Commercial Matters Involving Arbitration Disputes Can Only Be Heard By Commercial Court Of Status Of District Judge/Addl District Judge: Madhya Pradesh High Court

It held that a Civil Judge would not be the competent authority to entertain cases under Sections 9,14, 34 & 36 of the Arbitration and Conciliation Act, 1996.

A Division Bench comprising Chief Justice Mohammad Rafiq and Justice Vijay Kumar Shukla in its order dated February 26 held that the language employed in the definition clause of "Court" in Section 2(1)(c) of the Arbitration Act clearly indicates that the Legislature intended to confer power in respect of disputes involving arbitration on the highest judicial Court of the District.

This, the Court opined, was done to minimize the supervisory role of Courts in the arbitral process and, therefore, purposely excluded any Civil Court of a grade inferior to such Principal Civil Court, or any Court of Small Causes.

Background

The Court was presiding over a writ petition filed by Advocate Yashwardhan Raghuwanshi, assailing the validity of an order dated 20^th October, 2020 passed by the District and Sessions Judge, Bhopal, in exercise of powers conferred upon him by Section 15(1) of the Madhya Pradesh Civil Courts Act, 1958 read with Sections 194, 381(1) & 400 of CrPC, distributing civil and criminal business amongst various Additional District Judges and Subordinate Judges working under his supervision.

The challenge in particular was made to Entry 45 of the aforesaid order vide which cases filed under the Arbitration Act involving commercial disputes under provisions of the Commercial Courts Act, 2015 of specified value between Rs. 3 lakh to Rs. 1 crore were assigned to Civil Judge Class-I.

The controversy pertains to an apparent conflict between the Commercial Courts Act where Courts of Civil Judge are designated as Commercial Courts and the Arbitration Act where Courts of a grade inferior to Principal Civil Court have been barred from trying arbitration matters.

Arguments

It was the Petitioner's case that the Court of Civil Judge is not a competent authority to try arbitration disputes. He submitted:

• Arbitration Act is a consolidated statute for law relating to any form of arbitration dispute, intended to streamline the commercial disputes arising out of arbitration in speedy manner, for which purpose the Special Courts have been set up.
• Any commercial dispute involving arbitration shall be tried only by Principal Civil Court of the superior most jurisdiction in the District i.e. the Court of District Judge or at the maximum, it could be assigned to the Court of Additional District Judge as per Section 7 read with Section 15 of the Civil Courts Act but it cannot be assigned to a Court inferior thereto.
• The term "Court" for the purpose of Arbitration Act has been defined under Section 2(1 )(c) of the Arbitration Act which provides that "Court" means, in cases of an arbitration other than international commercial arbitration, the Principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such Principal Civil Court, or any Court of Small Causes.
• A conjoint reading of the Arbitration Act and Commercial Courts Act, makes it clear that only such "commercial matters" which do not involve the arbitration matters can be assigned to a notified Commercial Court of the status of a Senior Civil Judge but all matters involving both Commercial Courts Act as well as Arbitration Act can only be tried by the Principal Civil Court of original jurisdiction.
• Section 11 of the Commercial Courts Act provides that a Commercial Court or a Commercial Division, shall not entertain or decide any suit, application or proceedings relating to any commercial dispute in respect of which the jurisdiction of Civil Court is either expressly or impliedly barred under any other law for the time being in force. The jurisdiction of Commercial Courts of the status of Senior Civil Judge to entertain any suit, application or proceeding pertaining to Arbitration Act involving commercial disputes is expressly barred.
• As per Section 13 of the Commercial Courts Act, an appeal against the order of Commercial Court (XX Civil Judge Class-I) shall lie to the Commercial Appellate Court (XIX Additional District Judge), and then it has further provided appeal to the High Court. On the other hand, the Arbitration Act provides for only one appeal to the High Court under Section 37 of the Arbitration Act against the order of the Principal Civil Court.
• When the "commercial arbitration matters" arc clubbed together, they create an ambiguity and conflict. It is however scuttled law that when there is conflict between two central enactments, the provision of special law should prevail over the general law. Thus, on applying the doctrine of harmonious construction on the provisions of both the statutes, it is clear that they are best harmonized by giving effect to the special statute i.e. the Arbitration Act vis-a-vis the more general statute i.e. the Commercial Courts Act.

Findings

Concurring with the submissions made by the Petitioner, the Division Bench held,

"It would be evident from the language employed by the Legislature in the definition clause of "Court" in Section 2(1)(c) of the Arbitration Act that it intended to confer power in respect of the disputes involving arbitration on the highest judicial Court of a District so as to minimize the supervisory role of the Courts in the arbitral process and, therefore, purposely excluded any Civil Court of grade inferior to such Principal Civil Court, or any Court of Small Causes."

It added,

"Segregation of an arbitration matters on the basis of a pecuniary limit is not what the law provides for. All the arbitration matters, irrespective of the value of claim, arc required to be adjudicated by Principal Civil Court of original jurisdiction."

It thus held that the impugned order, to the extent of classifying the commercial disputes having subject matter of arbitration on the basis of valuation and conferring powers therefor on the Court of XX Civil Judge Class-I, Bhopal, would be violative of relevant provisions of law.

The Bench relied on State of Maharashtra v. Atlanta Limited, (2014) 11 SCC 61, whereby the Supreme Court, in the context of two Courts having concurrent jurisdiction, held that appeal against the award in cases where the District Court as the Principal Civil Court exercises original jurisdiction under the Arbitration Act, would lie to the High Court.

Reference was also made to a judgment of the Gujarat High Court in Fun N. Fud v. GLK Associates, 2019 SCC Online Guj 4236.

In this case, the High Court was examining the validity of the order passed by the Additional District Judge declining to hear an application under Section 9 of the Arbitration Act on the ground that it has no jurisdiction to hear and entertain such application and, and directing the applicant therein to present his application before the Court of Principal Senior Civil Judge.

The High Court had held that in view of Section 11 of the Commercial Courts Act, which bars a Commercial Court from deciding any suit, application or proceedings relating to any commercial dispute in respect of which the jurisdiction of the Civil Court is either expressly or impliedly barred under any other law for the time being in force, the Commercial Court which is a Civil Court of a grade inferior to such Principal Civil Court, or any Court of small causes, would be barred from exercising jurisdiction under Section 9 or any provision of the Arbitration Act.

Case Title: Yashwardhan Raghuwanshi v. District & Sessions Judge & Anr.

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