This article on “The Jurisdictional Dilemma: An Insight to Sec. 42 of Arbitration and Conciliation Act, 1996” is written by Karan Aggarwal, a student of GGSIPU.
“The power resided in a court by any legal provision, to adjudicate and apply mind to a certain dispute is in brief, the concept of jurisdiction”
The theories for the meaning, need and the birth of jurisdiction explains that the purpose is to establish for the dispute to reach the best suitable mind for deciding it, such that the same is determined as per the facts and circumstances of each case. Territorial jurisdiction further enables for fair enforcement of justice by providing both, aggrieved and accused parties with a setlist of conditions and compliances to decide as to which court shall be the best judge as per the positioning of the case. The Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act, 1996’) or the most recent / latest successor to the statutory regulation for Arbitration thereby also aims to ensure for the dispute to be solved or settled at a better place with more ease and has thereby called for the inclusion of exclusive jurisdiction provision.
Introduction to Provision
The bar of jurisdiction provision as laid under the infamous Section 42 of the Act, 1996 starts with a non-obstante clause, whereby the present provision is entitled to stand out against all other related laws in practice and even other parts of that very statute. The provision thereupon provides for the ‘Court’ to have exclusive jurisdiction to an extent that only that and ‘no other court’ is entitled to entertain and adjudge the said matter, provided that the attached sine qua non condition is fulfilled.
The stated condition for the court to be empowered with the exclusive jurisdiction includes for that particular court to be the one where ‘any application under this part’ in relation to the said dispute has been made. The placement of ‘this part’ there is to include for that application to be regarding any proceedings from sections 2 to 43 of the Act, 1996 (Part-1) is initiated or instituted.
Brief Understanding of the Provision
The provision therein provides for the following special powers to the court of exclusive jurisdiction:
- To have jurisdiction over the arbitral proceedings of said dispute
- To have the exclusive power to entertain and decide on all subsequent applications in the dispute.
The following conditions as laid under the section are to be fulfilled for the court to get the aforesaid entitlement:
- To be a Court under the definition of Courts as laid specifically under Section 2 (1) (e) of the Act, 1996.
- To be the first court to entertain an application made in relation to any arbitration agreement under any provision from Section 1 to Section 44 of the Act, 1996.
The need for establishing as to which court can be the valid ‘Court’ under the statutory definition in regard to a certain arbitration agreement brings us to analyze the same which provides for it to be any principal Civil Court or High Court, which has the jurisdiction to decide on the said arbitration agreement if it were a civil suit. The condition thereby in simpler form is to simply turn to Section 9 of the Civil Procedure Code, 1908 in order to establish the correct civil jurisdiction.
Section 23 of Contracts Act, 1872 VS Exclusive Jurisdiction Clause
Jurisdiction of Courts in arbitration agreements has always been one of the most perplexing issues before the Apex Court as well as before various High Courts, wherein the parties from time and again have reached with one or the other dichotomies. Some such issues have been explained herein in brief along with the rationale and reasoning applied through legal precedents and understanding of the law.
Arbitration agreements have to provide for the seat of arbitration or the place where the arbitration shall take place in case of any unprecedented dispute between the parties, while the common practice is to further put down in writing for as to jurisdiction of which court shall the matter be pertained to for arbitration proceedings. The validity of the same however has been questioned before various adjudicating authorities especially in cases where the court of jurisdiction as laid under the agreement, does not in natural circumstances gets the entitlement of jurisdiction under provisions of CPC thereby not being able to enter the definition of Court under Section 2(1)(e) of the Act, 1996.
The contracts where anything that defeats the legal provisions or constitutes anything that is forbidden under law, under section 23 of the Act, 1872 cannot be a legal contract. The exclusive jurisdiction clause in the arbitration agreement is a forum shopping clause where the parties go with any forum at their whims and fancies and thereby may fall under the restriction of Section 28 of the Act, 1872 as it avoids putting a restraint on legal recourses. It has been from now and then brought before the Courts at various authorities and it was the first observation of Hon’ble Supreme Court that jurisdiction shall not be created by an agreement if the said place could not otherwise have the jurisdiction in the said matter. The court further held that the agreement with such exclusive jurisdiction where one of the ordinary jurisdictions is picked in the clause, it may not violate Section 28 and 23 of the Act, 1872.
The validity of Exclusive Jurisdiction in Arbitration Agreement
The most important decision with regard to the aforementioned proposition is Indus Mobile Distribution Private Limited vs Datawind Innovations Private Limited, wherein the agreement stated for the seat of arbitration to be Mumbai and thereby the court jurisdiction was also stated to be Mumbai. However, the application for the appointment of arbitrator (under Section 11of the Act, 1996) was filed at the High Court of Delhi as it also had the entitlement to jurisdiction under CPC provisions for a civil suit.
The Apex Court thereon observed for it to be unreasonable for the Party to dispute the jurisdiction of the arbitration agreement while the seat was already decided in the agreement to be Mumbai. The Court held that only the Mumbai Court to have the exclusive jurisdiction of the arbitration proceedings as the same was laid in the agreement and that the seat of arbitration was also decided to be Mumbai thereby creating nexus between the parties.
The provision under Section 42 of The Arbitration and Conciliation Act, 1996 plays an important role in determining the very initial aspect of any legal proceedings, by providing for the jurisdiction element to the Arbitration Act, 1996. The provision under law as interpreted by various Apex Court judgments and precedents laid by various High Courts may be understood to include for the proceedings of Arbitration to be conducted in one court only that maybe the court that the parties have decided or the first court of proceedings provided that the Court under the general provisions of Civil Procedure Code has the power and capacity to decide the same.
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