Court Having Jurisdiction Over Seat Of Arbitration Would Be Entitled To Entertain Petition U/S 34 Of Arbitration Act: Jharkhand High Court

Brief Facts:

A dispute arose between the petitioner and the opposite party. An Arbitration clause was invoked. The award was also passed which was subsequently challenged before the commercial court at Ranchi under section 34 of the Act. The opposite party challenged the maintainability of section 34 petition on the ground that since the arbitrator had been appointed by the Orissa High Court, courts at Orissa would have jurisdiction to hear the petition as per section 42 of the Arbitration Act. After hearing both the parties, the commercial court dismissed the section 34 petition on the ground of non-maintainability.

Contentions:

The petitioner submitted that the Court exercising power under Section 11 of the Act, 1996 cannot be termed as a Court for the purpose of provision of Section 42.

It was also argued that t it is no more res integra that Section 42 of the Act, 1996 shall have no bearing upon the applications filed under Section 11(6) of the Act, 1996 and that in view of that only because Section 11(6) of the Act was applied by the Orissa High Court, that cannot be a ground that the jurisdiction is shifted to Orissa court.

It was also submitted that in the present case, the seat of arbitration in the present case, as is expressly envisaged under the contract, is at Ranchi and in view of that under the Act, 1996, an application for setting aside the arbitral award is maintainable only before the Courts at Ranchi.

It was further submitted that the Supreme Court in the case of Hindustan Construction Company Limited v. NHPC Limited & another (2020) held that once the seat of arbitration is designated, such clause then becomes an exclusive jurisdiction clause as a result of which only the courts where the seat is located would then have jurisdiction.

Per contra, the opposite party submitted that in light of Section 21 of the Act, 1996, proceeding starts on the date of making an application and in view of that, in light of Section 42 of the Act, 1996, the jurisdiction of that court is attracted.

It was also argued that Section 2(1)(e) of the Act, 1996 defines the term 'court' and in view of the fact that in light of Section 42, once the application is made under this Part, that Court is having exclusive jurisdiction of arbitral proceeding and in view of that, the learned Commercial Court has rightly passed the said order.

It was further contended that in view of the direction of the Division Bench of the Hon'ble Orissa High Court, the arbitration proceeding will take place at the Mediation Centre at Cuttack and in view of inability of the learned Arbitrator to conduct the proceeding in Orissa, the proceeding took place at Ranchi and in view of that, Orissa court is only having jurisdiction.

Observations:

The court at the outset addressed the argument whether writ under Article 226/227 is maintainable in the present case. The court observed that although the power of writ is not to be exercised in a routine manner, it can be exercised when the party is remediless and there is no alternative remedy available with the party as held by the Supreme Court in Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. (2022).

In the present case, an appeal under section 37 of the Act was withdrawn by the petitioner therefore it cannot be said that a final order came to be passed by the court. Hence, the writ in such circumstances would be maintainable as grave injustice would be caused to the party if it is left remediless.

Coming to the merits of the case, the court after pursuing the arbitration clause and proceedings before the Orissa High Court observed that the seat of arbitration is clearly at Ranchi and arbitration proceedings were also conducted at Ranchi.

The court observed that on a conjoint reading of sections 2(6) and 20 of the Act, it becomes clear that if the parties do not agree on the place of arbitration, they may authorise an entity to determine the venue. However, such a decision would not partake the character of adjudication of a dispute so as to clothe it with the character of an award.

It also noted that the Supreme Court in State of West Bengal v. Associated Contractors,(2015) held that the purpose of the Court in light of Section 2(1)(e), an application under Section 11 is not a Court as defined under Section 2(1)(e).

Similarly, the Supreme Court in Ravi Ranjan Developers Pvt. Ltd. v. Aditya Kumar Chatterjee, 2022 held that “section 42 cannot possibly have any application to an application under Section 11(6), which necessarily has to be made before a High Court, unless the earlier application was also made in a High Court.”

Based on the above, the court said that just because an application under section 11 of the Act seeking appointment of the arbitrator was filed before the Orissa High Court, the parties cannot be said to have surrendered jurisdiction to the High Court of Orissa.

In Indus Mobile Distribution Private Limited v. Datawind Innovations Pvt. Limited,(2017) the Supreme Court held that the moment the seat is designated, it is akin to an exclusive jurisdiction clause.

The court observed that “in the present case, the parties with consent have chosen further venue at Ranchi and at the moment the seat is determined, the Court is having jurisdiction of that seat and it will regulate the arbitration proceeding.”

It further observed that once the seat is chosen by the parties in terms of the contract/agreement, the court at that place will have jurisdiction.Merely because with consent of the parties, the Arbitrator has been appointed by the Hon'ble Orissa High Court, that cannot be a ground that Ranchi court is not having jurisdiction as Section 11 application is not decided by the Court, as has been held in the aforesaid judgments.

The court noted that the Supreme Court in BGS SGS SOMA JV v. NHPC Limited,(2020) held that whenever any designation of a place of arbitration is mentioned in the agreement as an arbitration clause being the “venue” of the arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” is really the “seat” of the arbitral proceedings.

Accordingly, the impugned order was set aside and the petition under section 34 of the Act was restored.

Case Title:M/s MECON Limited Versus M/s K.C.S. Pvt. Ltd.

LL Citation: 2025 LiveLaw (Jha) 15

Case Number:C.M.P. No. 415 of 2024

Judgment Date: 04/02/2025

For the Petitioner : Mr. Shresth Gautam, Advocate Mr. Yogendra Yadav, Advocate

For the Opposite Party : Mr. Suvendu Kumar Ray, Advocate Mr. Bhaskar Kumar, Advocate

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