Application under Arbitration and Conciliation Act for the appointment of an Arbitrator/Arbitral Tribunal cannot be moved in a High Court irrespective of its territorial jurisdiction: Supreme Court
The Supreme Court ruled that the application under Arbitration and Conciliation Act for the appointment of an Arbitrator/Arbitral Tribunal cannot be moved in a High Court irrespective of its territorial jurisdiction.
Background
The appeals are against an order passed by the Calcutta High Court, allowing the Arbitration Petition filed by the Respondent under Section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of an Arbitrator and also an order passed by the High Court, rejecting an application made by the Appellant for review of the said order.
The Appellant and the Respondent entered into a Development Agreement dated 15th June 2015 for development of property situated at Muzaffarpur in Bihar measuring about 12 Kaithas and 11 Dhurs, more fully described in the said Development Agreement, outside the jurisdiction of 2 Calcutta High Court. The said Development Agreement executed and registered in Muzaffarpur in Bihar, contains an arbitration clause. Differences and disputes arose in relation to the said Development Agreement, giving rise to various proceedings between the parties. The Respondent terminated the said Development Agreement. The Appellant has not accepted the termination of the said Development Agreement.
Arguments
Senior Advocate Ajit Kumar Sinha, appearing on behalf of the Appellant contended that even though the Appellant had opposed the application under Section 11(6) of the A&C Act, objecting to the territorial jurisdiction of the Calcutta High Court, the Calcutta High Court did not decide the objection.
Advocate Sinha submitted that Counsel appearing on behalf of the Appellant in the Calcutta High Court gave consent without instructions from the Appellant. Be that as it may, the Calcutta High Court did not adjudicate the issue of territorial jurisdiction raised by the Appellant in its Affidavit in Opposition filed in the High Court.
Senior Advocate Sanjay Ghosh, appearing on behalf of the Respondents, contended that the Calcutta High Court had the territorial jurisdiction to entertain the application under Section 11(6) of the A&C Act as the seat of arbitration was Kolkata.
Decision
The division bench of Justice Indira Banerjee and Justice A.S. Bopanna stated that as observed by the Constitution Bench, Section 2(2) of the A&C Act places a threshold limitation on the applicability of Part-I, where the place of arbitration is not in India. The Constitution Bench in effect and substance drew a distinction between venue and place of arbitration, as contemplated in Section 20 and held that only if the agreement of the parties was construed to provide for seat/place of arbitration in India, would Part-I of the 1996 Act be applicable. If the seat/place were outside India, Part-I would not apply, even though the venue of a few sittings may have been in India, or the cause of action may have arisen in India.
The court said that it is well settled that a judgment is a precedent for the issue of law that is raised and decided. The judgment has to be construed in the backdrop of the facts and circumstances in which the judgment has been rendered. Words, phrases and sentences in a judgment, cannot be read out of context. Nor is a judgment to be read and interpreted in the manner of a statute. It is only the law as interpreted by an earlier judgment, which constitutes a binding precedent, and not everything that the Judges say.
The court further added that neither of the parties to the agreement construed the arbitration clause to designate Kolkata as the seat of arbitration and held that Calcutta High Court inherently lacks jurisdiction to entertain the application of the Respondent under Section 11(6) of the Arbitration Act. The High Court should have decided the objection raised by the Appellant, to the jurisdiction of the Calcutta High Court, to entertain the application under Section 11(6) of A&C Act, before appointing an Arbitrator.
The court deemed it appropriate to appoint Justice Bhaskar Bhattacharya, Former Chief Justice of the High Court of Gujarat as Sole Arbitrator, to decide the disputes between the parties.
Case title: M/S Ravi Ranjan Developers Pvt. Ltd. v/s Aditya Kumar Chatterjee
Citation: Arising out of SLP (C) No. 17397-17398 of 2021
