Arbitration Award Can't Be Challenged In Different Jurisdiction Stating That There Was No Arbitration Agreement: Madhya Pradesh High Court

The Madhya Pradesh High Court has ruled that even if a party disputes the existence of an arbitration agreement, an application under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) to set aside an arbitral award cannot be filed in a Court not having jurisdiction under the arbitration agreement, solely on the ground that cause of action arose within its jurisdiction. The Single Bench of Justice Subodh Abhyankar held that the contention that since there was no arbitration agreement between the parties, therefore, the arbitral award could also be challenged wherever the cause of action arose between the parties, would defeat the provisions of Section 16 and Section 34 of the A&C Act and lead to a chaotic situation. The appellant Parenteral Drugs (India) Limited challenged the Arbitral Award rendered at Hyderabad by an Arbitral Tribunal, by filing an application under Section 34 of the A&C Act before the District Court of Indore. The respondent Gati Kintetsu Express Pvt Ltd opposed the application filed by the applicant on the ground that the Court at Indore had no jurisdiction to entertain the application, and contended that there was a valid arbitration agreement between the parties and the Arbitrator had not committed any error in passing the award. However, the District Judge decided the application filed by the appellant on merits and dismissed the application. Against the order passed by the District Judge, the appellant filed an appeal under Section 37 of the A&C Act before the Madhya Pradesh High Court. The appellant Parenteral Drugs submitted before the High Court that there was no arbitration agreement between the appellant and the respondent and the Arbitrator had wrongly assumed the jurisdiction to decide the dispute between the parties. The appellant contended that transactions between the appellant company and the respondent took place at Indore, hence part of the cause of action had arisen at Indore and therefore, the Court at Indore would have the jurisdiction to decide the application filed under Section 34 of the A&C Act. The appellant added that it had rightly invoked the jurisdiction of the Court in Indore, and that the award was liable to be set aside on the ground that there was no arbitration agreement between the parties. The Court noted that the appellant did not appear before the Arbitrator and no reply was filed by it despite service of notice by the Arbitrator. Also, the Court observed, objection to Arbitrator's jurisdiction was raised for the first time by the appellant in the application filed under Section 34 of the A&C Act before the District Court of Indore. The Court ruled that under Section 16 (1) of the A&C Act, the arbitral tribunal has the competence to rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. The Court held that even if the appellant company was of the view that no arbitration agreement had existed between the parties, it ought to have joined the proceedings of the Arbitrator and challenged the same under Section 16 of the A&C Act. The Court added that no other recourse was available to a party to challenge an award except as provided under the A&C Act. The Court held that the alleged arbitration agreement, on the basis of which arbitral proceedings had begun, clearly conferred jurisdiction on to the Courts of Hyderabad in Andhra Pradesh. Therefore, the Court added, when the award was passed by the Arbitrator at Hyderabad, it could not be challenged under Section 34 of the A&C Act at Indore. The Court held that the appellant's contention that since there was no arbitration agreement between the parties, therefore, the arbitral award could also be challenged wherever the cause of action arose between the parties, could not be accepted. The Court added that such an interpretation would defeat the provisions of Section 16 and Section 34 of the A&C Act and lead to a chaotic situation. The Court thus ruled that even if the appellant disputed the existence of the arbitration agreement, the Court at Indore would still not have the jurisdiction to entertain an application filed under Section 34 of the A&C Act against an award passed by an Arbitrator in Hyderabad. The Court added that since the said Award was passed by invoking the arbitration agreement that exclusively conferred jurisdiction onto the Courts in Hyderabad, Andhra Pradesh with respect to the arbitral proceedings, the Court at Indore would have no jurisdiction. The High Court thus held that the District Court at Indore did not have the jurisdiction, and it ought not to have decided the application under Section 34 of the A&C Act. The Court thus partly allowed the appeal of the appellant and set aside the order of the District Court. Case Title: Parenteral Drugs (India) Limited versus Gati Kintetsu Express Pvt Ltd ...

Arbitration Award Can't Be Challenged In Different Jurisdiction Stating That There Was No Arbitration Agreement: Madhya Pradesh High Court

Parina Katyal

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