S.42 Arbitration Act | Party Filing S.9 Application In One Court Can't Dispute Jurisdiction Later While Dealing With S.34 Application: Allahabad HC
The Allahabad High Court has held that once party has filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before one Court, he cannot raise an objection regarding territorial jurisdiction of that Court in dealing with any application arising out of the same arbitration agreement in view of Section 42 of the Act.Section 42 of the Act provides that...
The Allahabad High Court has held that once party has filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 before one Court, he cannot raise an objection regarding territorial jurisdiction of that Court in dealing with any application arising out of the same arbitration agreement in view of Section 42 of the Act.
Section 42 of the Act provides that notwithstanding anything contained elsewhere in Part-I of the Act or in any other law for the time being in force, where with respect to an arbitration agreement any application under Part-I has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.
The Court held that Section 42 provides jurisdictional exclusivity to the Court where any application under Part-I of the Act has been filed in respect of arbitration arising out of the same agreement, by providing that all subsequent applications shall also be filed before that Court.
“By vesting exclusive jurisdiction in a single court, Section 42 of the Act obviates the possibility of conflicting judgements and ensures uniformity in the adjudication of arbitral matters. When two entities embroiled in a commercial disagreement, opt for arbitration as their chosen mode of resolution, they may often find themselves at the crossroads of jurisdictional ambiguity.”
The Court held that Section 42 prevents parallel proceedings, helping in expeditious dispute resolution.
Factual Background
Parties entered into an agreement which contained an arbitration clause. Upon dispute, respondent filed an application under Section 9 of the Act before the Commercial Court, Gautam Buddh Nagar. Subsequently, petitioners approached the Delhi High Court for appointment of arbitrator where sole arbitrator was appointed in 2007. In 2017, the sole arbitrator passed the award.
Petitioners challenged the arbitral award before the Commercial Court, Gautam Buddh Nagar under Section 34 of the Act. However, the same was dismissed on grounds of territorial jurisdiction.
The dismissal was challenged under Article 227 of the Constitution of India before the Allahabad High Court on grounds that Commercial Court, Gautam Buddh Nagar was the competent court to hear application under Section 34 as application under Section 9 was also filed there. It was argued that application for appointment of arbitrator being filed at Delhi does not make it the seat of the arbitration, only the venue was fixed as Delhi.
Further, it was argued that bar placed under Section 42 does not apply to applications under Part-I of the Act, consequently, once Section 9 application was filed at Gautam Budh Nagar all the subsequent applications under Part-I of the Act will have to be made before the same Court. It was argued that mere filing of Section 11 application before the Delhi High Court does not confer jurisdiction upon Delhi Courts.
It was argued that seat and venue cannot be equated in absence of a specific contract. However, when contrary indicia is present, like filing of application under Section 9 before Commercial Court, Gautam Buddh Nagar, venue cannot be elevated to the status of the seat.
Counsel for respondent submitted that the agreement between the parties provided Delhi as the “venue” and when the petitioner had not objected to application for appointment of arbitrator being filed at Delhi, challenge to the award could be made before Commercial Court, Gautam Buddh Nagar. Since no seat was stated in the agreement was mentioned, it was argued that the “venue” must be treated as the “seat”.
High Court Verdict
The Court relied on BGS SGS SOMA JV v. NHPC Limited where the Supreme Court held that where “seat” has not been mentioned in the agreement, the Court wherever first application under Part-I of the Act is filed will have exclusive jurisdiction under Section 42 of the over any challenge to arbitral proceedings.
The Court also relied on State of West Bengal v. Associated Contractors, where the Supreme Court held that by virtue of the phrase “with respect to an arbitration agreement” in Section 42, it 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. The Court held that applications under Section 8 being made to specific judicial authority and application under Section 11 to the Chief Justice or designate Court are outside the purview of Section 42. But applications under Section 9 and Section 34 are within Section 42.
The Court held that application under Section 11 of the Act for appointment of arbitrator requires specialized adjudication and prompt intervention and are therefore to be filed before the High Court or Supreme Court, as the case may be.
The Court held that the merely because “venue” was defined in the agreement, it could not be considered as the “seat” of arbitration as well especially when application under Section 9 had been filed before the Commercial Court, Gautam Budh Nagar.
“Whether initiated before, during, or after the conclusion of arbitration, applications under Part 1 of the Act are subject to the jurisdictional constraints imposed by Section 42 of the Act. By availing itself of the jurisdiction of the District Court at Gautam Buddh Nagar, the respondent implicitly recognized the authority of that court to adjudicate matters arising out of the arbitration agreement between the parties. This recognition, coupled with the principles of estoppel, precludes the respondent from subsequently disavowing the jurisdiction of the court at Gautam Buddh Nagar to entertain subsequent applications under Part 1 of the Act.”
The Court held that by voluntarily invoking jurisdiction of Court at Gautam Budh Nagar, respondent was estopped from taking a contrary position at the time of challenge to arbitral award under Section 34 of the Act. Observing the inapplicability of doctrine of forum non conveniens, the Court held that respondent was trying to circumvent the jurisdictional requirements of Section 42.
In M/s Ravi Ranjan Developers Pvt. Ltd. v. Aditya Kumar Chatterjee, the Apex Court held that once application under Section 9 of the Act had been filed before Court in Muzaffarnagar, respondent could not have raised objections to the jurisdiction of that Court and contend that parties had agreed to confer exclusive jurisdiction on Calcutta High Court.
Further, the Court relied on Manjusha Premi and Others v. Prakash Gupta and Others, where the Allahabad High Court held that
“Undisputedly, the application under section 11 of the Act is filed before the Hon'ble Chief Justice or his delegates, which is not a “Court” in the eye of law and as such clearly, the provision of section 42 of the Act would not apply but the same would certainly be applicable if the application is filed under section 9 of the Act, which was done at the first instance before the District Judge, Varanasi on 28.10.2006 in the present case.”
Accordingly, the Court held that any application under Part-I of the Act could only be filed before the Commercial Court, Gautam Budh Nagar.
Regarding the question whether order under Section 34 of the Act of 1996 could be challenged under Article 227 of the Constitution of India, the Court held that under Article 227 the High Court has an inherent power of superinduce over all subordinate courts and tribunals under it irrespective of whether specific statutory provisions provide for such supervision.
The case was remitted to the Commercial Court, Gautam Budh Nagar to adjudicate upon application under Section 34 of Act of 1996.
Case Title: M/S Devi Dayal Trust And Others V. M/S Rajhans Towers Pvt. Ltd. [MATTERS UNDER ARTICLE 227 NO. 2199 OF 2023]
Counsel for Petitioner: Manish Goyal, Senior Advocate assisted by Nikhil Mishra
Counsel for Respondents: Munna Pandey and Harshit Pandey