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Arbitration

On Procedural Aspects The Arbitration Act Must Yield To The Provisions Of The Commercial Courts Act: Orissa High Court

Ausaf Ayyub
14 April 2022 10:06 AM GMT
On Procedural Aspects The Arbitration Act Must Yield To The Provisions Of The Commercial Courts Act: Orissa High Court
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The High Court of Orissa has observed that the Court for the purpose of deciding all the applications arising out of the arbitration agreement between the parties would be the Commercial Court as defined under the Commercial Courts Act which need not necessarily be the Principal Civil Court as provided under the Arbitration Act. The Court observed that the jurisdiction of the...

The High Court of Orissa has observed that the Court for the purpose of deciding all the applications arising out of the arbitration agreement between the parties would be the Commercial Court as defined under the Commercial Courts Act which need not necessarily be the Principal Civil Court as provided under the Arbitration Act.

The Court observed that the jurisdiction of the Commercial Court can be conferred on a judicial officer subordinate to the rank of a District Judge, i.e., the Principal Civil Judge notwithstanding anything contained in S. 2(1)(e) of the Arbitration Act.

The Division Bench of Justice S. Muralidhar and Justice R.K. Pattanaik further observed that in so far as the procedural aspects are concerned the Arbitration Act must yield to the provisions of the Commercial Courts Act.

Facts

The Court was hearing an appeal against the order(s) of the District and Sessions Judge who pursuant to a notification dated 13th November 2020, issued by the State of Orissa through its Principal Secretary, Law Department, transferred all the pending arbitration matters to the Court of Senior Civil Judge (Commercial Court).

The notification was issued by the government in consultation with the High Court establishing the Court of the Civil Judge (Senior Division) and conferring the powers and jurisdiction of the Commercial Courts under the Commercial Courts Act on such Court.

The petitioner(s) challenged the validity of both the government notification and the action of the D&SJ in transferring the petition on the ground that the said transfer is in violation of S. 2(1)(e) of the Arbitration Act as it confers jurisdiction, to decide all the applications arising under the Act, on a Court inferior to the Principal Civil Court which is against the mandate of the Arbitration Act which expressly provides that "Court" for the purpose of the Domestic Arbitrations shall be the Principal Civil Court and does not include any Court of inferior grade.

Contention Of The Parties

The petitioner(s) challenged the validity of the said notification and the action of the D&SJ on the following grounds:

  • The Arbitration Act is special legislation and the Commercial Courts Act is general legislation, therefore, in case of any conflict, the provisions of the Arbitration Act shall prevail. (Kandla Export Corpn. v. OCI Corpn. (2018) 14 SCC 715.)
  • As a corollary, the definition of Court given under the Arbitration Act would prevail over the definition of Commercial Court provided under the Commercial Courts Act, therefore, only the Principal Civil Court and no inferior Court would have the jurisdiction to decide disputes under the Arbitration Act.
  • That the non-obstante clause under the Commercial Courts Act will not override the provisions of the Arbitration Act.

The opposite parties sought to justify both the notification and the action taken thereto on the following grounds:

  • There is no conflict between both the laws and both are special laws, Commercial Courts Act being later legislation would prevail in case of any conflict.
  • That unless the two legislations are directly in collision with each other and it is impossible to obey both of them, the court shall apply the rule of purposive and harmonious construction and make attempts to solve the repugnancy without invalidating the provisions of any of the legislation.
  • That the purpose of both the legislations is primarily the same, i.e., speedy disposal of the disputes, and while the substantive rights are given under the Arbitration Act, procedural aspects are covered by the Commercial Courts Act.
  • That in case of any conflict between the provisions of both the legislations, the Commercial Courts Act shall prevail to the extent of procedural rights, reliance place on Gaurang Mahesh v. Sonia Gaurang, Bombay High Court.

Analysis By The Court

The Court went on to observe that prior to the enactment of the Commercial Courts Act, only the D&SJ had the jurisdiction to deal with arbitration matters, however, in terms of S. 3 the State government in consultation has been given the power to designate the Commercial Courts which would also hear all the arbitration matters as the arbitration falls within the list of commercial disputes given under the Act. Pursuant to that power the State government has issued the impugned notification conferring the power of Commercial Court on Additional District Judge.

The Court relied on the judgment of the Bombay High Court in Gaurang Mangesh (supra) to observe that the Arbitration Act prevails when it concerns the parties' substantive rights, and the Commercial Courts Act does when it concerns the parties' procedural rights and since the present matter is a procedural issue, the provisions of Commercial Courts shall override.

The Court observed that the Court for the purpose of deciding all the applications arising out of the arbitration agreement between the parties would be the Commercial Court as defined under the Commercial Courts Act which need not necessarily be the Principal Civil Court as provided under the Arbitration Act.

The Court held that the intent of the enactment of the Commercial Courts Act and the 2018 Amendment to the Act was to cover the widest possible commercial disputes under its ambit and provide for a more conducive and expeditious resolution of commercial disputes. The legislature has left it open to the State Government either to appoint a Civil Judge (Senior Division) or an Additional District Judge as the Commercial Court of the first instance to expedite the adjudication of commercial disputes.

The Court held that the intent of the 2018 Amendment which decreased the threshold amount from 1 Crore to 3 lakhs was to confer jurisdiction on Courts below the rank of the District Judge.

The Court observed that the jurisdiction of the Commercial Court can be conferred on a judicial officer subordinate to the rank of a District Judge, i.e., the Principal Civil Judge notwithstanding anything contained in S. 2(1)(e) of the Arbitration Act. Therefore, in terms of S. 15 of the Commercial Courts Act, the D&SJ was justified in transferring all the arbitration matters to the concerned Commercial Courts.

The Court further observed that since the jurisdiction is conferred on the Additional District Judge, appellate jurisdiction has been conferred in the form of a Commercial Appellate Court at the district level and the same is not inconsistent with S.37 of the Arbitration Act for the reason that it does not confine the appellate power to the High Courts only and the same is even extended to district courts as well.

Case Title: M.G. Mohanty and Anr v. State of Odisha and others, W.P.(C) Nos. Nos. 3523, 5491 & 5494 of 2022 and W.P.(C) Nos. 28644 & 30554 of 2021.

Citation: 2022 LiveLaw (Ori) 44

Date: 08.04.2022

Counsel for the Petitioner(s): Mr. Gautam Mukherjee, Senior Advocate Mr. Durga Prasad Nanda, Senior Advocate Mr. Prabhu Prasanna Behera, Advocate (In W.P.(C). 3523, 5491 & 5494 of 2022) Mr. Avijit Pal, Advocate (In W.P.(C) No.28644 of 2021) Mr. Durga Prasad Nanda, Senior Advocate (In W.P.(C). No.30554 of 2021)

Counsel for the Opposite Parties: Mr. P.K. Parhi, Asst. Solicitor General Mr. P.K. Muduli, Addl. Govt. Advocate Mr. Gautam Misra, Senior Advocate Mr. Yogesh Jagia, Senior Advocate Mr. Tanmay Mishra, Advocate Mr. S.S. Parida, Advocate

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