In view of the above authoritative
pronouncements what emerges is that, by the operation of
Section 20 of the Act, the parties are free to confer
jurisdiction even on a Court that does not ordinarily have
jurisdiction to entertain the matter. Once the parties
exercise their right under Section 20 and confer jurisdiction
on a Court that does not have jurisdiction to entertain the
matter, such Court would also have jurisdiction, together
with the court/courts that would originally have jurisdiction
to try the matter. Therefore, the parties are at liberty to
exclude the jurisdiction of either of the said courts by
agreement. In the present case, though the cause of action
in this case has arisen within the jurisdiction of the Ist
additional District Court, N.Paravur, Ernakulam, the
jurisdiction of the said Court has been excluded by
agreement of the parties. Therefore, the parties have by
agreement confined jurisdiction over the subject matter,
only to the Courts at New Delhi. Consequently, the first
Additional District Court, North Paravur, Ernakulam does
not have jurisdiction to entertain the petition under Section
9 of the Act. For the above reason, it also lacked the power
to pass the orders appealed against. As held by the
Supreme Court, to concede any such jurisdiction to the said
Court would bring into operation, Section 42 of the Act
conferring jurisdiction for all further proceedings also on
the said Court thereby rendering Section 20 of the Act,
otiose.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
MR.JUSTICE K.SURENDRA MOHAN
&
MR. JUSTICE K.ABRAHAM MATHEW
17TH DAY OF OCTOBER 2016
Arb.A.No. 37 of 2016
ZILLION INFRA PROJECTS PVT. LTD.
V
A.I.KURIAKOSE
Citation: AIR 2017(NOC) 209 Kerala
Both these appeals are directed against orders passed
by the Ist Additional District Court, N.Paravur, Ernakulam in
two different Original Petitions, O.P.No.100 of 2016 and
O.P.No.101 of 2016. The parties are the same. The original
Petitions were filed by the first respondent under Section 9
of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as the Act for short) seeking interim orders of
attachment. The District court has passed the orders
appealed against, issuing ex parte orders of attachment.
The appellant has filed these appeals challenging the said
orders. The contentions of the appellant in both these cases
is that, the Ist additional District Court, N.Paravur lacks
jurisdiction to entertain the Original Petitions. Since the
parties are the same and the issues that arise for
consideration identical, both the appeals are heard and
disposed of together.
2. The appellant, a private limited company, has
entered into a contract with the second respondent, M/S
Bharat Petroleum Corporation limited, for the erection of
some plant and machinery. The appellant had given on sub
contract certain components of the work undertaken by it to
the first respondent herein under separate agreements
entered into between them for the purpose. The
agreements in both these appeals are identical. In the
contract, it has been agreed between the parties that
disputes if any that may arise between them shall be
referred to or resolved through arbitration in accordance
with the provisions of the Act. It has also been agreed upon
that, the seat of arbitration shall be at New Delhi. A further
clause confining the jurisdiction in respect of any
dispute/disputes arising out of the work order to the courts
at New Delhi also forms part of the agreement. The
contention that is advanced before us is that, in view of the
exclusion of jurisdiction of all other Courts with respect to
the disputes that may arise under the terms of the
agreement, the Ist Additional District Court, N.Paravur does
not have jurisdiction in the matter. Consequently, the
orders appealed against are liable to be set aside, for want
of jurisdiction. In view of the limited question that arise for
consideration, other facts with respect to these cases are
not relevant.
3. According to Advocate Naveen Sharma who
appears for the appellant, in both these appeals, the parties
have, by entering into a contract evidenced herein by
Annexure A, agreed to the manner in which the disputes
between them are to be resolved. Clause No.24 of
Annexure A in Aribtration Appeal No.38 of 2016 provides
that dispute/disputes arising out of the work order shall be
resolved by arbitration in accordance with the Act. The
venue for arbitration shall be at New Delhi. The clause
further provides that the Courts at New Delhi alone shall
have jurisdiction in respect of any dispute/disputes arising
out of the work order in question. Clause No. 23 of
Annexure A in Arb.Appeal No.37 of 2016 is similarly
worded. Therefore, according to the counsel, the parties
have agreed upon and decided on the manner in which their
disputes are to be resolved and also by agreement,
stipulated that the courts in New Delhi alone shall have
jurisdiction in the matter. For the above reason, it is
contended that the District Court, Paravur does not have
jurisdiction in the matter and has erred in passing the
orders appealed against. The counsel places reliance on the
Constitutional Bench Decision of the Apex Court in Bharat
Aluminium Company v. Kaiser Aluminium Technical
Services Inc [(2012)9 SCC 552] as well as State of West
Bengal v. Associated Contractors [2015(1) SCC 32] and
a Division Bench Decision of the Andhra Pradesh High
Court in Jyothi Turbo Power Services Pvt Ltd v.
Shenzhen Shandong Nuclear Power Construction Co.
Ltd [2011 KHC 2499] to contend that once the parties have
chosen the venue of arbitration under Section 20 of the Act
only the Courts at the said place would qualify as "Court"
under Section 2(1)(e) of the Act. Section 20, Section 2(i)(e)
as well as Section 42 of the Act have been considered,
interpreted and explained by the Apex Court in the said
manner, according to the counsel. Therefore, it is
contended that, these appeals are only to be allowed by
setting aside the orders appealed against.
4. Advocate Vinod Bhat appears for the first
respondent. According to the learned counsel, the entire
cause of action has arisen within the jurisdiction of the
Additional District Court, N. Paravur. Since no part of the
cause of action has arisen within the jurisdiction of the New
Delhi Courts, according to the counsel, the parties cannot
confer jurisdiction on the courts at New Delhi. Section 20
confers a right on the parties only to choose the seat of
arbitration. The seat of arbitration has no doubt been
chosen as New Delhi by the parties. However that does not
deprive the competent court of jurisdiction of its power to
entertain matters over which it has jurisdiction as per law.
If at all, the appellant has any dispute regarding the
jurisdiction, it is contended that the same has to be raised
before the District Court, North Paravur itself. Therefore, it
is contended that these appeals are only to be dismissed.
5. Heard. As we have already noticed above, the
facts in these cases are not in dispute. For the purpose of
convenience of reference, we extract below clause No.24 of
of Annexure A agreement in Arb. Appeal No.38 of 2016.
24) DISPUTES
1.ARBITRATION: In case of any dispute/
disputes arising out of this work order, the same
shall be referred and resolved only by way of
arbitration in accordance with the provisions of the
Arbitration and Conciliation Act, 1996 by a sole
Arbitrator who shall be appointed by the Managing
Director of the company Zillion Infraprojects
Private Ltd and any award or final order passed by
such appointed sole arbitrator shall not be
questioned only on the ground that it was passed by
an appointee of the Managing Director acting as
such sole arbitrator. The procedure to be adopted
for such arbitration proceedings shall be
determined by the sole Arbitrator at his sole
discretion. The fact that such sole arbitrator so
appointed was in any manner connected with the
subject matter of the dispute shall not be
considered as a disqualification for such
appointment. The venue of the arbitration shall
only be at New Delhi.
2.JURISDICTION: The courts at New Delhi
alone shall have the exclusive jurisdiction in respect
of any dispute/disputes arising out of this work
order.
6. A perusal of the above clause shows that -
i) in case of any dispute/disputes arising out of the work
order, the same shall be referred and resolved by way of
arbitration in accordance with the provisions of the Act.
ii) The sole Arbitrator shall be appointed by the Managing
Director of the appellant.
iii) Any Award or final order passed by such sole
Arbitrator shall not be questioned only on the ground that it
was passed by an appointee of the Managing Director
acting as such sole Arbitrator.
iv) The procedure to be adopted for such arbitration
proceedings shall be determined by the sole arbitrator.
v) The venue of arbitration shall only be at New Delhi.
7. It has been further agreed that the Courts at New
Delhi alone shall have exclusive jurisdiction in respect of
any dispute/disputes arising out of the work order.
8. The contentions of the parties have to be
considered in the context of the above clause. It is clear
from the above clause that the parties have unequivocally
agreed to have their disputes settled through arbitration, to
be held at New Delhi. It has also been agreed that, only the
Courts at New Delhi shall have jurisdiction in respect of the
disputes arising out of the work order. Section 2(1)(e)
defines the expression "Court" as follows:-
2(1)(e) "Court" means--
(i) in the case of an arbitration other than
international commercial arbitration, the principal
Civil Court of original jurisdiction in a district, and
includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to
decide the questions forming the subject- matter of
the arbitration if the same had been the subject-
matter of a suit, but does not include any Civil
Court of a grade inferior to such principal Civil
Court, or any Court of Small Causes;
(ii) in the case of international commercial arbitration,
the High Court in exercise of its ordinary original
civil jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the
arbitration if the same had been the subject-matter
of a suit, and in other cases, a High Court having
jurisdiction to hear appeals from decrees of courts
subordinate to that High Court.
The above provision had come up for consideration before
the Apex Court in Bharat Aluminium Company vs.
Kaiser Aluminium Technical Services Inc. (Supra). It
has been noticed by the Court that Section 20 confers a
right on the parties to agree on the place of arbitration.
Therefore, whether the expression "Court" was controlled
by the expression "subject-matter of the arbitration" or "
subject- matter of the suit" has been considered and
explained at paragraph 96 of the said judgment in the
following words:-
96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:
"2. Definitions.--(1) In this Part, unless the context
otherwise requires--
(a)-(d) * * *
(e) 'Court' means the Principal Civil Court of
Original Jurisdiction in a district, and includes the High
Court in exercise of its ordinary original civil jurisdiction,
having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the
subject-matter of a suit, but does not include any civil
court of a grade inferior to such Principal Civil Court, or
any Court of Small Causes;"
We are of the opinion, the term "subject-matter of the
arbitration" cannot be confused with " subject-
matter of the suit". The term "subject-matter" in Section
2(1)(e) is confined to Part I. It has a reference and
connection with the process of dispute resolution. Its
purpose is to identify the courts having supervisory
control over the arbitration proceedings. Hence, it refers
to a court which would essentially be a court of the seat
of the arbitration process. In our opinion, the provision
in Section 2(1)(e) has to be construed keeping in view
the provisions in Section 20 which give recognition to
party autonomy. Accepting the narrow construction as
projected by the learned counsel for the appellants
would, in fact, render Section 20 nugatory. In our view,
the legislature has intentionally given jurisdiction to two
courts i.e. the courts which would have jurisdiction
where the cause of action is located and the courts where
the arbitration takes place. This was necessary as on
many occasions the agreement may provide for a seat of
arbitration at a place which would be neutral to both the
parties. Therefore, the courts where the arbitration
takes place would be required to exercise supervisory
control over the arbitral process. For example, if the
arbitration is held in Delhi, where neither of the parties
are from Delhi, (Delhi having been chosen as a neutral
place as between a party from Mumbai and the other
from Kolkata) and the tribunal sitting in Delhi passes an
interim order under Section 17 of the Arbitration Act,
1996, the appeal against such an interim order under
Section 37 must lie to the courts of Delhi being the
courts having supervisory jurisdiction over the
arbitration proceedings and the tribunal. This would be
irrespective of the fact that the obligations to be
performed under the contract were to be performed
either at Mumbai or at Kolkota, and only arbitration is to
take place in Delhi. In such circumstances, both the
courts would have jurisdiction i.e. the court within whose
jurisdiction the subject-matter of the suit is situated and
the courts within the jurisdiction of which the dispute
resolution i.e. arbitration is located.
9. In paragraph 97, the Court has gone on to
categorically lay down as follows:-
97. The definition of Section 2(1)(e) includes
"subject-matter of the arbitration" to give jurisdiction to
the courts where the arbitration takes place, which
otherwise would not exist.
10. Therefore, the Court that has been defined by
Section 2(1)(e) has been unmistakably held to be the Court
having supervisory control over the Arbitration proceedings
or the Court at the seat of the arbitration process. In the
present case, the court of the arbitration process is at New
Delhi. The above aspect has been reiterated and affirmed
by a three Judge Bench of the Apex Court in State of West
Bengal v. Associated Contractors (Supra).
11. Rohinton Fali Nariman, J. has after considering
the question in the context of the applicability of Section 42
of the Act concluded the issue at paragraph 25 of the
judgment as follows:-
25. Our conclusions therefore on Section 2(1)(e) and
Section 42 of the Arbitration Act, 1996 are as follows:-
(a) Section 2(1)(e) contains an exhaustive
definition marking out only the Principal Civil Court
of Original Jurisdiction in a district or a High Court
having original civil jurisdiction in the State, and no
other court as "court" for the purpose of Part I of
the Arbitration Act, 1996.
(b) The expression "with respect to an arbitration
agreement" makes it clear that Section 42 will apply
to all applications made whether before or during
arbitral proceedings or after an award is
pronounced under Part I of the 1996 Act.
(c ) However, Section 42 only applies to
applications made under Part I if they are made to a
court as defined. Since applications made under
Section 8 are made to judicial authorities and since
applications under Section 11 are made to the Chief
Justice or his designate, the judicial authority and
the Chief Justice or his designate not being court as
defined, such applications would be outside Section
42.
(d) Section 9 applications being applications
made to a court and Section 34 applications to set
aside arbitral awards are applications which are
within Section 42.
(e) In no circumstances can the Supreme Court
be "court" for the purposes of Section 2(1)(e), and
whether the Supreme Court does or does not retain
seisin after appointing an arbitrator, applications
will follow the first application made before either a
High Court having original jurisdiction in the State
or a Principal Civil Court having original jurisdiction
in the district, as the case may be.
(f) Section 42 will apply to applications made
after the arbitral proceedings have come to an end
provided they are made under Part I.
(g) If a first application is made to a court which
is neither a Principal Court of Original Jurisdiction
in a district or a High Court exercising original
jurisdiction in a State, such application not being to
a court as defined would be outside Section 42.
Also, an application made to a court without
subject-matter jurisdiction would be outside Section
42.
12. In view of the above authoritative
pronouncements what emerges is that, by the operation of
Section 20 of the Act, the parties are free to confer
jurisdiction even on a Court that does not ordinarily have
jurisdiction to entertain the matter. Once the parties
exercise their right under Section 20 and confer jurisdiction
on a Court that does not have jurisdiction to entertain the
matter, such Court would also have jurisdiction, together
with the court/courts that would originally have jurisdiction
to try the matter. Therefore, the parties are at liberty to
exclude the jurisdiction of either of the said courts by
agreement. In the present case, though the cause of action
in this case has arisen within the jurisdiction of the Ist
additional District Court, N.Paravur, Ernakulam, the
jurisdiction of the said Court has been excluded by
agreement of the parties. Therefore, the parties have by
agreement confined jurisdiction over the subject matter,
only to the Courts at New Delhi. Consequently, the first
Additional District Court, North Paravur, Ernakulam does
not have jurisdiction to entertain the petition under Section
9 of the Act. For the above reason, it also lacked the power
to pass the orders appealed against. As held by the
Supreme Court, to concede any such jurisdiction to the said
Court would bring into operation, Section 42 of the Act
conferring jurisdiction for all further proceedings also on
the said Court thereby rendering Section 20 of the Act,
otiose.
For the foregoing reasons, these appeals are allowed.
The order dated 04.08.2016 of the Ist Additional District
Court, N.Paravur in I.A.No.711 of 2016 in Arbitration
O.P.No.101 of 2016 and the order dated 04.08.2016 in
I.A.No.709 of 2016 in Arbitration O.P.No.100 of 2016 are
set aside.
Sd/-
K.SURENDRA MOHAN
JUDGE
Sd/-
K. ABRAHAM MATHEW
JUDGE
pronouncements what emerges is that, by the operation of
Section 20 of the Act, the parties are free to confer
jurisdiction even on a Court that does not ordinarily have
jurisdiction to entertain the matter. Once the parties
exercise their right under Section 20 and confer jurisdiction
on a Court that does not have jurisdiction to entertain the
matter, such Court would also have jurisdiction, together
with the court/courts that would originally have jurisdiction
to try the matter. Therefore, the parties are at liberty to
exclude the jurisdiction of either of the said courts by
agreement. In the present case, though the cause of action
in this case has arisen within the jurisdiction of the Ist
additional District Court, N.Paravur, Ernakulam, the
jurisdiction of the said Court has been excluded by
agreement of the parties. Therefore, the parties have by
agreement confined jurisdiction over the subject matter,
only to the Courts at New Delhi. Consequently, the first
Additional District Court, North Paravur, Ernakulam does
not have jurisdiction to entertain the petition under Section
9 of the Act. For the above reason, it also lacked the power
to pass the orders appealed against. As held by the
Supreme Court, to concede any such jurisdiction to the said
Court would bring into operation, Section 42 of the Act
conferring jurisdiction for all further proceedings also on
the said Court thereby rendering Section 20 of the Act,
otiose.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
MR.JUSTICE K.SURENDRA MOHAN
&
MR. JUSTICE K.ABRAHAM MATHEW
17TH DAY OF OCTOBER 2016
Arb.A.No. 37 of 2016
ZILLION INFRA PROJECTS PVT. LTD.
V
A.I.KURIAKOSE
Citation: AIR 2017(NOC) 209 Kerala
Both these appeals are directed against orders passed
by the Ist Additional District Court, N.Paravur, Ernakulam in
two different Original Petitions, O.P.No.100 of 2016 and
O.P.No.101 of 2016. The parties are the same. The original
Petitions were filed by the first respondent under Section 9
of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as the Act for short) seeking interim orders of
attachment. The District court has passed the orders
appealed against, issuing ex parte orders of attachment.
The appellant has filed these appeals challenging the said
orders. The contentions of the appellant in both these cases
is that, the Ist additional District Court, N.Paravur lacks
jurisdiction to entertain the Original Petitions. Since the
parties are the same and the issues that arise for
consideration identical, both the appeals are heard and
disposed of together.
2. The appellant, a private limited company, has
entered into a contract with the second respondent, M/S
Bharat Petroleum Corporation limited, for the erection of
some plant and machinery. The appellant had given on sub
contract certain components of the work undertaken by it to
the first respondent herein under separate agreements
entered into between them for the purpose. The
agreements in both these appeals are identical. In the
contract, it has been agreed between the parties that
disputes if any that may arise between them shall be
referred to or resolved through arbitration in accordance
with the provisions of the Act. It has also been agreed upon
that, the seat of arbitration shall be at New Delhi. A further
clause confining the jurisdiction in respect of any
dispute/disputes arising out of the work order to the courts
at New Delhi also forms part of the agreement. The
contention that is advanced before us is that, in view of the
exclusion of jurisdiction of all other Courts with respect to
the disputes that may arise under the terms of the
agreement, the Ist Additional District Court, N.Paravur does
not have jurisdiction in the matter. Consequently, the
orders appealed against are liable to be set aside, for want
of jurisdiction. In view of the limited question that arise for
consideration, other facts with respect to these cases are
not relevant.
3. According to Advocate Naveen Sharma who
appears for the appellant, in both these appeals, the parties
have, by entering into a contract evidenced herein by
Annexure A, agreed to the manner in which the disputes
between them are to be resolved. Clause No.24 of
Annexure A in Aribtration Appeal No.38 of 2016 provides
that dispute/disputes arising out of the work order shall be
resolved by arbitration in accordance with the Act. The
venue for arbitration shall be at New Delhi. The clause
further provides that the Courts at New Delhi alone shall
have jurisdiction in respect of any dispute/disputes arising
out of the work order in question. Clause No. 23 of
Annexure A in Arb.Appeal No.37 of 2016 is similarly
worded. Therefore, according to the counsel, the parties
have agreed upon and decided on the manner in which their
disputes are to be resolved and also by agreement,
stipulated that the courts in New Delhi alone shall have
jurisdiction in the matter. For the above reason, it is
contended that the District Court, Paravur does not have
jurisdiction in the matter and has erred in passing the
orders appealed against. The counsel places reliance on the
Constitutional Bench Decision of the Apex Court in Bharat
Aluminium Company v. Kaiser Aluminium Technical
Services Inc [(2012)9 SCC 552] as well as State of West
Bengal v. Associated Contractors [2015(1) SCC 32] and
a Division Bench Decision of the Andhra Pradesh High
Court in Jyothi Turbo Power Services Pvt Ltd v.
Shenzhen Shandong Nuclear Power Construction Co.
Ltd [2011 KHC 2499] to contend that once the parties have
chosen the venue of arbitration under Section 20 of the Act
only the Courts at the said place would qualify as "Court"
under Section 2(1)(e) of the Act. Section 20, Section 2(i)(e)
as well as Section 42 of the Act have been considered,
interpreted and explained by the Apex Court in the said
manner, according to the counsel. Therefore, it is
contended that, these appeals are only to be allowed by
setting aside the orders appealed against.
4. Advocate Vinod Bhat appears for the first
respondent. According to the learned counsel, the entire
cause of action has arisen within the jurisdiction of the
Additional District Court, N. Paravur. Since no part of the
cause of action has arisen within the jurisdiction of the New
Delhi Courts, according to the counsel, the parties cannot
confer jurisdiction on the courts at New Delhi. Section 20
confers a right on the parties only to choose the seat of
arbitration. The seat of arbitration has no doubt been
chosen as New Delhi by the parties. However that does not
deprive the competent court of jurisdiction of its power to
entertain matters over which it has jurisdiction as per law.
If at all, the appellant has any dispute regarding the
jurisdiction, it is contended that the same has to be raised
before the District Court, North Paravur itself. Therefore, it
is contended that these appeals are only to be dismissed.
5. Heard. As we have already noticed above, the
facts in these cases are not in dispute. For the purpose of
convenience of reference, we extract below clause No.24 of
of Annexure A agreement in Arb. Appeal No.38 of 2016.
24) DISPUTES
1.ARBITRATION: In case of any dispute/
disputes arising out of this work order, the same
shall be referred and resolved only by way of
arbitration in accordance with the provisions of the
Arbitration and Conciliation Act, 1996 by a sole
Arbitrator who shall be appointed by the Managing
Director of the company Zillion Infraprojects
Private Ltd and any award or final order passed by
such appointed sole arbitrator shall not be
questioned only on the ground that it was passed by
an appointee of the Managing Director acting as
such sole arbitrator. The procedure to be adopted
for such arbitration proceedings shall be
determined by the sole Arbitrator at his sole
discretion. The fact that such sole arbitrator so
appointed was in any manner connected with the
subject matter of the dispute shall not be
considered as a disqualification for such
appointment. The venue of the arbitration shall
only be at New Delhi.
2.JURISDICTION: The courts at New Delhi
alone shall have the exclusive jurisdiction in respect
of any dispute/disputes arising out of this work
order.
6. A perusal of the above clause shows that -
i) in case of any dispute/disputes arising out of the work
order, the same shall be referred and resolved by way of
arbitration in accordance with the provisions of the Act.
ii) The sole Arbitrator shall be appointed by the Managing
Director of the appellant.
iii) Any Award or final order passed by such sole
Arbitrator shall not be questioned only on the ground that it
was passed by an appointee of the Managing Director
acting as such sole Arbitrator.
iv) The procedure to be adopted for such arbitration
proceedings shall be determined by the sole arbitrator.
v) The venue of arbitration shall only be at New Delhi.
7. It has been further agreed that the Courts at New
Delhi alone shall have exclusive jurisdiction in respect of
any dispute/disputes arising out of the work order.
8. The contentions of the parties have to be
considered in the context of the above clause. It is clear
from the above clause that the parties have unequivocally
agreed to have their disputes settled through arbitration, to
be held at New Delhi. It has also been agreed that, only the
Courts at New Delhi shall have jurisdiction in respect of the
disputes arising out of the work order. Section 2(1)(e)
defines the expression "Court" as follows:-
2(1)(e) "Court" means--
(i) in the case of an arbitration other than
international commercial arbitration, the principal
Civil Court of original jurisdiction in a district, and
includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to
decide the questions forming the subject- matter of
the arbitration if the same had been the subject-
matter of a suit, but does not include any Civil
Court of a grade inferior to such principal Civil
Court, or any Court of Small Causes;
(ii) in the case of international commercial arbitration,
the High Court in exercise of its ordinary original
civil jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of the
arbitration if the same had been the subject-matter
of a suit, and in other cases, a High Court having
jurisdiction to hear appeals from decrees of courts
subordinate to that High Court.
The above provision had come up for consideration before
the Apex Court in Bharat Aluminium Company vs.
Kaiser Aluminium Technical Services Inc. (Supra). It
has been noticed by the Court that Section 20 confers a
right on the parties to agree on the place of arbitration.
Therefore, whether the expression "Court" was controlled
by the expression "subject-matter of the arbitration" or "
subject- matter of the suit" has been considered and
explained at paragraph 96 of the said judgment in the
following words:-
96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:
"2. Definitions.--(1) In this Part, unless the context
otherwise requires--
(a)-(d) * * *
(e) 'Court' means the Principal Civil Court of
Original Jurisdiction in a district, and includes the High
Court in exercise of its ordinary original civil jurisdiction,
having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the
subject-matter of a suit, but does not include any civil
court of a grade inferior to such Principal Civil Court, or
any Court of Small Causes;"
We are of the opinion, the term "subject-matter of the
arbitration" cannot be confused with " subject-
matter of the suit". The term "subject-matter" in Section
2(1)(e) is confined to Part I. It has a reference and
connection with the process of dispute resolution. Its
purpose is to identify the courts having supervisory
control over the arbitration proceedings. Hence, it refers
to a court which would essentially be a court of the seat
of the arbitration process. In our opinion, the provision
in Section 2(1)(e) has to be construed keeping in view
the provisions in Section 20 which give recognition to
party autonomy. Accepting the narrow construction as
projected by the learned counsel for the appellants
would, in fact, render Section 20 nugatory. In our view,
the legislature has intentionally given jurisdiction to two
courts i.e. the courts which would have jurisdiction
where the cause of action is located and the courts where
the arbitration takes place. This was necessary as on
many occasions the agreement may provide for a seat of
arbitration at a place which would be neutral to both the
parties. Therefore, the courts where the arbitration
takes place would be required to exercise supervisory
control over the arbitral process. For example, if the
arbitration is held in Delhi, where neither of the parties
are from Delhi, (Delhi having been chosen as a neutral
place as between a party from Mumbai and the other
from Kolkata) and the tribunal sitting in Delhi passes an
interim order under Section 17 of the Arbitration Act,
1996, the appeal against such an interim order under
Section 37 must lie to the courts of Delhi being the
courts having supervisory jurisdiction over the
arbitration proceedings and the tribunal. This would be
irrespective of the fact that the obligations to be
performed under the contract were to be performed
either at Mumbai or at Kolkota, and only arbitration is to
take place in Delhi. In such circumstances, both the
courts would have jurisdiction i.e. the court within whose
jurisdiction the subject-matter of the suit is situated and
the courts within the jurisdiction of which the dispute
resolution i.e. arbitration is located.
9. In paragraph 97, the Court has gone on to
categorically lay down as follows:-
97. The definition of Section 2(1)(e) includes
"subject-matter of the arbitration" to give jurisdiction to
the courts where the arbitration takes place, which
otherwise would not exist.
10. Therefore, the Court that has been defined by
Section 2(1)(e) has been unmistakably held to be the Court
having supervisory control over the Arbitration proceedings
or the Court at the seat of the arbitration process. In the
present case, the court of the arbitration process is at New
Delhi. The above aspect has been reiterated and affirmed
by a three Judge Bench of the Apex Court in State of West
Bengal v. Associated Contractors (Supra).
11. Rohinton Fali Nariman, J. has after considering
the question in the context of the applicability of Section 42
of the Act concluded the issue at paragraph 25 of the
judgment as follows:-
25. Our conclusions therefore on Section 2(1)(e) and
Section 42 of the Arbitration Act, 1996 are as follows:-
(a) Section 2(1)(e) contains an exhaustive
definition marking out only the Principal Civil Court
of Original Jurisdiction in a district or a High Court
having original civil jurisdiction in the State, and no
other court as "court" for the purpose of Part I of
the Arbitration Act, 1996.
(b) The expression "with respect to an arbitration
agreement" makes it clear that Section 42 will apply
to all applications made whether before or during
arbitral proceedings or after an award is
pronounced under Part I of the 1996 Act.
(c ) However, Section 42 only applies to
applications made under Part I if they are made to a
court as defined. Since applications made under
Section 8 are made to judicial authorities and since
applications under Section 11 are made to the Chief
Justice or his designate, the judicial authority and
the Chief Justice or his designate not being court as
defined, such applications would be outside Section
42.
(d) Section 9 applications being applications
made to a court and Section 34 applications to set
aside arbitral awards are applications which are
within Section 42.
(e) In no circumstances can the Supreme Court
be "court" for the purposes of Section 2(1)(e), and
whether the Supreme Court does or does not retain
seisin after appointing an arbitrator, applications
will follow the first application made before either a
High Court having original jurisdiction in the State
or a Principal Civil Court having original jurisdiction
in the district, as the case may be.
(f) Section 42 will apply to applications made
after the arbitral proceedings have come to an end
provided they are made under Part I.
(g) If a first application is made to a court which
is neither a Principal Court of Original Jurisdiction
in a district or a High Court exercising original
jurisdiction in a State, such application not being to
a court as defined would be outside Section 42.
Also, an application made to a court without
subject-matter jurisdiction would be outside Section
42.
12. In view of the above authoritative
pronouncements what emerges is that, by the operation of
Section 20 of the Act, the parties are free to confer
jurisdiction even on a Court that does not ordinarily have
jurisdiction to entertain the matter. Once the parties
exercise their right under Section 20 and confer jurisdiction
on a Court that does not have jurisdiction to entertain the
matter, such Court would also have jurisdiction, together
with the court/courts that would originally have jurisdiction
to try the matter. Therefore, the parties are at liberty to
exclude the jurisdiction of either of the said courts by
agreement. In the present case, though the cause of action
in this case has arisen within the jurisdiction of the Ist
additional District Court, N.Paravur, Ernakulam, the
jurisdiction of the said Court has been excluded by
agreement of the parties. Therefore, the parties have by
agreement confined jurisdiction over the subject matter,
only to the Courts at New Delhi. Consequently, the first
Additional District Court, North Paravur, Ernakulam does
not have jurisdiction to entertain the petition under Section
9 of the Act. For the above reason, it also lacked the power
to pass the orders appealed against. As held by the
Supreme Court, to concede any such jurisdiction to the said
Court would bring into operation, Section 42 of the Act
conferring jurisdiction for all further proceedings also on
the said Court thereby rendering Section 20 of the Act,
otiose.
For the foregoing reasons, these appeals are allowed.
The order dated 04.08.2016 of the Ist Additional District
Court, N.Paravur in I.A.No.711 of 2016 in Arbitration
O.P.No.101 of 2016 and the order dated 04.08.2016 in
I.A.No.709 of 2016 in Arbitration O.P.No.100 of 2016 are
set aside.
Sd/-
K.SURENDRA MOHAN
JUDGE
Sd/-
K. ABRAHAM MATHEW
JUDGE
All this is very much a matter of interpretation. A private agreement between two parties cannot compel anyone not privy to that agreement unless and until some legislation - or the inherent power of the Court - intervenes.
ReplyDeleteFrom a layman's point of view, the Parties have no power - or ability - to confer jurisdiction on any Court. All a Party can do is apply to invoke a jurisdiction the Court has already.