Chhattisgarh State Ware Housing Corporation vs Shyamlal Agrawal

Dhirendra Mishra, J.—With the consent of the parties, the matter was heard finally at the admission stage itself.

The instant appeal is directed against the order dated 17-7-2008 passed by the learned District Judge, Raigarh where by the application preferred by the appellant u/s 34 of the Arbitration and Conciliation Act, 1996(hereinafter referred to as `the Act, 1996'') has been rejected on the ground that since the arbitrator was appointed by the High Court u/s 11 of the Act, 1996, all subsequent applications arising out of the agreement shall also lie in the High Court, in view of the provisions contained u/s 42 of the Act, 1996 and the Court of District Judge has no jurisdiction to entertain application.

Learned counsel for the appellant submitted that the impugned order has been passed on the basis of erroneous interpretation of Section 42 of the Act, 1996.Section 42 is applicable to the pending arbitration proceeding. Once final award is made by the arbitrator, the same can be set aside only by making an application u/s 34 of the Act, 1996 to the Court as defined u/s 2(e).Reliance is placed in the matters of National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. and Anr. and Union of India v. Shring Construction Co. (P) Ltd.

Shri Anand Kumar Tiwari, learned Counsel appearing for the respondent fairly submitted that the impugned order is patently illegal and is based on erroneous interpretation of Section 42 of the Act, 1996.

We have heard learned Counsel for the parties.

The only question for our consideration is whether learned District Judge was legally justified in rejecting the application u/s 34 on the ground of jurisdiction? Chapter VII of the Act, 1996 deals with recourse against an arbitral award. Section 34 provides for the provisions for setting aside arbitral award. Sub-section (1) of Section 34 mandates that recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3). Sub-section (2)(a) provides that an arbitral award may be set aside by the Court when a party making application furnishes proof of the facts enumerated in paragraphs (i) to (v) and the Court records a finding as described in Sub-section (2)(b).

The Court is defined in Section 2(e) as under:

Court" means the principal Civil Court of original jurisdiction in a district, andincludes the High Court in exercise ofits 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 asuit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes.

From bare reading of the definition of the Court in the Act, it is evident that "Court" means the principal Civil Court of original jurisdiction and the same also includes the High Court in exercise of its ordinary original civil jurisdiction. There is no dispute that in the instant case arbitrator was appointed by the High Court which does not exercise its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject- matter of the arbitration. In our considered opinion, jurisdiction as contemplated u/s 42 of the Act, 1996 refers to arbitral proceedings and all subsequent applications arising out of that agreement during arbitral proceedings. The jurisdiction of the Court in the matters of application for setting aside award u/s 34 cannot be excluded by reference to Section 42 of the Act, 1996.

We are fortified in our view by the judgment in the matter of National Aluminium Co. Ltd., (Supra) wherein arbitrator was appointed by the Hon''ble Supreme Court. The question - apart from other questions - before the Hon''ble Supreme Court was whether an application u/s 34 for setting aside an award passed by the arbitrator appointed by the Supreme Court is maintainable before the Principal Civil Court of original jurisdiction as defined u/s 2(e) or application would lie before the Supreme Court? Answering the above question, the Hon''ble Supreme Court held in para-9 thus:

9.The next question to be considered by us in this application is whether the dispute having arisen prior to the coming in to force of the 1996 Act and the proceedings having continued under the provisions of the 1996Act,would the provisions of the 1940 Act still be applicable for making an application for the modification of the award, and if so, before which court. First part of this issue need not detain us because of the admitted fact that by consent of the parties provisions of the 1996 Act have been made applicable to the proceedings, which is inconformity with Section 85(2)(a) of 1996 Act, hence, it is futile to contend that for the purpose of challenge to the award the 1940 Act will apply. Hence, we reject this contention. In regard to the forum before which the application for modification or setting aside the award is concerned, we find no difficulty in coming to the conclusion that in view of the provisions of Section 34 read with Section 2(e) of the 1996 Act it is not this Court which has the jurisdiction to entertain an application for modification of the award and it could only be the principal civil court of original jurisdiction as contemplated u/s 2(e) of the Act, therefore, in our opinion, this application is not maintainable before this Court.

In the matter of Union of India(Supra)also the arbitrator was appointed by the High Court. The petitioner under a bona fide belief that award of such an arbitrator could be challenged before High Court only, filed writ petition before the High Court. The writ petition was dismissed as not maintainable on the ground that the award could be challenged u/s 34 by filing objections before District Judge and thereafter party concerned filing an objection u/s 34 before District Judge along with an application for condo nation of delay. The application was rejected by the District Judge as well as by the High Court on the ground of limitation. However, the Hon''ble Supreme Court allowing the appeal remanded the case to the District Judge with a direction to decide whether application for setting aside the award u/s 34 of the Act filed by the appellant could be considered to be within a period of limitation i.e. after deducting the period spent by the appellant in prosecuting the remedy before High Court.

On the basis of aforesaid discussion, we are of the opinion that irrespective of the Court by which dispute was referred to the arbitrator for adjudication, the forum for filing application u/s 34 of the Act, 1996for setting aside award is a Court defined u/s 2(e) of the Act, therefore, learned District Judge, Raigarhhad jurisdiction to decide the application u/s 34 preferred by the appellant for setting aside the award passed by the arbitrator.

For the aforesaid reasons, the order impugned is contrary to law, the same deserves to be set aside and it is accordingly set aside. The matter is remitted to the learned District Judge, Raigarh for deciding the appeal on merits, in accordance with law.

The parties shall appear before the Court of learned District Judge on 20th February, 2009.

There shall be no orders as to costs.