Telangana High Court
The Singareni Collieries Company ... vs M/S. Ama Industries Pvt. Ltd., on 28 May, 2025
Author: T. Vinod Kumar
Bench: T. Vinod Kumar
THE HON'BLE SRI JUSTICE T. VINOD KUMAR
AND
THE HON'BLE SRI JUSTICE PULLA KARTHIK
CIVIL REVISION PETITION No. 882 of 2019
ORDER:
1. This Civil Revision Petition is filed aggrieved by the docket order dated 31.12.2018 in Memo. S.R. No.6041 of 2018 in C.O.P. No. 84 of 2018 passed by the Commercial Court Judge - cum - XXIV Additional Chief Judge, City Civil Court, at Hyderabad.
2. Heard Sri P. Sri Harsha Reddy, learned counsel for the petitioner and Smt. Manjari S. Ganu learned counsel representing Sri Sunil B. Ganu, learned counsel for the respondent No.1 and perused the record.
3. The respondent No.1 herein filed the aforesaid C.O.P under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act, 1996') challenging the Arbitration Award dated 16.04.2018. The petitioner herein is the respondent No.1 before the court below.
4. The petitioner herein, filed the underlying memo raising a preliminary objection that the Commercial Court, Hyderabad did not have jurisdiction to entertain the subject O.P. under Section 42 2 of the Act, 1996, since previously the 1st respondent herein had filed A.O.P. No.402 of 2016 before the District Court, Khammam under Section 9 of the Act, 1996. The Respondent No.1 herein filed his reply memo contending that Hyderabad is the seat of arbitration, since the arbitral proceedings were conducted and the award was also passed in Hyderabad. The petitioner thus contended that the courts located at the seat of arbitration had jurisdiction to deal with the award passed by the arbitral Tribunal.
5. The Court below placing reliance on the decision of the Supreme Court in Indus Mobile Distribution Pvt Ltd., Vs. Datawind Innovations Pvt Ltd.1, dismissed the said memo holding that an application under Section 34 of the Act, 1996 is to be filed where the arbitration took place and where the arbitration place is fixed. The present revision is preferred aggrieved by the said order. Contentions of the Petitioner:
6. Learned Counsel appearing for the petitioner contends that, Section 42 of the Act, 1996 which starts with a non - obstante clause provides that once an application is filed before a Court 1 2017 SCC Online SC 442 3 seeking relief under Part I of the Act, 1996, such Court alone shall have jurisdiction to deal with all subsequent applications arising out of the arbitration agreement including the arbitration proceeding; and since, the Respondent No.1 herein had filed A.O.P. No.402/2016 before the Principal District Judge at Khammam under Section 9 of the Act, 1996 seeking injunction restraining the petitioner herein from encashing the bank guarantee, therefore any subsequent applications would lie to the very same Court by virtue of Section 42 of the Act, 1996.
7. It is further contended that, the Commercial Court at Hyderabad, cannot assume jurisdiction on the ground that the arbitral proceedings were held and the award was passed at Hyderabad, when the tender conditions specifically vest the Courts at Khammam with exclusive jurisdiction; and that the Courts in Hyderabad would have jurisdiction by virtue of the award being passed in Hyderabad, had the earlier application vide A.O.P. No.402/2016 not been filed before the District Judge, Khammam. Contentions of the Respondent No.1:
8. Per contra, learned Counsel for the respondent No.1 contends that, though the tender conditions vide Enq. No. 4 E1313O0427 dated 24.02.2014 clothes the Courts at Khammam to have jurisdiction, since the petitioner herein had chosen the place of arbitration and conducted the arbitral proceedings in Hyderabad, the Courts at Hyderabad had jurisdiction to deal with the challenge under Section 34 of the Act, 1996.
9. By placing reliance on the decision of the Supreme Court on Indus Mobile's case (supra) and Hindustan Construction Company Ltd Vs NHPC Ltd & Anr2, it is contended that the moment a seat of arbitration is fixed, the same amounts to conferring exclusive jurisdiction on the Courts located at the seat of arbitration to supervise the arbitral proceedings including any challenge to the award passed. Therefore, only the Commercial Court at Hyderabad had jurisdiction to adjudicate the aforesaid C.O.P. Considerations by this Court:
10. The only question falling for consideration of this Court is whether by operation of Section 42 of the Act, 1996, the jurisdiction of the Commercial Court in Hyderabad, stands ousted 2 (2020) 4 SCC 310 5 on account of Section 9 application filed before the District Court, Khammam?
11. Before proceeding with the facts on hand, it is appropriate to consider the law relating to jurisdiction of Courts under the Act, 1996.
12. Section 2(1)(e)(i) of the Act, 1996 defines the term 'Court' as a Court having jurisdiction to decide the subject matter of the dispute. That being said Section 20 recognizing party autonomy in arbitration, provides that parties were free to choose the place of arbitration. Thus, both the Courts having subject matter of jurisdiction and the Courts located at the seat have jurisdiction over the arbitral proceedings.
13. However, Section 42 of the Act, 1996 defines the jurisdiction of the Court as under:
Section 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 sequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.
According to Section 42, the moment of any application under Part I of the Act, 1996 is made before a Court, the said Court alone has jurisdiction for all subsequent proceedings, including the arbitral 6 proceedings. Therefore, Section 42 of the Act, 1996 contemplates an ouster of jurisdiction.
14. A Full Bench of the Hon'ble Supreme Court in BGS SGS SOMA JV vs. NHPC Ltd.3, referring extensively to its previous decisions including the decision in Indus Mobile's case (supra), answered the question of when the ouster of jurisdiction under Section 42 of the Act, 1996 operates. The relevant observations are as under:
"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 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 3 (2020)4SCC234 7 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."
Thus, once a seat of arbitration is decided, the Courts at the place of seat of arbitration alone shall have exclusive jurisdiction. The ouster of jurisdiction provided under Section 42 of the Act, 1996 applies only in cases where an application under Part I of Act, 1996 is filed before a Court having jurisdiction where cause of action arises before the seat of arbitration is decided. In other words, from the moment a seat is designated under the arbitration agreement, the Courts located at the seat of arbitration becomes the court having subject matter of jurisdiction under Section 2(1)(e)(i) of the Act, 1996.
15. Again, the Hon'ble Supreme Court in BBR (India) Private Limited vs. S.P. Singla Constructions Private Limited 4, relying on the decision in BGS SGS SOMA's case (supra), held that Section 42 of the Act, 1996 was enacted to avoid conflict of jurisdiction and that the said Clause would only apply where the seat of 4 (2023)1SCC693 8 arbitration is not designated. The relevant observations are as under:
"31. We have already referred to the first few sentences of the aforementioned paragraph and explained the reasoning in the context of the present case. The paragraph BGS SGS Soma (supra) also explains the non-obstante effect as incorporated in Section 42 to hold that it is evident that the application made under Part-I must be to a court which has a jurisdiction to decide such application. Where 'the seat' is designated in the agreement, the courts of 'the seat' alone will have the jurisdiction. Thus, all applications under Part-I will be made in the court where 'the seat' is located as that court would alone have jurisdiction over the arbitration proceedings and all subsequent proceedings arising out of the arbitration proceedings. The quotation also clarifies that when either no 'seat' is designated by an 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. An application Under Section 9 of the Act may be preferred before the court in which a part of cause of action arises in the case where parties had not agreed on the 'seat of arbitration'. This is possible in the absence of an agreement fixing 'the seat', as an application Under Section 9 may be filed before 'the seat' is determined by the arbitral tribunal Under Section 20(2) of the Act. Consequently, in such situations, the court where the earliest application has been made, being the court in which a part or entire of the cause of action arises, would then be the exclusive court Under Section 42 of the Act. Accordingly, such a court would have control over the arbitration proceedings."
Therefore, as seen from above where the agreement fixes a seat of arbitration only Courts located at such seat of arbitration had exclusive jurisdiction to deal with all proceedings arising out of the arbitration agreement. However, in cases where the agreement does not designate a seat of arbitration and an application under Part I of the Act, 1996 is filed before fixing of the seat of arbitration, then such court where the earliest application was made, has jurisdiction 9 over all subsequent proceedings including challenge against the arbitral award.
16. In conclusion, the aforesaid decisions enunciate the operation of the bar under Section 42 of the Act, 1996 as under:
i. The definition of Court under section 2(1)(e)(i) of the Act, 1996, where the arbitration agreement fixes the seat of arbitration, ordinarily means only the Courts at the located at the seat of Arbitration.
ii. Thus, the moment a seat of arbitration is decided the same acts as an exclusive jurisdiction clause divesting all other Courts of their jurisdiction. Thereafter, filing an application before any other Court is non - est in the eye of law. Hence the bar under Section 42 of the Act, 1996 does not apply in such situations.
iii. In cases where the seat of arbitration is yet to be determined and an application under Part I of the Act, 1996 is made to the Court having subject matter jurisdiction, such Court becomes the Court having jurisdiction to deal with all further proceedings including the arbitral proceedings. The ouster contemplated under Section 42 of the Act, 1996 applies 10 thereby barring the jurisdiction of all other courts including the Courts at the seat of arbitration.
17. In the facts at hand, the dispute resolution Clause in the tender conditions vide Enq. No. E1313O0427 dated 24.02.2014 is as under:
"17. ARBITRATION:
Normally all disputes should be settled by negotiations between the company and the concerned parties.
In case any dispute/difference is not settled through negotiations, the respective parties can seek remedy by Arbitration.
a. The Arbitrator (s) will be appointed to resolve the disputes between the parties. The Chairman & M.D. of the S.C.Co.Ltd., is having absolute power to appoint a single Arbitrator or more than one Arbitrator or to refer the dispute to the Institutional Arbitration at his discretion and his decision is final and binding on the parties. The appointed Arbitrator(s)/ Institutional Arbitration should pass a seasoned award and the parties should bear the costs of the Arbitration equally b. If any of the Arbitrators appointed by the Chairman & M.D of the S.C.Co. Ltd., is unable to continue as an Arbitrator for any reasons whatsoever or if the Chairman & M.D of the S.C.CO.Ltd., for the reasons to be recorded in writing thinks fit for appointment of a new Arbitrator in the place of existing Arbitrator, he is having a power to do so. If such a new Arbitrator is appointed, he can either continue the arbitration proceedings from the stage where the earlier Arbitrator discontinued his proceedings or alternatively the new Arbitrator may start proceedings de novo if the circumstances warrant him to do so."
18. The jurisdiction clause in the tender conditions vide Enq. No. E1313O0427 dated 24.02.2014 is as under:
"19. JURISDICTION: The Court at Khammam district in the state of Andhra Pradesh only shall have jurisdiction to deal with and decide any legal matter or 11 dispute whatsoever arising out of this contract including disputes arising on encashment of Bank Guarantees."
19. It is pertinent to note that the arbitration does not fix any place either as a venue of arbitration or as the seat of arbitration. However, the jurisdiction clause vests the courts at Khammam to have jurisdiction to deal with any legal matter or disputes arising out of the contract.
20. In the facts at hand, the Respondent No.1 herein filed A.O.P. No. 402 of 2016 before the Principal District Judge, Khammam, on 11.07.2016. The contentions in the claim petition therein reveal that though the respondent No.1 had sent a notice dated 05.07.2016 seeking appointment of an arbitrator, no reply was issued to the said notice, and as such the respondent No.1 herein had sought the interim relief under Section 9 of the Act, 1996. The Court below at Khammam on the first hearing in A.O.P. No. 402 of 2016, issued an interim injunction on the very same day vide order dated 11.07.2016 in I.A. No.855 of 2016. Thereafter, the petitioner herein vide notice dated 20.10.2016 appointed a sole arbitrator. However, even in the said notice no place is proposed as the seat of arbitration. Therefore, at the time of filing the application under Section 9 of the Act, 1996 there was no designated seat of 12 arbitration. Thus, the bar under Section 42 of the Act, 1996, squarely applies vesting the Courts at Khammam with supervisory jurisdiction over the arbitral proceedings, and divesting the jurisdiction of other courts including the Courts located at the seat of arbitration.
21. Further, it is to be noted that the said A.O.P. was partly allowed on extending interim injunction restraining the petitioner herein from encashing the bank guarantee to an extent of balance amount of Rs. 12,60,000/- after adjustment till the arbitral proceedings were completed. Thus, this Court is of the view that the respondent No.1 herein having obtained an interim protection from the Principal District Court at Khammam, till the conclusion of the arbitral proceedings is estopped from reprobating that the very same Court lacks supervisory jurisdiction over the arbitral Tribunal.
22. The Supreme Court in P.R. Deshpande Vs. Maruti Balaram Haibatti 5, held as under:
5
(1998)6SCC507 13 "5. Relying on those decisions Agrawal, J., speaking for the two Judge Bench in R. N. Gosain v. Yashpal Dhir, MANU/SC/0078/1993 : AIR1993SC352 (supra) has observed thus:
"Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that 'a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage."
8. The doctrine of election is based on the rule of estoppel - the principle that one cannot approbate and reprobate inheres in it. Doctrine of estoppel by election is one of the species of estoppel in Pais (or equitable estoppel) which is a rule in equity. By that rule a person may be precluded by his actions or conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had (vide Black's Law Dictionary, 5th Edn.)"
23. Though the counsel for the respondent No.1 had placed reliance on the decision rendered in Hindustan Construction's case (supra), the same does not support his contention as it was observed that the arbitration agreement fixed the seat of arbitration as Delhi.
24. Therefore, in the light of the foregoing discussion this Court is of the view that, the underlying C.O.P. filed challenging the arbitral award dated 16.04.2018 under Section 34 of the Act, 1996, is to be presented before the appropriate Court having jurisdiction in Khammam.
25. Accordingly, the present Civil Revision Petition is allowed.
The impugned docket order dated 31.12.2018 in Memo. S.R.No. 14 6041 of 2018 in C.O.P. No. 84 of 2018 passed by the Commercial Court Judge - cum - XXIV Additional Chief Judge, City Civil Court, at Hyderabad is set-aside. The respondent No.1 herein is directed to re-present the same before the appropriate Court having jurisdiction in Khammam.
26. Pending miscellaneous applications if any shall stand closed.
No order as to costs.
___________________ T. VINOD KUMAR, J ___________________ PULLA KARTHIK, J Date:28.05.2025 VSV/MRKR 15 THE HON'BLE SRI JUSTICE T. VINOD KUMAR AND THE HON'BLE SRI JUSTICE PULLA KARTHIK CIVIL REVISION PETITION No.882 of 2019 .08.2023 VSR/MRKR