Introduction:
The Arbitration and Conciliation Act of 1940 as well as the Arbitration and Conciliation Act of 1996 including the amendments made in the same, provide a definition of the term “Court” in Section 2 of these Acts, to be applied and used accordingly by litigants and judges. The two thing that connects all these different together (without denying the major differences between them) is the fact that, firstly the legislature has not tried to define the term “Court”, but more to define “Jurisdiction”, an evidence of this is the fact that while defining the term “Court”, the legislature has used the word “court” in the definition itself. Secondly, the “Court” will have the power to accept the case if it has the jurisdiction to adjudicate the subject matter of the arbitration if the same had been the subject matter of a suit.
The Code of Civil Procedure, 1908 (“CPC”) under Section 20 of the Act, states as to when can a suit be instituted in a court within the local limits of whose jurisdiction:
- The defendant or each of defendants, where more than one, at the time of commencement of the suit actually and voluntarily resides, or carries on business, or personally works for gain; or
- Any of the defendants (in case of more than one defendant), at the time of commencement of the suit actually and voluntarily resides, or carries on business, or personally works for gain, provided that either the leave of the court is take or the such other defendants acquiesce; or
- The cause of action, wholly or part arises.
The following articles tries to address the controversy regarding the fact that where the contract was formed at one location (Location 1), the registered office of either of the parties are at different location (Location 2 of the petitioner and Location 3 for the respondent/defendant) and the arbitration takes place at a different location (Location 4), will the “Court” under whose jurisdiction the arbitration proceeding took place i.e. Location 4, fall within the definition of “Court”, as defined in the Arbitration Act.
Difference Between “Seat” And “Venue” Of Arbitration:
It needs to be pointed out that any of the Arbitration and Conciliation Act both repealed and in force currently in India, does not in any of its section makes the difference between “Seat” and “Venue”, however through many judicial decisions, it has now been confirmed that a “Venue”, of arbitration, does not provide with the law governing the arbitration. Nonetheless, the question of law being analyzed is not whether the “Venue” law will govern the arbitration or not but to understand whether the “Court” of the “Venue” will have jurisdiction to entertain the arbitration applications/suits or not.
Tracing The History:
The first case to decide on this matter had come to the Delhi High Court, starting from the judgement in the matter of Gulati Construction Company, Jhansi v. Betwa River Board and Another (AIR 1984 Delhi 299) which was governed by the Arbitration and Conciliation Act, 1940 and the same position has been maintained till 2013 in the regard to the Arbitration Act, 1996 as was decided in the case of Mikuni Corporation v. UCAL Fuel System Ltd. Carburettors Ltd. Siemens VDO Automotive (2008 SCC OnLine Del 127), that the place where the arbitration may take place is not relevant for deciding the jurisdiction of “Court” to entertain any application under the Arbitration Act.
In the matter of Globe Cogeneration Power Limited v. Sri Hiranyakeshi Sahakari Sakkere Karkhane Niyamit (2004 SCC OnLine Kar 155). The Karnataka High Court too had maintained a similar position by categorically stating that, the parties to the arbitration agreement do not belong to Bengaluru, the arbitration agreement was not made in Bengaluru , the lease deed was not executed in Bengaluru, the property in respect of which the interim relief under Section 9 of the Arbitration Act 1996, was sought is not situated in Bengaluru and even the work under the contract is not required to be performed in Bengaluru, just because there exists a clause in the arbitration agreement, placing Bengaluru as the venue of arbitration will not confer jurisdiction to a Bengaluru Court, to hear an application under Section 9 of the Arbitration Act.
The Supreme Court had in the matter of Jatinder Nath v. Chopra Land Developers Pvt. Ltd. (2007 11 SCC 453), had also carried out with the position that, merely because the arbitrator chooses to hold the proceedings at a particular place and passes an award there, it will not provide jurisdiction to the court of the place to decide matter under the Act. It is pointed out that the case of Jatinder Nath was governed under the Arbitration Act of 1940.
Change In Jurisprudence:
A 5-judge bench in the matter of Bharat Aluminum Co. v. Kaiser Aluminum Technical Services (2012) 9 SCC 552 (“BALCO”), in which the Apex Court of India had read the term “subject-matter of the arbitration” appearing in Section 2(1)(c) of the Arbitration Act, 1996, quite liberally and differentiated it from “subject-matter of the suit”. It was the opinion of the Court, that Section 2(1)(c) should be read in consonance with Section 20 of the Arbitration Act, and this will lead to the inevitable conclusion that, the place where arbitration took place, the court having jurisdiction over such territory will also have power to adjudicate matter under the Act.
Post BALCO:
Following the decision of the Constitutional Bench of the Supreme Court, the Delhi High Court in Sai Consulting Engineers Pvt. Ltd. v. Rail Vikas Nigam Ltd. (2013 SCC OnLine Del 679) had changed its position in 2013, and held that the place where arbitration takes place, the courts having territorial jurisdiction over the place will be a competent court to be approached for matters arising out of the arbitration agreement under the Arbitration Act.
However, the Bombay High Court, in the matter of Videocon Industries Ltd. v. JMC Projects (India) Ltd., (2013 SCC OnLine Bom 39) has continued to maintain the earlier position i.e. place of arbitration does not confer power to the court to entertain application under the Arbitration Act under whose jurisdiction arbitration took place.
Conclusion:
It first and foremost needs to be realized that the case of BALCO had arisen in regard to an international commercial arbitration, and hence, any decision or remarks made in regard to domestic arbitration, can only be considered as Obiter dictum of the Court and not its Ratio decidendi. However, based on many judicial pronouncements made in the history of the Indian legal regime, {for example, Textile Technical Tradesmen Association v. Union of India (2011 1 LJJ 297 Mad), Indian Radiological and Imaging Association v. Union of India (AIR 2016 Del 78)}it can be ascertained that, even the Obiter dictum of the Supreme Court on a point of law has a binding effect on High Courts and Subordinate Courts.
In addition to this, there remains the fact, that under Section 20 of the Arbitration Act, 1996 the parties are free to decide any place/location which they deem fit in which arbitration proceedings can take place. Hence, to say that the Court of such a place does not have jurisdiction to entertain any application/petition arising out of a dispute falling within the arbitration agreement, will be contradictory to the legislatures intent of providing the party the choice to decide the venue based on their convenience.
Furthermore, since Section 20 of CPC, allows for case to be filed in the place where the cause of action arose, it can be said that any dispute regarding the arbitration proceeding leads to a cause of action, hence, the court under whose jurisdiction the arbitration proceeding took place has the power to adjudicate such disputes.
Based on the aforesaid reasons, the decision pronounced by the Supreme Court, is correct in law, however, it will be beneficial if the Supreme Court, comes up with a judgement on the same line dealing specifically with domestic arbitration, to make it legally binding under Article 141 of the Constitution of India, without relying on other judicial pronouncement regarding its validity.
This article is written by Shantanu Lakhotia of Jindal Global Law School.
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