Court holds that statutory arbitration under MSME Act does not override parties' agreed exclusive jurisdiction in arbitration agreements; post-award applications must be filed in courts designated by contract, not where Facilitation Council is located.
In a significant judgment delivered on September 10, 2026, the Calcutta High Court clarified the territorial jurisdiction applicable to post-award arbitration proceedings conducted under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act). The judgment arose from a dispute between M/s. Innovel Energy Services Pvt. Ltd. (formerly Environ Solar Pvt. Ltd.) and Elevar Digitel Infrastructure Private Limited (formerly ATC Telecom Infrastructures Pvt. Ltd.).
The dispute pertained to non-payment of invoices amounting to over Rs. 64 lakh for electrical and technical maintenance services provided by the petitioner. The petitioner, an MSME-registered supplier, invoked the statutory arbitration mechanism under Section 18 of the MSMED Act before the West Bengal Micro Small Enterprises Facilitation Council (WBMSEFC) situated in Kolkata. After conciliation efforts failed, the Council conducted arbitration and passed an award in favor of the petitioner on September 18, 2025.
However, post-award proceedings became contentious. The petitioner filed an application under Section 29A of the Arbitration and Conciliation Act, 1996, seeking an extension of the arbitral mandate on the ground that delays were caused by adjournments and extensions sought by the respondent. The petitioner argued that since the arbitration took place before the Facilitation Council located in Kolkata, this Court had territorial jurisdiction to entertain the application.
The respondent countered that while the Facilitation Council has statutory jurisdiction to conduct arbitration under MSMED Act, this does not translate into territorial jurisdiction of the Calcutta High Court for post-award matters. The respondent relied on the exclusive jurisdiction clause in the underlying contract, which designated the courts at New Delhi as the forum for all disputes arising from the contract and arbitration. The respondent had already initiated challenge proceedings under Section 34 of the Arbitration Act before courts in New Delhi.
The Court, presided over by Justice Gaurang Kanth, examined the interplay between the MSMED Act and the Arbitration and Conciliation Act, 1996. The judgment reaffirmed the settled principle that the Facilitation Council's statutory jurisdiction under Section 18 of the MSMED Act overrides any inconsistent contractual arbitration agreement only for the conduct of arbitration itself. However, once an arbitral award is passed, proceedings relating to enforcement, challenge, or extension of the arbitral mandate are governed by the Arbitration and Conciliation Act.
Importantly, the Court distinguished between the "venue" where arbitration is conducted and the "juridical seat" or "place of arbitration" that determines the territorial jurisdiction of courts. The Court referred to precedents including the Supreme Court's ruling in Harcharan Dass Gupta v. Union of India (2025) and judgments from the Bombay and Calcutta High Courts, which held that the location of the Facilitation Council does not affect the agreed exclusive jurisdiction clause.
Accordingly, the Calcutta High Court held that the exclusive jurisdiction clause conferring jurisdiction on the courts at New Delhi governs all post-award proceedings. The petitioner's application under Section 29A filed before the Calcutta High Court was therefore dismissed for lack of territorial jurisdiction.
The Court left open the petitioner's right to pursue remedies before the competent courts at New Delhi, which are the proper forum in accordance with the contract. The Court declined to express any opinion on the merits of the extension application given the jurisdictional bar.
This judgment provides clarity on the jurisdictional issues arising from MSME arbitration proceedings, emphasizing that while MSME Facilitation Councils have overriding jurisdiction to conduct arbitration, parties' contractual agreements on exclusive jurisdiction for court proceedings remain binding post-award. It underscores the importance of distinguishing between arbitration venue and juridical seat in determining court jurisdiction under the Arbitration and Conciliation Act.
Bottom Line:
The jurisdiction of the Facilitation Council to conduct arbitration under Section 18 of the MSME Development Act does not determine the territorial jurisdiction of the Court under Section 2(1)(e) of the Arbitration and Conciliation Act, 1996. Post-award proceedings must adhere to the agreed exclusive jurisdiction clause.
Statutory provision(s):
Arbitration and Conciliation Act, 1996 Section 2(1)(e), Section 29A; Micro, Small and Medium Enterprises Development Act, 2006 Section 18(3), Section 18(4), Section 24
