2002 (8) TMI 771 - HC - Companies Law

Petition for Arbitrator Appointment Transferred to Bombay High Court

Sasken Communication Technologies Ltd. Versus Prime Telesystems Ltd.

The court determined that the petition seeking the appointment of an arbitrator should have been filed in the Bombay High Court, where an application ... Arbitrators Issues Involved:1. Existence of an Arbitration Agreement.2. Territorial jurisdiction of the court.3. Applicability of Section 42 of the Arbitration and Conciliation Act, 1996.Issue-wise Detailed Analysis:1. Existence of an Arbitration Agreement:The petitioner filed a petition under Section 11(4) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator on behalf of respondent No. 1. The petitioner argued that the respondents failed to honor their obligations under a subscription-cum-shareholders agreement dated 28-2-2001, leading to disputes that necessitated arbitration as per Article 36.1 of the agreement. The respondents opposed this, contending that no arbitration agreement existed because the agreement did not mature into a concluded contract due to non-compliance with Articles 2.1 and 2.1.8 within 45 days. The court held that under Section 11 of the Act, it does not discharge judicial functions and is not obliged to adjudicate the existence or validity of the arbitration agreement, which should be determined by the arbitrators. Thus, the petition could not be dismissed outright based on the respondents' contentions.2. Territorial Jurisdiction of the Court:A significant issue was whether the Delhi High Court had jurisdiction to entertain the petition. The arbitration agreement specified Mumbai as the venue for arbitration proceedings (Article 36.1) and granted exclusive jurisdiction to Mumbai courts (Article 37.1). The respondents argued that since an application under Section 9 of the Act was already filed in the Bombay High Court, the Delhi High Court lacked jurisdiction. The petitioner countered that jurisdiction is governed by Section 2(e) of the Act and that no part of the cause of action arose within the jurisdiction of the Bombay High Court. The court noted that jurisdiction under the Act is determined by where the subject matter of the arbitration would be if it were a civil suit. Since the petitioner failed to demonstrate that no part of the cause of action arose in Mumbai, the court could not hold that the Bombay High Court lacked jurisdiction.3. Applicability of Section 42 of the Arbitration and Conciliation Act, 1996:Section 42 of the Act stipulates that once an application under the Act is made in a court, that court alone has jurisdiction over subsequent applications related to the arbitration agreement. The court emphasized that this provision ensures all proceedings related to an arbitration agreement occur in the same court to avoid conflicting decisions and undue harassment. The court held that until the Bombay High Court determined it lacked jurisdiction, all applications under the Act had to be made there. The court referenced a similar case, D.L.F. Industries Ltd. v. Standard Chartered Bank, where exclusive jurisdiction was upheld based on the arbitration agreement's terms.Conclusion:The court concluded that the present petition under Section 11 of the Act should have been filed in the Bombay High Court, where an application under Section 9 was already pending. The petition was returned to the petitioner for filing in a court of competent jurisdiction in Mumbai within 15 days.