Case: M/s. Vaishno Enterprises Vs. Hamilton Medical AG &amp; Anr

2. That the appellant is a registered partnership consultant which provides consultancy services to foreign medical equipment companies in the form of liaisoning services with hospitals and government departments and entities for procurement of medical equipment like ventilators. That Respondent No.1 herein is a company registered under the laws of Switzerland, having its office at Bonaduz, Switzerland and is a manufacturer and supplier of critical care ventilation solutions for a variety of patient segments, applications and environments across the world. According to the respondent, it has its own consultants, engaged in India, who facilitate the installation of their equipment and undertake related ancillary work. That the appellant herein which provides consultancy services, approached the respondent-Company and requested to be associated with the Company in implementation of their projects in India. One HLL Infra–Tech Services Limited, a Nodal Agency of the Government of India, floated a tender dated 20.08.2018 to purchase/procure 1186 high end ventilators and other medical equipment to be supplied to various hospitals/medical colleges/departments across India. The respondent also participated in the said tender by offering its bid through its authorized local agent, M/s Medelec Health Care Solutions. The tender was awarded in favour of the said Medelec Solutions. That thereafter the appellant and the respondent entered into a Consulting Agreement on 10.02.2020, with a restricted term of six months, agreeing that the appellant herein shall act as a consultant for the respondent – Company. That thereafter the appellant raised various invoices claiming certain amounts. The same were alleged to have been paid by the respondent. That the earlier Consulting Agreement dated 10.02.2020 expired on 10.08.2020, the appellant and the respondent entered into a fresh Consulting Agreement on 24.08.2020 for a period of six months. That the appellant herein got registered under the Micro, Small and Medium Enterprises Act, 2006 (hereinafter referred to as, MSME Act) on 28.08.2020. That thereafter the dispute arose between the parties. A legal notice dated 09.09.2020 was sent by the appellant calling upon the respondent to pay the amounts covered by Invoice No. 5 dated 22.06.2020 and Invoice No. 6 dated 07.09.2020 and one another along with damages of Rs.50 lakhs. In the said notice, the appellants informed that it was registered under the MSME Act. The respondent terminated the Consulting Agreement dated 24.08.2020 vide termination letter dated 22.10.2020. That the appellant herein replied to the termination notice vide reply dated 16.11.2020. That as the dispute arose between the parties, the appellant herein approached the Council on 22.10.2020 which case was registered as Reference No.1581/MSEFC/2020. The appellant prayed for the following reliefs:(a) That the opposite party is liable to pay the petitioner a sum of USD 711,845/- equivalent to Rs.5,21,85,357/- towards Invoice No.5 dated 22.6.2020,(b) that the Opposite Party is liable to pay the Petitioner a sum of USD 104,205/- equivalent to Rs. 76,26,073/- towards Invoice No.6 dated 7.9.2020,(c) That the termination letter dated 2.10.2020 issued by the Opposite Party is illegal, void and contrary to the terms of the Consulting Agreement dated 24.5.2020.(d) that the Opposite party is liable to pay the Petitioner a sum of USD 304,964/- equivalent to Rs.2,23,56,910/- towards the Proforma invoice dated 21.10.2020 towards balance 25% commission payable in respect of 1158 ventilators pursuant to the Consulting Agreement dated 24.8.2020,(e) that the Opposite party is liable to pay the petitioner interest as per Section 16 of the MSMED Act 2006 as enumerated in Form-I of this Application till date of payment.3. On 22.10.2020 itself an intimation was sent by the Council to the respondent. That on receipt of the said notice, the respondent addressed a letter to the Chairman of the Council and contended that they are a company that is based in Switzerland and therefore MSME Act shall not be applicable to companies located outside country. It was also stated that the respondent has no office in India more particularly in New Delhi as mentioned in the complaint/notice. On 04.11.2020 the Council sent Form 2 notice calling for statement of defence to the Respondent herein. One another notice dated 12.11.2020 was sent by the Council. Thereafter a notice for a conciliation meeting dated 23.11.2020 was served upon the respondent and the meeting was scheduled on 28.11.2020. Thereafter the respondent filed Writ Petition No. 21623 of 2020 before the High Court challenging the legality and validity of the aforesaid notices. By judgment and order dated 20.04.2021, the learned Single Judge allowed the said writ petition and set aside the notices issued by the Council by observing that the Council has no jurisdiction to resolve the dispute between the parties. That the appellant herein challenged the judgment and order passed by the learned Single Judge in Writ Appeal No. 201 of 2020 before the Division Bench. By the impugned judgment and order the Division Bench of the High Court has dismissed the said appeal and has confirmed the judgment and order passed by the learned Single judge. The impugned judgment and order passed by the Division Bench is the subject matter of the present appeal.

Reasoning: 8.2 It is not in dispute that the contract/agreement between the appellant and the respondent has been executed on 24.08.2020. Therefore, the laws of India applicable at the time of contract/agreement shall be applicable and therefore the parties shall be governed by the laws of India prevailing/applicable at the time when the contract was executed. It is admitted position that the date on which a contract/agreement was executed i.e. on 24.08.2020 the appellant was not registered MSME. Considering the relevant provisions of the MSME Act more particularly Section 2(n) read with Section 8 of the MSME Act, the provisions of the MSME Act shall be applicable in case of supplier who has filed a memorandum with the authority referred to in sub-section (1) of Section 8. Therefore, the supplier has to be a micro or small enterprise registered as MSME, registered with any of the authority mentioned in sub-section (1) of Section 8 and Section 2(n) of the MSME Act. It is admitted position that in the present case the appellant is registered as MSME only on 28.08.2020. Therefore, when the contract was entered into the appellant was not MSME and therefore the parties would not be governed by the MSME Act and the parties shall be governed by the laws of India applicable and/or prevailing at the time of execution of the contract. If that be so the Council would have no jurisdiction to entertain the dispute between the appellant and the Respondent no.1, in exercise of powers under Section 18 of the MSME Act. Therefore, in the aforesaid peculiar facts and circumstances of the case, more particularly the terms of the Agreement, the order passed by the learned Single Judge confirmed by the Division Bench holding the Council would have no jurisdiction with respect to Respondent No.1 is not required to be interfered with.8.3. However, at the same time, the larger question/issue whether in a case where the buyer is located outside India but has availed the services in India and/or done the business in India with the Indian supplier and the contract was executed in India the MSME Act would be applicable or not and/or another larger issue that in case the supplier is subsequently registered as MSME the Council would still have jurisdiction are kept open to be considered in an appropriate case bearing in mind Section 18 as well as Section 8 of the MSME Act and the judgments of this Court in the case of M/s Shilpi Industries vs. Kerala State Road Transport Corporation, C.A. No.1570-78 of 2021 [2021 SCC Online SC 439] arising under the provisions of MSME Act and Shanti Conductors Pvt. Ltd. Vs. Assam State Electricity Board, (2019) 19 SCC 529  in which case a similar provision under the Small Scale and Ancillary Industries Undertakings, Act, 1993 came up for consideration before this Court.