The National Thermal Power Corp. vs R.S. Avtar Singh & Co. And Anr.
2001 Latest Caselaw 1378 Del

ORDER

V.S. Aggarwal, J.

1. The short question which craves for an answer is as to whether the present application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short the Act) could be filed in this court or not.

2. This question arises in view of the facts to be delineated hereinafter. An application had been filed in this court and on 28th May, 1998 in OMP 25/97 this court held that no case was made out for appointment of the arbitrator. When the matter went to the Supreme Court with the consent of the parties, Justice S C Agarwal had been appointed as the arbitrator. The operative part of the judgment of the Supreme Court in this regard reads:-

"During the course of hearing of this appeal the parties on both sides have agreed that in the place of the two arbitrators one be nominated by each of the parties, it would be sufficient if the reference is made to a single arbitrator. To this extent parties by consent have modified the original terms of the agreement which no doubt required reference to two arbitrators. Counsel on both sides have stated that no objection will be raised in future that the order of this court appointing single arbitration is contrary to the agreement between the parties. Parties have also agreed that the reference is to be made to Justice S C Agarwal, former Judge of this court and that the respective arbitrators nominated by the parties may be discharged."

3. The arbitrator has since submitted the award and the applicant National Thermal Power Corporation has submitted the application under Section 34 of the Act against the award passed by the arbitrator dated 7th April, 2000. To this, the objection raised on behalf of the respondent has been that since the arbitrator had been appointed by the Supreme Court of India, therefore, the present application under Section 34 of the Act could only be filed in that court and not in this court.

4. Before proceeding further in this regard, reference can well be made to the salient provisions of the Act relevant for disposal of the said question. Section 2(e) defines the court and reads:

"(e) "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;"

5. In other words, the court is the principal civil court and or original jurisdiction in the District Court and includes the High Court in exercise of its Ordinary Original Civil Jurisdiction. Section 10 of the Act further provides that the parties are free to determine the number of arbitrators provided such number shall not be an even number. Section 11 provides the procedure as to when the arbitrators have to be appointed and circumstances under which the Chief Justice or the institution designated by him or the person designated by him can appoint the arbitrator. Similar provisions exist in case of international commercial arbitrations and reference has to be made to Chief Justice of India. Section 34 further providers the procedure for recourse against the arbitral award. It can only be set aside in terms of sub-section (2) and sub-section 3 to Section 34 of the Act. Section 42 of the Act also assumes importance because it provides as to who can have the jurisdiction to deal with the matter. The said provision reads as under:-

"42. Jurisdiction-Notwithstanding anything contained elsewhere in this Part or in 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 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 and in no other court."

6. On behalf of the applicant it had been submitted that since the application originally had been made in this court, therefore, this court alone has the jurisdiction to deal with the arbitral proceedings that may arise subsequently. According to him, the plain meaning of the words "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."

7. On the contrary, the attention of the court by the respondent has been drawn towards the decision of the Supreme Court in the case of M/s Guru Nanak Foundation vs. M/s Rattan Singh & Sons . This was a decision under the Arbitration Act, 1940. In the cited case, an application had been filed in this court under Section 20 of the Arbitration Act, 1940 for directions to file the arbitration agreement in the court. The suit ended in an order of reference to the arbitrator. A subsequent application was made in this court under Section 5 read with Section 11 of the Arbitration, Act, 1940 for removal of the arbitrator. The said application was dismissed. The matter was taken to the Supreme Court. The supreme Court removed the arbitrator and appointed another person as the arbitrator. Thereafter Supreme Court gave further directions about manner and method of conducting the arbitration proceedings and fixed the time for completion of arbitration proceedings. The Supreme Court held that keeping in view of the these facts and provisions of sub-section (4) to Section 31 of Arbitration Act, 1940 the subsequent application could only be filed in the Supreme Court. The precise findings of the Supreme Court in this regard are to the following effect:-

"... To illustrate the point, if an award was required to be filed under S. 14(2) read with Section 31(1) in any particular court as being the court in which a suit touching the subject-matter of award would have been required to be filed, but if any application in the reference under the Act has been filed in some other court which was competent to entertain that application, then to the exclusion of the first mentioned court the latter court alone, in view of the overriding effect of the provision contained in S. 31(4), will have jurisdiction to entertain the award and the award will have to be filed in that court alone and no other court will have jurisdiction to entertain the same."

8. The petitioner's learned counsel, on the contrary, referred to the decision of the Supreme court in the case of Sundaram Finance Ltd. vs. NEPC India Ltd. wherein the Supreme Court held that the Arbitration and Conciliation Act, 1996 is very different from Arbitration Act, 1940 and therefore provisions of the Act of 1996 has to be construed and interpreted independently. Reference to the Act of 1940 may actually lead to misconstruction. Not only that perusal of the decision in the case of Guru Nanak Foundation (supra) further reveals that in the cited case not only the Supreme Court had independently appointed an arbitrator but had given directions about manner and method of conducting arbitration proceedings. it appears therefore that it was totally an independent appointment of an arbitrator rather than merely disposing an appeal against the judgment of this court. Therefore, not only because the present Act is totally different from the Arbitration Act, 1940 for the above said reason the decision referred to by the respondent's learned counsel will have little impact and thrust with respect to the facts of the present case.

9. Not only that it is abundantly clear from perusal of the Arbitration and Conciliation Act, 1996 that there are material differences because as noted above under Section 42 of the Act the subsequent applications have only to be filed in that court. The expression "Court" in the Arbitration Act, 1940 was to the following effect:

"(c) "Court" means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under Section 21 include a Small Cause Court"

10. The definition of the "Court" under the Arbitration and Conciliation Act, 1996 is totally different. Now it does not mean the civil court having jurisdiction to decide the question. Presently under the definition of court under Section 2(e) of the Arbitration and Conciliation Act, 1996 it has to be the principal court of civil jurisdiction and includes the High Court in exercise of its Ordinary Original Jurisdiction. Keeping in view the pecuniary jurisdiction when application under Section 34 of Act has been filed in this regard indeed in face of the definition of Section 2(e) of the Act this court alone could entertain the same.

11. Reference with advantage can be made to the decision from Allahabad High Court in M/s ITI Ltd. vs. District Judge, Allahabad & Ors. AIR 1998 Allahabad 313. While reading Section 2(e) and Section 42 of the Act the court held:

"A conjoint reading of Sections 2(e) and 42 of the act, leaves no manner of doubt that the parliament intended to make only one Court - The principal Civil Court of original jurisdiction or, as the case may be, the High Court in exercise of its ordinary original jurisdiction, whichever Court is approached earlier, as the venue for all matters connected with an arbitration; and award; and all arbitral proceedings. Secs 2(3) and 42 paraphrased in simple language, would mean that any application with respect to an arbitration agreement will have to be filed in the principal civil Court of original jurisdiction in a district, or, as the case may be, in the original civil jurisdiction of the High Court, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit and that Court alone to which the application is filed shall have the jurisdiction over the entire arbitral proceedings to the exclusion of any other Court, having jurisdiction to decide the questions forming the subject matter of arbitration."

12. The above said finding are in consonance with the finding recorded above.

13. In fact the Supreme Court in the case of P. Anand Gajapathi Raju & Ors. vs. PVG Raju (dead) and Ors. also dealt with the same controversy. In sequence of detailed facts, the Supreme Court held that court to which the party shall have the recourse to challenge the award would be the Court defined in clause (e) of Section 2 of the Act of 1996. It was concluded:

"In the matter before us, the arbitration agreement covers all the disputes between the parties in the proceedings before us and even more than that. As already noted, the arbitration in terms of their arbitration agreement. Nothing remains to be decided in the original action or the appeal arising thereform. there is no question of stay of the proceedings till the arbitration proceedings conclude and the award becomes final in terms of the provisions of the new Act. All the rights, obligations and remedies of the parties would now be governed by the new Act including the right to challenge the award. 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. An application before a court under Section 8 merely brings to the court's notice that the subject-matter of the action before it is the subject-matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the Act as the court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent court within the meaning of Section 2(e) of the new Act."

14. The decision in the case of P. Anand Gajapathi Raju (supra) was followed by the Supreme Court again and reiterated the same view in the case of Tamil Nadu Electricity Board vs. Sumathi & Ors. .

15. Keeping in view the aforesaid, it needs hardly a reiteration that when an application as filed in a court all subsequent applications in view of Section 42 of the Arbitration and Conciliation Act, 1996 has to be filed in the same court. The Court is defined under Section 2(e) of the Act but it includes the High Court in it original jurisdiction. Otherwise the same has to be filed in the principal court of civil jurisdiction. Keeping with the pecuniary jurisdiction it could only be filed in this court and that has been done so.

16. As a result of the reasons given the objection of the respondent's learned counsel is to be negatived and it is held that this court could only entertain the said application.

17. List it on 7th November, 2001 for further directions.