Supreme Court on Section 42 of the Arbitration and Conciliation Act, 1996

[The
following guest post is contributed by Pulkit
Sharma
, Advocate, Bombay High Court]
The Supreme Court
has in the case of State of W.B.
v Associated Contractors
((2015) 1 SCC 32) considered the applicability
of Section 42 of the Arbitration and Conciliation Act, 1996 (“Act”) to applications not made before a
“court” as defined under Section 2(1)(e) of the Act and has laid down the law
in this regard giving details of circumstances to which the bar of Section 42
of the Act would not apply.
Relevant Facts
A contract was
executed between the parties regarding execution of the work of excavation and
lining of a canal in West Bengal. The contract had an arbitration clause.
Respondent had approached the Calcutta High Court for seeking certain interim
orders. Also, for settlement of a dispute, an application was made under
Section 11 of the Act and an arbitrator was appointed by the court. The award
by the arbitral tribunal in favour of the Respondents was challenged by State
of WB under Section 34 of the Act before the Principal Civil Court of the
Learned District Judge at Jalpaiguri, West Bengal. Against this, the Respondent
filed an application under Article 227 of the Constitution challenging the
jurisdiction of the District Court. The Calcutta High Court held that since
parties had already submitted to the jurisdiction of the Calcutta High Court in
its ordinary original civil jurisdiction in connection with different earlier
proceedings arising out of the said contract, the jurisdiction of the court of
the learned District Judge to entertain the said application for setting aside
the award was excluded by Section 42 of the Act and that the Calcutta High
Court in its ordinary original civil jurisdiction is the only court which can
set aside the award. Against this, SLP was filed in the Supreme Court.
Relevant Provisions
Considered by the Supreme Court
The Supreme Court
considered Section 2(1)(e) of the Act which defines ‘Court’ for the purposes of
the Act and Section 42 of the Act for identifying the exclusive jurisdiction of
certain courts over all arbitral proceedings arising from an arbitration
agreement. The court also relied on corresponding provisions of the old 1940
Arbitration Act (Section 2(c) and 31(4)) to identify departures from the
language of the said provisions and identifying clear intent of the legislature
in this respect. Detailed discussion on these provisions along with the text
thereof is available at https://indiacorplaw.in/wp-content/uploads/2015/08/41899.pdf.
Analysis and Judgment
1.         One of the questions considered by the
Supreme Court in the present case was whether the Supreme Court is a ‘Court’
under Section 2(1)(e) of the Act.  The Supreme
Court observed that the definition in the Act (2(1)(e) is materially different
from the one that has been provided under the 1940 Act under Section 2(c). The
court considered a variety of reasons why the Supreme Court cannot possibly be
considered to be ‘Court’ within the meaning of Section 2(1)(e) of the Act
(refer para 20 of the judgment). Firstly, the definition provided in Section
2(1)(e) is exhaustive and recognizes only one of the two possible courts that
could be ‘Court’ under Section 2(1)(e). Secondly, the words “civil court” under
the 1940 Act (which could include an appellate court including the Supreme
Court – though the Supreme Court in the present case expressed doubt over the
proposition that the Supreme Court exercising jurisdiction under Article 136 of
the Constitution is an ordinary appellate court) are not present in Section
2(1)(e) of the Act which only speaks of the Principal Civil Court of Original
Jurisdiction in a district or a High Court exercising ordinary original civil
jurisdiction. Thirdly, if an application could be construed to be preferred
directly to the Supreme Court, then the remedy of appeal under Section 37 of
the Act from applications under Section 9 and 34 of the Act would not be
available and any further appeal under Article 136 of the Constitution would
also not be available. Further, there is no context in Section 42 for the term
‘Court’ to be construed otherwise as defined in Section 2(1)(e) of the Act.
2.
        Another question which the court
considered was whether Section 42 of the Act would apply to cases where an
application made in a court is found to be without jurisdiction. The court
observed (relying on authorities under Section 31(4) of the old legislation) that
the bar of Section 42 of the Act would not apply if it is found that the court
to which the application has been made did not have the jurisdiction. Accordingly,
it may also be observed that where the agreement between the parties restricted
the jurisdiction to only one particular court, that court alone would have
jurisdiction as neither Section 31(4) of the old act nor Section 42 of the Act
contains a non obstante clause wiping out a contrary agreement between the
parties. It has thus been held that applications preferred to courts outside
the exclusive court agreed by the parties would also be without jurisdiction
(para 22 of the judgment).
3.
        The Supreme Court further analysed
other relevant provisions of the Act such as Section 8 and 11 to lay down the
following as regards applicability of the bar provided under Section 42 of the
Act (from para 25 of the judgment):
(a)
       Section 2(1)(e) contains an
exhaustive definition marking out only the Principal Civil Court of original
jurisdiction in a district or a High Court having original civil jurisdiction
in the State, and no other court as “court” for the purpose of Part-I
of the Arbitration Act, 1996.
(b)
      The expression “with respect to
an arbitration agreement” makes it clear that Section 42 will apply to all
applications made whether before or during arbitral proceedings or after an
Award is pronounced under Part-I of the 1996 Act.
(c)
       However, Section 42
only applies to applications made under Part-I if they are made to a court as
defined. Since applications made Under Section 8
are made to judicial authorities and since applications under Section 11
are made to the Chief Justice or his designate, the judicial authority and the
Chief Justice or his designate not being court as defined, such applications
would be outside Section 42.
(d)
      Section 9
applications being applications made to a court and Section 34
applications to set aside arbitral awards are applications which are within
Section 42.
(e)        In no circumstances can the Supreme
Court be “court” for the purposes of Section 2(1)(e),
and whether the Supreme Court does or does not retain seisin after appointing
an Arbitrator, applications will follow the first application made before
either a High Court having original jurisdiction in the State or a Principal
Civil court having original jurisdiction in the district as the case may be.
(f)        Section 42
will apply to applications made after the arbitral proceedings have come to an
end provided they are made under Part-I.
           (g)        If a first application is made to a
court which is neither a Principal Court of original jurisdiction in a district
or a High Court exercising original jurisdiction in a State, such application
not being to a court as defined would be outside Section 42.
Also, an application made to a court without subject matter jurisdiction would
be outside Section 42.
4.         The judgment of the Calcutta High Court
was found to be correct and the appeal was dismissed.
Additional Observation
One of the
observations made by the Supreme Court while discussing Section 11 of the Act
was that the decision of the Chief Justice or his designate [under Section 11
of the Act], not being the decision of the Supreme Court or the High Court, as
the case may be, has no precedential value being a decision of the judicial
authority which is not a Court of Record.
The impact of
this will be analyzed by me in a subsequent post especially in the context of precedential
value of judgment of the Supreme Court in Swiss Timing Limited v Organising Committee ((2014) 6 SCC
677) which held the law laid down by the Supreme Court in the case of N.
Radhakrishnan v Maestro Engineers ((2010) 1 SCC 72) (holding that disputes
containing allegations of serious fraud are not arbitrable) per incuriam.
The said judgment (Swiss Timing) was a decision rendered while dealing with
a petition under Section 11 of the Act and in light of the above, may not now
have a precedential value.
– Pulkit Sharma

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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