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High Court Of Delhi
JAGSON AIRLINES LIMITED - Appellant
Versus
BANNARI AMMAN EXPORTS (P) LIMITED - Respondent
ORIGINAL MISCELLANEOUS PETITION 146 of 2003
Decided On : 04/28/2003
Held:
The determining criteria to decide the jurisdiction of a court as envisaged in
Section 2(1)(e) of the Act is the court where the claims of a party to be preferred before the Arbitrator if converted into a suit are maintainable. In the instant case both the parties against whom the respondent has filed statement of claims before the learned Arbitrator have their registered office at New Delhi and Section 20 of CPC provides jurisdiction to the court where any of the parties resides or has registered office or principal office or subordinate office. Thus on the premise of Section 2(1)(e) of the Act which is on the parameter of Section 20 of CPC the Delhi Court has jurisdiction to try the suit and as such has the jurisdiction to entertain any action envisaged under the Arbitration Act.
Application under Section 8 of the Act which was moved by the petitioners before the Chennai High Court where plea was taken that the suit filed by the respondent was barred by arbitration clause. Now the question arises whether an application under Section 8 of the Act is an application as contemplated by Section 42 or not. In other words whether application referred in Section 42 encompasses an application under Section 8 of the Act or not.
Mere filing of application under Section 8 of the Act would not provide jurisdiction to the court.
It is thus beyond the pale of controversy that the application under Section 8 is not an application providing jurisdiction to the court as contemplated by Section 42 of the Act.
Therefore, (1) That the parties had agreed by way of arbitration agreement as to the place of arbitration being New Delhi.
(2) The Division Bench of Madras High Court only recorded the agreement between the parties as to the common named Arbitrator. Former Judge of the Supreme Court was appointed as a common arbitrator for deciding disputes arising from two different agreements.
(3) That even the Arbitrator was conscious of the fact that parties had neither agreed to the change of venue nor had given go by to the earlier agreements and thereforee the Arbitrator rightly referred the matter for the decision of the High Court.
(4) That the Division Bench of the Madras High Court in the subsequent order did not decide the question whether the parties had agreed to the change of place of arbitration and had given go by to the earlier agreements executed between them and left it to the Honble Arbitrator to decide the place of arbitration against the decision of the Arbitrator that it was for the High Court to decide the question as to the venue.
(5) That the Arbitrator decide the application as to whether the parties had agreed as to the change of venue of arbitration proceedings or not without any jurisdiction.
(6) That the competent court in terms of Section 2(1)(e) of the Act is the court at New Delhi because of the petitioner not only having regd. Office at New Delhi but also that if the claims of the respondent are converted into civil suit, the civil suit will lie at New Delhi.
(7) That the application under Section 8 moved by the petitioner before the Chennai High Court was not an application contemplated under Section 42 of the Arbitration Act as this application emerged from the arbitration clause and was not an application seeking substantive relief under the Agreements.
In view of the foregoing reasons, the petition is allowed. The order passed by the Arbitrator is set aside. The arbitration proceedings shall now be conducted in terms of Clauses 43 and 44 of the agreements at New Delhi by Justice S. Natarajan appointed by the Chennai. High Court and if it is not possible for the Arbitrator to conduct the proceedings at New Delhi, the parties may choose another common Arbitrator within one month failing which they will have the liberty to approach this court for appointment of a new Arbitrator.
( 1 ) A very interesting question of law has cropped up in this petition. The question is whether the order passed by the Arbitrator as to the place of arbitration is challengeable by way of a petition under Section 20 of the Arbitration and Conciliation Act, 1996. The nature of question is such that decision will vary from the facts of each case.
( 2 ) AT the outset, Ms. Indu Malhotra learned counsel for respondent No. 1 has contended that the order of the arbitrator deciding the application of the petitioner as to the place of arbitration does not come within the ambit of an interim award and is therefore, not challengeable and the remedy available to the aggrieved party is by way of challenging the final award under Section 34 of the Arbitration and Conciliation Act, 1996 which includes the challenge as to the place/ venue of arbitration. In support of this contention, Ms. Malhotra has relied upon Sanshin Chemicals Industry vs. Oriental Carbons and Chemicals Ltd. (2001) 3 SCC 341 wherein the Supreme Court observed that though the decision on the question of venue is of utmost importance yet the contention that an aggrieved party has no right to assail the decision once the said decision has not been assailed at the stage when the decision was taken, does not appear to be correct. It was further observed that the aforesaid contention is not correct because the ultimate arbitral award could be assailed on the ground indicated in sub- section (2) of Section 34 and an erroneous decision on the question of venue which ultimately affected the procedure that has been followed in the arbitral proceedings could come within the sweep of Section 34 (2) of the Act and as such it can not be said that an aggrieved party has no remedy at all.
( 3 ) AS is apparent, the ratio of this decision is that the aggrieved party has a right to assail the decision of the arbitrator as to the place of arbitration at the stage when the decision is taken and cannot be forced to wait for the arbitral award and then challenge the decision of the arbitrator as to the place of arbitration. What was held by the Supreme Court is that if an aggrieved party does not challenge the decision of the arbitrator as to the place of arbitration at the stage when the decision is taken by the arbitrator it does not mean that the said party has no remedy left. The aggrieved party has still the remedy of challenging the correctness of the decision of the arbitrator on the question of venue when it assails or challenges the award under the provisions of Section 34 of the Act as such a decision of the arbitrator also comes within the sweep of Section 34 (2 ).
( 4 ) IN the instant case, the aggrieved party has rushed to this Court the moment the arbitrator has returned the decision on the place of arbitration and to tell the petitioner that he should wait for the arbitral award and then come before this Court by way of provisions of Section 34 of the Act would be not only counter productive but highly preposterous and far- fetched proposition as in case the decision of the arbitrator as to the place of arbitration is set aside in the petition under Section 34 of the Act, the whole proceedings get vitiated and the time wasted by the arbitrator, the money spent by the parties and the tortuous exercise in certain cases undergone by the parties and the arbitrator would be rendered nugatory, tautologous and futile. This is neither the object of the adjudication of disputes by way of mechanism of alternative disputes resolution through arbitration nor the intention. The object is to decide the disputes expeditiously without involving enormous expenses and without subjecting the arbitration proceedings or the award to the mill of bringing parties and the proceedings to a grinding halt. If the decision on the question like place of arbitration emanating from the arbitration clause by virtue of which the parties have chosen some different place other than one determined
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