In a recent legal case, the High Court’s analysis of jurisdictional issues in arbitration appointments raised significant concerns. The court’s decision highlighted the paramount importance of adhering to the designated court for arbitration proceedings, as prescribed by the Arbitration Act. This blog explores the intricate legal arguments surrounding jurisdiction and the implications for arbitration proceedings. Stay informed on the nuances of arbitration law with our detailed analysis.
Facts
- The appellants opposed the application based on Section 42 of the Arbitration Act
- The appellants argued that the application under Section 11(6) should be filed before the High Court of Andhra Pradesh at Amaravati
- The appellants pointed out that the procedure dated 16.11.2016 was superseded by the GCC issued by the Railway Board in November, 2018
- Despite jurisdictional issues raised, the High Court of Orissa at Cuttack appointed the Arbitrator without addressing the jurisdictional question
- The High Court justified its decision by stating that the appellant did not oppose the appointment of an arbitrator, and delaying the process would serve no purpose
- The original respondent, General Manager – East Coast Railway, appealed against this decision, feeling aggrieved
- Arguments were heard from both parties, with the learned ASG appearing for the appellants and learned Counsel representing the respondent
- The learned Additional District Judge had previously allowed an application, restraining the appellants from forfeiting a security deposit for six months except on special circumstances
- The respondent later requested the constitution of an Arbitral Tribunal and raised five claims, but the validity of the tribunal was questioned by the appellants
- Subsequently, the respondent filed an Arbitration Petition before the High Court of Orissa at Cuttack seeking appointment of an arbitrator under Section 11(6) of the Act
- The Arbitrator then called for submission of claims from the parties
- The respondent requested time for filing the claim due to the Covid-19 pandemic
- The proceedings were adjourned by the Arbitrator to 03.04.2020
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Arguments
- The respondent initiated proceedings under Section 9 of the Arbitration Act before the Additional District Judge, Visakhapatnam.
- The respondent sought interim injunction against the encashment of Performance Bank Guarantee and forfeiture of security deposit.
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Analysis
- The High Court of Orissa at Cuttack entertained the application under Section 11(6) of the Arbitration Act and appointed the sole arbitrator without deciding the jurisdictional issue.
- The appellants, East Coast Railway, did not oppose the appointment of an arbitrator, but this alone does not confer jurisdiction on the High Court if it originally had no jurisdiction.
- A specific objection on the maintainability of the application under Section 11(6) was raised by the appellant before the High Court.
- Heavy reliance was placed on Section 42 of the Arbitration Act, which pertains to jurisdiction.
- Arbitration proceedings were initiated by the appellants through the appointment of an arbitrator as per the Arbitration Agreement.
- The argument was made that as the respondent initiated proceedings under Section 9 in the Court at Vishakhapatnam, jurisdiction lies with the High Court of Andhra Pradesh at Amaravati.
- The designated Court has exclusive jurisdiction over the arbitral proceedings and any subsequent applications related to the arbitration agreement.
- All applications related to the arbitration agreement must be made in the designated Court and not in any other Court.
- This provision takes precedence over any other laws or provisions regarding jurisdiction in arbitration agreements.
- The Court where an application under this Part has been made will have sole authority over the arbitral proceedings.
- Under Section 42 of the Arbitration Act, the High Court of Andhra Pradesh at Amravati has exclusive jurisdiction for subsequent applications related to the Contract Agreement.
- Further arbitral proceedings must also be carried out in the High Court of Andhra Pradesh at Amravati, and no other court.
- The High Court of Orissa at Cuttack erred in entertaining an application under Section 11(6) of the Act and appointing the sole arbitrator as it was not within its jurisdiction.
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Decision
- 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 quashed and set aside.
- The High Court of Orissa at Cuttack did not have jurisdiction to entertain the application under Section 11(6) of the Act as the respondent had earlier initiated arbitration proceedings under Section 9 in the Court at Vishakhapatnam.
- The Present Appeal is allowed, and the impugned order is quashed solely on the jurisdictional ground.
- The respondent claimant is allowed to submit an application under Section 11(6) of the Act before the competent High Court of Andhra Pradesh at Amaravati within four weeks.
- If the application is submitted within the specified timeframe, it will be considered in accordance with the law and on its own merits at the earliest.
Case Title: GENERAL MANAGER EAST COAST RAILWAY RAIL SADAN Vs. HINDUSTAN CONSTRUCTION CO. LTD (2022 INSC 743)
Case Number: C.A. No.-004747-004747 / 2022
