Punjab-Haryana High Court
M/S Madhava Brahamputra … vs State Of Punjab And Ors on 8 April, 2021FAO Nos.3520 and 3524 of 2019 -1-
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
FAO No.3520 of 2019
M/s Madhava Brahamputra Consortium Ltd. …Appellant
Versus
State of Punjab and others …Respondents
FAO No.3524 of 2019
M/s Madhava Brahamputra Consortium Ltd. …Appellant
Versus
State of Punjab and others …Respondents
Dated of decision: – 08.04.2021
CORAM: HON’BLE MR. JUSTICE HARSIMRAN SINGH SETHI
Present: Mr. Dheeraj Mahajan, Advocate for the appellant.
Ms. Sunint Kaur, AAG, Punjab.
***
Harsimran Singh Sethi, J. (Oral)
By this order, two appeals, details of which have been given in
the heading are being decided as both the appeals arise out of the same
contract between the parties.
The above said two appeals have arisen on account of the fact
that the appellant initially had filed one claim petition in respect of which an
Award was passed by the Arbitrator on 11.08.2015 and in respect of the
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subsequent claim petition filed by the appellant in pursuance to the same
agreement, an Award dated 22.01.2017 was passed by the Arbitrator. In
respect of both the Awards passed by the Arbitrator, objections were filed
by the State of Punjab before the Additional District Judge, Jalandhar,
which objections have been decided vide orders dated 01.02.2019, which
have been impugned in these appeals.
The brief facts which have led to the filing of the present
appeals are that the appellant and the respondent-State of Punjab entered
into an agreement for the execution of the work namely “Construction of
approaches to road over bridge (excluding Railway Portion)” which work
was to be executed at Jalandhar. This work was advertised in the year 2006
and the appellant, who competed for the allotment of the said work was
found eligible for the allotment of the same and the parties entered into an
agreement for execution of the said work vide agreement No.1 of 2006-07.
As per the admitted facts, the work was to commence from 17.11.2006 and
was to be executed within the time limit of fifteen months.
After the allotment of the work, the appellant started executing
the same but, for one reason or the other the same could not be completed
within the stipulated time of fifteen months and the scheduled date for
completion of work got extended from time to time. Due to the said
extension of stipulated time for completion of work, certain disputes arose
between the parties. It is a further conceded position between the parties
that as per the agreement, all the disputes between the parties were to be
decided by way of arbitration and the venue/seat of the arbitration
proceedings was Chandigarh.
Keeping in view the disputes, which arose between the parties,
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a claim petition was filed by the appellant before the Sole Arbitrator and the
Sole Arbitrator Lt. Gen. Hari Uniyal, PVSM (Retd.) conducted the
proceedings at Chandigarh. On completion of the proceedings, the
Arbitrator gave an Award dated 11.08.2015 while being stationed at
Gurugram.
It is noticed here itself that the appellant also raised certain
other claims which were not a part of the first claim petition qua the same
agreement by filing a second claim petition before the Arbitrator. In respect
of the said claims, raised in the second claim petition, the Arbitrator gave an
Award dated 22.01.2017.
Both the Awards were objected to by the respondent-State of
Punjab and objection petitions were filed under Section 34(2) (b) (ii) read
with Section 18 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred as ‘the 1996 Act’) before the Additional District Judge, Jalandhar.
The appellant raised an objection with regard to the
maintainability of the objection petitions against the Awards dated
11.08.2015 and 22.01.2017 filed before Additional District Judge, Jalandhar
on the ground that the arbitration proceedings were held in Chandigarh and,
therefore, the Court at Jalandhar will not have the jurisdiction to entertain
the objection petitions. The objection petitions by the respondent-State of
Punjab have been decided by the concerned Court at Jalandhar vide
impugned judgments dated 01.02.2019. Objections raised by the
respondent-State have been decided on merit but without deciding plea of
the appellant of non-maintainability of the objection petitions before a Court
at Jalandhar.
The judgements dated 01.02.2019 passed by the Additional
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Sessions Judge, Jalandhar in respect of the two Awards dated 11.08.2015
and 22.01.2017 are challenged by way of the present appeals.
Learned counsel for the appellant argues that the objection
raised by the appellant before the Court below that the objection petitions
filed by the State of Punjab under Section 34(2) (b) (ii) read with Section 18
of the 1996 Act against the Awards dated 11.08.2015 and 22.01.2017 are
not maintainable at Court in Jalandhar due to lack of jurisdiction, though,
has been noticed by the Court below but, the same has not been decided
while passing impugned judgments dated 01.02.2019. Learned counsel for
the appellant argues that once the venue of the arbitration was at
Chandigarh and all the arbitration proceedings were held at Chandigarh,
the objections to the Awards as envisaged under Section 34 of the 1996 Act
could not have been filed before a Court at Jalandhar as the jurisdiction to
raise objections to the awards lies only before the Principal Civil Court at
Chandigarh and, therefore, the Court at Jalandhar has exceeded its
jurisdiction in deciding the objections raised by the State of Punjab in
respect of the Awards dated 11.08.2015 and 21.01.2017.
Learned counsel for the appellant further argues that once the
appellant had taken a preliminary objection qua the maintainability of the
objection petitions at Jalandhar, despite noticing the said objection, no
finding has been returned on the said aspect, hence, the judgements dated
01.02.2019 are liable to be set aside on this ground as the jurisdiction of the
Court at Jalandhar to decide the objections raised by the respondent-State
should have been decided before deciding the objection petitions on merits.
Learned State counsel concedes that there was an objection
raised qua the jurisdiction of the Court at Jalandhar to deal with the
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objection petitions filed by the State of Punjab qua the Awards dated
11.08.2015 and 27.01.2017 under Section 34 (2) (b) (ii) read with Section
18 of the 1996 Act and there is no finding recorded by the Court below on
the said aspect. Learned counsel for the respondent argues that the Court at
Jalandhar will have the jurisdiction to entertain the objection petitions filed
by the State qua the awards given by the Arbitrator as some part of the cause
of action has accrued in Jalandhar. Learned State counsel submits that as the
work under the agreement was to be executed at Jalandhar, the Court at
Jalandhar will have the jurisdiction to entertain the objections raised against
the Awards given by the Arbitrator.
I have heard learned counsel for the parties and have gone
through the record with their able assistance.
From the above narration, it is clear that the appellant and the
respondent-State of Punjab entered into an agreement being agreement No.1
of 2006 for the execution of certain works to be executed at Jalandhar. It is
also a conceded position that as per the said agreement, in case of any
dispute, the same was to be settled by way of an arbitration and the venue of
the arbitration was fixed at Chandigarh. It is also not disputed by the learned
counsel appearing for the State of Punjab that the claim petitions filed by
the appellant before the Arbitrator were dealt with by the Arbitrator at the
venue of the arbitration i.e. Chandigarh and all the arbitration proceedings
were held in Chandigarh except that the Award was given by the Arbitrator
at Gurugram. The two Awards in respects of the two claim petitions filed by
the appellant were given by the Arbitrator on 11.08.2015 and 27.01.2017
which Awards were objected to by the respondent-State by filing objections
as envisaged under Section 34 of the 1996 Act. It is the conceded position
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between the parties that the objection qua jurisdiction was raised by the
appellant before the Principal Civil Judge, Jalandhar with regard to the
maintainability of the objection petitions filed by the State of Punjab qua
the Awards given by the Arbitrator dated 11.08.2015 and 27.01.2017. Once,
the said objections were raised, it becomes the duty of the Court to decide
the same in accordance with law coupled with the facts of the case before
deciding the objection petitions filed by the State of Punjab qua the Arbitral
Awards on merits. It is a matter of fact that despite noticing the said
objections in the impugned judgements, the same have not been decided by
the Court at Jalandhar in the impugned judgments dated 01.02.2019 which
is contrary to the settled principles of law that the Courts are required to
decide all the objections raised by the parties in accordance with law. The
objections such as jurisdiction, cannot be ignored once the same goes to the
root of the controversy. Admittedly, in the present case, the Court below
has ignored the objections qua maintainability of the objection petitions
filed by the respondent-State of Punjab against the Awards as envisaged
under Section 34 of the 1996 Act. The said act of the Court below is not in
accordance with law hence, cannot be sustained. The judgments dated
11.08.2015 and 27.01.2017 rendered by the Court below are liable to be set
aside on this ground alone.
The Hon’ble Supreme Court of India in Civil Appeal No. 1498
of 2005 titled as ‘K. Sagar, M.D., Khan Chit Fund, Musheerabad Vs. A. Bal
Reddy & Anr.’, decided on 11.06.2008 held that where the question of
jurisdiction has been raised, the same is to be decided first. The non-
deciding of the objections regarding the jurisdiction though, the same was
raised and noticed as well, was found contrary to the law. The relevant
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paragraphs of the judgment are as under:-
“7. We find that M/s Dwarkadish Chits’ case
(supra) dealt with the issue of jurisdiction
under the Consumer Protection Act, 1986
(in short the `Act’) as to whether the
Consumer Forums established under the Act
have jurisdiction to entertain dispute
between the chit fund and one of its prized
subscriber or between the subscribers. It is
not correct as contented by the respondent
No. 1 that the question of jurisdiction was
not raised. In fact the State Commissioner
observed that since the respondents before it
i.e. functionaries of the chit fund were not
consumers, the issue regarding jurisdiction
cannot be adjudicated in the appeal before
it. The National Commissioner
unfortunately does not appear to have
referred to its earlier decision while
dismissing the revision petition.
8. In the aforesaid background, we are of
the view that the issue relating to
jurisdiction has to be decided by the forums
first.
9. We therefore, set aside the impugned
order of the National Commission
confirming the order passed by the State
Commission, and remit the matter to the
State Commission to consider the question
of jurisdiction. To avoid unnecessary delay
let parties appear before the State
Commission without further notice on 7th
of July, 2008 so that the date of hearing can
be fixed. We make it clear that we have not
expressed any opinion on the merits of the
case. The parties are permitted to produce
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certified copy of the judgment so that
necessary follow up action can be taken.”
Hon’ble Supreme Court of India while deciding Civil Appeal
No.8078 of 2001 titled as Arun Agarwal vs. Nagreeka Exports (P) Ltd.
and another decided on 26.11.2001 has held that where the question of
jurisdiction has been raised, the same has to be decided as a preliminary
issue before deciding the dispute on merits. The relevant portion of the
judgment is as under:-
“Heard counsel for the parties. We are of the view
that the question regarding the jurisdiction of the
Court was required to be decided as a preliminary
issue. We, therefore, set aside the order under
challenge and send the case back to the High Court
to decide the question of jurisdiction of the Court as
a preliminary issue. The order passed by the High
Court directing the defendant-appellant to furnish
security for a sum of Rs. 55 lakhs by way of bank
guarantee shall remain suspended till the said
question pertaining to jurisdiction of the Court is
decided by the High Court. In case it is held by the
High Court that the Court has jurisdiction, the
direction to furnish security for a sum of Rs. 55
lakhs shall come into operation. The appeal is
disposed of in the aforesaid terms.”
Keeping in view the above, it is clear that the decision rendered
in the impugned judgments on merits without deciding the objections qua
the jurisdiction is contrary to the settled principle of law and, hence, cannot
be sustained.
Though, the matter can be remanded to the Court below for
fresh adjudication on the objection raised by the appellant qua the
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jurisdiction of the Principal Civil Judge at Jalandhar to deal with the
objections raised by the State of Punjab against the arbitral Awards dated
11.08.2015 and 27.01.2017 but as the main object of the Arbitration and
Conciliation Act, 1996 is to decide the lis between the parties quickly, this
Court is of the view that remanding the case back for adjudication on the
aspect whether the Principal Civil Judge at Jalandhar has the jurisdiction to
deal with the objections raised by the State of Punjab to the Arbitral Awards
dated 11.08.2015 and 27.01.2017 or not will consume further time and this
Court should decide the said objection regarding maintainability keeping in
view the facts and circumstances of the present case.
The question which now arises before this Court in these
appeals is whether the State of Punjab could have preferred the objections
under Section 34 (2) (b) (ii) read with Section 18 of the 1996 Act qua the
Awards dated 11.08.2015 and 27.01.2017 before the Court at Jalandhar or
not.
In order to answer the question of jurisdiction of the Principal
Civil Judge at Jalandhar to entertain the objection petitions filed by the
respondent-State certain provisions of the 1996 Act, as amended from time
to time, needs to be noticed. Section 2 (e) of the 1996 Act which deals with
definition of “Court, Section 20 which gives definition of the place of
arbitration and Section 42 which gives definition of the jurisdiction are
reproduced hereunder for the ready reference:-
Section 2(e) Court means-
(i) in 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
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jurisdiction, having ju- risdiction 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;
(ii) in the case of international commercial arbitration,
the High Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the
questions forming the subject-matter of a suit if the
same had been the subject-matter of a suit, and in
other cases, a High Court having jurisdiction to hear
appeals from decrees of courts subordinate to that
High Court;
Section 20:- Place of Arbitration:-
(1) The parties are free to agree on the place of
arbitration.
(2) Failing any agreement referred to in sub-section
(1) the place of arbitration shall be determined
by the arbitral tribunal having regard to the
circumstances of the case, including the
convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section
(2), the arbitral tribunal may, unless otherwise
agreed by the parties, meet at any place it
considers appropriate for consultation among
its members, for hearing witnesses, experts or
the parties, or for inspection of documents,
good or other property.”
Section 42, Jurisdiction:- Notwithstanding
anything contained elsewhere in this Part or 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 any
Court, that Court alone shall have jurisdiction
over the arbitral proceedings and all subsequent
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applications arising out of that agreement and the
arbitral proceedings shall be made in that Court
and no other Court.”
A bare reading of the above reproduction of the provisions of
1996 Act makes it amply clear that the Court means Principal Civil Court of
the ordinary jurisdiction in a district and also includes 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.
Section 20 which deals with the place of arbitration makes it
clear that parties to the agreement are free to decide the place of arbitration
and in case there is no place of arbitration decided then, the place where the
actual arbitration proceedings have taken place will be considered as place
of arbitration
The question which needs to be decided in the present
proceedings is whether the Court where the arbitration proceedings have
taken place keeping in view the agreement between the parties will have the
exclusive jurisdiction to entertain the proceedings arising in respect of the
arbitration agreement between the parties or even the Court, where some
cause of action has accrued in terms of the agreement between the parties,
will also have the concurrent jurisdiction to entertain the proceedings
arising out of the arbitral agreement between the parties.
The said question is no longer res integra and has been decided
in detail keeping in view the provisions of the 1996 Act as amended time to
time as well as the law on the subject by the Hon’ble Supreme Court of India
in a recent judgment in Civil Appeal No.9307 of 2019 titled as BGS SGS
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Soma JV vs. NHPC Limited 2020(4) SCC 234. While deciding the precise
question whether only one Principal Court will have the exclusive
jurisdiction to entertain the proceedings arising out of the arbitral agreement
or more than one Court will have the concurrent jurisdiction to entertain the
proceedings arising out of the arbitral agreement between the parties, the
Hon’ble Supreme Court of India while discussing the provisions of the 1996
Act and the law on the subject including the judgment of a Five Judges
Bench in Bharat Aluminium Company Limited (‘BALCO’) vs. Kaiser
Aluminium Technical Services 2012(9) SCC 552 held as under:-
2. Three appeals before us raise questions as to
maintainability of appeals under Section 37 of the
Arbitration and Conciliation Act, 1996 ), and,
given the arbitration clause in these proceedings,
whether the “seat” of the arbitration proceedings is
New Delhi or Faridabad, consequent upon which a
petition under Section 34 of the Arbitration Act,
1996 may be filed dependent on where the seat of
arbitration is located.
xxxxxxxx
40. A reading of paragraphs 75, 76, 96, 110, 116,
123 and 194 of BALCO (supra) would show that
where parties have selected the seat of arbitration
in their agreement, such selection would then
amount to an ex-clusive jurisdiction clause, as the
parties have now indicated that the Courts at the
“seat” would alone have jurisdiction to entertain
challenges against the arbitral award which have
been made at the seat. The example given in
paragraph 96 buttresses this proposition, and is
supported by the previous and subsequent
paragraphs pointed out hereinabove. The BALCO
judgment (supra), when read as a whole, applies
the concept of “seat” as laid down by the English
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judgments (and which is in Section 20 of the
Arbitration Act, 1996), by harmoniously
construing Section 20 with Section 2(1)(e), so as
to broaden the definition of “court”, and bring
within its ken courts of the “seat” of the
arbitration1.
41. However, this proposition is contradicted
when paragraph 96 speaks of the concurrent
jurisdiction of Courts within whose jurisdiction
the cause of action arises wholly or in part, and
Courts within the jurisdiction of which the dispute
resolution i.e. arbitration, is located.
xxxxxxxxxxx
“50. The aforesaid amendment carried out in the
definition of “Court” is also a step showing the
right direction, namely, that in international
commercial arbitrations held in India, the High
Court alone is to exercise jurisdiction over such
proceedings, even where no part of the cause of
action may have arisen within the jurisdiction of
such High Court, such High Court not having
ordinary original jurisdiction. In such cases, the
“place” where the award is delivered alone is
looked at, and the High Court given jurisdiction
to supervise the arbitration proceedings, on the
footing of its jurisdiction to hear appeals from
decrees of courts subordinate to it, which is only
on the basis of territorial jurisdiction which in
turn relates to the “place” where the award is
made. In the light of this important change in the
law, Section 2(1)(e) (i) of the Arbitration Act,
1996 must also be construed in the manner
indicated by this judgment.
51. Take the consequence of the opposite
conclusion, in the light of the facts of a given
example, as follows. New Delhi is specifically
designated to be the seat of the arbitration in the
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arbitration clause between the parties. Part of the
cause of action, however, arises in several
places, including where the contract is partially
to be performed, let us say, in a remote part of
Uttarakhand. If concurrent jurisdiction were to
be the order of the day, despite the seat having
been located and specifically chosen by the
parties, party autonomy would suffer, which
BALCO (supra) specifically states cannot be the
case. Thus, if an application is made to a District
Court in a remote corner of the Uttarakhand
hills, which then becomes the Court for the
purposes of Section 42 of the Arbitration Act,
1996 where even Section 34 applications have
then to be made, the result would be contrary to
the stated intention of the parties – as even
though the parties have contemplated that a
neutral place be chosen as the seat so that the
Courts of that place alone would have
jurisdiction, yet, any one of five other Courts in
which a part of the cause of action arises,
including Courts in remote corners of the
country, would also be clothed with jurisdiction.
This obviously cannot be the case. If, therefore,
the conflicting portion of the judgment of
BALCO (supra) in paragraph 96 is kept aside
for a moment, the very fact that parties have
chosen a place to be the seat would necessarily
carry with it the decision of both parties that the
Courts at the seat would exclusively have
jurisdiction over the entire arbitral process.
xxxxxxx
59. The view of the Delhi High Court in Antrix
Corporation Ltd. (supra), which followed
judgments of the Bombay High Court, does not
commend itself to us. First and foremost, it is
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incorrect to state that the example given by the
Court in paragraph 96 of BALCO (supra) rein-
forces the concurrent jurisdiction aspect of the
said paragraph. As has been pointed out by us, the
conclusion that the Delhi as well as the Mumbai or
Kolkata Courts would have jurisdiction in the
example given in the said paragraph is wholly
incorrect, given the sentence, “This would be
irrespective of the fact that the obligations to be
performed under the contract were to be
performed either at Mumbai or at Kolkata, and
only arbitration is to take place in Delhi”. The
sentence which follows this is out of sync with
this sentence, and the other paragraphs of the
judgment. Thus, BALCO (supra) does not
“unmistakably” hold that two Courts have
concurrent jurisdiction, i.e., the seat Court and the
Court within whose jurisdiction the cause of
action arises. What is missed by these High Court
judgments is the subsequent paragraphs in
BALCO (supra), which clearly and unmistakably
state that the choosing of a “seat” amounts to the
choosing of the exclusive jurisdiction of the
Courts at which the “seat” is located. What is also
missed are the judgments of this Court in Enercon
(India) Ltd. (supra) and Reliance Industries
(supra).
xxxxxxx
61.Equally incorrect is the finding in Antrix
Corporation Ltd. (supra) that Section 42 of the
Arbitration Act, 1996 would be rendered
ineffective and useless. Section 42 is meant to
avoid conflicts in jurisdiction of Courts by placing
the supervisory jurisdiction over all arbitral
proceedings in connection with the arbitration in
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one Court exclusively. This is why the section
begins with a non-obstante clause, and then goes
on to state “…where with respect to an arbitration
agreement any application under this Part has been
made in a Court…” It is obvious that the
application made under this part to a Court must
be a Court which has jurisdiction to decide such
application. The subsequent holdings of this
Court, that where a seat is designated in an
agreement, the Courts of the seat alone have
jurisdiction, would require that all applications
under Part I be made only in the Court where the
seat is located, and that Court alone then has
jurisdiction over the arbitral proceedings and all
subsequent applications arising out of the arbitral
agreement. So read, Section 42 is not rendered
ineffective or useless. Also, where it is found on
the facts of a particular case that either no “seat” is
designated by agreement, or the so called “seat” is
only a convenient “venue”, then there may be
several Courts where a part of the cause of action
arises that may have jurisdiction. Again, an
application under Section 9 of the Arbitration Act,
1996 may be preferred before a court in which
part of the cause of action arises in a case where
parties have not agreed on the “seat” of
arbitration, and before such “seat” may have been
determined, on the facts of a particular case, by
the Arbitral Tribunal under Section 20(2) of the
Arbitration Act, 1996. In both these situations, the
earliest application having been made to a Court in
which a part of the cause of action arises would
then be the exclusive Court under Section 42,
which would have control over the arbitral
proceedings. For all these reasons, the law stated
by the Bombay and Delhi High Courts in this
regard is incorrect and is overruled.
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63. It will thus be seen that wherever there is an
express designation of a “venue”, and no
designation of any alternative place as the “seat”,
combined with a supranational body of rules
governing the arbitration, and no other significant
contrary indicia, the inexorable conclusion is that
the stated venue is actually the juridical seat of the
arbitral proceeding.
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84 .On a conspectus of the aforesaid judgments, it
may be concluded that whenever there is the
designation of a place of arbitration in an
arbitration clause as being the “venue” of the
arbitration proceedings, the expression “arbitration
proceedings” would make it clear that the “venue”
is really the “seat” of the arbitral proceedings, as
the aforesaid expression does not include just one
or more individual or particular hearing, but the
arbitration proceedings as a whole, including the
making of an award at that place. This language
has to be contrasted with language such as
“tribunals are to meet or have witnesses, experts
or the parties” where only hearings are to take
place in the “venue”, which may lead to the
conclusion, other things being equal, that the
venue so stated is not the “seat” of arbitral
proceedings, but only a convenient place of
meeting. Further, the fact that the arbitral
proceedings “shall be held” at a particular venue
would also indicate that the parties intended to
anchor arbitral proceedings to a particular place,
signifying thereby, that that place is the seat of the
arbitral proceedings. This, coupled with there
being no other significant contrary indicia that the
stated venue is merely a “venue” and not the
“seat” of the arbitral proceedings, would then
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conclusively show that such a clause designates a
“seat” of the arbitral proceedings. In an
International context, if a supranational body of
rules is to govern the arbitration, this would
further be an indicia that “the venue”, so stated,
would be the seat of the arbitral proceedings. In a
national context, this would be replaced by the
Arbitration Act, 1996 as applying to the “stated
venue”, which then becomes the “seat” for the
purposes of arbitration. Correctness of the
judgment in Hardy Exploration and Production
(India) Ltd.”
A bare perusal of the above reproduction of the judgment
would show that the Hon’ble Supreme Court of India has held that two
Courts do not have concurrent jurisdiction to be treated as Principal Civil
Court to decide the disputes between the parties arising out of an arbitral
agreement. Hon’ble Supreme Court of India held that exclusive jurisdiction
to decide the dispute arising out of the arbitral agreement between the
parties will only be with the Principal Civil Court of the place, where the
arbitral proceedings have been held between the parties in terms of their
agreement which might be explicit or implicit and no two Courts can have
the concurrent jurisdiction to decide the dispute between the parties arising
out of the arbitral contract, even if, some part of the cause of action has
accrued at a place other than the place where the arbitral proceedings have
taken place between the parties in terms of the agreement entered into
between them.
By applying the said principle of law in the present case, it is
clear that the parties had undisputedly decided that the arbitration
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proceedings will be held at Chandigarh and as a matter of fact all the
arbitral proceedings were held at Chandigarh. That being so, applying the
ratio of Hon’ble Supreme Court of India in BGS SGS Soma JV’s case
(supra) only the Principal Civil Judge at Chandigarh will have the
jurisdiction to entertain the dispute arising out of the arbitral proceedings
including the objections raised against the Arbitral Award. The contention
being raised by the respondent-State that as the works were to be executed
at Jalandhar, hence, the Court at Jalandhar will also have the jurisdiction on
account of the fact that cause of action has accrued there, cannot be
accepted in view of the settled principle of law noticed hereinbefore. For
this purpose, the observations and the law laid down by the Hon’ble
Supreme Court of India, paragraphs 97, 98, 99 and 100 of BGS SGS Soma
JV’s case (supra) are reproduced hereunder for the ready reference:-
97. Coming to the impugned judgment in the present
appeals, it is clear that the reasoning followed stems
from the subject-matter test that flows from the
definition of ‘court’ in Section 2(1)(e)(i) of the Act.
According to the impugned judgment, since the
agreement was executed at Faridabad, part of the
cause of action would arise at Faridabad, clothing
Faridabad courts with jurisdiction for the purposes of
filing a Section 34 petition. The second part of the
reasoning is that Faridabad is the place where the
request for reference to arbitration was received, as a
result of which part of the cause of action arose in
Faridabad, which ousts the jurisdiction of Courts of
New Delhi, in which no part of the cause of action
arose.
98. We have extracted the arbitration agreement in the
present case (as contained in Clause 67.3 of the
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agreement between the parties) in paragraph 3 of
this judgment. As per the arbitration agreement, in
case a dispute was to arise with a foreign
contractor, clause 67.3(ii) would apply. Under this
sub-clause, a dispute which would amount to an
‘international commercial arbitration’ within the
meaning of Section 2(1)(f) of the Arbitration Act,
1996, would have to be finally settled in
accordance with the Arbitration Act, 1996 read
with the UNCITRAL Arbitration Rules, and in
case of any conflict, the Arbitration Act, 1996 is to
prevail (as an award made under Part I is
considered a domestic award under Section 2(7) of
the Arbitration Act, 1996 notwithstanding the fact
that it is an award made in an international
commercial arbitration). Applying the Shashoua
principle delineated above, it is clear that if the
dispute was with a foreign contractor under Clause
67.3 of the agreement, the fact that arbitration
proceedings shall be held at New Delhi/Faridabad,
India in sub-clause (vi) of Clause 67.3, would
amount to the designation of either of these places
as the “seat” of arbitration, as a supranational body
of law is to be applied, namely, the UNCITRAL
Arbitration Rules, in conjunction with
the Arbitration Act, 1996. As such arbitration
would be an international commercial arbitration
which would be decided in India, the Arbitration
Act, 1996 is to apply as well. There being no other
contra indication in such a situation, either New
Delhi or Faridabad, India is the designated “seat”
under the agreement, and it is thereafter for the
parties to choose as to in which of the two places
the arbitration is finally to be held.
99. Given the fact that if there were a dispute
between NHPC Ltd. and a foreign contractor,
clause 67.3(vi) would have to be read as a clause
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designating the “seat” of arbitration, the same must
follow even when sub-clause (vi) is to be read with
sub-clause (i) of Clause 67.3, where the dispute
between NHPC Ltd. would be with an Indian
Contractor. The arbitration clause in the present
case states that “Arbitration Proceedings shall be
held at New Delhi/Faridabad, India…”, thereby
signifying that all the hearings, including the
making of the award, are to take place at one of the
stated places. Negatively speaking, the clause does
not state that the venue is so that some, or all, of
the hearings take place at the venue; neither does it
use language such as “the Tribunal may meet”, or
“may hear witnesses, experts or parties”. The
expression “shall be held” also indicates that the
so-called “venue” is really the “seat” of the arbitral
proceedings. The dispute is to be settled in
accordance with the Arbitration Act, 1996 which,
therefore, applies a national body of rules to the
arbitration that is to be held either at New Delhi or
Faridabad, given the fact that the present
arbitration would be Indian and not international. It
is clear, therefore, that even in such a scenario,
New Delhi/Faridabad, India has been designated as
the “seat” of the arbitration proceedings.
100. However, the fact that in all the three appeals
before us the proceedings were finally held at New
Delhi, and the awards were signed in New Delhi,
and not at Faridabad, would lead to the conclusion
that both parties have chosen New Delhi as the
“seat” of arbitration under Section 20(1) of the
Arbitration Act, 1996. This being the case, both
parties have, therefore, chosen that the Courts at
New Delhi alone would have exclusive jurisdiction
over the arbitral proceedings. Therefore, the fact
that a part of the cause of action may have arisen at
Faridabad would not be relevant once the “seat”
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has been chosen, which would then amount to an
exclusive jurisdiction clause so far as Courts of the
“seat” are concerned.”
Learned State counsel has not been able to controvert the law
settled by the Hon’ble Surpeme Court of India as noticed hereinbefore, that
the Courts cannot assume the jurisdiction only on the basis of some cause of
action accruing within their jurisdiction and only the Court having
jurisdiction over the area where the parties have agreed to conduct the
arbitration proceedings and the same were in fact conducted will have the
exclusive jurisdiction. No law contrary to the above noticed principle of
law has been cited in favour of the contention being raised to support the
impugned orders. As per law, it is clear that the Principal Civil Court at
Jalandhar will not have the jurisdiction to entertain the objection petitions
filed by the respondent-State to the Awards dated 11.08.2015 and
22.01.2017 under Section 34 of the 1996 Act on the pretext that some cause
of action had accrued within Jalandhar. That being so, the judgments dated
01.02.2019 deciding the objection petitions filed by the State of Punjab
against the said Arbitral Awards by the Court at Jalandhar cannot be
sustained and are accordingly set aside.
As the present appeals are being accepted on the ground of lack
of jurisdiction of the Principal Civil Judge at Jalandhar to decide the
objection petitions, the respondent-State cannot be left remediless in respect
of the Awards dated 11.08.2015 and 22.01.2017 given by the Arbitrator.
The objection petitions filed before the Principal Civil Court at Jalandhar
were wrongly presented by the State of Punjab hence the same be returned
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to the State of Punjab to be filed before the competent Court of law
provided, the State of Punjab still wants to pursue the objections to the
awards dated 11.08.2015 and 22.01.2017 even at this stage.
April 08, 2021 (HARSIMRAN SINGH SETHI)
aarti/naresh.k JUDGE
Whether speaking/reasoned : Yes/No
Whether reportable : Yes/No
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