Exclusive Supervisory Jurisdiction Granted To Court Receiving First Application Under Arbitration Act, Bombay HC Limits Territorial Jurisdiction

Brief Facts:

Hyundai Construction Equipment India Pvt. Ltd (“Petitioner”), engaged in manufacturing heavy construction equipment with operations across India, entered into two agreements with Saumya Mining Limited (“Respondent”), a company based in Kolkata, engaged in mining and infrastructure projects. The first agreement, dated 1st October 2011, involved the Petitioner delivering specified equipment to the Respondent for a purchase consideration. This agreement included an arbitration clause (Clause 25), stating that any disputes would be resolved through arbitration governed by the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), with proceedings conducted in Kolkata.

The second agreement, dated 26th September 2013, titled 'Agreement of Sale in Installment,' entailed the Petitioner providing a hydraulic excavator and other equipment to the Respondent on hire. This agreement also contained another arbitration clause (Clause 31), stating that disputes would be resolved through arbitration governed by the Arbitration Act, 1940, with proceedings conducted in Pune.

Disputes arose between the parties, leading to Petitioner issuing a demand notice to Respondent in October 2015. After Respondent failed to respond, Petitioner filed an Arbitration Petition in the Kolkata High Court. The Kolkata High Court appointed a Court Receiver to take possession of machinery, but as the Respondent relocated the machinery, time was extended for the Court Receiver to complete the task. In April 2019, the Petitioner invoked the arbitration clause and nominated arbitrators, requesting the Respondent to do the same. The Respondent denied the Petitioner's claims and raised the issue of limitation. Aggrieved by the same, the Petitioner filed a petition under Section 11 of the Arbitration Act in Bombay High Court for the appointment of an arbitrator.

The Petitioner contended that since the arbitration clause in the 2013 agreement specifies Pune as the venue for arbitration, the High Court has jurisdiction to appoint an arbitrator under Section 11 of the Arbitration Act. The Petitioner acknowledged that while both agreements were executed in Kolkata, the venue of arbitration specified in the 2013 agreement was Pune.

Observations by the High Court:

The Bombay High Court noted that the Petitioner previously approached the Kolkata High Court for the appointment of a court receiver. Furthermore, the it noted that the dispute's cause of action arose within the jurisdiction of Kolkata. Section 42 of the Arbitration Act states that in cases where an application has been made in a Court concerning an arbitration agreement, that Court alone possesses jurisdiction over all subsequent proceedings related to the agreement.

Therefore, the Bombay High Court held that the application under the Arbitration Act pursuant to the agreements was already submitted before the Kolkata High Court, thereby, making it the only competent authority to entertain applications under the Arbitration Act. Reliance was placed on the decision of BGS SGS Soma v. NHPC Limited where the Supreme Court highlighted that the primary objective of Section 42 is to prevent conflicts in jurisdiction among courts by assigning exclusive supervisory jurisdiction over arbitral proceedings to one court. Further, the Bombay High Court noted that when a seat is designated in the arbitration agreement, only the courts of that seat have jurisdiction over all proceedings related to the agreement. It noted that even in cases where no specific seat is designated, or the designated seat serves merely as a convenient venue, multiple courts may potentially have jurisdiction, depending on where a part of the cause of action arises. Additionally, it noted that in situations where parties have not agreed upon a seat of arbitration, an application under Section 9 of the Arbitration Act, could be filed before a court where a part of the cause of action arises.

Since the agreements were executed in Kolkata, and the Respondent maintained a place of business there, the Bombay High Court held no suit could have been filed in any Court under its jurisdiction, as no part of the cause of action occurred within its territorial bounds. Consequently, the Bombay High Court dismissed the petition for appointment of arbitrator.

Case Title: Hyundai Construction Equipment India Pvt. Ltd vs Saumya Mining Limited and Another

Case No.: Arbitration Petition No. 32 of 2022.

Advocate for the Petitioner: Mr. Nilesh M Wable.

Advocate for the Respondent: None.

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