2014 (1) TMI 966 - SC - Companies Law

Jurisdiction of Court to decided arbitration appeal - whether a challenge to an arbitration award (or arbitral agreement, or arbitral proceeding), wherein jurisdiction lies with more than one court, can be permitted to proceed simultaneously in two different courts - Held that - term subject matter of the arbitration cannot be confused with subject matter of the suit . The term subject matter in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the Learned Counsel for the Appellants would, in fact, render Section 20 nugatory - Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process - both the Courts would have jurisdiction, i.e., the Court within whose jurisdiction the subject matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution, i.e., arbitration is located. It is not open to the appellants to advance such submission before this Court. Firstly, because the appellants had in paragraph 8 of the reply affidavit filed before the High Court, clearly acknowledged the legal position, that both the High Court as also the District Judge, Thane, in so far as the present controversy is concerned, fall within the definition of the term Court under Section 2(1)(e) of the Arbitration Act. And secondly, because the impugned order passed by the High Court expressly notices in paragraph 10, that it was admitted by the rival parties before the High Court, that the High Court on the original side, as also the District Judge, Thane, had the jurisdiction in respect of the subject matter. A perusal of Section 42 of Arbitration Act reveals a clear acknowledgment by the legislature, that the jurisdiction for raising a challenge to the same arbitration agreement, arbitral proceeding or arbitral award, could most definitely arise in more than one court simultaneously. To remedy such a situation Section 42 of the Arbitration Act mandates, that the court wherein the first application arising out of such a challenge is filed, shall alone have the jurisdiction to adjudicate upon the dispute(s), which are filed later in point of time. The above legislative intent must also be understood as mandating, that disputes arising out of the same arbitration agreement, arbitral proceeding or arbitral award, would not be adjudicated upon by more than one court, even though jurisdiction to raise such disputes may legitimately lie before two or more courts. The very fact that the appellants before this Court, have chosen to initiate proceedings against the arbitral award before principal Civil Court of original jurisdiction in a district i.e., before the District Judge, Thane, and the respondent before this Court, has raised a challenge to the same arbitral award before the ordinary original civil side of the High Court of Bombay, clearly demonstrates, that the underlying principle contained in Section 42 of the Arbitration Act would stand breached, if two different courts would adjudicate upon disputes arising out of the same arbitral award. There can be no doubt, that adjudication of a controversy by different courts, can easily give rise to different conclusions and determinations. Therefore, logic and common sense also require, the determination of all such matters, by one jurisdictional court alone. In the present case, the complication in the matter has arisen only because, the proceedings initiated by the appellants before the District Judge, Thane, and proceedings initiated by the respondent on the ordinary original civil side of the High Court of Bombay, were filed on the same day - we uphold the order passed by the High Court requiring the matters to be adjudicated on the ordinary original civil side by the High Court of Bombay - Decided against Appellants.

Summary

Issues Involved:
1. Jurisdiction to adjudicate arbitral award disputes.
2. Applicability of Section 24 of the Code of Civil Procedure (CPC) in transferring arbitration proceedings.
3. Interpretation of Section 2(1)(e) and Section 42 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Jurisdiction to Adjudicate Arbitral Award Disputes:
The primary issue was whether the High Court of Bombay or the District Judge, Thane, had jurisdiction to adjudicate disputes arising from an arbitral award dated 12.5.2012. The State of Maharashtra contended that only the District Judge, Thane, had jurisdiction based on the definition of "Court" in Section 2(1)(e) of the Arbitration Act, emphasizing that the subject matter of the dispute was situated in Thane. Conversely, Atlanta Limited argued that since the arbitration seat was in Mumbai and the agreements were executed there, the High Court of Bombay had jurisdiction.

The judgment clarified that both the High Court and the District Judge, Thane, had jurisdiction as per Section 2(1)(e) of the Arbitration Act. However, the Court concluded that the High Court of Bombay, exercising its "ordinary original civil jurisdiction," was the more appropriate forum. This conclusion was based on the legislative intent inferred from Section 2(1)(e), which gives preference to the superior court when both the High Court and a District Court have jurisdiction.

2. Applicability of Section 24 of the Code of Civil Procedure (CPC):
The High Court had transferred the proceedings from the District Judge, Thane, to itself under Section 24 of the CPC to avoid conflicting decisions or simultaneous trials. The State of Maharashtra argued that Section 24 could not be invoked in a petition filed under Section 34 of the Arbitration Act. The Supreme Court upheld the High Court's decision, emphasizing the need for a single court to adjudicate all disputes arising from the same arbitral award to avoid conflicting judgments. The Court noted that Section 42 of the Arbitration Act, which mandates that once a court is approached, it alone shall have jurisdiction over all subsequent applications, could not apply as both parties filed on the same day.

3. Interpretation of Section 2(1)(e) and Section 42 of the Arbitration and Conciliation Act, 1996:
The judgment delved into the interpretation of Section 2(1)(e), which defines "Court" as the principal Civil Court of original jurisdiction in a district and includes the High Court in its ordinary original civil jurisdiction. The Court emphasized that this definition implies a legislative intent to prioritize the High Court when it exercises original jurisdiction. The Court also referred to Section 42, which aims to prevent multiple courts from adjudicating the same arbitration-related disputes. Although Section 42 could not resolve the present case due to simultaneous filings, the Court maintained that the legislative intent was to have a single court adjudicate all related disputes.

Conclusion:
The Supreme Court upheld the High Court's decision to transfer the proceedings to itself, emphasizing that the High Court of Bombay was the appropriate forum to adjudicate the disputes. The judgment reinforced the principle that when jurisdiction lies with both a High Court and a District Court, the High Court's jurisdiction should prevail to ensure consistency and avoid conflicting decisions. The Court directed the District Judge, Thane, to transfer the files to the High Court of Bombay for disposal in accordance with the law.