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TMI Blog2023 (3) TMI 1494X X X X Extracts X X X X X X X X Extracts X X X X ..... istrict Judge (Commercial Court) 04, Shahdara, Karkardooma Delhi; 2. And may set aside the impugned order dated 29.11.2022 passed in OMP (COMM) No. 01 of 2022. 3. And may make any such other and further Orders as it may deem fit" 2. The facts which led to the filing of the present appeal are as follows: 2.1 It is stated that the appellant issued Purchase Order dated September 25, 2013 to the respondent for Supply, Erection, testing & commissioning of 02 nos. 20 MT Mounded underground LPG Storage Bullet & Pipeline for a Rail Coach Factory, Rae Bareli (U.P). 2.2 It is further stated that the subject work was completed by July 21, 2015. The respondent had also issued a 'No Claim Certificate' dated November 05, 2015 for Rs.1,12,95,207/- which was the agreed amount towards full and final payment between the appellant and the respondent. 2.3 It is stated that the respondent had applied for the registration under section 8 of the MSMED Act, on July 25, 2016 and consequently got registered under the provisions of the MSMED Act. 2.4 It is further stated that the respondent had also sent a legal notice dated February 02, 2017, to the appellant, wherein it was admitted that it had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erriding effect over the Act of 1996, however, on the issue of the jurisdiction, it had given primacy to the concept of 'seat of arbitration' over the mandate of section 19 of the MSMED Act. 3.3 The ratio adopted by the District Court, as laid down in the judgments of the Supreme Court in the cases of BGS SGS SOMA JV vs. NHPC LTD., arising out of Civil Appeal No. 9307 of 2019, decided on December 10, 2019 and Hindustan Construction Company Ltd. vs. NHPC Ltd. & Anr., arising out of Transfer Petition (C) no. 3053 of 2019 decided on March 04, 2020, cannot be applied in the facts and circumstances of the instant FAO, because in the said cases, the arbitration process undergone between the parties therein, took place arising out of an arbitration agreement entered between them, wherein both the parties also had an agreement over the seat of arbitration. However, the arbitration that took place in the present case did not arise out of the arbitration agreement between the parties herein. It is a statutory arbitration under the MSMED Act, wherein parties have no opportunity to choose a seat of arbitration. It is his submission that the District Court completely ignored the observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Act of 1996, which is a only general Act. 3.7 The MSMED Act, is inconsistent with the Act of 1996, thus, distinction had also been drawn between the provisions of the MSMED Act and the Act of 1996, to highlight the following inconsistencies between the two Acts:- a. Section 18 (4) of the MSMED Act allows the same person to act either as Conciliator or Arbitrator. However, there is no such provision in the Act of 1996; b. Section 19 of the MSMED Act, prescribes for pre-deposit of the amount awarded, while Section 34 of the Act of 1996 does not have such provision; c. Moreover, Section 19 of the MSMED Act sets out a procedure vis-à-vis a decree, award or other orders made either by the counsel or any other institution or centre providing the alternative dispute resolution services to which reference has been made. While Section 34 of the Act of 1996 only allows challenge to an award and that too by the Arbitrator so chosen by the parties; d. Further Section 19 of the MSMED Act allows filing of the petition to challenge a decree / award or other order in 'any court' while Act of 1996 mandates such challenge to be made in the 'the Court' only. e. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt herein, on the ground that the District Judge did not have the territorial jurisdiction to entertain the challenge filed against the arbitral award passed by the Facilitation Council at Kanpur. 6. So, on the basis of the aforesaid submissions, Mr. Sharma has prayed that the impugned order passed by the District Judge should not be interfered with. ANALYSIS 7. Having heard the learned counsel for the parties and perused the record, the short issue which arises for consideration is whether the learned District Judge was right in rejecting the petition filed by the appellant challenging the award dated January 09, 2022 passed by the Facilitation Council at Kanpur, whereby the learned Arbitrator has awarded an amount of Rs.63,35,077/- in favour of the respondent herein on the ground that the learned District Judge does not have the territorial jurisdiction to entertain the petition. Suffice to state that the District Judge has come to such a finding only on the basis of the fact that the arbitration proceedings which were held in terms of the provisions of MSMED Act, took place under the aegis of the Facilitation Council at Kanpur. 8. The relevant clause in the agreement entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n arbitral award continues to be the place over which the Court has been conferred with exclusive jurisdiction, as agreed between the parties. The Court further held that the MSMED Act despite being the Special Legislation would not eclipse and nullify the jurisdiction clause agreed upon between the parties. It means, post rendering of the arbitral award by the Facilitation Council, the exclusive jurisdiction clause entered between the parties shall not be affected. 12. That being said, it is a settled law that a place which is provided under the exclusive jurisdiction clause agreed between the parties determines the territorial jurisdiction of the Court to entertain a petition under Section 34 of the Act of 1996. Though in the present case, there was no arbitration clause, but still the parties have conferred exclusive jurisdiction to the Courts in Delhi. The same shall mean that any challenge to the arbitration award in terms of Section 19 of the MSMED Act would necessarily lie before the Court in Delhi. So, it follows that a challenge to the award passed under the MSMED Act shall necessarily be in terms of Section 34 of the Act of 1996 and surely the principles as governed unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraphs 14 to 17, held as under: - "14. There can be no quarrel with the said proposition, as it is law of the land. But, the crucial question is, as to which Court shall have jurisdiction when an aggrieved party intends to challenge an Arbitral Award passed by the Facilitation Council under the provisions of the MSMED Act. It is an admitted position that under the provisions of the MSMED Act, there is no avenue of challenge or appeal provided to the aggrieved party. In fact, sub Section (3) of Section 18 of the MSMED Act, specifically provides that when the Facilitation Council takes up the dispute for Arbitration, the provisions of the Arbitration Act shall apply to the dispute, as if the Arbitration was in pursuance of an Arbitration Agreement under Section 7(1) of the Arbitration Act. In the said judgment in the case of Gujarat State Civil Supplies Corporation Ltd. Vs. Mahakali Foods Pvt. Ltd. (supra), the Hon'ble Supreme Court concluded that the proceedings before the Facilitation Council, acting as the Arbitral Tribunal, would be governed by the Arbitration Act. Consequently, when the Facilitation Council renders its Arbitration Award, any challenge raised against the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies Corporation Ltd. Vs. Mahakali Foods Pvt. Ltd. (supra), the Hon'ble Supreme Court has observed that statutory Arbitration under Section 18 of the MSMED Act, would override the agreement between the parties, it necessarily applies to the agreed procedure of Arbitration between the parties. It is clear that if parties agreed for Arbitration by a sole Arbitrator or by an agreed procedure of constituting an Arbitral Tribunal, the same would stand obliterated by operation Section 18 of the MSMED Act. But once the Arbitration Award is pronounced, and there is an exclusionary clause of jurisdiction agreed between the parties, thereby agreeing upon jurisdiction of only one Court, in exclusion to others, the challenge initiated by the aggrieved party under the Arbitration Act, even against an award passed by the Facilitation Council under the MSMED Act, will lie only before the Court upon which the parties agreed to place exclusive jurisdiction. This Court is in agreement with the view taken by the Division Bench of the Delhi High Court in the case of Indian Oil Corporation Ltd. Vs. Fepl Engineering (P) Ltd & Anr. (supra), to the effect that Arbitration proceedings undertaken befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Gujarat State Civil Supplies Corporation Ltd. (supra), which we reproduced as under: "27. The submissions made on behalf of the counsel for the Buyers that a conscious omission of the word "agreement" in sub-section (1) of Section 18, which otherwise finds mention in Section 16 of the MSMED Act, 2006 implies that the arbitration agreement independently entered into between the parties as contemplated under Section 7 of the Arbitration Act, 1996 was not intended to be superseded by the provisions contained under Section 18 of the MSMED Act, 2006 also cannot be accepted. A private agreement between the parties cannot obliterate the statutory provisions. Once the statutory mechanism under subsection (1) of Section 18 is triggered by any party, it would override any other agreement independently entered into between the parties, in view of the non obstante clauses contained in subsection (1) and sub-section (4) of Section 18. The provisions of Sections 15 to 23 have also overriding effect as contemplated in Section 24 of the MSMED Act, 2006 when anything inconsistent is contained in any other law for the time being in force. It cannot be gainsaid that while interpretati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight created in favour of the party under the said provision. It is therefore held that no party to a dispute covered under Section 17 of the MSMED Act, 2006 would be precluded from making a reference to the Facilitation Council under Section 18(1) thereof, merely because there is an arbitration agreement existing between the parties." 16. With respect, we are not in agreement with the view taken by the learned Single Judge, for the reasons stated by the learned Single Judge of the Bombay High Court in paragraph 16 of the judgment, which we have reproduced above, which we reiterate in the following manner:- (i) Once the Arbitral Award is pronounced, and there is an exclusionary clause of jurisdiction agreed between the parties, thereby, agreeing upon the jurisdiction of only one Court, in exclusion to others, the challenge initiated by the aggrieved party under the Act of 1996, even against an award passed by the Facilitation Council under the MSMED Act, will lie only before the Court upon which the parties have agreed to place exclusive jurisdiction. (ii) Similar is the conclusion of the Division Bench of this Court in the case of Indian Oil Corporation Ltd. (supra), to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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