MSME Council Location Does Not Determine Court's Jurisdiction In Post-Award Proceedings: Calcutta HIgh Court

The Calcutta High Court has reiterated that the location of an MSME Facilitation Council does not, by itself, determine the territorial jurisdiction of courts over proceedings arising from an arbitral award.

Applying this principle, the court held that an exclusive-jurisdiction clause in favour of the New Delhi courts governed a Section 29A application seeking an extension of the arbitral mandate after an award was passed by the West Bengal Micro Small Enterprises Facilitation Council (WBMSEFC), Kolkata.

Justice Gaurang Kanth observed, “Section 18(3) of the MSMED Act itself provides that where the Facilitation Council proceeds to arbitrate the dispute, the provisions of the Arbitration and Conciliation Act shall apply to the dispute as if the arbitration were pursuant to an arbitration agreement under Section 7 of the said Act. Consequently, once the statutory arbitral proceedings culminate in an award, any challenge to, or proceeding arising in relation to, such award is governed by the provisions of the Arbitration and Conciliation Act. The statutory location of the Facilitation Council, therefore, cannot by itself be treated as determinative of the territorial jurisdiction of the Court under Section 2(1)(e) of the Arbitration Act.”

The Court was considering a Section 29A application under the Arbitration and Conciliation Act, 1996, seeking a post-award extension of time in arbitral proceedings conducted by the WBMSEFC, Kolkata.

The application was filed by Innovel Energy Services, previously known as Environ Solar.

Innovel argued that the arbitral proceedings had exceeded the statutory timeline because of adjournments and extensions sought by the respondent. It contended that the Calcutta High Court had jurisdiction because the WBMSEFC had conducted the arbitration at Kolkata.

Elevar Digitel Infrastructure opposed the application. It relied on the agreement's exclusive-jurisdiction clause, which conferred jurisdiction on the Courts at New Delhi. It also pointed out that it had already challenged the same arbitral award under Section 34 of the Arbitration Act before the Courts at New Delhi.

The High Court relied on Gammon Engineers & Contractors (P) Ltd. v. Sahay Industries and Power Generation Corporation Ltd. v. Techniche Consulting Service.

In Gammon Engineers, the Bombay High Court had held that the location of the Facilitation Council may constitute the venue of the statutory arbitration. It does not, however, displace an agreed exclusive-jurisdiction clause governing proceedings arising from the arbitral award.

The Calcutta High Court noted that a coordinate Bench had applied the same principle in Odisha Power Generation Corporation. That case also concerned an arbitral award arising from proceedings before the WBMSEFC.

Applying the principle to the present case, Justice Kanth noted that the parties had expressly agreed to confer exclusive jurisdiction on the Courts at New Delhi. There was no material showing that they had subsequently altered that arrangement or designated Kolkata as the juridical seat of arbitration.

"The fact that thestatutory arbitration was conducted by the Facilitation Council at Kolkatais, therefore, insufficient to override the express contractual stipulationconferring exclusive jurisdiction upon the Courts at New Delhi", the court ruled.

The court also considered Innovel's reliance on the Supreme Court's decision in Harcharan Dass Gupta v. Union of India. It held that the decision principally concerned the statutory jurisdiction of the Facilitation Council and the overriding effect of Section 18 of the MSMED Act over the contractual arbitral mechanism.

The Supreme Court ruling, the High Court said, did not hold that the location of the Facilitation Council necessarily determines territorial jurisdiction over post-award proceedings despite an otherwise valid and binding exclusive-jurisdiction clause.

The High Court accordingly held that the WBMSEFC's statutory jurisdiction to conduct the arbitration did not, by itself, confer territorial jurisdiction on the Calcutta High Court over proceedings arising from the arbitral award. The contractual stipulation conferring exclusive jurisdiction upon the Courts at New Delhi continued to operate.

The court also took note of the respondent's pending Section 34 challenge to the same arbitral award before the Courts at New Delhi. It said this demonstrated that the respondent had invoked the contractual forum agreed upon by the parties for proceedings arising from the arbitration and the award.

The court dismissed the Section 29A application as not maintainable before it for want of territorial jurisdiction. It left Innovel free to pursue such remedy as may be available before the competent Court in accordance with law.