Case Note & Summary
The Supreme Court dealt with multiple transfer petitions and a civil appeal arising from orders passed by the Additional District Judge-cum-Presiding Judge, Special Commercial Court at Gurugram, and other courts, concerning the jurisdiction to hear applications under the Arbitration and Conciliation Act, 1996. The core dispute involved the interpretation of the arbitration clause in agreements between Hindustan Construction Company Ltd. and NHPC Ltd., where the courts below had held that the seat of arbitration was New Delhi but, applying Section 42 of the Act, concluded that the Faridabad Court also had jurisdiction because part of the cause of action arose there and an application was first made to that court. The Supreme Court, relying on its earlier judgment in BGS SGS Soma JV vs. NHPC Ltd., clarified that once the seat of arbitration is designated, it becomes an exclusive jurisdiction clause, and only the courts where the seat is located have jurisdiction. Section 42 of the Act applies only when an application is made to a court which has jurisdiction; an application made to a court without jurisdiction does not trigger Section 42. Consequently, the impugned orders were set aside, and all Section 34 petitions pending before the Faridabad Court and other courts were directed to be transferred to the High Court of Delhi at New Delhi. The Court also directed that status quo be maintained for eight weeks to allow for proper institution of the transferred cases, and clarified that objections regarding limitation would not be entertained. The judgment was delivered by a bench comprising Justices Rohinton Fali Nariman, S. Ravindra Bhat, and V. Ramasubramanian on March 4, 2020.
Headnote
A) Arbitration Law - Seat of Arbitration - Exclusive Jurisdiction - Once the seat of arbitration is designated by agreement, it becomes an exclusive jurisdiction clause, and only courts where the seat is located have jurisdiction to the exclusion of all other courts. (Paras 5-6) B) Arbitration Law - Section 42 of the Arbitration and Conciliation Act, 1996 - Application to Courts Without Jurisdiction - Section 42 applies only when an application is made to a court which has jurisdiction; an application made to a court without jurisdiction does not trigger Section 42. (Paras 4-6) C) Arbitration Law - Transfer of Proceedings - Section 34 Petitions - Where the seat is designated, Section 34 petitions must be filed only in the court where the seat is located; petitions filed elsewhere must be transferred to that court. (Paras 6-8)
Issue of Consideration
Whether the Faridabad Court had jurisdiction to entertain applications under the Arbitration Act when the seat of arbitration was designated as New Delhi, and the effect of Section 42 of the Arbitration Act in such circumstances.
Final Decision
The Supreme Court set aside the impugned judgment and transferred all Section 34 petitions pending before the Faridabad Court and other courts to the High Court of Delhi at New Delhi. The Court also directed that status quo be maintained for eight weeks and that objections regarding limitation would not be entertained.
Law Points
- Seat of arbitration determines exclusive jurisdiction
- Section 42 of Arbitration Act applies only to courts with jurisdiction
- BGS SGS Soma JV overrules conflicting High Court decisions
