Arbitration In IndiaCourt Situated within the Territorial Jurisdiction of the seat or place of arbitration is solely entitled to entertain a section 34 Application

The Hon’ble High Court of Kerala at Ernakulam, in the case of Southern Railway v. M. R. Ramakrishnan, OP (C) No. 3115 of 2018 has held that the District Court, Ernakulam, i.e., the Court within the territorial jurisdiction of the ‘seat’ or ‘place’ of arbitration as determined by the Learned Arbitral Tribunal only has jurisdiction to entertain an application under Section 34 of the Arbitration Act, 1996.

FACTS

A dispute arose between the Southern Railway (“Petitioner”) and M.R. Ramakrishnan (“Respondent”) pertaining to the licence fee payable by the Respondent, who is a licensee of a combined fruit and tea stall at the Wadakkancherry Railway Station in Thrissur District. An Arbitrator, appointed by the Hon’ble High Court of Kerala at Ernakulam (“High Court”) in order to resolve the aforesaid dispute, conducted the arbitration proceedings at Ernakulam, and subsequently passed an award dated 18.06.2018 (“Award”). It is pertinent to note herein that the place of arbitration was determined by the Arbitrator and was not mutually agreed upon by the parties.

Subsequently, the Respondent invoked Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”) and challenged the Award before the District Court, Ernakulam (“District Court”).

The Petitioner raised a preliminary objection to the above Section 34 Application asserting that the District Court lacked territorial jurisdiction under Section 2(1) (e) of the Act to entertain a Section 34 application.

Vide an Order dated 08.10.2018, the District Court held that it has the due jurisdiction to entertain the Section 34 of Application, prompting the Petitioner to file the present Original Petition before the High Court.

ISSUE BEFORE THE HIGH COURT

Which Court has the territorial jurisdiction to entertain the application filed under Section 34 of the Act?

CONTENTION OF PARTIES

The Petitioner argued that the District Court lacked territorial jurisdiction under Section 2(1)(e) of the Act to entertain the Section 34 application.

Citing the case of D Net Malayalam Digitals Pvt. Ltd. v. Asianet Satellite Communications Ltd. (2016 (4) KLT 30), the Petitioner contended that the seat of arbitration or the place where the arbitration proceedings were conducted  is not relevant in determining the territorial jurisdiction of the Court, which is essentially is governed by Sections 15 to 20 of the Code of Civil Procedure.

On the contrary, the Respondent asserted that the District Court  had the jurisdiction to deal with the Section 34 Application, emphasizing the determination of Ernakulam as the seat or place of arbitration.

Relying on the case of Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc. [(2012) 9 SCC 552], the Respondent argued that the term ‘subject-matter of the arbitration’ in Section 2(1)(e) of the Act is intended to identify the court having supervisory control over the arbitration proceedings.

DECISION AND FINDINGS

The High Court examined Section 2(1)(e) of the Act,  emphasizing the necessity for supervisory control over arbitration proceedings by the Court within the territorial jurisdiction of the seat or place of arbitration.

Referring to the cases of Brahmani River Pellets Limited v. Kamachi Industries Limited [(2020) 5 SCC 462] and D Net Malayalam Digitals Pvt. Ltd. supra, the High Court acknowledged the distinction between the “place” as a “juridical seat” and a “venue” in arbitration proceedings.

The High Court, in analysing Section 20 of the Act, held that primarily, the parties are free to agree on the place of arbitration. In the absence of such an Agreement between the Parties, the Arbitral Tribunal is authorized to determine the place of arbitration.

The High Court also referred to the decision in Sasidharan K. and Another v. Manager, Sundaram Finance Ltd. (2018 (3) KHC 638), following Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. (2017 KHC 6327 = AIR 2017 SC 2105), which concluded that the Court situated within the territorial jurisdiction of the seat or place of arbitration alone will entertain an application under Section 34 of the Act.

Noting that the Arbitral Tribunal had determined Ernakulam as the seat of arbitration, the High Court upheld the jurisdiction of the District Court  to entertain the Section 34 application.

The High Court, based on the legal principles and case laws discussed, dismissed the Original Petition, affirming the jurisdiction of the District Court, and directed the District Court to expedite the resolution within three months.

AMLEGALS REMARKS

The judgment herein upholds the District Court’s jurisdiction based on the  determination of seat by the Arbitral Tribunal. This decision contributes to the ongoing discourse on the relationship between the seat of arbitration and territorial jurisdiction, offering clarity and reinforcing the supervisory role of the chosen seat in arbitration proceedings under the Act.

Issues regarding seat, venue, and territorial jurisdiction is prevalent in arbitration. Hence, it is pivotal to outline one and all details in the arbitration clause of any agreement, in order to evade the possibility of potential disputes.

-Team AMLEGALS, assisted by Mr. Agresh Sharma (Intern)

For any query or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or himanshi.patwa@amlegals.com