JThe tussle over jurisdiction has repeatedly surfaced in arbitration proceedings, forcing the Supreme Court to step in repeatedly to settle disputes. In Managing Director East Coast Railway Rail Sadan and Anr v Hindustan Construction Co Ltd, the appellant and the respondent entered into a contract which subsequently gave rise to a dispute.
The defendant, the original plaintiff in the case, commenced proceedings before the Visakhapatnam Supplementary District Judge under Section 9 of the Arbitration and Conciliation Act 1996, seeking an interim injunction against the collection of the performance bank guarantee and the confiscation of the security deposit. .
Section 9 of the Arbitration Act provides that a party may ‒ before or during arbitration proceedings or at any time after an award is made but before its execution ‒ file a request for an award of an interim injunction. The application for an interim injunction was granted.
The appellant initiated arbitration proceedings by appointing an arbitral tribunal to rule on the dispute. However, the defendant questioned the validity of the tribunal and filed an application with the High Court of Orissa for the appointment of an arbitrator. The court, exercising its powers under section 11(6) of the Arbitration Act, appointed an arbitrator to resolve the dispute between the parties.
The appellant challenged the verdict and filed a civil appeal with the Supreme Court in light of section 42 of the law which deals with the jurisdiction of the courts.
Prior to filing a claim under Section 11(6) of the Act in the Orissa High Court at Cuttack, the Respondent filed a claim under Section 9 of the Act in the Court of Visakhapatnam. The Appellant argued that in view of Section 42 of the Act, the High Court of Andhra Pradesh would have sole jurisdiction to adjudicate subsequent claims arising out of the contractual agreement, and that any further arbitration proceedings would be held in the High Court of Andhra Pradesh and no other court.
After much deliberation, the bench came to the conclusion that the appellant was correct in asserting that the High Court of Andhra Pradesh had jurisdiction to appoint the arbitrator under Section 11(6) of the Act, and that the Orissa High Court erred in its decision. We also relied on section 42 of the law, which reads as follows:
“42. Jurisdiction. – Notwithstanding anything contained elsewhere in this Part or in any other law then in force, where in respect of an arbitration agreement a claim under this Part has been filed in a court , that court shall have sole jurisdiction to hear the arbitral proceedings and all subsequent claims arising out of this agreement and the arbitral proceedings shall be made in that court and in no other court.
In light of this, the appeal was upheld and the judgment and order of the Orissa High Court, as well as the appointment of the sole arbitrator, were set aside. The court had no power to consider the claim made under section 11(6) of the law regarding the contractual arrangement. Furthermore, the defendant had filed an interim application in the High Court of Andhra Pradesh under Section 9 of the Act. Therefore, the request for the appointment of the arbitrator could only be considered by the High Court of Andhra Pradesh.
The High Court added that even after the case has been referred to arbitration, the arbitrator must be free to decide his or her own jurisdiction, including the existence of the arbitration agreement, under the article 16 of the law on arbitration and conciliation. The court appointed a sole arbitrator and referred the parties to arbitration.
The Dispute Summary is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi and Mumbai. Authors can be contacted at support@numenlaw.com. Readers should not act upon this information without seeking professional legal advice.