[Domestic Arbitrations] Settled That When Party Does Not Objection To Court's Territorial Jurisdiction, It Is Deemed As Waived: Bombay High Court

The Bombay High Court on March 9, 2021 pronounced judgment on whether a person could raise objection to territorial jurisdiction of a Court under Section 42 of the Arbitration Act, 1996 (the Act) at subsequent stages of proceedings, after initially submitting to litigation.

Answering in the negative, Justice BP Colabawalla stated,

"..it is now well settled that when an objection to the territorial jurisdiction of a Court is not taken by a party, he is deemed to have waived it and cannot raise that issue/objection in subsequent proceedings…"

The High Court was hearing a petition filed by Naresh Kanayalal Rajwani under Section 34 of the Arbitration Act challenging an arbitral award.

The first respondent, Kotak Mahindra Bank, insisted upon a decision on the preliminary question of whether the Bombay High Court had the territorial jurisdiction to entertain the plea, since Delhi was the seat of arbitration.

Pertinently, the respondents had appeared in Court and raised no arguments on territorial jurisdiction when the petitioners similarly assailed a prior arbitral award before the Bombay High Court.

The arbitration proceedings on both occasions were initiated by the Bank.

What the parties argued

Advocate Vishal Kanade for Kotak Mahindra asserted that the Court did not have the inherent jurisdiction to adjudicate upon the dispute. Therefore, any question of objections to territorial jurisdiction being waived did not have any merit, it was argued.

It was additionally submitted that the parties had no dispute that Delhi was to be the "seat" of arbitration. Therefore only courts within the seat of arbitration would have jurisdiction whether territorial or over subject-matter.

Dr Abhinav Chandrachud, appearing for the petitioner, pointed out that the first respondent was precluded from claiming that the Court did not have jurisdiction, since it participated in the first round of litigation.

The Judgement records the submission thus,

"…having participated in the arbitration proceedings before this Court in the first round and not having raised any objection to this Court's territorial jurisdiction, as well as acting in furtherance of the order passed by this Court on 17th August, 2015 by invoking a fresh arbitration, is now precluded from contending that this Court did not have jurisdiction to entertain the earlier Section 34 petition."

Since the jurisdiction of the court was accepted and arbitration proceedings instituted thereby, Section 42 of the Act would apply, he submitted. This would necessitate all subsequent all subsequent proceedings arising out of and with respect to the arbitration agreement between the parties, would have to be filed only in this Court, it was additionally said.

What the Court held

On the nature of jurisdiction

Disagreeing with the respondent's stance that the inherent jurisdiction of the Court was in question, the High Court ruled that it was only the territorial jurisdiction that was in question in the case at hand.

In this respect, the Court quoted Sneh Lata Goel Vs. Pushplata and ors [(2019)3 SCC 594] where the Supreme Court held that an objection to territorial jurisdiction does not travel to the root of or to the inherent lack of jurisdiction of a civil court to entertain the suit and hence can be waived.

Section 42 of the Act reads:
Jurisdiction. - Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court."

On whether objections to territorial jurisdiction can be waived

After recording a finding that an objection to territorial jurisdiction did not go to the root of the dispute, as opposed to inherent or subject matter jurisdiction, the Court asserted that the same could be waived.

Relying on Sneh Lata, it was stated,

"..it is clear that when an objection to the territorial jurisdiction of a Court is not taken at the earliest available opportunity it cannot be raised in subsequent proceedings."

The Court emphasised that a case could not be reversed purely on technical grounds unless it resulted in a prejudice on merits.

The Bench held,

"The policy underlying the same is that when a case had been tried by a Court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds, unless it has resulted in failure of justice. The policy is to treat objections to territorial jurisdiction as technical and not open to consideration by an Appellate Court or in subsequent proceedings, unless there has been a prejudice on the merits.."

On the applicability of Section 42

After discussing the elements of Section 42, the Bombay High Court reasoned that it would Court alone have jurisdiction to entertain the present petition as well, since the first application was made to the Court.

Referring to the definition of Court as per Section 2(1)(e)(i), the Bench emphasised that the High Court is certainly a Court as defined in section 2(1)(e)(i) in which the earlier Section 34 petition was filed and entertained. The Bench underscored that the High Court possessed the inherent jurisdiction to entertain the application under Section 34 as per the definition in Section 2(1)(e)(i).

"It is not as if this Court whilst entertaining the said petition was not the High Court exercising original jurisdiction or did not have subject-matter jurisdiction to entertain the said petition. If at all, it did not have territorial jurisdiction and which was waived by respondent No.1 as discussed earlier."

Section 2(1)(e)(i) defines Court as:
"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"

On these grounds, the Court held that it had the jurisdiction to entertain the petition under Section 34 of the Act.

Advocates Dr. Abhinav Chandrachud, Laxminarayan Shukla, Unnati Ghia and Mehul Rathod, informed by M/s Legal Vision represented the Petitioners.

Advocates Vishal Kanade, Chinmayee Ghag, and Nishant Rana informed by Zastriya Attorneys and Legal Consultants argued for the Respondent No.1.

Case Name: Naresh Kanayalal Rajwani v. Kotak Mahindra Bank and Anr.

Click here to view the judgment