On January 24, 2019, the Calcutta High Court passed judgment in the matter of Mohanlal Agarwal v. Manjan Devi Patni and others (C.O. No. 3328/2018).

Facts in brief

The petitioner had suffered an arbitral award dated February 28, 2018, and had filed an application challenging the said award under Section 34 of the Arbitration and Conciliation Act, 1996. The respondents thereafter, filed an application challenging the maintainability of the case before the District Judge at Alipore, by relying on Section 42 of the 1996 Act. The trial Judge allowed such application challenging maintainability and returned the application under Section 34 of the 1996 Act to the petitioner for presenting before the concerned court having jurisdiction. The said order, dated August 14, 2018, was under challenge in the present application under Article 227 of the Constitution of India. The petitioner had submitted to the jurisdiction of this court in conceding to the said order under Section 29?A of the 1996 Act.

The issues in question were:

• Whether the definition of the term “Court”, as used in Section 42, has to be seen in the context of the definition of "Court", as given in Section 2(1)(e) of the 1996 Act?
• Whether in the context of Section 42 of the 1996 Act, in view of the definition of 'court' in Section 2(1)(e) of the said Act, for the purpose of Section 9 or Section 34 or Section 14(2) of the Act, 'Court' would mean the principal civil court of original jurisdiction in the district?
• Whether the seat of arbitration is irrelevant for ascertaining jurisdiction and even a forum selection clause cannot confer jurisdiction on a court other than the one already having jurisdiction?
• Whether clause 15 of the arbitration agreement?in?question dated July 12, 2002, pertaining to jurisdiction, stipulates that the Ordinary Original Civil jurisdiction of the Hon'ble High Court at Calcutta alone?

Arguments:

The Counsel for the respondent argued that the moment the seat is designated, it is akin to an exclusive jurisdiction clause and on the facts of the said case, it was clear that the seat of arbitration was Mumbai and Clause 19 further made it clear that jurisdiction exclusively vested in the Mumbai courts. He had further submitted that under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of CPC be attracted.

Lastly, he had also contended that the Calcutta High Court had jurisdiction under clause 12 of the Letters Patent to entertain and try arbitration petitions even if no cause of action had arisen within its jurisdiction, provided the respondent had an office in Calcutta.

Judgement

The court observed that all the judgments cited by the petitioner on the jurisdiction of courts pertaining to arbitral proceedings, the objection as to jurisdiction were taken before the first forum itself, which is a point of distinction going to the root of the question. The Court applied Section 2 (1) (e) in the context of Section 42 and read it conjointly with the case of State of West Bengal and others vs. Associated Contractors (2015) 1 SCC 32 and held that it is this Court which fulfils all the aforementioned three criteria and qualifies to be the first court conferring jurisdiction, as envisaged in Section 42 of the 1996 Act.

The Court held that “the forum selection clause (Clause 15 of the agreement?in?question) specifically named the Ordinary Original Civil jurisdiction of this court "alone" and "failing whom any other competent court" as the forum.”

The Court also held that “this court in its original side would be the same court wielding jurisdiction by virtue of the forum selection clause as well as the seat of arbitration, thus having jurisdiction.” It further observed that “in case of applications under the 1996 Act, where the Code of Civil Procedure is not applicable, the bar to jurisdiction cannot spring from Sections 16, 17 and 20. The Court upheld the order of this court in Texmaco Ltd. v. Tirupati Buildestates Pvt. Ltd (AIR 2011 Cal 158) which states that “if the parties allow the proceedings to continue before an apparently incompetent court without raising any objection thereto, subsequent applications under Part I of the 1996 Act pertaining to the same arbitration agreement have to be made to the apparently incompetent court which received the earlier application as the parties would be estopped from questioning the jurisdiction of the court subsequently upon not having urged it in course of the earliest application under Part I of the Act in the apparently incompetent court.” Therefore, the Court concluded that the petitioner had lost the opportunity to raise an objection as to territorial jurisdiction before this court and could not approach a hierarchically inferior forum at Alipore, that too in a subsequent proceeding altogether with such objection at this belated stage.

Thus, the court below was justified in returning the application of the petitioner under Section 34 of the 1996 Act for presentation before the proper court and the Court dismissed this application by affirming the order of the Court below.