[Arbitration Act] S.34 Pleas Are Of Commercial Nature, Cannot Be Decided By Bench Having Ordinary Original Jurisdiction: Calcutta High Court

The Calcutta High Court Bench of Justices Arijit Banerjee and Om Narayan Rai while deciding a Section 37, Arbitration and Conciliation Act, 1996 (“ACA”) appeal, set aside an order passed in Section 34, ACA petition on the ground that the court passing it lacked the jurisdiction to pass such an order. The concerned judge had the power to determine only such applications under Section 34 which did not pertain to commercial matters, whereas the power to decide Section 34 applications of commercial nature vested with another judge. Facts The present appeal under Section 37, ACA challenged an order dated April 5, 2023 passed on an application under Section 34, ACA being A.P. 831 of 2018 whereby the said application was allowed upon setting aside the award made and published on September 23, 2018 (“Impugned Award”). The Appellant and the Respondent had entered into an agreement for certain repair work on turnkey basis. Respondent completed the work but when payments due to the Respondent were not made, disputes arose between the parties. The Respondent approached the West Bengal State Micro and Small Enterprise Facilitation Council (“MSME Council”) under Section 18 of the MSMED Act, 2006. While the reference before the said Council was pending for consideration, the Appellant went ahead and appointed an arbitrator on September 23, 2016 by invoking the arbitration clause in the work order. Subsequently, the arbitrator appointed by the Appellant proceeded with the arbitral proceedings and made and published an award on September 23, 2018 in favour of the Appellant. Feeling aggrieved by the said award, the Respondent approached this Court by filing an application under Section 34, ACA which was registered as A.P. 831 of 2018. The said application under Section 34, ACA was allowed by the order dated April 5, 2023 which has been assailed in the present appeal (“Impugned Order”). Contentions The primary contention raised by the Counsel for the Appellant was that since the matter pertained to the Commercial Division of this Court, the application under Section 34, ACA ought to have been decided by the Commercial Court and not by the Court exercising ordinary original civil jurisdiction. The Counsel highlighted Sections 2(1)(c)(vi) and 2(1)(xviii) as well as Section 15 of the Commercial Courts Act, 2015 (“CC Act”) to demonstrate that the Section 34 application ought to have been decided by the Courts sitting in Commercial Division and not by the Court exercising ordinary original civil jurisdiction. It was submitted by the Counsel that since the aforesaid petition had been decided by a Court exercising ordinary original civil jurisdiction and not a Commercial Court therefore the order passed by the said Court was one without jurisdiction and should be treated as a nullity. The Counsel for the Appellant assailed the Impugned Award on several grounds however since the court limited the determination to the question of jurisdiction, the same have not been reproduced for brevity. The Counsel for the Respondent submitted that at the relevant point of time when the arbitration petition was filed, the Court presided over by the same Hon'ble Judge had the jurisdiction/determination in respect of both types of matters i.e. matters pertaining to the ordinary original civil jurisdiction as well as commercial matters and, therefore, the contention that Section 34 application had been decided by the Court while exercising ordinary original civil jurisdiction would not be a case of lack of determination or inherent lack of jurisdiction. It was at best an error of description of jurisdiction which was/is corrigible. The Counsel for the Respondent had rebutted all the grounds taken by the Appellant to assailed the Impugned Award however since the court limited the determination to the question of jurisdiction, the same have not been reproduced for brevity. Observations The Court observed that since a challenge had been thrown to the jurisdiction of the Court that passed the Impugned Order in the present appeal, the same needed to be decided first. It had been contended by the Appellant that the order should have been passed by a Commercial Court and not a Court exercising ordinary original civil jurisdiction inasmuch as the dispute between the parties was a commercial dispute. On the other hand, the Counsel for the Respondent had submitted that the same Court which was exercising ordinary original civil jurisdiction was also exercising the jurisdiction under the Commercial Division on the relevant date when the matter was heard and decided and as such the order impugned even if expressed to have been passed by the Court in exercise of its ordinary original civil jurisdiction, could not be said to have been passed without jurisdiction. The Court perused several orders passed by the Hon'ble Judge who disposed the Section 34...

[Arbitration Act] S.34 Pleas Are Of Commercial Nature, Cannot Be Decided By Bench Having Ordinary Original Jurisdiction: Calcutta High Court

Arpita Pande

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