Sunday 31 December 2017

Whether in arbitration proceeding parties can exclude jurisdiction of all other courts where more than one court has jurisdiction?

I think the controversy has been set at naught by the latest judgment of the Hon'ble Apex Court rendered in Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited & Ors., MANU/SC/0456/2017 : 2017(5) Scale 60. In this judgment, Hon'ble Supreme Court has taken note of all other several cases, which have also been referred by both the parties before me. The Apex Court reiterated that once the seat of arbitration has been fixed, it would have in the nature of exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration. In paragraphs 20 and 21 of such judgment, the Hon'ble Apex Court has further held as under:

"20. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.

21. It is well settled that where more than one court has jurisdiction, it is open for parties to exclude all other courts."

IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL

Civil Revision No. 35/2017 and Appeal from Order No. 275/2017

Decided On: 31.05.2017

Nagar Palika Parishad Vs.Ramesth Construction Pvt. Ltd.

Hon'ble Judges/Coram:
S.K. Gupta, J.

Citation: AIR 2017(NOC)1046 UTR


1. The aforetitled appeal and revision assail the same judgment and order dated 14.2.2017 rendered by the District Judge, Pauri Garhwal, hence are being taken up together for adjudication.

2. Having heard learned Counsels of either party, it transpires that a concession agreement dated 23.3.2013 was entered into between the Nagar Palika Parishad, Kotdwar and the Ramesth Construction Pvt. Ltd. for construction and development of the modern bus terminal-cum-multiplex commercial complex in Kotdwar town under build, operate and transfer back (BOT) scheme. The work had to be completed by 22.3.2015 and the site was handed over to the contractor, but due to several constraints like encroachment of not only the private people but also by some government concerns on the site, such work could not be so completed within the stipulated time. So, it was extended for one year more, i.e. uptill 22.3.2016. Yet, only the 15 per cent work could have been done.

3. It has been the case of contractor that it was the accountability of Nagar Palika Parishad to hand over the site without any encroachment and such task could not have been done by the contractor because to remove the encroachments, institution of the proceedings under the Public Premises Act could have been initiated only by the Nagar Palika Parishad, and not by the contractor. In this period of 3 years, the contractor invested huge money towards the development of the site, but the work could not be completed for the reasons, as have been highlighted above. As a consequence, the municipality issued the termination notice of the work on 31.12.2016 and thereafter on 25.1.2017.

4. So in the above backdrop, the contractor invoked the interference of the Court of District Judge, Pauri Garhwal under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter for brevity called as the 'Act'). The notices were issued to the Nagar Palika Parishad, Kotdwar, which moved an application 26C under Section (sic Order) 7 Rule 11 of the Civil Procedure Code read with Arbitration Clause No. 11.2(b) of the concession agreement and Section 2(1)(e) of the Act.

5. The learned Judge not only rejected the 26C application, but also passed an ad interim injunction against the municipality directing the preservation of the disputed property/subject-matter of the dispute.

6. The appeal has been filed challenging the issuance of the ad interim injunction part, while the revision has been preferred before this Court against the rejection of the application 26C.

7. It would be relevant to have note of the clause 11.2(b) of the concession agreement entered into between the parties which reads as under:

"(b) Place of Arbitration

The place of arbitration shall ordinarily be Dehradun but by agreement of the Parties, the arbitration hearings, if required, may be held elsewhere."

8. At the same time, it would also be relevant to note the meaning of the word "Court", as envisaged under Section 2(I)(e) of the Act. It reads as under:

"(e) "Court" means-

(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its 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 a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes."

9. This definition of the Court is for the purpose of intra-national arbitrations, like the case in hand.

10. Learned Counsel of the appellant/revisionist has vehemently argued that where the seat of arbitral tribunal has been settled by way of a stipulation between the parties and that was the city of Dehradun, then it was the Court of District Judge, Dehradun, who would have exercised the jurisdiction under Section 9, 34 and other relevant provisions of the Act, and no other Court.

11. On the other hand, learned Senior Counsel on behalf of the contractor has argued that the subject-matter of the contract was at Kotdwar. One of the parties, i.e. Nagar Palika Parishad, is also local self government body of Kotdwar town. Therefore, the Courts of District Pauri Garhwal having its territorial jurisdiction over Kotdwar cannot be excluded.

12. Both the parties have relied upon several judgments of Hon'ble Apex Court, but I think the controversy has been set at naught by the latest judgment of the Hon'ble Apex Court rendered in Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited & Ors., MANU/SC/0456/2017 : 2017(5) Scale 60. In this judgment, Hon'ble Supreme Court has taken note of all other several cases, which have also been referred by both the parties before me. The Apex Court reiterated that once the seat of arbitration has been fixed, it would have in the nature of exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration. In paragraphs 20 and 21 of such judgment, the Hon'ble Apex Court has further held as under:

"20. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.

21. It is well settled that where more than one court has jurisdiction, it is open for parties to exclude all other courts."

13. Citing many other cases, the Hon'ble Apex Court further made it clear that since the juridical seat of arbitration was at Mumbai, hence the Mumbai courts alone were having jurisdiction to the exclusion of all other courts in the country. Being so, the judgment of the Delhi High Court exercising the powers under the Act vis-à-vis to the dispute between the parties was set aside.

14. In view of what has been set forth above, I am not convinced with the arguments of the learned Senior Counsel of the respondent that the place of arbitration has been chosen ordinarily at Dehradun, so the jurisdiction of the Court of District Judge, Pauri Garhwal cannot be excluded. In my opinion, the jurisdiction of the District Judge, Pauri Garhwal had been ousted at the strength of the stipulation 11.2(b), disregard of the fact that the exclusive jurisdiction to the courts of Dehradun had not been conferred specifically, but when the place of arbitration was intended to be at Dehradun by the parties, its implicative effect will certainly be that the court of District Judge, Dehradun alone has jurisdiction under the Act over all disputes which are settled by the arbitral tribunal between the parties.

15. Learned Counsel on behalf of the appellant has stressed and drawn attention of this Court towards the provision of Section 9(3) of the Act, which reads as under:

"Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious."
16. He has contended that since the arbitral tribunal has been constituted on 13.5.2017 and its first meeting has also been held at Doon on such date, therefore, it is prohibited for any Court to entertain the application under Section 9(1) of the Act.

17. This argument has been refuted by the learned Senior Counsel on behalf of the respondent that the application under Section 9 has already been entertained by the District Judge, Pauri Garhwal and the impugned order was passed almost three months ago on 14.2.2017.

18. I am unable to agree with the contention of learned Counsel of the respondent for the reason that the application moved under Section 9(1) of the Act is still pending for adjudication because by passing the impugned order, he has merely disallowed the objections of the municipality for rejecting such application under Order 7 Rule 11 CPC. There is no room for doubt that the word "entertain" does not mean simply the moving of an application to the Court and taking cognizance of the same, but it entails the proper adjudication of such application. Therefore, the entertainment of an application would mean the adjudication of that application, which is still pending in the Court. Since the tribunal now has been constituted, as indicated above, hence, the applicability of the bar provided under Section 9(3) of the Act cannot be gainsaid.

19. For the reasons mentioned hereinbefore, I set aside the impugned judgment and order rendered by the District Judge, Pauri Garhwal. At the same time, I direct both the parties to maintain status quo for a period of next four months so that the prayer of interim relief be adjudicated by the arbitral tribunal after rendering opportunity to both the parties.

20. Thus the appeal and the revision, both are hereby allowed. As a consequence, application of the municipality under Order 7 Rule 11 CPC stands allowed and the application under Section 9 moved by the contractor thus rejected.



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