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M/S Vaishno Enterprises vs Hamilton Medical AG

Civil Appeal · 2022 INSC 341Decided 24 Mar 2022
Civil Appeal No. 1892 of 2022
M.R. Shah · B.V. Nagarathna

Background

Vaishno Enterprises, an Indian consultancy firm, helped Switzerland-based ventilator manufacturer Hamilton Medical AG with liaison work for supplying ventilators to Indian hospitals under a government tender. After a dispute arose over unpaid invoices, Vaishno Enterprises (by then registered as a Micro, Small and Medium Enterprise, or "MSME") approached the MSME Facilitation Council seeking payment. Hamilton Medical challenged the Council's jurisdiction before the High Court, arguing it was a foreign company with no Indian office, and won at both the Single Judge and Division Bench stage. Vaishno Enterprises appealed to the Supreme Court.

Decision Breakdown

The Supreme Court held that what mattered was not merely where the buyer was located, but which country's law and which point in time governed the contract. The relevant agreement (dated 24.08.2020) had a "choice of law" clause specifying Indian law as applicable at the time of execution, and on that date, Vaishno Enterprises was not yet registered as an MSME (registration came four days later, on 28.08.2020). Since a supplier must be MSME-registered at the time the contract governing the dispute is entered into for the special MSME dispute-resolution mechanism to apply, the Council had no jurisdiction. The Court dismissed the appeal but explicitly left open, for a future case, the broader questions of whether a foreign buyer doing business in India can be brought under the MSME Act, and whether subsequent MSME registration could still confer jurisdiction in different facts.

Lesson Learnt

A supplier must be registered as an MSME before or at the time it enters into the contract in dispute, not merely by the time the dispute or claim arises, for the MSME Facilitation Council's special payment-recovery jurisdiction to apply.

Official source (sci.gov.in)View Judgment (PDF)

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