2022 (7) TMI 1059 - SC - Indian Laws

Supreme Court Overturns Arbitrator Appointment Decision, Emphasizes Jurisdiction Compliance

General Manager East Coast Railway Rail Sadan & Anr. Versus Hindustan Construction Co. Ltd.

The Supreme Court allowed the appeal, ruling that the High Court of Orissa erred in appointing an arbitrator under Section 11(6) of the Arbitration Act, ... Territorial Jurisdiction - Maintainability of the application under Section 11(6) of the Arbitration Act before the Orissa High Court - respondent claimant had initiated proceedings under Section 9 of the Arbitration Act in the Court at Vishakhapatnam - Appointment of an Arbitrator to adjudicate the dispute between the parties - Section 11(6) of the Arbitration and Conciliation Act, 1996 - HELD THAT:- Without deciding the said issue which goes to the root of the jurisdiction of the High Court of Orissa at Cuttack, the said High Court by the impugned order has entertained the application under Section 11(6) of the Act and has appointed the sole arbitrator by observing that since the appellants – East Coast Railway, in principle, has not opposed the appointment of an arbitrator, there is little purpose served in relegating the original petitioner to the concerned High Court as that will only delay the adjudication of the disputes. The appellants might not have opposed the appointment of an arbitrator (though the fresh appointment of an Arbitrator was also opposed by the appellants herein) by that itself it will not confer the jurisdiction upon the High Court if otherwise, the High Court had no jurisdiction. It is not in dispute that before filing an application under Section 11(6) of the Act before the High Court of Orissa at Cuttack, the respondent – claimant moved an application before the Court at Visakhapatnam under Section 9 of the Arbitration Act. In that view of the matter considering Section 42 of the Arbitration Act, the High Court of Andhra Pradesh at Hyderabad alone would have jurisdiction to decide the subsequent applications arising out of the Contract Agreement and the further arbitral proceedings shall have to be made in the High court of Andhra Pradesh at Amaravati alone and in no other court. In that view of the matter the High Court of Orissa at Cuttack has committed a serious error in entertaining the application under Section 11(6) of the Act before it and appointing the sole arbitrator. The impugned judgment and order passed by the High Court of Orissa at Cuttack in Arbitration Petition No.10 of 2021 and appointing the sole arbitrator is hereby quashed and set aside solely on the ground that the High Court of Orissa at Cuttack would have no jurisdiction to entertain the application under Section 11(6) of the Act with respect to the contract agreement for which the respondent claimant earlier initiated the arbitration proceedings under Section 9 of the Arbitration Act in the Court at Vishakhapatnam. Appeal allowed. Issues:Jurisdiction of High Court to entertain application under Section 11(6) of the Arbitration Act.Analysis:The dispute in this case arose from a contract/agreement dated 29.11.2018 between the parties. The respondent initiated proceedings under Section 9 of the Arbitration Act seeking an interim injunction against the encashment of Performance Bank Guarantee and forfeiture of security deposit. The Additional District Judge allowed this application, restraining the appellants from forfeiting the security deposit for six months. Subsequently, the respondent requested the appellant to constitute an Arbitral Tribunal, raising five claims. The appellant initiated arbitration proceedings by appointing an arbitrator. However, the respondent questioned the validity of the arbitral tribunal and filed an application under Section 11(6) of the Act before the High Court of Orissa at Cuttack, seeking appointment of an arbitrator. The appellants opposed this application, citing Section 42 of the Arbitration Act, which states that the court where an application under the Act has been made shall have jurisdiction over the arbitral proceedings. The High Court of Orissa at Cuttack appointed an arbitrator without addressing the jurisdictional issue, leading to the present appeal.The appellant raised objections regarding the jurisdiction of the High Court of Orissa to entertain the application under Section 11(6) of the Arbitration Act. They argued that as the respondent had previously initiated proceedings under Section 9 in the Court at Vishakhapatnam, only the High Court of Andhra Pradesh at Amaravati would have jurisdiction. Despite this crucial jurisdictional issue, the High Court of Orissa appointed the arbitrator, citing the lack of opposition from the appellants. The appellant's lack of opposition to the arbitrator's appointment does not confer jurisdiction on the High Court if it otherwise had no jurisdiction. The appellant heavily relied on Section 42 of the Arbitration Act, emphasizing that subsequent applications arising from an arbitration agreement must be made in the court where the initial application was filed, as per the Act.The High Court of Orissa at Cuttack erred in entertaining the application under Section 11(6) of the Arbitration Act and appointing the sole arbitrator, as the jurisdiction lay with the High Court of Andhra Pradesh at Amaravati. The Supreme Court allowed the appeal, quashing the impugned judgment and order passed by the High Court of Orissa. The respondent was given the opportunity to move the application before the competent High Court of Andhra Pradesh at Amaravati within four weeks, emphasizing adherence to jurisdictional provisions under the Arbitration Act. The appeal was allowed without costs, considering the circumstances of the case.This judgment clarifies the importance of jurisdiction in arbitration proceedings and highlights the significance of complying with the statutory provisions under the Arbitration and Conciliation Act, 1996. The Supreme Court's decision emphasizes the need for applications under the Act to be filed in the appropriate court based on the jurisdictional requirements outlined in the legislation.