Gujarat High Court Affirms Mehsana's Jurisdiction Over MSME Arbitration Challenge

(MENAFN- KNN India) Gujarat, Jan 8 (KNN) In a significant legal development, the Gujarat High Court has ruled that the court at Mehsana has jurisdiction to hear a petition challenging an arbitral award issued by the Micro, Small, and Medium Enterprises Facilitation Council (MSMEFC).

Overturning an earlier order by the Commercial Court in Mehsana, the High Court held that an agreement between the parties conferring exclusive jurisdiction to the Mehsana court must be upheld.

The High Court emphasised that the exclusive jurisdiction clause in the agreement between the parties could not be overridden by the statutory provisions of the MSMED Act.

It observed that while Section 18 of the MSMED Act fixes the seat of arbitration at the location of the supplier (in this case, Cuttack, Odisha), this does not negate the jurisdiction conferred by the parties' agreement.

Referring to precedents, including Ravi Ranjan Developers Pvt. Ltd. vs. Aditya Kumar Chatterjee (2022), the court clarified that the venue of arbitration cannot be equated with the seat of arbitration unless explicitly stated.

The court noted that once parties have consciously agreed to confer jurisdiction to the court at Mehsana, this agreement must prevail. It further highlighted that the interplay between the MSMED Act and the Arbitration Act ends once the award is challenged under Section 34 of the Arbitration Act.

The High Court also referred to a Delhi High Court ruling, which affirmed that an arbitral challenge must be filed where parties had conferred jurisdiction, irrespective of the statutory location of the arbitration proceedings.

This decision arose from a dispute surrounding an arbitral award dated July 30, 2016, issued by the MSMEFC. The appellant had sought to set aside the award by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996.

However, the Commercial Court in Mehsana dismissed the application, stating it lacked jurisdiction and that the proper venue was Cuttack, Odisha, where the MSMEFC is located.

The Commercial Court's ruling was based on its interpretation of Section 18 of the MSMED Act, which places arbitration at the location of the supplier.

The respondent supported this position, arguing that statutory provisions override party agreements. They further contended that the MSMED Act, being a special enactment, takes precedence over the general provisions of the Arbitration Act.

The appellant argued that the agreement between the parties clearly conferred exclusive jurisdiction to the Mehsana court, where the tender and its acceptance were issued.

They emphasised that the venue of arbitration in Cuttack could not be equated with the seat of arbitration and relied on the Supreme Court's decision in BGS SGS Soma JV (2020), which differentiates between venue and seat.

By setting aside the Commercial Court's order, the Gujarat High Court has reinforced the significance of party autonomy in arbitration agreements and clarified the scope of jurisdiction under the MSMED and Arbitration Acts. This decision is expected to influence similar disputes in the future.

(KNN Bureau)

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