Application Seeking Appointment Of Arbitrator Cannot Be Moved Before A High Court If No Part Of Cause Of Action Arose Within Its Territorial Jurisdiction: Supreme Court

The Supreme Court observed that an application under Section 11(6) of the Arbitration and Conciliation Act for the appointment of an Arbitrator/Arbitral Tribunal cannot be moved in a High Court irrespective of its territorial jurisdiction.

"It could never have been the intention of Section 11(6) of the A&C Act that arbitration proceedings should be initiated in any High Court in India, irrespective of whether the Respondent resided or carried on business within the jurisdiction of that High Court, and irrespective of whether any part of the cause of action arose within the jurisdiction of that Court, to put an opponent at a disadvantage and steal a march over the opponent.", the bench comprising Justices Indira Banerjee and AS Bopanna observed.

The court was considering an special leave petition against an order of the Calcutta High Court, allowing an Arbitration Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator. The issue raised in the appeal was whether the Calcutta High Court had jurisdiction to entertain the application when no part of the cause of action had arisen within the jurisdiction of Calcutta High Court.?

In this case, the Development Agreement was admittedly executed and registered outside the jurisdiction of the High Court of Calcutta, the agreement pertains to development of property located in Muzaffarpur outside jurisdiction of the Calcutta High Court. The Appellant has its registered office in Patna outside the jurisdiction of Calcutta High Court. The Appellant has no establishment and does not carry on any business within the jurisdiction of the Calcutta High Court.

The court noted that under Section 11(6), an application for appointment of an Arbitrator necessarily has to be moved in the High Court, irrespective of whether the High Court has the jurisdiction to decide a suit in respect of the subject matter of arbitration and irrespective of whether the High Court at all has original jurisdiction to entertain and decide suits.

" At the same time, an application under Section 11(6) of the A&C Act for appointment of an Arbitrator/Arbitral Tribunal cannot be moved in any High Court in India, irrespective of its territorial jurisdiction. Section 11(6) of the A&C Act has to be harmoniously read with Section 2(1)(e) of the A&C Act and construed to mean, a High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A&C Act.  It could never have been the intention of Section 11(6) of the A&C Act that arbitration proceedings should be initiated in any High Court in India, irrespective of whether the Respondent resided or carried on business within the jurisdiction of that High Court, and irrespective of whether any part of the cause of action arose within the jurisdiction of that Court, to put an opponent at a disadvantage and steal a march over the opponent."

The court also rejected the contention that Calcutta High Court had the territorial jurisdiction to entertain the application under Section 11(6) of the A&C Act as the seat of arbitration was Kolkata. Referring to the agreement, the bench observed:

In this case, the parties, as observed above did not agree to refer their disputes to the jurisdiction of the Courts in Kolkata. It was not the intention of the parties that Kolkata should be the seat of arbitration. Kolkata was only intended to be the venue for arbitration sittings. Accordingly, the Respondent himself approached the District Court at Muzaffarpur, and not a Court in Kolkata for interim protection under Section 9 of the A&C Act. The Respondent having himself invoked the jurisdiction of the District Court at Muzaffarpur, is estopped from contending that the parties had agreed to confer exclusive jurisdiction to the Calcutta High Court to the exclusion of other Courts. Neither of the parties to the agreement construed the arbitration clause to designate Kolkata as the seat of arbitration. We are constrained to hold that Calcutta High Court inherently lacks jurisdiction to entertain the application of the Respondent under Section 11(6) of the Arbitration Act.

Setting aside the High Court order, the bench appointed Justice Bhaskar Bhattacharya, former Chief Justice of the High Court of Gujarat as Sole Arbitrator.

Case details

Ravi Ranjan Developers Pvt. Ltd. vs Aditya Kumar Chatterjee | 2022 LiveLaw (SC) 329 | SLP(C) 17397-17398/2021 | 24 March 2022

Coram: Justices Indira Banerjee and AS Bopanna

Counsel: Sr. Adv Ajit Kumar Sinha for the petitioner, Sr. Adv Sanjay Ghosh for respondent

Headnotes

Arbitration and Conciliation Act, 1996 ; Section 11(6) and 2(1)(e) -  An application under Section 11(6) of the A&C Act for appointment of an Arbitrator/Arbitral Tribunal cannot be moved in any High Court in India, irrespective of its territorial jurisdiction. Section 11(6) of the A&C Act has to be harmoniously read with Section 2(1)(e) of the A&C Act and construed to mean, a High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A&C Act. It could never have been the intention of Section 11(6) of the A&C Act that arbitration proceedings should be initiated in any High Court in India, irrespective of whether the Respondent resided or carried on business within the jurisdiction of that High Court, and irrespective of whether any part of the cause of action arose within the jurisdiction of that Court, to put an opponent at a disadvantage and steal a march over the opponent.

Arbitration and Conciliation Act, 1996 - Jurisdiction - When two or more Courts have jurisdiction to adjudicate disputes arising out of an arbitration agreement, the parties might, by agreement, decide to refer all disputes to any one Court to the exclusion of all other Courts, which might otherwise have had jurisdiction to decide the disputes. The parties cannot, however, by consent, confer jurisdiction on a Court which inherently lacked jurisdiction. (Para 47)

Arbitration and Conciliation Act, 1996 ; Section 42 and 11(6) - 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. (Para 32)

Arbitration and Conciliation Act, 1996 - Only if the agreement of the parties was construed to provide for seat/place of arbitration in India, would Part-I of the 1996 Act be applicable. If the seat/place were outside India, Part-I would not apply, even though the venue of a few sittings may have been in India, or the cause of action may have arisen in India. [Referred to Bharat Aluminium Company v. Kaiser Aluminium (2012) 9 SCC 552 ] (Para 36)

Arbitration and Conciliation Act, 1996 ; Section 42 - The Section has obviously been enacted to prevent the parties from being dragged into proceedings in different Courts, when more than one Court has jurisdiction. Where with respect to any arbitration agreement, any application under Part I of the A&C Act has been made in a Court, that Court alone would have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement, and the arbitral proceedings, would have to be made in that Court and in no other Court, unless, of course, the Court in which the first application had been instituted, inherently lacked jurisdiction to entertain that application. The Section which starts with a non obstante clause, is binding irrespective of any other law for the time being in force, and irrespective of any other provision in Part I of the A&C Act. (Para 31)

Arbitration and Conciliation Act, 1996 - Seat and Venue - Sittings at various places are relatable to venue. It cannot be equated with the seat of arbitration or place of arbitration, which has a different connotation. [Referred to Union of India v. Hardy Exploration and Production (India) Inc (2019) 13 SCC 472 ; Mankastu Impex Private Limited v. Airvisual Limited (2020) 5 SCC 399] (Para 44,45)

Precedents- A judgment is a precedent for the issue of law that is raised and decided. The judgment has to be construed in the backdrop of the facts and circumstances in which the judgment has been rendered. Words, phrases and sentences in a judgment, cannot be read out of context. Nor is a judgment to be read and interpreted in the manner of a statute. It is only the law as interpreted by in an earlier judgment, which constitutes a binding precedent, and not everything that the Judges say. (Para 41)

Summary: Special leave petition against an order of the Calcutta High Court, allowing an Arbitration Petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 for appointment of an Arbitrator - Allowed - Calcutta High Court inherently lacks jurisdiction to entertain the application.