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2024 Supreme(Guj) 2249
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SUNITA AGARWAL, CJ, PRANAV TRIVEDI, J.
Uttar Gujarat Vij Company Limited – Appellant
Versus
Gupta Power Infrastructure Limited – Respondent
R/First Appeal No. 1728 Of 2022, Civil Application (For Stay) No. 1 Of 2022
Decided On : 24-12-2024
For The Appellant : Mr. Maulik G. Nanavati With Ms. Manvi Damle And Mr. Kishan Patel For Nanavati & Co.
For The Respondent: Mr Saurabh G Amin
Contractual exclusive jurisdiction clauses survive statutory arbitration proceedings unless the special legislation expressly bars such agreements. Parties' autonomy in selecting a forum for setting aside an arbitral award remains protected under the general arbitration framework despite the mandatory venue provisions of the special enactments.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 2(1)(e), 2(4), 7, 34, and 37 - Micro, Small and Medium Enterprises Development Act, 2006 - Sections 15, 16, 17, 18, 19, and 24 - Contractual jurisdiction - Challenge to arbitral award - Principle of party autonomy - The special enactment governing dispute resolution for enterprises does not override the parties' right to agree upon an exclusive forum for subsequent legal challenges. (Paras 25, 27-29)
(B) Seat vs. Venue - Distinction between conducting proceedings and determining judicial forum - Contractually agreed exclusive jurisdiction clauses survive the initiation of statutory arbitration if the special statute does not explicitly bar such agreements regarding court jurisdiction. (Paras 22, 33)
(C) Appeal - Scope - An order rejecting an application for setting aside an arbitral award on the ground of territorial jurisdiction is appealable under the governing arbitration legislation, as it constitutes a denial of the remedy. (Para 40)
Facts of the case:
A dispute arose between parties regarding contractual supply agreements. The matter was referred to a statutory council for arbitration. Upon the passing of the award, one party challenged the decision under arbitration law in a court situated where the tender had been accepted. The lower court dismissed the application, holding that the statutory council's location conferred exclusive jurisdiction to another forum, citing the special legislation as overriding the agreement. This appeal followed.
Findings of Court:
The appellate court determined that the special legislation fixes the venue for arbitration but does not override the fundamental right of parties to designate an exclusive court for disputes. The contractual choice of forum remains valid and enforceable in proceedings to challenge an industrial award, as the special statute does not restrict the jurisdiction of courts defined under general arbitration law.
Issues: Whether the provisions of a special enterprise development statute fixing the location for arbitration proceedings override a contractual clause establishing exclusive jurisdiction in a different court for challenging such awards.
Ratio Decidendi: The court maintained that statutory mechanisms for conciliation and arbitration replace the procedural mode of tribunal constitution, but do not replace the parties' agreement on judicial competency for challenges under the general arbitration law. The special statute's overriding effect is limited to the arbitration stage; once concluded, the challenge to an award is governed by the general framework where contractual forum choice remains paramount.
Result: Appeal allowed; the lower court's finding of lack of jurisdiction was set aside, and the petition for setting aside the award was restored for trial on merits.
| Table of Content |
|---|
| 1. factual background and contractual jurisdiction provisions governing the dispute. (Para 1 , 2 , 3 , 23) |
| 2. appellant's submission on seat vs. venue determination based on exclusive jurisdiction clauses. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10) |
| 3. respondent's argument that msmed act provisions override contractual jurisdiction clauses. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21) |
| 4. the court's analysis confirming that jurisdiction clauses survive statutory arbitration under msmed act. (Para 22 , 24 , 25 , 27 , 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36) |
| 5. applicability of persuasive precedents and the maintainability of an appeal under section 37. (Para 37 , 38 , 39 , 40) |
| 6. final order setting aside the lower court's finding on lack of territorial jurisdiction. (Para 41 , 42) |
JUDGMENT :
SUNITA AGARWAL, CJ.
The present appeal is directed against the judgment and order dated 5.4.2022 passed by the Commercial Court, 5th Additional District Judge, Mehsana in rejecting the application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Arbitration Act, 1996’) challenging the arbitral award dated 30.07.2016 passed by the Micro, Small and Medium Enterprises Facilitation Council (MSMEFC) in MSMEFC Case No. 26 of 2014. The application under Section 34 has been rejected on the ground that the Court at Mehsana has no jurisdiction to try, entertain and dispose of the application, inasmuch as, the territorial jurisdiction to challenge the MSME Facilitation Council’s award is with the Court in the State of Odisha as the seat of MSMEF Council would be the seat of arbitration in the spirit of Section 18 read with section 24 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as ‘the MSMED Act, 2006).
2. It was held by the Commercial Court that the seat of arbitration is fixed by virtue of Section 18 of the Act’ 2006 at a place where MSMEF Arbitrator has jurisdiction, which is the place where supplier is located. The location of the supplier being at Cuttack, Odisha, the District Court at Cuttack, Odisha alone has jurisdiction to entertain the application under Section 34 of the Arbitration Act’ 1996 to the exclusion of all other Courts by virtue of Section 18 and 24 of the MSMED Act’ 2006.
3. Mr. Maulik G. Nanavati, the learned advocate appearing for the appellant invited attention of the Court to the Clauses 44 and 45 of the contract entered into between the parties, which read as under:-
“44. Jurisdiction:- All questions, disputes or differences arising under out of or in connection with the tender/contract, if concluded, shall be subject to the exclusive jurisdiction of the Court under whose jurisdiction the place from which the tender/acceptance of tender is issued, is situated.”
“45. Arbitration :- All questions, disputes or differences whatsoever which may at any time arise between the parties to this agreement touching the agreement or subject matter thereof, arising out of or in relation there to and whether as to construction or otherwise, shall be referred to the decision of this Sole Arbitrator, appointed by the Chairman, UGVCL, for that purpose, who shall be a retired High Court Judge or retired District and Sessions Judge, and the decision of the said Arbitrator shall be final and binding upon the parties. Reference to the Arbitration shall be governed by the provisions of Indian Arbitration and Conciliation Act, 1996 as amended from time to time and the rules made thereunder.”
4. It was argued that by virtue of Clause 44 read with Clause 45, only the Court at Mehsana was having jurisdiction to deal with all questions, disputes or differences arising out of the or in connection with the tender/contract. The exclusive jurisdiction is conferred to the Court at Mehsana by the parties under whose jurisdiction, the place where tender/acceptance of tender was issued, is situated. It was argued that even though the venue of arbitrati
