[S.18 MSME Act] Challenge To Facilitation Council Order Lies With High Court Having Territorial Jurisdiction Over Council: Kerala High Court

The Kerala High Court recently held that the challenge to an order issued by the Facilitation Council under the Micro, Small and Medium Enterprises Development Act, 2006, for a dispute between a supplier and buyer, would lie with the High Court in whose territorial jurisdiction the Facilitation Council is located. 

A single bench of Justice Viju Abraham observed that under Section 18 of the MSME Act, the jurisdiction to issue an order lies with the Facilitation Council in the place where the supplier is located and hence such an order could only be challenged in the High Court having territorial jurisdiction over such Facilitation Council. 

The Court was dealing with a plea challenging an intimation by the Karnataka State Micro and Small Enterprises Facilitation Council to the Petitioner, a partnership firm involved in marketing and distribution of certain products. The intimation issued by the Council alleged that the Petitioner had not made payments for the materials supplied by the 2nd Respondent (supplier).

On the question of maintainability, the Petitioner (buyer) argued that the since the goods have been supplied to the Petitioner in Kerala, the Kerala High Court had the jurisdiction to entertain the writ petition.

However, the 2nd respondent argued that jurisdiction is vested with the High Court of Karnataka as the seat of the Council was not within the territorial jurisdiction of the Kerala High Court.

The Court was of the view that the Kerala High Court did not have the jurisdiction, going by Section 18 of the MSME Act:

"...unlike in the provisions of the Civil Procedure Code, 1908 giving territorial jurisdiction to various courts based on the place where the defendant resides or the part of cause of action arose, Section 18 of the Act 2006 provides jurisdiction only to the Facilitation Council situated in the place where the supplier is located, i.e., in the present case the council located in the State of Karnataka. In view of the said non-obstante clause in Section 18 of the Act 2006, any order issued by the 1st respondent could be challenged only before the High Court having jurisdiction over the same. In view of the above, I hold that this court has no territorial jurisdiction to entertain a challenge against Ext.P1 intimation issued by the 1st respondent."

The Court additionally held that even if part of the cause of action arose in Kerala, the doctrine of forum conveniens would apply as the predominant part of the cause of action arose in the jurisdiction of the Karnataka High Court.:

“Even assuming for argument sake that a small portion of the cause of action has arisen within the jurisdiction of this Court in as much as the goods have been supplied to the petitioner who is residing within the jurisdiction of this Court, I am of the opinion that the claim of the petitioner that this Court has jurisdiction to entertain this writ petition has to be rejected based on the doctrine of forum conveniens. The seat of the Facilitation Council and the supplier, 2nd respondent herein, is in the State of Karnataka and any award passed as per Section 18 of the Act 2006 which is deemed to be an award as per the provisions of the Arbitration and Conciliation Act, 1996 is to be challenged before the Principal Civil Court which is also located in the State of Karnataka. Therefore, I am of the opinion that the High Court of Karnataka assumes jurisdiction as the predominant and substantial part of the cause of action indisputably happened within its jurisdiction.”

Holding that the Court did not have the jurisdiction to entertain the matter, the Court refrained from adjudicating on the factual and legal contentions raised.

Advs. N K Subramanian and M Rishikesh Shenoy appeared for the Petitioners

Advs. Latheef P K, Jayakrishnan P K, Rageeba Shahul appeared for the 2nd Respondent

Adv. B Ramachandran appeared for the Micro and Small Enterprises Facilitation Council

Case Title: M/S.Shreyas Marketing V. Micro and Small Enterprises Facilitation Council

Citation: 2023 LiveLaw (Ker) 293

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