Case Note & Summary
The petitioner, M/s. Bharat Sanchar Nigam Limited (BSNL), filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an award dated 17.03.2020 passed by the Micro and Small Enterprises Facilitation Council, Jaipur (1st respondent). The dispute arose from a tender for supply of PLB pipes and accessories, where the 2nd respondent (M/s. Purma Plast Private Limited) was the L1 bidder. Supplies were delayed, and BSNL imposed liquidated damages. The 2nd respondent invoked the jurisdiction of the Jaipur Council under the MSMED Act, 2006, claiming delayed payment and recovery of liquidated damages. The Council awarded Rs.1,94,34,486/- with monthly compound interest. BSNL challenged the award primarily on the ground that the Jaipur Council lacked territorial jurisdiction, as the seat of arbitration was agreed to be Chennai. The Court, after hearing both sides, noted that the 2nd respondent had a statutory right under the MSMED Act to approach a Facilitation Council, but the territorial jurisdiction must be determined based on the place of supply or the cause of action. Since the supplies were made to BSNL in Chennai and the seat of arbitration was Chennai, the Jaipur Council had no jurisdiction. The Court held that the award was patently illegal and set it aside, granting liberty to the 2nd respondent to approach the appropriate Council.
Headnote
A) Arbitration - Jurisdiction of MSME Facilitation Council - Territorial Limits - Section 16, Micro, Small and Medium Enterprises Development Act, 2006 - The Council at Jaipur lacked territorial jurisdiction to adjudicate the dispute as the cause of action arose within the jurisdiction of the Chennai Council, the seat of arbitration being Chennai. The Court held that the award passed without jurisdiction is a nullity and liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996. (Paras 4-6) B) Arbitration - Award - Setting Aside - Section 34, Arbitration and Conciliation Act, 1996 - An award passed by a Facilitation Council lacking territorial jurisdiction is patently illegal and in conflict with the public policy of India. The Court held that the impugned award dated 17.03.2020 is set aside, and the 2nd respondent is at liberty to approach the appropriate Facilitation Council having jurisdiction. (Paras 6-7)
Issue of Consideration
Whether the Micro and Small Enterprises Facilitation Council, Jaipur had territorial jurisdiction to entertain the claim of the 2nd respondent and pass the impugned award, given that the seat of arbitration was agreed to be Chennai.
Final Decision
The impugned award dated 17.03.2020 passed by the 1st respondent Council is set aside. The 2nd respondent is at liberty to approach the appropriate Facilitation Council having jurisdiction in accordance with law.
Law Points
- Territorial jurisdiction of Micro and Small Enterprises Facilitation Council under MSMED Act
- 2006
- Section 34 of Arbitration and Conciliation Act
- 1996
- Section 16 of MSMED Act
- Section 31 of MSMED Act
