Citation Codes: [2022] 15 S.C.R. 1117 ; 2022 INSC 1299; 2022 SCC OnLine SC 568
Date of Judgement: 24 March 2022
Court: Supreme Court of India
Judges: Justice Indira Banerjee & Justice A.S. Bopanna
Facts of the case
M/S Ravi Ranjan Developers Pvt. Ltd [hereinafter “appellant”] and Aditya Kumar Chatterjee [hereinafter “respondent”] entered into a development agreement for a property in Muzaffarpur, Bihar. The arbitration clause in the agreement provided that disputes would be resolved through arbitration under the Arbitration and Conciliation Act, 1996, with the sitting of the Tribunal in Kolkata.
Differences emerged leading to its Termination by the Respondent, which the Appellant refused to accept. Subsequently, the Appellant filed a petition before the Real Estate Regulatory Authority, Patna and the Respondent filed for the interim protection of development property in the Court of District Judge, Muzaffarpur. Thereafter, the Respondent invoked arbitration by sending a notice to the registered address of the appellant in Patna. The Respondent filed a petition in the Calcutta High Court for the appointment of arbitrator under Section 11(6) of the Arbitration & Conciliation Act, 1996. The Appellant opposed the petition arguing that the Calcutta High Court lacked territorial jurisdiction.
The Calcutta High Court allowed the arbitration petition and appointed a sole arbitrator. Following this, the Appellant filed for review of the order on the ground that the court did not decide the issue of territorial jurisdiction. However, the review application came to be dismissed on the ground that the counsel representing the Appellant had consented to the appointment of the arbitrator.
Aggrieved by the orders, the Appellant filed this Special Leave Petition before the Hon’ble Supreme Court.
Issues involved in the case
Whether Calcutta High Court had jurisdiction to decide the arbitration petition under Section 11(6) of the Arbitration & Conciliation Act, provided that no cause of action had arisen in its jurisdiction.
Appellant’s Position
The Appellant contended that any order passed without jurisdiction can be questioned at any time or stage, irrespective of the consent being provided. To substantiate the same, they relied on the case of Kiran Singh v. Chaman Paswan, wherein the Hon’ble Apex Court held that a decree passed by a court without jurisdiction is a nullity and the invalidity could be sought even during the execution stage.
The appellant referred to the definition of “Court” in Section 2(1)(e) of the Arbitration and Conciliation Act which provides that Court” refers to the principal Civil Court of original jurisdiction in a district, which includes the High Court exercising ordinary original civil jurisdiction. Suits relating to immovable property must be filed in the court within whose jurisdiction the property is located and can also be filed where the defendant resides or conducts business. In the present case, no suit could be filed within the jurisdiction of the Calcutta High Court as the property is in Muzaffarpur, Bihar, and the appellant neither resides nor conducts business in the Calcutta jurisdiction.
Moreover, they relied on Section 42 of the Arbitration and Conciliation Act, 1996 to argue that since the interim protection application under Section 9 of the Arbitration and Conciliation Act was filed in the District Court of Muzaffarpur in Bihar, the application for appointment of arbitrator should not have been filed in the Calcutta High Court.
Respondent’s Position
The Respondent contended that the Calcutta High Court had territorial jurisdiction as the seat of arbitration was Kolkata. They relied on the cases of Indus Mobile Distribution Pvt. Ltd, Hindustan Construction Company Ltd and BGS SGS Soma JV, wherein the Hon’ble Supreme Court held that upon a seat of arbitration being designated, the clause designating the arbitration seat would qualify as an exclusive jurisdiction clause. Therefore, contending that the courts within whose territorial limits the arbitral seat is located can exercise the jurisdiction, which in the instant matter is Calcutta High Court.
Judgement & Reasoning
The court held that the Calcutta High Court inherently lacked jurisdiction to entertain the application for the appointment of arbitrator. The court made the following observations:
The court observed that the Development Agreement only provided that the venue for the Arbitral Tribunal’s sitting would be Kolkata and that neither of the parties agreed to submit to the jurisdiction of Calcutta High Court. The court highlighted the difference between venue and seat of arbitration. The Supreme Court relied on the case of UOI v. Hardy Exploration and Production (India) Inc., where it was observed that there could be various venues but they cannot be equated with the place of arbitration or seat. Further, the case of Mankastu Impex Pvt Ltd. v. Airvisual Ltd was also relied upon wherein the court concurred that the seat of arbitration and venue of arbitration cannot be used interchangeably and that the mere expression regarding the place of arbitration will not be sufficient to conclude that the parties agree it to be the seat of arbitration, reliance must be placed on the agreement clauses along with the conduct of parties. Therefore, in the instant matter, the Hon’ble Apex Court elucidated that as per the development agreement, neither of the parties agreed for Kolkata to be the seat of arbitration and merely agreed for Kolkata to be the venue of arbitration.
The Hon’ble Court opined that the application under Section 11(6) for the appointment of an arbitrator or a tribunal cannot be moved in any High Court of India, irrespective of the territorial jurisdiction. The definition of court provided under Section 2(1)(e) should be harmoniously read with Section 11(6) of the act and thereby an application under Section 11(6) of the act must be filed before the High Court which would exercise supervisory jurisdiction and not any other High Court.
The Hon’ble Court also held that when two or more courts have jurisdiction to adjudicate a dispute arising out of an arbitration agreement, the parties may, by agreement, decide to refer the disputes to one court. However, even with their consent, the parties cannot confer jurisdiction over a dispute on a court that inherently lacks it. Therefore, parties cannot confer jurisdiction upon the Calcutta High Court since it inherently lacks jurisdiction
It was also observed that the Respondent approached the District Court at Muzaffarpur initially with the application for interim protection under Section 9 of the Act thereby invoking its jurisdiction and would thus be estopped from contending that exclusive jurisdiction is with Calcutta High Court.
Author(s)
Bhumika Urs
Student at Symbiosis Law School, Hyderabad