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Judgment
Pinaki Chandra Ghose, J.—This appeal is directed against an order dated 13th May, 2010/ whereby His Lordship was pleased to hold that Section 42 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''the said Act'') would not apply to either Section 11 or Section 8 contained in Part I of the said Act.
The facts of the case briefly are as follows:
The appellant entered into a contract with the respondent whereby the respondent sold to the claimant 500 MT of cold rolled galvanized plain sheets @ US D 1085.00 per MT on the terms and conditions contained in the said agreement. The material was to be shifted latest of 28th February, 2007. The claimant was required to open a confirmed irrevocable letter of credit towards price of 250 MT and the balance 250 MT was to be supplied by the respondent against 10% advance and 90% against documents. The appellant/plaintiff opened the letter of credit and paid the advance to the respondent on 23rd February, 2007. The respondent in spite of repeated requests failed, neglected and avoided to shift the material as per the contractual terms as prices of the material had gone up considerably. During this period the import licence obtained by the appellant expired.
The dispute cropped up between the parties and the dispute was referred to Indian Council of Arbitration (ICA), New Delhi in terms of the arbitration clause contained in the said agreement. It further appears that the appointment was made by the Hon''ble High Court at Delhi when the Delhi High Court was pleased to appoint Mr. Justice Aloke Chakravorty (retd.) as sole arbitrator in the matter to adjudicate upon the disputes between the parties. The learned arbitrator duly published his award on 19th January, 2010. The award was served upon the appellant on the same date and thereafter an execution petition had been filed before the High Court at Delhi by the appellant and an interim order was also passed by the Hon''ble Delhi High Court on 30th April, 2010.
In these circumstances, the respondent filed a petition u/s 34 of the said Act challenging the award dated 19th January, 2010 before this High Court. The Hon''ble Single Judge rejected the objection as to the maintainability of the petition taken by the appellant and directed the appellant to file affidavit-in-opposition on merits within four weeks from 13th May, 2010.
The question arose before the hon''ble first court with regard to the maintainability of the petition filed by the respondent u/s 34 of the Arbitration and Conciliation Act, 1996.
It appears from the fact that the Hon''ble Delhi High Court in exercise of its power conferred u/s 11(6) of the said Act while assuming the jurisdiction appointed Mr. Justice Aloke Chakravorty (retd.) as sole arbitrator vide order dated 11th December, 2007. The respondent herein has filed a petition u/s 34 of the said Act challenging the said award before this hon''ble court. It is contended on behalf of the appellant that by virtue of Section 42 of the said Act, only the Hon''ble High Court at Delhi has the jurisdiction to entertain and decide all subsequent applications arising out of the arbitral proceedings. It is further contended that in view of the non obstante clause contained in Section 42 of the said Act, this court lacks jurisdiction.
Such contention of the appellant was negatived by the learned trial court. Being aggrieved, this appeal has been filed.
Mr. Narendra Sharma, learned counsel appearing on behalf of the appellant, relied upon a decision reported in Visva Bharati Vs. Sarkar and Sarkar, and contended on behalf of the appellant that any order passed u/s 11(6) would be treated as judicial order and that would automatically debar any court other than the said High Court to entertain any further application under the said Act of 1996 including the application u/s 34 in view of the non obstante clause stipulated in Section 42. The learned counsel also relied upon a decision reported in 2003(3) Arb. LR 530 (Del.)--Damayanti Builders vs. Union of India, where the Hon''ble Delhi High Court has held in a similar situation as follows (at pages 531-532):
In a petition filed u/s 11(6) of the Arbitration and Conciliation Act this court, by order dated 06.01.1999, appointed an arbitrator to adjudicate the disputes between the parties. The arbitrator entered upon the reference and made and published his award. The respondent was not satisfied with the award and he has, therefore, filed this application u/s 34 of the Act before the learned Additional District Judge. Notice of that application appears to have been issued to the appellant but as no one appeared on his behalf, the court proceeded ex parte against the appellant and after hearing the respondent allowed his application u/s 34 of the Act and set aside the award. As already mentioned above, aggrieved by this order present application has been filed by the appellant. The only contention raised in this appeal is that since u/s 42 of the Act Delhi High Court alone had jurisdiction to entertain any subsequent application after appointment of the arbitrator by this court, the court had no jurisdiction to entertain the application u/s 34 of the Act. u/s 42 of the Act 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 proceedings arising out of that agreement and the arbitral proceedings shall be made in that court and in no other court. Sections 11, 34 and 42 appear in Part I of the Act. The appellant had made an application u/s 11 and the arbitrator was appointed in those proceedings in this court u/s 11 of the Act. In view of the application having been made u/s 11 of the Act all subsequent applications arising out of the agreement or the arbitral proceedings were required to be made only in Delhi High Court and in no other court. The application u/s 34, therefore, filed by the respondent for setting aside the award was not maintainable before the Additional District Judge and he had no jurisdiction to entertain such an application. Since the learned Additional District Judge did not have jurisdiction to entertain the application, in my view, the order passed by him on the application of the respondent and Section 34 of the Act cannot be sustained and is, accordingly, set aside. I, accordingly, allow this appeal and direct the application u/s 34 of the Arbitration Act filed by the respondent to be returned to it for presentation in court.
On the contrary, Mr. Ratnanko Banerjee, learned counsel appearing on behalf of the respondent, submitted that the appeal is not maintainable and in support of his such contention he relied upon a decision in the case of Hindustan Copper Limited Vs. Nicco Corporation Ltd.,
After considering the facts and circumstances of this case, it appears to us that in the case of Visva Bharati the Hon''ble Division Bench of this High Court held that an order passed u/s 11(6) by a court appointing an arbitrator would debar any other court other than that High Court to entertain any further application under the said Act of 1996 including an application u/s 34 in view of the now obstante clause stipulated in Section 42 and after holding the same the Hon''ble Division Bench of this High Court held that any other application as contemplated u/s 42 should also include an application u/s 34 and thus the said application u/s 34 should lie before the said court. The court when appointed an arbitrator or exercised its power u/s 11(6), then except that court no other court shall have jurisdiction to entertain any other application including an application u/s 34 of the said Act.
We have also considered the decision of the learned trial court and the order of the Hon''ble Single Judge of the Delhi High Court. It appears to us that the Hon''ble Single Judge while dealing with the matter differed from the opinion expressed by the bench of the Delhi High Court, where His Lordship was pleased to rely upon sub-section (11) and sub-section (12) of Section 11 of the Act, which are set out hereunder:
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, the Chief Justice or his designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12)(a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal civil court referred to in clause (e) of sub-section (1) of Section 2 is situate and, where the High Court itself is the court referred to in that clause, to the Chief Justice of that High Court.
His Lordship held that clause (b) of sub-section (12) leaves no room for any argument. His Lordship has specifically given an example to make the position clear which is as follows:
An example would suffice in this case. If the entirety of the cause of action relating to an agreement takes place outside the original jurisdiction of this court but elsewhere in the State of West Bengal, the party seeking a reference may make a request in such regard to the Chief justice of this court or his delegate. This would not imply that any subsequent petition u/s 9 (or any other provision under Part I of the 1996 Act) would also have to be carried to this court on its original side simply because a previous request had been made to the Chief Justice of this court (or his delegate) u/s 11 of the Act. Section 42 of the 1996 Act would not apply to either Section 11 or Section 8 contained in Part I of the Act for obvious reasons.
We have noticed that in the case of McDermott International Inc. vs. Burn Standard Co. Ltd. and others reported in (2005) 10 SCC 353 : 2005(Suppl.) Arb. LR 21 (SO the Three Judges Bench of the Hon''ble Supreme Court held that the "court" in Section 2(1)(e) is applicable in which application u/s 34 is to be filed. The order of court appointing an arbitrator containing provisions therefore held, determinative. Therefore, in our considered opinion, it is necessary to file an application u/s 34 of the said Act before the court appointing arbitrator. In the said decision of McDermott International Inc. the Hon''ble Supreme Court held that since it is provided in the order itself that the learned arbitrator shall file the award in this court and any application, which may become necessary after the conclusion of the arbitral proceedings, shall be filed only in this court, gave jurisdiction to the Hon''ble Supreme Court to entertain an application u/s 34.
According to our opinion, the bar of jurisdiction u/s 42 of the said Act is only intended to apply to a ''court'' as defined in Section 2(1)(e) of the said Act. In order to activate provisions of Section 42, it has to be shown that an application in respect of an arbitration agreement has been filed in the said court.
In the instant case, it appears to us that the application was filed in court and the Delhi High Court, in the facts and circumstances of this case, duly exercised its jurisdiction and appointed an arbitrator to adjudicate upon the disputes between the parties, on an application filed u/s 11(6) of the said Act. The said order was made after the law was settled by the Constitutional Bench in S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, in the said decision it has been held that the order appointing an arbitrator is nothing but power exercised by the court judicially u/s 11 and, therefore, it has been held that such appointment is based on a judicial order. It has been held that the said order was passed by a ''court'' as defined u/s 2(1)(e) of the said Act. Accordingly, for the purpose of the provisions of Section 42 of the said Act, in our opinion, it would create a bar on the jurisdiction of this court to entertain the present application u/s 34.
Accordingly, in our considered opinion, this factor has to be taken into account for the purpose of deciding this appeal. Hence, we accept the objection raised on behalf of the appellant and we find that this court has no jurisdiction to entertain this application u/s 34 of the said Act. In our considered opinion, since the application has been made u/s 11 of the said Act before the Delhi High Court all subsequent applications arising out of the arbitral proceedings are required to be made only in Delhi High Court.
For the reasons stated hereinabove, we allow the appeal and set aside the order of the Hon''ble First Court.
Xerox certified copy of this order, if applied for, be supplied to the parties on usual undertakings.
Asim Kumar Ray, J.
I agree.