Gujarat High Court
M/S Samadhan Manpower And Engineering ... vs M/S Associated Power Structures Pvt. ... on 5 February, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 888 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
==================================================
Approved for Reporting Yes No
==================================================
M/S SAMADHAN MANPOWER AND ENGINEERING SERVICES
Versus
M/S ASSOCIATED POWER STRUCTURES PVT. LTD. & ANR.
==================================================
Appearance:
MR ANILKUMAR ADITYA for URVESH K GOR(7448) for the Petitioner(s) No. 1
==================================================
CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 05/02/2025
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)
1. By way of present petition, a challenge is made to the order
dated 18.05.2024 passed by the 4 th Additional District Judge,
Vadodara (Commercial Court), (hereinafter referred to as the
"learned Commercial Court, Vadodara") in Commercial CMA No. 31
of 2021 below Exhibit-12, rejecting the application of the petitioner
filed under Section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the "Act, 1996").
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
2. The facts leading to the filing of the writ petition are that the
petitioner is a proprietorship concern and is inter alia engaged in the
business of providing manpower for labour work. The petitioner is
working on sub-contract basis. The respondent no. 1 herein
(hereinafter referred as the "respondent") is a Company incorporated
under the Companies Act, 1956 inter alia engaged in the business of
constructing and installing heavy electronic cable lines and poll. The
respondent had given work order to supply manpower to the
petitioner for their work which was going on in the State of Uttar
Pradesh. It is the case of the petitioner that there was no written
agreement between the petitioner and the respondent or any
Memorandum of Understanding (MOU). However, the work was
allotted to the petitioner only upon the "work order", issued by the
respondent.
2.1. It was the case of the petitioner that the firm had completed
the work as per the work order and some payment was made by the
respondent. However, part payment was withheld by the respondent
on the plea of fabricated allegation against the petitioner.
Subsequently, a dispute arose between the parties. It is the case of
the petitioner that since the petitioner is a registered firm under the
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
provisions of Micro, Small and Medium Enterprise Development Act,
2006 (for short "MSMED, Act, 2006"), the petitioner filed reference
before the Micro and Small Enterprises Facilitation Council.
2.2. It was further the case of the petitioner that the respondent
had failed to pay due bill amount which has resulted into filing of the
reference, which came to be numbered as UP03B0047406/S /00001.
Pursuant to the filing of the reference, notice was served to the
respondent and in response, counter affidavit was filed by the
respondent. Upon completion of hearing of both the parties, the
Micro and Small Enterprises Facilitation Council passed an award on
23.03.2021 in favour of the petitioner wherein the respondent was
directed to pay an outstanding amount of Rs.8,40,041/- along with
interest of Rs.4,71,413/- as per Section 16 of the MSMED Act, 2006,
totalling to Rs.13,11,454/-. Therefore, the award to the tune of
Rs.13,11,454/- was passed in favour of the petitioner.
3. Being aggrieved and dissatisfied by the award passed by the
Micro and Small Enterprises Facilitation Council on 23.03.2021, the
respondent preferred an application under Section 34 of the Act,
1996, before the learned Commercial Court, at Vadodara, which
came to be numbered as Commercial CMA No. 13 of 2021. Pursuant
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
to filing of the application, notice came to be issued to the petitioner.
It was the case of the petitioner that the learned Commercial Court,
Vadodara would have no jurisdiction as no arbitral proceedings were
conducted within the territory of the State of Gujarat. It was the case
of the petitioner that as per the work order, the work was concluded
in the State of Uttar Pradesh and the reference was made in the
State of Uttar Pradesh and even the arbitral proceedings were
concluded in the State of Uttar Pradesh. Therefore, the Court in the
State of Gujarat would not have jurisdiction. This stand of the
petitioner had led to filing of the application below Exhibit-12 for
dismissal of the application under Section 34 of the Act, 1996 on the
ground that the learned Commercial Court, Vadodara would not have
territorial jurisdiction. The application was filed by the petitioner on
05.09.2021 and the respondent had filed its reply on 14.12.2023
opposing the application below Exhibit-12.
3.1. After hearing both the parties and on perusing the record, the
learned Commercial Court, Vadodara, vide impugned order dated
18.05.2023, rejected Exhibit-12 application of the petitioner for
dismissal of application filed under Section 34 of the Act, 1996,
which is impugned in the present writ petition.
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
4. We have heard learned advocate Mr. AnilKumar Aditya, who
appeared virtually on hybrid mode on behalf of Mr. Urvesh Gor,
learned advocate for the petitioner herein.
5. It was submitted by the learned counsel for the petitioner that
the work was done in the State of Uttar Pradesh and in furtherance
to that reference was made at the Micro and Small Enterprises
Facilitation Council situated in the State of Uttar Pradesh at Kanpur.
The arbitration proceedings having been concluded in the State of
Uttar Pradesh, the learned Commercial Court, Vadodara has no
jurisdiction to entertain the application filed under Section 34 of the
Act, 1996.
5.1. It was further submitted that the MSMED Act, 2006 being a
Special Act will have an overriding effect on the general enactment,
namely the Arbitration and Conciliation Act, 1996. Section 18(4) of
the MSMED Act, 2006 confers jurisdiction upon the Micro and Small
Enterprises Facilitation Council to act as an Arbitrator or Conciliator
in a dispute located within its jurisdiction. Resultantly, any
appeal/application against the award passed by the Micro and Small
Enterprises Facilitation Council has to be preferred only where the
"seat" of the Council as per statute, is decided. In the present case,
the "seat" of Arbitration would be at Kanpur in the State of Uttar
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
Pradesh and the District Court at Kanpur only would have
jurisdiction to entertain the application and not the Commercial
Court at Vadodara. It was further sought to be submitted that private
agreement between the parties cannot obliterate the statutory
provisions. Once the statutory mechanism under sub-section (1) of
Section 18 of the MSMED Act, 2006 is triggered by any party, it
would override any other agreement independently entered into
between the parties. In the facts and circumstances of the present
case, there was no agreement but only work order was signed, which
cannot override the effect of Section 18 of the MSMED Act, 2006.
The impugned order dated 18.05.2024 passed by the learned
Commercial Court, Vadodara in Commercial CMA No. 31 of 2021,
therefore, cannot be sustained.
6. Having heard learned counsels for the petitioner and perused
the material on record, one factual aspect which is required to be
clarified, at the outset, is with respect to the work order which was
signed between the parties which was not placed on the record by
the petitioner. However, there is a categorical finding of fact
recorded in paragraph '6' of the order that the work order dated
01.09.2017 contains a jurisdiction clause no. 35 which provides :-
"Notwithstanding the place where it is this contract is
signed or where the work is executed, it is agreed that the
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
Vadodara (Gujarat State) Court will be the jurisdiction for
any disputes arising in the above contract"; Arbitration
proceedings took place at Kanpur and award was also
passed there by MSEFC."
7. The content of Clause no. 35 in the work order which provides
for jurisdiction of the Court could not be disputed. As per Clause no.
35 of the work order, the learned Commercial Court, Vadodara has
been conferred exclusive jurisdiction to deal with the question of
dispute or difference arising out in connection with the work order
with the consent of the parties. It is well settled that when the clause
in the contract/work order vests exclusive jurisdiction over the
dispute, it should not be considered as fixing 'seat' and the exclusive
Court having jurisdiction to entertain the application under the Act,
1996. Therefore, the terminology of clause no. 35 of the work order
would give exclusive jurisdiction to the learned Commercial Court, at
Vadodara and such clause would be contra indica as held by the
Hon'ble Apex Court in the case of BGS SGS Soma JV vs. NHPC
Limited reported in (2020) 4 SCC 234. When the parties agree that
the arbitration proceedings will be concluded at Micro and Small
Enterprises Facilitation Council, at Kanpur, cannot be read to mean
that the place has been designated under the work order as to 'seat'
of the arbitration and would operate as exclusive jurisdiction clause.
The work order signed by the parties, particularly, clause no. 35
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
exclusively confers jurisdiction to the learned Commercial court,
Vadodara. The place of arbitration agreed upon at 'Kanpur' is merely
a convenient location for holding arbitration proceedings being the
venue of the arbitration and the Court at Vadodara selected as
having exclusive jurisdiction in all disputes arising out of the work
order should be considered as 'Juridical Seat' of the arbitration.
8. On the question of "seat" and "venue", the law laid down by
the Apex Court as to what constitutes the 'juridical seat' or
arbitration proceedings and whether once the seat is delineated by
the arbitration agreement, the Court at the place of the seat will
alone have exclusive jurisdiction over the arbitral proceedings have
been placed before us. Where the clause in the contract vests
exclusive jurisdiction over the disputes, it should be considered as
fixing "seat" and the exclusive Court having jurisdiction to entertain
the application under the Act' 1996. Where the parties have agreed
that all actions and proceedings arising out/related to the contract
shall lie in the Courts of competent jurisdiction at place 'A' and have
agreed to conduct the arbitration proceedings at place 'B', the
expression in the agreement that the Court at place 'A' will have
jurisdiction, would be a contrary indicator as held by the Apex Court
in the case of BGS SGS Soma (supra).
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
9. In the decision of the Apex Court in Ravi Ranjan Developers
Pvt. Ltd. vs. Aditya Kumar Chatterjee [(2022 SCC OnLine SC
568] emphasis has been laid down that "seat of arbitration" and
"venue of arbitration" cannot be used interchangeably. Mere
expression "place of arbitration" can not be made basis to determine
the intention of the parties that they have intended that place as the
"seat of arbitration". The intention of the parties as to the "seat"
should be determined from the clauses in the agreement and the
conduct of the parties. It is well settled principle of law that when
two or more Courts have jurisdiction to adjudicate the disputes
arising out of an arbitration agreement, the parties might, by
agreement decide to refer all disputes to any one Court to the
exclusion of all other Courts, which might otherwise have had
jurisdiction to decide the disputes. The parties cannot, however, by
consent confer jurisdiction on a Court which inherently lacks
jurisdiction.
10. The fact that the arbitral proceedings "shall be held" at a
particular venue would also indicate that the parties intended to
anchor the arbitral proceedings to a particular place, signifying their
intention that the place is the seat of the arbitral proceedings. This
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
coupled with there being no other contra indicia that stated venue is
merely a "venue" and not "seat" of the arbitral proceedings, would
then conclusively show that such a clause designates the "seat" of
the arbitral proceedings.
11. In the instant case, there is a categorical clause in the work
order signed by the parties to confer exclusive jurisdiction to the
Court at Vadodara. There being a sufficient contra indica to confer
exclusive jurisdiction upon the Court, the 'juridical seat' for all court
proceedings would be the Court at Vadodara. The fact that the
MSME Felicitation Council located at Kanpur in the State of Uttar
Pradesh had passed the award and the opponent unit which is a
MSME unit is situated at Kanpur, State of Uttar Pradesh, "the
juridical seat" cannot be fixed at Kanpur, State of Uttar Pradesh to
confer exclusive jurisdiction upon the Court of the said place.
12. To examine the issue, this Court is required to note the
decision of the Apex Court in the case of BGS SGS Soma (supra),
Mankastu Impex Private Limited versus Airvisual Limited
reported in (2020) 5 SCC 399, wherein the question of "seat" and
"venue" with reference to the arbitration proceedings has been
decided. In the case of BGS SGS Soma (supra), the issue was
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
pertaining to maintainability of appeal under Section 37 of the Act,
1996, on the premise that in view of the arbitration clause, whether
the seat of arbitration proceedings was New Delhi or Faridabad,
consequent upon which the petition under Section 34 of the Act,
1996 may be filed depending on where the seat of arbitration was
located.
13. The Apex Court has noted therein that in the judgment
impugned, the Punjab and Haryana High Court referred two earlier
decisions of the Apex Court in Bharat Aluminum Co.(BALCO) vs.
Kaiser Aluminum reported in (2012) 9 SCC 522 and Indus
Mobile Distribution (P) Ltd. versus Datawind Innovations (P)
Ltd. reported in (2017) 7 SCC 678, along with other decisions to
arrive at a conclusion that the arbitration clause in that case did not
refer to the seat of arbitration, but only referred to the "venue" of
arbitration. Consequently, since a part of the cause of action had
arisen in Faridabad, the Faridabad Commercial Court alone would
have jurisdiction over the arbitral proceedings, and the Courts at
New Delhi would have no such jurisdiction. The correctness of the
said proposition was assailed before the Apex Court. The Apex Court
has proceeded to lay down the law on what constitutes the "juridical
seat" of arbitration proceedings, and whether, once the seat is
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
delineated by the arbitration agreement, courts at the place of the
seat would alone, thereafter, have exclusive jurisdiction over the
arbitral proceedings.
14. Considering the scheme of the old Arbitration Act 1940, it was
observed therein that it did not refer to the juridical seat of the
arbitration proceedings at all. The UNCITRAL Model of International
Commercial Courts as adopted by the United Nations Commission on
International Trade Law on 21.06.1985, introduced the concept of
"place" or "seat" of the arbitral proceedings, which has been adopted
by our country. The Arbitration Act, 1996 which repealed the
Arbitration Act, 1940, adopted provisions of UNCITRAL Model and
refers to "the place" of arbitration and defines "Courts", and
indicates which Courts have jurisdiction in relation to arbitral
proceedings. The provisions in Part - I in Section 2(1)(e), 2(2),
Section 20, Section 31(4) and 42 of the Act, 1996, noted therein are
relevant to be extracted as under : -
"2.Definitions. -
(1) In this Part, unless the context otherwise requires,-
(a) to (d) - xxxxxx...xxxxxx...xxxxxx
(e)"Court" means-
(i) in case of an arbitration other than international
commercial arbitration, the principal Civil Court of original
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
jurisdiction in a district, and includes the High Court in
exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-
matter of the arbitration if the same had been the subject-
matter of a suit, but does not include any Civil Court of a
grade inferior to such principal Civil Court, or any Court of
Small Causes;
(ii) in the case of international commercial arbitration, the
High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the questions
forming the subject-matter of a suit if the same had been
the subject-matter of a suit, and in other cases, a High
Court having jurisdiction to hear appeals from decrees of
courts subordinate to that High Court;
(f) to (h) -xxxxxx...xxxxxx...xxxxxx
(2) This part shall apply where the place of arbitration is in
India. Provided that subject to an agreement to the
contrary, the provisions of sections 9, 27 and clause (a) of
sub-section (1) and sub-section (3) of Section 37 shall also
apply to international commercial arbitration, even if the
place of arbitration is outside India, and an arbitral award
or to be made in such place is enforceable and recognised
under the provisions of Part II of this Act."
20. Place of Arbitration.-
(1)The parties are free to agree on the place of arbitration.
(2)Failing any agreement referred to in sub-section (1), the
place of arbitration shall be determined by the arbitral
tribunal having regard to the circumstances of the case,
including the convenience of the parties.
(3)Notwithstanding sub-section (1) or sub-section (2), the
arbitral tribunal may, unless otherwise agreed by the
parties, meet at any place it considers appropriate for
consultation among its members, for hearing witnesses,
experts or the parties, or for inspection of documents,
goods or other property." "
31. Form and contents of arbitral award.-
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
(1) to (3) - xxxxxx...xxxxxx...xxxxxx
(4) The arbitral award shall state its date and the place of
arbitration as determined in accordance with section 20 and
the award shall be deemed to have been made at that
place."
"42. Jurisdiction.- Notwithstanding anything contained
elsewhere in this Part or any other law for the time being in
force, where with respect to an arbitration agreement any
application under this Part has been made in any Court,
that Court alone shall have jurisdiction over the arbitral
proceedings and all subsequent applications arising out of
that agreement and the arbitral proceedings shall be made
in that Court and no other Court."
15. It was further discussed in paragraph '31' and '32' in BGS
SGS Soma (supra) that from the above noted provisions, the new
concept of "juridical seat" of the arbitration proceedings has been
given by the Act, 1996 and the arbitral award is now not only to state
its date, but also the place of arbitration as determined in
accordance with Section 20. However, the definition of "Court" has
been narrowed down to mean only principal civil court and the High
Court in exercise of their original ordinary civil jurisdiction. Thus, the
concept of "juridical seat" of the arbitral proceedings, and its
relationship to the jurisdiction of the courts which are then to look
into matters relating to the arbitral proceedings including challenges
to arbitral awards had to be developed in accordance with
international practice on a case by case basis by the Apex Court.
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
Noticing that in some of the earlier decisions of the Apex Court, no
proper distinction between the "seat" and "venue" of arbitral
proceedings was made, the observations in the judgment in the case
of Union of India versus McDonnell Douglas Corporation
reported in (1993) 2 Lloyd's Rep 48, were noted that the provisions
of Section 2(1)(e) of the Act, 1996 had been considered therein to
provide jurisdiction of the original Civil Court and the High Court to
decide the question forming "the subject matter of the arbitration". It
was further noted that a plain reading of the Section 20 leaves no
room for doubt that where the place of arbitration is in India, the
parties are free to agree to any "place" or "seat" within India. In
absence of the agreement of the parties thereto, Sub-section (2) of
Section 20 authorizes the tribunal to determine the place / seat of
such arbitration. Section 20(3), however, enables the tribunal to
meet at any place for conducting hearings at a place of convenience
in matters such as consultations among its members for hearing
witnesses, experts or the parties. The observations in paragraph 99
in McDonnell Douglas Corporation (supra), emphasis to which is
supplied therein, are relevant to be extracted hereinunder : -
"99. The fixation of the most convenient "venue" is taken care of
by Section 20(3). Section 20, has to be read in the context of
Section 2(2), which places a threshold limitation on the
applicability of Part I, where the place of arbitration is in India.
Therefore, Section 20 would also not support the submission of
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
the extra-territorial applicability of Part I, as canvassed by the
Learned Counsel for the Appellants, so far as purely domestic
arbitration is concerned." (emphasis in original and supplied)
15.1 While examining the concept of "juridical seat" of the arbitral
proceedings and the important test laid down in the decision of the
English Courts and the Apex Court, in order to determine whether
the "seat" of the arbitral proceedings has, in fact, been indicated in
the agreement between the parties, it was observed by the Apex
Court in BGS SGS Soma (supra), in paragraph '82' as under : -
"82. On a conspectus of the aforesaid judgments, it may be
concluded that whenever there is the designation of a place
of arbitration in an arbitration clause as being the "venue"
of the arbitration proceedings, the expression "arbitration
proceedings" would make it clear that the "venue" is really
the "seat" of the arbitral proceedings, as the aforesaid
expression does not include just one or more individual or
particular hearing, but the arbitration proceedings as a
whole, including the making of an award at that place. This
language has to be contrasted with language such as
"tribunals are to meet or have witnesses, experts or the
parties" where only hearings are to take place in the
"venue", which may lead to the conclusion, other things
being equal, that the venue so stated is not the "seat" of
arbitral proceedings, but only a convenient place of
meeting. Further, the fact that the arbitral proceedings
"shall be held" at a particular venue would also indicate
that the parties intended to anchor arbitral proceedings to a
particular place, signifying thereby, that that place is the
seat of the arbitral proceedings. This, coupled with there
being no other significant contrary indicia that the stated
venue is merely a "venue" and not the "seat" of the arbitral
proceedings, would then conclusively show that such a
clause designates a "seat" of the arbitral proceedings. In an
International context, if a supranational body of rules is to
govern the arbitration, this would further be an indicia that
"the venue", so stated, would be the seat of the arbitral
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
proceedings. In a national context, this would be replaced
by the Arbitration Act, 1996 as applying to the "stated
venue", which then becomes the "seat" for the purposes of
arbitration."
16. The decision in the case of BGS SGS Soma (supra), has been
considered to note that it was held therein that in absence of
contrary expression expressed by the parties, the conclusion has to
be drawn that the parties have chosen the place where arbitration
proceedings were held as the seat of arbitration under Section 20(1)
of the Act. From the reading of the above noted decisions, it can be
seen that mere designation of a place of arbitration in arbitration
clause as being "venue of the arbitration proceedings", would not be
determinative factor to decide the "seat of the arbitral proceedings".
The language of the arbitral agreement has to be read on case by
case basis to determine as to whether "venue" so stated is "seat" of
arbitral proceedings, or it is only convenient place of meeting. The
moment the seat is designated, it is akin to an exclusive jurisdiction
clause for the purpose of regulating arbitral proceedings arising out
of the agreement between the parties. In the instant case there being
specific clause being clause no. 35 giving jurisdiction to Vadodara
Court would clinch the issue.
17. The second limb of argument canvassed by the learned counsel
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
for the petitioner was that Section 18(4) of the MSMED Act, 2006
fixes 'seat' of arbitration being place where Micro and Small
Enterprises Facilitation Council is situated at the location of the
supplier i.e. Kanpur. The contention is that Section 18(4) of the
MSMED Act, 2006 fixes the 'seat' of arbitration which further
decides location of the supplier and location of the buyer has no
relevance to decide the jurisdiction of the Micro and Small
Enterprises Facilitation Council. The submission is that the
provisions of the MSMED Act, 2006 would have an overriding effect
on the provisions of the Act, 1996.
18. Taking note of the above arguments, we have to examine the
interplay between the Arbitration Act' 1996 and MSMED Act' 2006
by going through the relevant provisions of both the enactments.
When we go through the provisions of the MSMED Act' 2006, it can
be discerned that the overriding effect has been given by virtue of
Section 18(4) read with Section 24 of the MSMED Act' 2006 over any
agreement between the parties in relation to the dispute covered by
the MSMED Act' 2006 and in so far as the claim under Section 17,
where it has been kept open to the parties to refer the dispute to the
MSME Facilitation Council. From the procedure prescribed in
Chapter-V of the MSMED Act' 2006, it is evident that the forum
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
namely, MSME Facilitation Council provided in Section 18, is in
replacement of 'arbitration agreement' as contained in Section 7 of
the Arbitration Act' 1996, which covers the dispute resolution
mechanism of arbitration between the parties. Sub-section(4) of
Section 2 of the Arbitration Act' 1996 provides that Part-I of the
Arbitration and Conciliation Act' 1996 shall apply to every arbitration
including statutory arbitration, and every arbitration under any other
enactment for the time being in force shall be deemed to be the
arbitration pursuant to the arbitration agreement within the meaning
of the Arbitration Act' 1996.
19. Thus, by virtue of Section 2(4) read with Section 7, in so far as
the arbitration proceedings are concerned, they shall be governed by
the statutory enactment, which would result in replacing the mode
and manner of appointment of arbitral tribunal under the Arbitration
Act' 1996. The provisions of the Arbitration Act' 1996 which are
inconsistent with the statutory enactment shall not apply. With the
commencement and conclusion of the arbitral proceedings under the
statute namely the MSMED Act' 2006, at both the stages, the
Arbitrator and the parties would have to refer to the provisions of the
Arbitration Act' 1996. For any dispute pertaining to the correctness
or validity of the arbitral award, execution and implementation
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
thereof, no other procedure have been provided under the MSMED
Act' 2006, and the provisions of the Arbitration Act' 1996 are
applicable.
20. Further, we may also note from the language employed in sub-
section (3) of Section 18 that where the conciliation initiated under
sub-section (2) of Section 18 is not successful, the Council is
empowered to take up the dispute for arbitration onto itself or refer
to it any institution or center providing alternate dispute resolution
services for such arbitration. In both eventuality, the arbitration
proceedings would be governed by the provisions of the Arbitration
and Conciliation Act, 1996 in dealing with the dispute as if the
arbitration was pursuant to an arbitration agreement referred to in
sub-section(1) of Section 7 of the Arbitration Act' 1996. With the
language employed under sub-section (3) of Section 18, if the
provisions of sub-section (4) of Section 18 are read and understood,
it would mean that the provisions of subsection (4) of Section 18
would have an overriding effect only with respect to the jurisdiction
of the MSME Felicitation Council in adjudication of the dispute as an
Arbitrator and has no application beyond that point.
21. We may further look into the provisions of the Section 19 of
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
the MSMED Act' 2006, which provides the manner in which the
application can be moved for setting aside the decree, award or
order made either by the Council itself or by any institution or center
providing alternative dispute resolution services to which a reference
is made by the Council. Section 19 contemplates pre-deposit of
certain amount before any such application is entertained by any
Court. The word 'Court' is not defined under the MSMED Act' 2006.
The phrase 'any court' contained in Section 19 of the MSMED Act'
2006, thus, has to be understood to mean the 'court' defined under
Section 2 (1)(e)of the Arbitration Act, 1996, which applies to the
arbitration proceedings conducted by the MSME Facilitation Council
or a institute or center referred to by it, by virtue of sub-section (3)
of Section 18. The resultant effect would be that the Court having
jurisdiction to entertain the challenge to an arbitral award within the
meaning of Section 34 of the Arbitration Act, 1996 shall be able to
adjudicate the challenge to an arbitral award within the scope of the
said provisions. A conjoint reading of Section 19 of the MSMED Act'
2006 and Section 34 of the Arbitration Act' 1996 makes it clear that
the 'Court' defined in Section 2(1)(e)of the Arbitration Act' 1996 will
have the jurisdiction to entertain the challenge to any award of the
MSME Felicitation Council or the institution to whom the dispute is
referred by the Council, subject to fulfillment of the condition of pre-
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
deposit laid down in Section 19 of the MSMED Act' 2006.
22. We may further note that except Section 19 contained in
Chapter-V of the MSMED Act' 2006, there is no other provision
which would deal with the procedure or the manner or even the
jurisdiction of the Court where challenge to an award by the Council
can be laid. Section 24 of the MSMED Act' 2006 which gives
overriding effect to the provisions of Sections 15 to 23 contained in
Chapter-V of the MSMED Act' 2006, thus, would not apply beyond
the provisions contained therein. Meaning thereby, once the
challenge is put forth before the 'Court' defined in Section 2(1)(e) of
the Arbitration Act, 1996 by making pre-requisite deposit as per
Section 19 of the MSMED Act' 2006, the interplay between the
MSMED Act' 2006 and the Arbitration Act' 1996 would come to an
end.
23. The Court before which the challenge is laid, once entertained
the challenge by ensuring compliance of Section 19 of the MSMED
Act' 2006, would have to deal with the challenge within the purview
of Section 34 of the Arbitration Act, 1996. The MSMED Act' 2006
cannot be read and applied to determine the jurisdiction of the Court
defined in Section 2(1)(e) of the Arbitration Act' 1996 before which
the challenge to an award is laid under Section 34. The limited scope
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
of Section 19 of the MSMED Act' 2006 is clear with the conjoint
reading of Section 19 of the MSMED Act' 2006, Section 2(1)(e) and
Section 34 of the Arbitration Act' 1996. The interplay between
Section 18 of the MSMED Act' 2006, Section 2(4) and Section 7 of
the Arbitration Act' 1996, has already been discussed hereinbefore in
detail.
24. The Legislature which fixes the jurisdiction of the MSME
Facilitation Council by virtue of sub-section (4) of Section 18, has not
prescribed any provision dealing with the jurisdiction of the Courts
entertaining application for setting aside any decree, award or other
order made either by the Council itself or by any institution or center
referred to by the Council, in view of the fact that the provisions of
the Arbitration and Conciliation Act, 1996 are applicable at both the
stages of making of the award and post-passing of the award. The
only mode and manner of referring the dispute for conciliation and
arbitration and appointment of an arbitrator in case of disagreement
between the parties, as governed by the Arbitration Act' 1996 has
been replaced by the statutory scheme of the MSMED Act' 2006.
25. In view of the above discussion, the contention of the learned
counsel for the respondent that by virtue of the overriding effect of
sub-section (4) of Section 18 read with Section 24 of the MSMED
NEUTRAL CITATION
C/SCA/888/2025 JUDGMENT DATED: 05/02/2025
undefined
Act' 2006, the juridical seat of arbitration proceedings has been fixed
and it would result in exclusion of the jurisdiction of the Civil Court
anywhere else in India where cause of action for adjudication of the
dispute lies, is untenable. This, issue of interpretation between
MSMED, Act, 2006 and the Act of 1996 was categorically decided by
this Court in the case of Uttar Gujarat Vij Company Limited v.
Gupta Power Infrastructure Limited rendered in First Appeal No.
1728 of 2022 dated 24.12.2024. Therefore, the provisions of Section
18(4) of the MSMED Act, 2006 cannot be read to exclude the
jurisdiction of the Civil Court at Vadodara which otherwise has
jurisdiction to deal with the dispute being the Civil Court within
which the jurisdiction of the work order was executed.
26. In view of the aforesaid observations, we do not find any
infirmity in the order dated 18.05.2024 passed by the learned
Commercial Court, at Vadodara in Commercial CMA No. 31 of 2021.
The petition being devoid of merits is, accordingly dismissed.
No order as to cost.
(SUNITA AGARWAL, CJ )
(PRANAV TRIVEDI,J)
phalguni
