Court's Jurisdiction U/S 34 Of Arbitration Act Against Award Under MSMED Act Is Determined By Agreement Between Parties: Gujarat HC

The Gujarat High Court bench of Mrs. Chief Justice Sunita Agarwal and Mr.Justice Pranav Trivedi of has held that the jurisdiction of the Court to hear the application under Section 34 of the Arbitration Act' 1996 as to challenge the award passed under Section 18(4) of the MSMED Act' 2006, would be governed by the agreement between the parties which has conferred exclusive jurisdiction to a particular Court. Brief Facts The present appeal is directed against the judgment and order dated 5.4.2022 passed by the Commercial Court, 5th Additional District Judge, Mehsana in rejecting the application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Arbitration Act, 1996') challenging the arbitral award dated 30.07.2016 passed by the Micro, Small and Medium Enterprises Facilitation Council (MSMEFC). The application under Section 34 has been rejected on the ground that the Court at Mehsana has no jurisdiction to try, entertain and dispose of the application, inasmuch as, the territorial jurisdiction to challenge the MSME Facilitation Council's award is with the Court in the State of Odisha as the seat of MSMEF Council would be the seat of arbitration. It was held by the Commercial Court that the seat of arbitration is fixed by virtue of Section 18 of the Act' 2006 at a place where MSMEF Arbitrator has jurisdiction, which is the place where supplier is located. The location of the supplier being at Cuttack, Odisha, the District Court at Cuttack, Odisha alone has jurisdiction to entertain the application under Section 34 of the Arbitration Act' 1996 to the exclusion of all other Courts by virtue of Section 18 and 24 of the MSMED Act' 2006. Contentions: The appellant argued that the exclusive jurisdiction is conferred to the Court at Mehsana by the parties under whose jurisdiction, the place where tender/acceptance of tender was issued, is situated. It was also submitted that even though the venue of arbitration will be at Cuttack, i.e. the place of location of MSME Facilitation Council, but the seat of the arbitration cannot be fixed at Cuttack. It was further contended that it is fairly well settled in cases where the parties have determined the 'seat' in their agreement, the same is akin to conferring exclusive jurisdiction on the Court(s) thereof. Where the clause in the contract vests exclusive jurisdiction over the disputes, it should be considered as fixing “seat” and the exclusive Court having jurisdiction to entertain the application under the Act' 1996. While placing reliance on the the judgment of the Apex Court in Ravi Ranjan Developers Pvt. Ltd. vs. Aditya Kumar Chatterjee (2022 )it was submitted that “seat of arbitration” and “venue of arbitration” cannot be used interchangeably. Mere expression “place of arbitration” can not be made basis to determine the intention of the parties that they have intended that place as the “seat of arbitration”. It was also argued that in BGS SGS Soma JV (supra), the Supreme Court has laid down the test for determination of “seat” in paragraph No. 82, wherein it was concluded that whenever there is designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” is really the “seat” of the arbitral proceedings, inasmuch as, the said expression does not include just one or more individual or particular hearing, but the arbitral proceedings as a whole, including the making of an award at that place. Based on the above, it was submitted that in the instant case, there is a categorical clause in the agreement signed by the parties to confer exclusive jurisdiction to the Court at the place from which tender / acceptance of tender was issued. There being a sufficient contra indica to confer exclusive jurisdiction upon the Court, the 'juridical seat' for all court proceedings would be the Court at Mehsana. While relying on the Bombay High Court judgment, it was submitted that the application under Section 34 of the Arbitration Act' 1996 to challenge the award passed under Section 18(4) of the MSMED Act' 2006 would be covered by the agreement between the parties which has conferred exclusive jurisdiction to a particular Court, and would not lie to the Court at a place where award has been passed under Section 18 of the MSMED Act' 2006 which is guided by the location of the supplier. Per contra, the respondent submitted that as the Commercial Court has held that it lacks jurisdiction and has reserved the liberty to the appellant to approach the Court of proper jurisdiction, the impugned order does not fall within the narrow ambit of Section 37. The appeal under Section 37 being a creature of a statute, a party does not have inherent right to appeal on any issue beyond the scope of Section 37. Reliance is...

Court's Jurisdiction U/S 34 Of Arbitration Act Against Award Under MSMED Act Is Determined By Agreement Between Parties: Gujarat HC

Mohd Malik Chauhan

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