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2005 DIGILAW 245 (CAL)

ASSOCIATED CONTRACTORS v. STATE OF WEST BENGAL

2005-04-11

JYOTIRMAY BHATTACHARYA

body2005
JYOTIRMAY BHATTACHARYA, J. ( 1 ) THE jurisdiction of the Court of the learned District Judge at Jalpaiguri to entertain the opposite parties' application for setting aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the said Act) and consequently the Court's jurisdiction to issue notice calling upon the petitioner to appear in the said proceeding, have been challenged in this application under Article 227 of the Constitution of India. ( 2 ) MR. Bachwat, learned Senior Counsel, appearing in support of this petition, submitted that not only the appointment of the Arbitrator was made by this Court but also several other proceedings, such as proceeding under sections 9, 31, 38 and 39 of the said Act, were entertained and disposed of by this Court with the participation of both the parties. More so, an appeal was also filed by the opposite parties challenging the interim order passed in connection with the petitioner's application under Section 9 of the said act. ( 3 ) MR. Bachwat further contended that though apparently the principal civil Court of the district of Jalpaiguri had otherwise jurisdiction to entertain the said application in view of the provision as contained in Section 34 read with Section 2 (3) of the said Act, but still then because of the incorporation of the non-obstante clause in Section 42 of the said Act, the jurisdiction of the principal Civil Court of the district of Jalpaiguri to entertain such an application has been excluded, as the parties had already chosen the jurisdiction of this Court by filing the aforesaid applications and/or appeals in connection with arbitral proceeding arising out of the dispute relating to the arbitration agreement. ( 4 ) TO strengthen the said submission, Mr. ( 4 ) TO strengthen the said submission, Mr. Bachwat relied upon a decision of the Hon'ble Supreme Court in the case of Kumbha Mawji v. Dominion of India reported in AIR 1953 SC 313 and submitted that the hon'ble Supreme Court while considering a similar provision contained in section 31 of the Arbitration Act, 1940 held as follows :" (13) Thus it will be seen on a comprehensive view of Section 31 that while the first sub-section determines the jurisdiction of the court in which an award can be filed, sub-sections (2), (3) and (4) are intended to make that jurisdiction effective in three different ways, (1) by vesting in one Court the authority to deal with all questions regarding the validity, effect of existence of an award or - an arbitration agreement, (2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one Court, and (3) by vesting exclusive jurisdiction in the Court in which the first application relating to the matter is filed. The context, therefore, of sub-section (4) would seem to indicate that the sub-section was not meant to be confined to applications made during the pendency of an arbitration. The necessity for clothing a single Court with effective and exclusive jurisdiction, and to bring about by the combined operation of these three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced. There is no conceivable reason why the Legislature should have intended to confine the operation of sub-section (4) only to applications made during the pendency of an arbitration, if as is contended, the phrase "in any reference" is to be taken as meaning "in the course of a reference". " ( 5 ) BY relying upon another decision of the Hon'ble Supreme Court in the case of Neycer India Ltd. v. GMB Ceramics Ltd. reported in (2002)9 scc 489 , Mr. " ( 5 ) BY relying upon another decision of the Hon'ble Supreme Court in the case of Neycer India Ltd. v. GMB Ceramics Ltd. reported in (2002)9 scc 489 , Mr. Bachwat further submitted that the Hon'ble Supreme Court even in the said decision held that since the parties submitted to the jurisdiction of the Calcutta High Court at different stages of the said arbitral proceeding, the parties cannot subsequently challenge the jurisdiction of the Calcutta High Court either to entertain the award or to make a decision as to its enforceability and legality thereof on the ground that the parties by agreement having once selected the forum for redressal of such dispute arising out of the arbitration agreement either before the City Civil Court, madras or before the High Court at Madras, cannot approach the Calcutta high Court for enforcement of the award and/or for setting aside the award. ( 6 ) BY referring to another decision of the Hon'ble Supreme Court in the case of F. C. I. v. A. M. Ahmed and Co. reported in (2001 )10 SCC 532, Mr. Bachwat further submitted that the Hon'ble Supreme Court in a similar situation while considering the provision of Section 31 of the Arbitration act, 1940 which is pan' materia with the present provision of Section 42 of the said Act held that since the Arbitrator was appointed by the High Court itself, the notice issued by the subordinate Court at Tuticorin for setting aside the award, was invalid as the same was issued by the said Subordinate court at Tuticorin without jurisdiction. ( 7 ) THUS, in short, Mr. Bachwat submitted that the principal Civil Court of the district of Jalpaiguri is suffering from inherent lack of jurisdiction even to entertain the said application for setting aside the award and thereby the issuance of the notice in connection therewith is also invalid and illegal. As such, notice issued by the said Court, is without jurisdiction. ( 8 ) MR. Bachwat, however, cited some other decisions of the Hon'ble supreme Court to show that this Court in exercise of its jurisdiction under article 227 of the Constitution of India is competent enough to pass appropriate orders for keeping the subordinate Courts within the bounds of their jurisdiction. ( 8 ) MR. Bachwat, however, cited some other decisions of the Hon'ble supreme Court to show that this Court in exercise of its jurisdiction under article 227 of the Constitution of India is competent enough to pass appropriate orders for keeping the subordinate Courts within the bounds of their jurisdiction. ( 9 ) BUT since the jurisdiction and/or authority of this Court to entertain such an application under Article 227 of the Constitution of India has not been challenged by the opposite parties herein, this Court does not intend to discuss the effect of those citations in great details in view of the decision of the Hon'ble Supreme Court in the case of Surya Dev Rai v. Ram Chander rai, reported in (2003)6 SCC 675 : (2003)2 WBLR (SC) 614, wherein it was held that the supervisory jurisdiction of the High Court under Article 227 of the Constitution of India for keeping the subordinate Courts within the bounds of their jurisdiction has been recognised even after narrowing down the scope of interference under Section 115 of the Code of Civil Procedure following the amendment of the Civil Procedure Code by Act of 46 of 1999. ( 10 ) MR. Bachwat, thus, invited this Court to invoke its jurisdiction under article 227 of the Constitution of India for setting aside the order by which the Court of learned District Judge at Jalpaiguri entertained the opposite parties' application for setting aside the award on the aforesaid grounds. ( 11 ) MR. Bikash Ranjan Bhattacharya, learned Senior Counsel, appearing on behalf of the opposite parties herein, refuted the said submission of Mr. Bachwat by drawing the attention of this Court to various provisions of the said Act. ( 12 ) BY referring to Section 34 of the said Act, Mr. Bhattacharya submitted that the said provision makes it clear that an arbitral award can be set aside by the Court only on the grounds as mentioned therein. ( 13 ) MR. Bachwat by drawing the attention of this Court to various provisions of the said Act. ( 12 ) BY referring to Section 34 of the said Act, Mr. Bhattacharya submitted that the said provision makes it clear that an arbitral award can be set aside by the Court only on the grounds as mentioned therein. ( 13 ) MR. Bhattacharya further submitted that the "court" as referred to in the said provision has been defined in Section 2 (e) of the said Act which says the "court" means 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. ( 14 ) MR. Bhattacharya contended that since the dispute forming the subject matter of the arbitration, arose within the territorial jurisdiction of the principal Civil Court of the district Jalpaiguri, the said Court alone has the jurisdiction to entertain the application for setting aside the award. ( 15 ) MR. Bhattacharya further submitted that the jurisdiction of the principal Civil Court of the District Jalpaiguri, cannot be held to be ousted in view of the exclusion as provided in Section 42 of the said Act, because of earlier invocation of the jurisdiction of a particular Court by the parties in connection with a dispute arising out of the arbitration agreement. ( 16 ) MR. Bhattacharya very seriously contended that this ouster of jurisdiction refers to any pending arbitral proceeding. Mr. Bhattacharya further contended that the jurisdiction of the principal Civil Court of the district which has otherwise jurisdiction in view of Section 2 (e) of the said Act, cannot be held to be ousted regarding entertainment of any post arbitral proceeding. ( 17 ) BY referring to Section 32 of the said Act, Mr. Bhattacharya submitted that the arbitral proceeding terminates by the final arbitral award or by an order of the arbitral Tribunal under sub-section (2) thereof. ( 18 ) THUS, according to Mr. ( 17 ) BY referring to Section 32 of the said Act, Mr. Bhattacharya submitted that the arbitral proceeding terminates by the final arbitral award or by an order of the arbitral Tribunal under sub-section (2) thereof. ( 18 ) THUS, according to Mr. Bhattacharya, an application under Section 34 of the said Act of for setting aside an award being a post award proceeding can be entertained by the District Judge of Jalpaiguri which is competent enough to entertain such an application for setting aside an award as the said application has nothing to do with the arbitral proceeding which stood terminated with the passing of the award. ( 19 ) MR. bhattacharya further submitted that the appointment of Arbitrator under Section 11 of the said Act is nothing but an administrative job of the chief Justice of the High Court. As such, by virtue of appointment of Arbitrator by the Hon'ble Chief Justice of this Court under Section 11 of the said Act, this Court which otherwise is lacking jurisdiction inherently, cannot assume jurisdiction over any dispute arising out of the contract between the parties. ( 20 ) BY referring to a decision of the Hon'ble Supreme Court in the case of P. Anand Gajapathi Raju and Ors. v. P. V. G. Raju (Dead) and Ors. , reported in (2000)4 SCC 539 , Mr. Bhattacharya submitted that the Hon'ble Supreme court set at rest such a dispute in the said decision wherein it was held that the Court to which the party shall have recourse to challenge the award would be the Court as defined in clause (e) of Section 2 of the new Act and not the Court to which an application under Section 8 of the new Act is made. ( 21 ) BY relying upon the said decision, Mr. Bhattacharya submitted that the jurisdiction of the District Judge's Court at Jalpaiguri cannot be ousted merely because of the fact that the parties in connection with the arbitral proceeding submitted to the jurisdiction of this Court in its Ordinary Original civil Jurisdiction. ( 22 ) MR. ( 21 ) BY relying upon the said decision, Mr. Bhattacharya submitted that the jurisdiction of the District Judge's Court at Jalpaiguri cannot be ousted merely because of the fact that the parties in connection with the arbitral proceeding submitted to the jurisdiction of this Court in its Ordinary Original civil Jurisdiction. ( 22 ) MR. Bhattacharya, thus, submitted that in view of the said citation, the District Judge's Court at Jalpaiguri is rather the Court which can only entertain such an application for setting aside the award irrespective of submission of the parties to the jurisdiction of this Court earlier during the pendency of the arbitral proceeding. ( 23 ) THUS, Mr. Bhattacharya submitted that in view of the said decision of the Hon'ble Supreme Court, no interference at all necessary as prayed for by the petitioner in this petition under Article 227 of the Constitution of india. ( 24 ) MR. Bachwat raised another point regarding commission of fraud upon the Court of the learned District Judge at Jalpaiguri by the opposite party by not disclosing the earlier proceedings between the parties in the application for setting aside the award. ( 25 ) I, however, do not take note of the said submission of Mr. Bachwat, as the settled law is that the Court upon which such fraud has been committed is the Court competent to consider such allegation of fraud. Thus, without approaching the particular Court concern, the allegation of fraud cannot be agitated before this Court in its supervisory jurisdiction. ( 26 ) THEREFORE, I restrict my consideration to the respective contentions of the parties relating to the jurisdictional infirmities of the Court to entertain the application for setting aside the award. ( 27 ) LET me now consider the effect of the respective submission of the learned Counsel of the parties in the aforesaid background. ( 28 ) THE background of this case under which such an application for setting aside of the award was filed has already been narrated above wherefrom it is apparent that the parties themselves submitted to the jurisdiction of the High Court in its Ordinary Original Civil Jurisdiction in connection with the dispute arising out of the arbitration agreement from time to time. ( 29 ) IN this background, this Court will have to consider as to whether the jurisdiction of the principal Civil Court of the district Jalpaiguri has been ousted to entertain such an application under Section 42 of the said Act or not. ( 30 ) THUS, in effect the dispute which has been raised in this application really hinges upon the interpretation of the provision contained in Section 42 of the said Act which runs as follows :"42. Jurisdiction. Notwithstanding anything contained elsewhere in this Part or in other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that court in no other Court. " ( 31 ) IT appears that the said provision starts with a non-obstante clause which excludes the other provisions relating to jurisdiction contained elsewhere in this Part or any other law for the time being in force. ( 32 ) SECTION 42 of the said Act is included in Part I of the said Act, as the said Part contains Sections 2 to 43. Thus, the provisions relating to jurisdiction to entertain the application for setting aside the award, as contained in Section 34 read with Section 2 (e) of the said Act becomes ineffective in view of the non-obstante clause contained in Section 42 of the said Act. ( 33 ) LET me now consider the submission of Mr. Bhattacharya with regard to the applicability of Section 42 of the said Act to a post award proceeding. ( 34 ) IT is no doubt true that the commencement of arbitral proceeding and termination thereof has been provided in Sections 21 and 32 of the said Act respectively. Section 32 of the said Act makes it clear that the arbitration proceeding terminates by the final award or by an order of arbitral tribunal under Sub-section (2) thereof. Sub-section (3) of Section 32 makes it clear that subject to Section 33 and sub-section (4) of Section 34, the mandate of the arbitral Tribunal shall terminate with the termination of the arbitral proceedings. Sub-section (3) of Section 32 makes it clear that subject to Section 33 and sub-section (4) of Section 34, the mandate of the arbitral Tribunal shall terminate with the termination of the arbitral proceedings. ( 35 ) SECTION 33 of the said Act deals with correction and interpretation of award; additional award, while sub-section (4) of the said Act provides that on receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such action as in the opinion of arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. ( 36 ) THE enforcement of an arbitral award can be made under Section 36 of the said Act only when the time for filing an application for setting aside the arbitral award under Section 34 has expired or such an application having been made, has been refused. Thus, the scheme of the said Act makes it clear that the award passed in an arbitral proceeding can be enforced only after the determination of the application for setting aside the award, if any, made by the opposite parties. ( 37 ) UNLIKE under the provisions of the old Act of 1940, the provisions for filing the award in Court and for passing judgment upon award by the court is no longer necessary for enforcement of the award passed under the provisions of the present Act. Under the Scheme of the old Act of 1940, various types of applications after the passing of the award were contemplated. Section 15 of the said Act authorised the Court to modify the award. Section 17 of the said Act provided for passing of the judgment in terms of the award. The award, thus, will become enforceable only after passing of the judgment upon award under Section 17 of the Arbitration Act of 1940. ( 38 ) UNDER the provision of the present Arbitration and Conciliation Act of 1996, as I have indicated above that the award itself becomes final and enforceable subject to Section 34 of the said Act. The award, thus, will become enforceable only after passing of the judgment upon award under Section 17 of the Arbitration Act of 1940. ( 38 ) UNDER the provision of the present Arbitration and Conciliation Act of 1996, as I have indicated above that the award itself becomes final and enforceable subject to Section 34 of the said Act. Under the present Act, only three types of post arbitral proceeding are contemplated; one in Section 33, i. e. , for correction and interpretation of award; additional award and another in Section 34 of the said Act, i. e. , for application for setting aside the arbitral award and another under Section 9 of the said Act. ( 39 ) IN any event, it cannot be said that the proceeding for setting aside of an award is an independent proceeding having no co-relation with the arbitral proceeding which commences under Section 21 of the said Act. The grounds for setting aside the award, as mentioned in Section 34 (2) of the said Act have definite co-relation with the arbitral proceeding. As such, when section 42 of the said Act gives a mandate for filing all subsequent applications arising out of that agreement and arbitral proceedings in that court, in my view, the said provision refers to any subsequent application arising out of the arbitral proceedings which includes post arbitral proceedings also. As such, when the application for setting aside an award is an application arising out of an arbitral proceeding, the provisions of section 42 of the said Act definitely applies to the proceeding under Section 34 of the said Act. ( 40 ) THUS, though the application for setting aside an award is no doubt a post award proceeding, but in my considered view, the exclusion of jurisdiction of other Courts as provided in Section 42 of the said Act applies to the proceeding under Section 34 of the said Act. ( 41 ) BEFORE, parting with, let me consider the effect of the decision which was cited by Mr. Bhattacharya in the case of P. Anand Gajapathi Raju (supra) has no application in the facts of the instant case. ( 41 ) BEFORE, parting with, let me consider the effect of the decision which was cited by Mr. Bhattacharya in the case of P. Anand Gajapathi Raju (supra) has no application in the facts of the instant case. ( 42 ) ON careful consideration of the said decision, it appears to me that the Hon'ble Supreme Court found that the Court while referring a dispute to arbitrator under Section 8 of the said Act may not be the Court as defined in section 2 (e) of the said Act. In such a context, the Hon'ble Supreme Court he/d that under such a situation, the Court as defined in Section 2 (e) of the said Act will have the jurisdiction to entertain the application for setting aside the award. ( 43 ) THE effect of submission of the parties to any Court as defined under Section 2 (e) of the said Act in connection with the proceedings under sections 9, 31, 38 and 39 of the said Act, was not considered by the Hon'ble supreme Court in the said decision. ( 44 ) SECTION 8 of the said Act confers jurisdiction upon any Civil Court, be it a principal Court of the district or any Court subordinate to such principal court of the district to refer the parties to arbitration where there is an arbitration agreement. Reference may be made in this regard to the decision of the Hon'ble Supreme Court in the case of Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums, reported in AIR 2003 SC 2881 : (2003)2 wblr (SC) 559. ( 45 ) THUS, whenever it is brought to the notice of any Court even if such court is subordinate to the Court of the principal Court of the district that there is an arbitration agreement between the parties concerning the same dispute before such Court, the,said Court can refer the parties to the arbitration proceeding but in any even the said Court being not a Court as defined under Section 2 (e) of the said Act, cannot entertain any application in connection with the arbitral proceeding. ( 46 ) ACCORDINGLY, I do not find any substance in the submission of Mr. Bhattacharya, rather I find much substance in the submission of Mr. Bachwat. ( 46 ) ACCORDINGLY, I do not find any substance in the submission of Mr. Bhattacharya, rather I find much substance in the submission of Mr. Bachwat. Though the scheme under the old Act is different from the scheme for arbitration as provided under the new Act but still then the principles decided by the Hon'ble Supreme Court which were relied upon by Mr. Bachwat has application in the facts of the instant case as the object for exclusion of jurisdiction of the Court other than the Court to whose jurisdiction the parties have already submitted, is same in both the said provisions under the old act as well as in the new Act. ( 47 ) ACCORDINGLY, I hold that since the parties already had submitted to the jurisdiction of this Court in its Ordinary Original Civil Jurisdiction in connection with different earlier proceedings arising out of the said contract, as indicated above, the jurisdiction of the Court of the learned District Judge at Jalpaiguri to entertain the said application for setting aside of the award was excluded under Section 42 of the said Act. Thus, I find that this Court in its Ordinary Original Civil Jurisdiction is the only Court which can entertain an application for setting aside the said award. ( 48 ) THE revisional application, thus, stands allowed. The impugned notice is, thus, quashed. ( 49 ) THE learned District Judge, Jalpaiguri is directed to return the said application for setting aside the award to the opposite parties for refiling the same before this Court in its Ordinary Original Civil Jurisdiction.