THE HON'BLE SRI JUSTICE A.ABHISHEK REDDY
WRIT PETITION No. 21623 OF 2020
ORDER:
This writ petition is filed by M/s. Hamilton Medical AG, seeking to set aside the Intimation-cum-Notice, dated 22.10.2020 (received through mail), the Notice, dated 04.11.2020 (received through mail, dated 18.11.2020); and Notice, dated 12.11.2020 (received through email, dated 23.11.2020) having reference No. 1581/MSEFC/2020 issued by the respondent No. 1 with reference to the application being UDYAM-TS-02-0002716/M/00001 filed by the respondent No. 1 and to stay all consequential proceedings emanating therefrom.
The petitioner 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. The petitioner-Company does not have any factory within India and therefore, is in the process of setting up a domestic private limited company. The Company has its own consultants, engaged in India, who facilitate the installation of the equipment of the petitioners and undertake related ancillary work. It also supplies the equipment to its distributors who supply to the customers in the private and Government sectors. In August- September, 2018, M/s. Vaishno Enterprises, respondent No. 2 herein, a partnership firm, which provides consultancy services, approached the petitioner-Company and requested to be associated with the Company in implementation of their projects in India. While so, HLL Infra Tech Services Limited, a Nodal Agency of Government of India, had floated a tender, dated 20.08.2018 to 2 purchase/procure 1186 high end ventilators and other medical equipment to be supplied to various hospitals/medical colleges/ departments across India. The petitioner has participated in the said tender by offering its bid through its authorized local agent, M/s. Medelec Health Care Solutions ('Medelec Solutions'). Eventually, the tender was awarded in favour of Medelec Solutions. Upon sudden resignation of Senior Consultants of petitioner- Company, the respondent No. 2 contacted the petitioner-Company through email and offered their services. After negotiations, the petitioner and the respondent No. 2 entered into a Consulting Agreement on 10.02.2020, with a restricted term of six months, agreeing that the respondent No. 2 would act as a consultant for the petitioner-Company and handle such issues as per the terms and conditions of the agreement, dated 10.02.2020. Immediately thereafter, the respondent No.2 had raised various invoices, dated 11.02.2020, 11.04.2020 and 15.05.2020 claiming certain amounts. Even though the respondent No. 2 is not eligible to claim those amounts, the petitioner-Company, in good faith, paid the excessive amount as raised in Invoice Nos. 1 and 4 on 05.05.2020 and 17.06.2020 respectively, as supply was being maintained and LCs were being opened in a rush due to pandemic crisis. Again, the respondent No. 2 raised Invoice No. 5 on 22.06.2020 for an amount of USD 7,11,845.00. As there was no basis for raising of invoices, the petitioner through email dated 24.08.2020 informed the respondent No. 2 that the invoices will be cleared in due course and asked the firm to perform its obligations and to supply the equipments to meet the huge demand. The Consulting Agreement dated 10.02.2020 expired on 10.08.2020. 3 However, as the petitioner-Company is in need of services of respondent No. 2 to meet the demand, a fresh Consulting Agreement was entered with the respondent No. 2 on 24.08.2020 for a period of six months. Subsequently, as there was no help and assistance for the transportation, installations, demonstration of ventilators from the respondent No. 2, the petitioner-Company had to involve other companies to ensure smooth supply of equipments. The respondent No. 2, thereafter, started to threaten the petitioner-Company in order to extort money and started to send warning emails to various members of the Board and the Company of the petitioner, such as email dated 24.08.2020. Further, a legal notice, dated 09.09.2020 was sent by the respondent No. 2 calling upon the petitioner-Company to pay the amounts covered by Invoice Nos. 5 and 6 within 30 days along with damages of Rs.50.00 lakh. In the said notice, the respondent No. 2 informed that it had registered itself under the Micro, Small and Medium Enterprises Act, 2006 (for short, 'MSME Act'). Immediately, the petitioner-Company terminated the Consulting Agreement, dated 24.08.2020 vide termination letter, dated 02.10.2020.
While so, the Chairman of Micro, Small, Medium Enterprises Facilitation Council, Ranga Reddy, the respondent No. 1 herein issued the impugned Intimation-cum-Notice, dated 22.10.2020, whereby the petitioner was advised to pay an amount of Rs.8,18,20,882/- to the respondent No. 2 being the dues of unpaid Invoice Nos. 5, 6 and proforma Invoice, dated 21.10.2020 within fifteen days. The petitioner-Company sent a reply, dated 26.10.2020 informing the respondent No. 1 that no amount is 4 payable to the respondent No. 2 and that the petitioner-Company is not situated within India and therefore, the provisions of MSME Act will not be applicable to the Company. Thereafter, the petitioner-Company received an email, dated 18.11.2020 from the official mail ID of respondent No. 1, containing therein a covering letter of respondent No. 2, the Statement of Claim, dated 02.11.2020 along with attested affidavit being Reference No. 1581/MSEFC/2020 and impugned notice, dated 04.11.2020 issued thereon by the respondent No. 1 calling upon the petitioner- Company to furnish their Statement of Defense to the Statement of Claim filed by the respondent No. 2 within 30 days. In the same mail, dated 18.11.2020, the petitioner had also received a copy of the Supplementary Pleadings, dated 16.11.2020, to the Statement of Claim.
Sri S. Niranjan Reddy, the Senior Counsel appearing for the petitioner-Company, has vehemently contended that all the claims before the respondent No. 1 are being filed through online and since the portal of respondent No. 1 does not have the option for filing of claims against a person/Company 'situated outside of India', in order to get the claim filed, the respondent No. 2 wrongly incorporated the address of the Company as "M-73 'M' Block Main Market, Greater Kailash, Part-I, New Delhi-110048" and "Via Crush 87402 Bonaduz CH South Delhi", to give an impression that the petitioner-Company is located in India. In its reply, dated 26.10.2020, the petitioner-Company had categorically informed the respondent No. 1 that the Company is based in Switzerland and operating/functioning from "Via Crush 8, CH-7402, Bonaduz, Switzerland". Therefore, the very issuance of the impugned 5 notices by the respondent No. 1 is without proper application of mind apart from lack of jurisdiction. The learned counsel has drawn the attention of this Court to Rule 6(v) of the G.O.Ms. No. 39, dated 30.06.2017 and has contended that the respondent No. 1 has the power to examine the reference at preliminary stage to check regarding the fee or competence of MSME Unit to file the reference and is empowered to return the same if the reference or particulars entered therein are not to the satisfaction of the respondent No. 1. Further, as per Rule 9(1) of the G.O.Ms. No. 39, dated 30.06.2017, the respondent No. 1 is under obligation to deal with the aspect of jurisdiction to entertain the claim of respondent No. 2. In the present case, inasmuch as the petitioner-Company, by its reply dated 26.10.2020, raised the preliminary objection as to the jurisdiction of respondent No. 1 to entertain the claim of the respondent No. 2 and the competence of to respondent No. 2 to file the reference, the respondent No. 1 ought to have adjudicated and given a finding on the objection by disposing of the representation of the petitioner dated 26.10.2020 before proceeding to issue the impugned notice, dated 04.11.2020. The respondent No. 1 has lost the sight of the fact that the satisfaction regarding the jurisdiction of the respondent No. 1 and the competence of the respondent No. 2 to file the statement of claim are prerequisites for issuance of notice. Thus, the respondent No. 1 has issued the impugned notice, dated 04.11.2020 with utter disregard to the reply, dated 26.10.2020 submitted by the petitioner-Company and therefore, the same is liable to be set aside being violative of Section 18(4) of the MSME Act. It is contended that after issuing the reply, dated 26.10.2020 raising the jurisdictional aspect, the 6 Supplementary Pleadings to the Statement of Claim is made by the respondent No. 2 as an afterthought to wriggle out of the bar of territorial jurisdiction of the respondent No. 1. Lastly, it is submitted that the respondent No. 2 cannot be termed as the supplier qua the petitioner under the MSME Act, 2006.
On the other hand, the learned counsel, Sri Hari Haran, appearing on behalf of respondent No. 2 contended inter alia that the Consulting Agreement, dated 10.02.2020 was entered solely to facilitate payments to the respondent No. 2 for the services already rendered for securing the interests of the petitioner-Company before the tender and for the services to be rendered to the petitioner-Company for ensuring smooth execution of the tender by the Company. That the initial agreement was executed in New Delhi; the subsequent Consultant Agreement, dated 28.08.2020 was also executed at New Delhi; the cause of action arose in India; the service rendered by respondent No. 2 is in India and no part of cause of action took place in Switzerland. Therefore, the respondent No. 1 has the jurisdiction to entertain the claim made by the respondent No. 2. The petitioner has been carrying on its business in India through its registered office/registered service centre at New Delhi, Mumbai, Kolkata and Bangalore; employed 14 persons to carry on its operations; appointed a Special Power of Attorney and Special Agent. Therefore, just because the petitioner-Company's registered office is outside India, it cannot be concluded that the petitioner is not located in India. Since the petitioner is a buyer of services rendered by respondent No. 2 and is located in India, irrespective of the place of its registered office, it is amenable to the jurisdiction of respondent No. 1. 7
The learned counsel for respondent No. 2 has also raised preliminary objection as to the maintainability of writ petition by the petitioner-Company being a foreign registered entity. It is contended that inasmuch as the action of respondent No. 1 in issuing the impugned notices is a statutory mandate under the Rules and MSME Act, 2006, a writ of mandamus cannot be issued. Further, it is contended that the petitioner has an alternative, efficacious remedy to approach the respondent No. 1 with regard to the objections under the mechanism of MSME Act, 2006 and the Rules framed thereunder under Section 16 of the Arbitration and Conciliation Act, 1996. The disputed question of jurisdictional fact whether the petitioner is located in India or not can only be effectively adjudicated before the respondent No. 1 but not before this Court under Article 226 of the Constitution of India. Even the claim of petitioner-Company about its non-liability to pay the invoices and the alleged fraud by the respondent No. 2 are again disputed questions of fact which can be adjudicated only by respondent No. 1.
Heard the learned counsel appearing for the parties and perused the material available on record.
This Court, while ordering notice before admission on 30.11.2020, stayed all further proceedings before the respondent No. 1.
In order to appreciate the contentions of both the parties and the issues involved in the case, the relevant provisions are extracted below. Rule 9(1) of the G.O.Ms. No. 39, dated 30.06.2017, published by the Industries & Commerce (FP&MSME) Department, reads thus:-
8
"The Council shall if it is satisfied that, on the facts stated therein, it has jurisdiction to proceed with the reference, cause a copy of the statement of claim to be sent by registered post to the Respondent along with the copies of the attached documents and issue notice in Form (2) to the Respondent asking him to furnish within fifteen days a statement of Defense in Form (3) with such documents and facts in support of his Defense or having a bearing on the matter under reference together with his half share of deposit for costs in such manner as may be specified therein and within the time allowed to the Respondent for furnishing his statement of Defense".
As seen from the record, in response to the mail, dated 18.11.2020 sent by the respondent No. 1 enclosing the Statement of Claim along with notice, dated 04.11.2020, the petitioner- Company submitted a reply on 26.10.2020 questioning the jurisdiction of respondent No. 1 to entertain the claim of respondent No. 1. The relevant portion of the reply, dated 26.10.2020 reads thus:-
"Mr. Chiranjeevi has given a false address for our company as "M- 73 'M' Block Main Market, Greater Kailash, Part-I, New Delhi- 110048" and "Via Crush 8, 7402 Bonaduz CH South Delhi". We request to be allowed to clarify that we are a company based in Switzerland. We are a leading manufacturer and supplier of critical care ventilation solutions based in Switzerland and operating/functioning from "Via Crush 8, CH - 7402, Bonaduz, Switzerland" for over thirty years and are registered under the laws of Switzerland. All facts can be also verified from the website https://www.hamilton-medical.com/en_IN/About-us.html.
Our company has terminated Mr. Poluru Chiranjeevi's agreement vide letter dated 02/10/2020 and our letterhead can also be examined to see the address at Switzerland. The agreements and invoices that have been enclosed in the email as sent by your good office would also reflect that we are based in Switzerland. Xxx This letter is being sent merely to clarify our correct location and is without prejudice to our rights and recourse under applicable laws. A cursory investigation on our part suggests that the MSME Act applies to domestic companies (Section 18(4) of the Act)."
In both the Consulting Agreements, dated 10.02.2020 and 24.08.2020, entered by and between the petitioner-Company and respondent No. 2, the address of the petitioner-Company is mentioned as Via Crusch 8, 7402, Bonaduz, Switzerland. Similar is the address mentioned in the legal notice, dated 09.09.2020 sent by respondent No. 2. However, it is mentioned therein that the 9 company is being represented by its Special Power of Attorney in India by one Mr. Amit Bhalla, M-73 (M Block Main Market), Greater Kailash, Part-1, New Delhi-110048. As seen from the record, the registered address of the petitioner-Company is in Switzerland and not India. Therefore, mere residence of the SPA holder cannot confer the jurisdiction on respondent No. 1 to entertain the claim of respondent No. 2. When the respondent No. 2 had raised various invoices showing the address of the petitioner-Company in Switzerland, it is not understandable as to how the respondent No. 2 could provide the petitioner-Company's address as "M-73 'M' Block Main Market, Greater Kailash, Part-I, New Delhi-110048" and "Via Crush 87402 Bonaduz CH South Delhi". The obvious reason for showing the address in South Delhi appears to be to wriggle out the bar of jurisdiction of respondent No. 1 provided under Section 18(4) of the MSME Act, 2006. Section 18(4) of the MSME Act reads as under:-
"Notwithstanding anything contained in any other law for the time being in force, the Micro Small Medium Enterprise Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under the section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India".
(Emphasis added) The provisions of the Act, more specifically Section 18(4) of the MSME Act, 2006, as extracted above, confers jurisdiction on respondent No.1 only with regard to any dispute between the supplier located within its jurisdiction and the buyer located anywhere in India. It is well accepted principle of law that the powers or the jurisdiction that can be exercised by any Court/Tribunal are conferred by the statute and the same have to be exercised as per the specified provision contained in the statute. 10 The said provision dealing with the jurisdiction has to be complied with, without any deviation and the Court/Tribunal cannot deviate from this cardinal rule. Where the Courts lack the inherent jurisdiction to try a particular case, they cannot act beyond the said powers or at the behest of the party and have to necessarily reject the application at the threshold. Even acquiescence or waiver by the other party cannot confer any jurisdiction on the said Court or Tribunal when the same is lacking. This Court as well as the Hon'ble Apex Court in catena of judgments has time and again held that the question of jurisdiction can be raised at any point of time and absence of the defect of inherent jurisdiction cannot be cured even by acquiescence or waiver. Where an express power under the statute has been provided, the same has to be read in the manner provided and the language employed therein. A plain reading of Section 18(4) of the MSME Act makes it manifestly clear that the respondent No.1 will have the jurisdiction only to try the case "in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India" and not otherwise. The petitioner in this case is having registered Offices outside of India and merely because in the cause title, the address of the petitioner is shown as "M-73 'M' Block Main Market, Greater Kailash, Part-I, New Delhi-110048" and "Via Crush 87402 Bonaduz CH South Delhi", the respondent No. 1 will not get any jurisdiction to try the case. Once it is established that the respondent No.1 lacks the inherent jurisdiction to try the case filed by respondent No.2, the notices issued by the said authority do not have any legal sanctity and have to be set aside. Therefore, the argument of the learned Counsel appearing for respondent No.2 11 that the petitioner can raise all questions with regard to jurisdiction aspect before the respondent No.1 cannot be countenanced. The documents filed by the parties reveal that the respondent No.1 does not have the jurisdiction or the authority to issue notices to the petitioner, which is located outside India and respondent No. 1 apparently lacks the inherent jurisdiction to try the case and therefore, on this ground alone, the impugned proceedings are liable to be set aside and no proceedings are maintainable against the petitioner-Company before the respondent No. 1.
The writ petition is allowed accordingly setting aside all the impugned proceedings on the file of the respondent No. 1. If the respondent No. 2 is so advised, he is free to agitate his rights before the proper forum having the jurisdiction to decide the lis between the parties and the same shall be decided on its own merits.
Miscellaneous petitions pending, if any, shall stand closed.
__________________________ A. ABHISHEK REDDY, J Date: 20-04-2021 Tsr