of Supplier - Section 2(n) read with Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 - The MSEFC's jurisdiction under Section 18 is limited to disputes between a 'supplier' and a 'buyer' as defined under the Act. A buyer who is not registered as a 'supplier' cannot be subjected to the Council's jurisdiction. The Council's order directing payment by the petitioner, who is a buyer and not a supplier, is without jurisdiction and liable to be set aside. (Paras 10-15) B) Waiver - Jurisdictional Objection - Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006 - The failure of a party to file objections under Section 18(3) does not waive the issue of jurisdiction. Jurisdiction goes to the root of the matter and can be raised at any stage, including in a writ petition. The Council cannot assume jurisdiction by default. (Paras 16-20) C) Territorial Jurisdiction - MSEFC - Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 - The MSEFC at Daman had no territorial jurisdiction over the petitioner, who is based in Pune, Maharashtra. The cause of action arose in Pune where the goods were supplied and payment was to be made. The Council's assumption of jurisdiction is invalid. (Paras 21-25)
Issue of Consideration
Whether the Micro and Small Enterprises Facilitation Council (MSEFC) has jurisdiction to entertain a reference under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, when the buyer (petitioner) is not registered as a 'supplier' under Section 2(n) of the Act, and whether the failure to file objections under Section 18(3) can confer jurisdiction on the Council.
Final Decision
The High Court allowed the writ petitions and quashed the orders dated 7 March 2024 passed by the Micro and Small Enterprises Facilitation Council, Daman, in both references.
Law Points
- Jurisdiction of MSEFC
- Definition of Supplier under MSMED Act
- Section 2(n) of MSMED Act
- Section 18 of MSMED Act
- Section 16 of MSMED Act
- Territorial Jurisdiction
- Waiver of Objection
