Court Within Territorial Jurisdiction Of Seat Or Place Of Arbitration Alone Can Entertain Application U/S 34 Arbitration Act: Kerala High Court

The Kerala High Court recently held that the Court situated within the territorial jurisdiction of the seat or place of arbitration alone will have the jurisdiction to entertain an application filed under Section 34 of the Arbitration and Conciliation Act, 1996.

A single bench of Justice K Babu observed that the term “subject-matter of arbitration” in the definition of “court” in Section 2(1)(e) of the Act, refers to the Court having supervisory control over the arbitration proceedings. This would mean the Court where the seat or place of arbitration is will have jurisdiction to entertain a challenge to the arbitral award under Section 34 of the Act.

The court while relying on the decision of the Supreme Court in Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. [(2012) 9 SCC 552], observed that the Court where the arbitration takes place must exercise supervisory control over the arbitral process. The Supreme Court had observed in the said case:

“The Legislature has intentionally given jurisdiction to two Courts, the Court which would have jurisdiction where the cause of action is located and the Court where the arbitration takes place. This was essential as, in many cases, the arbitration agreement may provide a seat of arbitration at a place that would be neutral to both parties. Therefore, the Court where the arbitration takes place has to exercise supervisory control over the arbitral process.”

The Court also took note of the observation of the Supreme Court in the above case that Section 2(1)(e) of the Act is for the purpose of identifying the `Court’ having supervisory control over the arbitration proceedings and that this is to be determined by keeping Section 20 of the Act in mind as the word “place” used in Sections 20(1) and 20(2) refers to “juridical seat”. As per Section 20(1), parties are free to agree on the place of arbitration and as per Section 20(2) in the absence of an agreement regarding the place of arbitration by the parties, the Arbitral Tribunal can determine the place of arbitration.

The matter at hand pertains to a dispute between the Southern Railway and the licencee of a fruit and tea stall at Wadakkancherry Railway Station in Thrissur District regarding the licencee fee payable. An Arbitrator was appointed by the High Court and sittings were held by the Arbitrator at Ernakulam and an arbitral award was passed. The parties had not agreed on the place of arbitration and hence the Arbitrator decided on Ernakulam as the place of arbitration.

The Arbitral award was challenged by the respondent under Section 34 of the Act before the Ernakulam District Court. The petitioner objected to the jurisdiction of the District Court, Ernakulam to entertain the application. However, the District Court held that it has territorial jurisdiction to entertain the application. Against the order of the district court, the petitioner had approached the high court.

The court held that, the parties had not agreed on a place of arbitration and the Arbitral Tribunal had determined the `seat’ or `place’ of arbitration to be Ernakulam. Hence, the District Court, Ernakulam, alone has jurisdiction to entertain an application under Section 34 of the Arbitration Act, 1996, the court concluded.

Counsel for Petitioner: Advocate Dinesh Rao.A

Counsel for Respondent: Advocate Varghese C. Kuriakose

Amicus Curiae: G.Sreekumar (Chelur)

Case Title: Southern Railway V M R Ramakrishnan

Citation: 2023 LiveLaw (Ker) 93

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