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Bharat Sanchar Nigam Ltd. v. Tirupati Stationers Pvt. Ltd.
Factual and Procedural Background
The petitioner, General Manager, Bharat Sanchar Nigam Ltd. (BSNL), Ranchi, challenged an award dated 21.07.2011 passed by the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur in Claim Petition No. 25 of 2008. The award directed payment of Rs. 1,84,193 as principal and Rs. 3,38,838 as interest up to 19.05.2010 in favor of the respondent, M/s Tirupati Stationers Pvt. Ltd. The respondent had filed the claim petition before the Facilitation Council at Kanpur alleging outstanding payments related to supply of computer stationery to BSNL Ranchi. The petitioner questioned the jurisdiction of the Kanpur Facilitation Council to entertain the claim petition, as the contract execution, supply, billing, and payment all occurred at Ranchi, Jharkhand. The writ petition was filed in the Jharkhand High Court challenging the award on jurisdictional grounds.
Legal Issues Presented
- Whether the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur had jurisdiction to entertain Claim Petition No. 25 of 2008, given that the cause of action arose entirely at Ranchi, Jharkhand.
- Whether, in the absence of a notification by the State of Jharkhand establishing a Micro and Small Enterprises Facilitation Council, the Kanpur Facilitation Council could validly exercise jurisdiction over the dispute.
- Which court has jurisdiction to entertain a challenge to an award passed by a Micro and Small Enterprises Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006.
Arguments of the Parties
Petitioner’s Arguments
- The contract was executed at Ranchi, the supply was made at Ranchi, bills were submitted at Ranchi, and payment was made at Ranchi.
- The claim petition was improperly filed before the U.P. Facilitation Council at Kanpur, which lacked jurisdiction.
- The State of Jharkhand had not issued any notification establishing a Micro and Small Enterprises Facilitation Council, hence the Kanpur Council’s jurisdiction was invalid.
Respondent’s Arguments
The opinion does not contain a detailed account of the respondent’s legal arguments.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., (2011) 8 SCC 333 | The Arbitration Act, 1996 is a self-contained Code governing arbitration proceedings. | Supported the application of the Arbitration and Conciliation Act, 1996 to disputes referred to arbitration under the MSME Act. |
| Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. & Ors., (2012) 9 SCC 552 | Interpretation of Sections 2(1)(e), 20, 28 read with Section 45 of the Arbitration Act, 1996 emphasizing the principle of territoriality in jurisdiction. | Guided the court to hold that jurisdiction lies either where the subject-matter is situated or where arbitration is held. |
Court's Reasoning and Analysis
The court analyzed the jurisdictional provisions under the Micro, Small and Medium Enterprises Development Act, 2006, particularly Sections 18, 20, and 21. Section 20 mandates that State Governments establish Facilitation Councils by notification, specifying their territorial jurisdiction. The court noted that the State of Jharkhand had not issued such a notification, whereas the claim petition was entertained by the U.P. Facilitation Council at Kanpur.
Relying on the principle of territoriality as expounded in the cited Supreme Court precedents, the court held that the challenge to the award must be made in a court within whose territorial jurisdiction the Facilitation Council is established and exercising jurisdiction, or where the subject-matter is situated. Since the Kanpur Facilitation Council lies outside the territorial jurisdiction of the Jharkhand High Court and the cause of action arose entirely in Ranchi, the writ petition filed in Jharkhand was not maintainable.
Holding and Implications
The writ petition is dismissed.
The direct effect of this decision is that the Jharkhand High Court declined jurisdiction to entertain the challenge to the award made by the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur. The ruling reinforces the principle that jurisdiction in disputes under the MSME Act is territorially confined to the area where the Facilitation Council is established or where the subject-matter is located. No broader precedent beyond the facts of this case was established.
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No. 6775 of 2011
General Manager, Bharat Sanchar Nigam Ltd., Ranchi through Sri B.K. Mishra, SDE Legal office of the General Manager, Ranchi, P.O. G.P.O., Ranchi, P.S. Kotwali, District Ranchi, Jharkhand ... … Petitioner
Versus
M/s Tirupati Stationers Pvt. Ltd., 36/51, Gillish Bazar, Ram Das Hata, P.O. & P.S. Kanpur, District Kanpur-208001 ... ... … Respondents
CORAM: HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR -----
For the Petitioner : Mr. Arbind Kumar Jha, Advocate For the Respondent : Mr. Sanjay Prasad, Advocate
Order No. 06 Dated: 28.01.2016
Aggrieved by award dated 21.07.2011 in Claim Petition No. 25 of 2008 whereby, the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur awarded Rs. 1,84,193/- as principal sum and Rs. 3,38,838/- as interest upto 19.05.2010, the present writ petition has been filed.
2. Heard the learned counsel for the parties.
3. Raising a question of jurisdiction of the U.P. State Micro and Small Enterprises Facilitation Council, Kanpur, to entertain Claim Petition No. 25 of 2008, the learned counsel for the petitioner submits that the contract was executed at Ranchi, the supply was made at Ranchi, the bills were submitted at Ranchi and payment was made to the respondent-M/s Tirupati Stationers Private Limited at Ranchi however, the claim petition was filed before the Facilitation Council at Kanpur and it was entertained. It is contended that in terms of Section 20 of the Micro, Small and Medium Enterprises Development Act, 2006, the State of Jharkhand has yet not issued notification for establishment of one
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or more Micro and Small Enterprises Facilitation Council still, the claim petition for which whole cause of action arose at Ranchi was entertained.
4. Briefly stated, the respondent preferred Claim Petition No. 25 of 2008 claiming Rs. 1,62,260/- as difference in tax, Rs. 1,34,190/- as freight charges and Rs. 21,931/- as outstanding payment with interest of Rs. 87,240/-. The respondent carries business of manufacture of computer stationery, photocopy papers, T.P. Rolls, Fax Rolls, duplicate papers etc. For supply of computer stationery on DGS&D rates, the petitioner agreed to release payment within 30 days against Form C/D. Raising a grievance that the petitioner-BSNL did not release Form C, CST etc. the claim petition was filed by the respondent.
5. Section 20 of the Micro, Small and Medium Enterprises Development Act, 2006 provides that the State Government shall, by notification, establish one or more Micro and Small Enterprises Facilitation Councils at such places, exercising such jurisdiction and for such areas, as may be specified in the notification. The composition of the Micro and Small Enterprises Facilitation Council under Section 21 includes Director of Industries or any other Officer not below the rank of Director in the Department of the State Government having administrative control over the small-scale industries or Micro Small and Medium Enterprises. The fact that the Micro and Small Enterprises Facilitation Council can be established by a notification of the State Government and Director of Industries or any other Officer not below the rank of Director in the Department of the State Government is one of the members of the Facilitation Council who shall act as Chairperson of the Council leads to a conclusion that challenge to the award of the Facilitation Council can be adjudicated by the High Court within
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whose jurisdiction the Facilitation Council is situated and it is exercising jurisdiction within such areas which fall within the territorial jurisdiction of the said High Court. Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 provides that the Arbitration and Conciliation Act, 1996 shall apply to the dispute referred for arbitration under sub-section (3) and it shall be deemed as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of Section 7 of the 1996 Act. In "Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd.", (2011) 8 SCC 333, it has been noticed that the Arbitration Act has been held to be a self-contained Code. In "Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. & Ors." (2012) 9 SCC 552, the Hon'ble Supreme Court has observed that the provisions under Section 2(1)(e), Section 20 and Section 28 r/w Section 45 of the 1996 Act have to be interpreted by keeping the principle of territoriality at the forefront. With reference to a case in which arbitration is held at place A though, the subject-matter of the suit is situated at place B, it has been held that both the courts would have jurisdiction i.e., the Court within whose jurisdiction the
"subject-matter" of the suit is situated and the Court within the jurisdiction of which the dispute resolution i.e., arbitration is located. Thus, it has to be held that challenge to the award made by the Micro and Small Enterprises Facilitation Council must be made in a Court of competent jurisdiction within the territorial jurisdiction of which the Council is situated and exercising jurisdiction or in a Court within whose jurisdiction the subject-matter is situated.
6. Considering the fact that the award in Claim Petition No. 25 of 2008 has been made by the U.P. Micro and Small Enterprises Facilitation Council, Kanpur which does not fall within the territorial jurisdiction of the High Court of Jharkhand and the
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subject-matter for arbitration is a claim for money, the present writ petition is held not maintainable and accordingly, it is dismissed.
(Shree Chandrashekhar, J.)
Manish
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