M/s. Milkfood Pvt.
Ltd. Vs. M/s. GMC Ice Cream (P) Ltd.
J U D G M E N T
R.V. RAVEENDRAN,J.
1.
Leave
granted.
2.
Under
an agreement dated 7.4.1992, respondent agreed to manufacture and pack appellant's
product (ice cream) as per the specifications and standards of the appellant. Clause
20 of the said agreement provided for settlement of disputes by arbitration.
The said clause provided that the venue of arbitration should be Delhi and contract
was subject to Delhi jurisdiction.
3.
Respondent
filed a suit (T.S.No.40/1995) in the court of learned Munsif, Gaya (Bihar) for an
injunction to restrain the appellant from interfering with the manufacture and
supply of ice cream by the respondent. On being served with the notice of the said
suit, the appellant filed an application under section 34 of Arbitration Act,
1940 (`Act' for short) for stay of proceedings in the suit on the ground that
the contract between the parties provided for arbitration. The learned Munsif
by order dated 3.8.1995 allowed the appellant's application under section 34 of
the Act and stayed further proceedings in the suit.
4.
The
respondent filed a revision under section 115 of the Code of Civil Procedure
(`Code' for short) before the Patna High Court against the order dated
3.8.1995. The High Court disposed of the said revision petition by the
following order dated 6.5.1997 : "Before this court parties have agreed
that the dispute between them may be referred, as per the agreement to
Arbitrators chosen by the parties. The plaintiff has chosen Shri Uday Sinha a retired
judge of this court and Senior Advocate of the Supreme Court, while the
defendants have chosen Shri Hari Lal Agrawal, Senior Advocate of the Supreme
Court, a former judge of this court and Chief Justice of Orissa High Court as
Arbitrators. The dispute between the parties is referred to arbitrator. I hope that
the learned Arbitrators will dispose of the arbitration proceedings within
three months of the entering the reference. Let a copy of this order be sent to
both Shri Hari Lal Agarwal at his address Nageshwar Colony, Boring Road,
Patna-1 and Shri Uday Sinha at his Patna address 308 Patliputra Colony, Patna. Parties
are directed to appear before the Arbitrators within a month from today. Let all
necessary documents be filed before the Arbitrators within four weeks
thereafter. This application is disposed of."It may be mentioned that long
before the disposal of the revision petition, by notice dated 14.9.1995 the
appellant had appointed its arbitrator and called upon the respondent to concur
in that appointment or alternatively nominate its arbitrator. When respondent also
appointed its arbitrator, the two arbitrators appointed an umpire. The arbitral
tribunal made an award dated 17.8.2004 in favour of the respondent.
5.
The
respondent filed a suit under section 14 (2) of the Act in the court of
Sub-Judge, Gaya on 28.8.2004 praying that the award be made a rule of the court.
The appellant entered appearance on 28.10.2004 and made an application under
Order 7 Rule 10 of the Code read with section 31(4) of the Act contending that
only the Delhi High Court had jurisdiction to entertain the application and
Gaya court did not have jurisdiction.
6.
The
appellant also challenged the award by filing a petition under sections 30 and
33 of the Act before Delhi High Court on 16.10.2004. On 25.10.2005 the
appellant's petition under sections 30 and 33 of the Act was disposed of by
Delhi High Court on the ground that the award had been filed before the learned
Sub-Judge, Gaya, prior to filing of the petition by the appellant under sections
30 & 33 of the Act and since the matter was pending in the Gaya court and
the appellant had challenged the jurisdiction of that court, the Gaya court
would decide whether it had jurisdiction; and if it came to the conclusion that
it had no jurisdiction, that court could forward the record to Delhi High Court,
in which event the appellant could seek revival of the petition under sections
30 and 33 of the Act.
7.
The
Sub-Court Gaya heard and dismissed the application filed by the appellant (for return
of the plaint to the respondent) by order dated 23.3.2006 holding that it had jurisdiction
to entertain and decide the application under section 14(2) of the Act. The
said order was challenged by the appellant by filing a revision petition before
the Patna High Court. A learned single Judge of the Patna High Court dismissed
the revision petition, by the impugned order dated 25.5.2008. He noted that the
parties had earlier consented before the Patna High Court for referring the disputes
to arbitration and that Patna High Court had recorded the said agreement and
referred the disputes to arbitration by order dated 6.5.1997. He held that the
said order dated 6.5.1997 should be considered to be an order under section 8
of the Act; and if so, the order dated 6.5.1997 would be the order in the first
application under the Act in the reference; and as Patna High Court did not have
original jurisdiction, the Sub-Judge, Gaya which was the corresponding civil court
having original jurisdiction would have jurisdiction to entertain the application
under section 14(2) of the Act, having regard to section 31(4) of the Act. The
said order is challenged in this appeal by special leave.
8.
On
the contentions urged, the only question that arises for consideration is whether
the proceedings under section 14(2) of the Act could have been initiated only
in the Delhi High Court and not before the Sub-court, Gaya, having regard to
section 31(4) of the Act.
9.
Section
31 of the Act deals with jurisdiction and the same is extracted below : "31.
Jurisdiction.-
a. Subject to the
provisions of this Act, an award may be filed in any Court having jurisdiction in
the matter to which the reference relates.
b. Notwithstanding
anything contained in any other law for the time being in force and save as otherwise
provided in this Act, all questions regarding the validity, effect or existence
of an award or an arbitration agreement between the parties to the agreement or
persons claiming under them shall be decided by the Court in which the award under
the agreement has been, or may be, filed, and by no other Court.
c. All applications
regarding the conduct of arbitration proceedings or otherwise arising out of such
proceedings shall be made to the Court where the award has been, or may be,
filed, and to no other Court.
d. Notwithstanding
anything contained elsewhere in this Act or in any other law for the time being
in force, where in any reference any application under this Act has been made in
a Court competent to entertain it, that Court alone shall have jurisdiction
over the arbitration proceedings-, and all subsequent applications arising, out
of that reference, and the arbitration proceedings shall be made in that Court and
in no other Court." (emphasis supplied)Sub-section (4) of section 31
provides where any application under the Act, in any reference, had been made in
a court competent to entertain it, then notwithstanding anything contained in
the Act (or in any other law for the time being in force), that court alone shall
have jurisdiction over the arbitration proceedings and all subsequent applications
arising out of that reference and therefore all arbitration proceedings shall
be made in that court alone and not in any other court. Sub-section (4) of
section 31 of the old Act corresponds to section 42 of the new Act.
10.
As
the court where the first application was made is the court competent to entertain
all subsequent applications under the Act, it is necessary to decide where the first
application in the reference was made under the Act. In chronological order,
the four applications in the reckoning for being considered as the first
application in the reference under the Act, in a competent court are:
i.
The
application dated 19.6.1995 filed by the appellant under section 34 of the Act,
in the court of Munsif, Gaya (resulting in the order dated 3.8.1995).
ii.
The
revision petition dated 2.7.1996 filed by the respondent against the order
dated 3.8.1995, under section 115 of the Code, in the Patna High Court
(resulting in the order dated 6.5.1997).
iii.
The
application made in April 1998 by the appellant under Section 33 of the Act, in
the Delhi High Court (resulting in the order dated 13.10.1998).
iv.
The
application dated 16.8.2000 by the respondent under section 27 of Arbitration
& Conciliation Act, 1996 in the Delhi High Court (resulting in the order
dated 1.10.2000).The appellant contends that the first application in the
reference was filed under the Act in Delhi High Court in April, 1998 and therefore
all subsequent proceedings including the application under section 14(2) should
be filed in Delhi High Court. The respondent contends that the application made
either in the Gaya Court on 19.6.1995 or in the Patna High Court on 2.7.1996
should be considered to be the first application in the reference in a
competent court; and as that Patna High Court did not have original civil
jurisdiction, the corresponding civil court namely the Sub-Judge, Gaya was 8the
court where all applications, including an application under section 14(2) of
the Act should be filed.
11.
In
Kumbha Mawji vs. Union of India - 1953 SCR 878, this Court explained that the
words `in any reference' would mean `in the matter of a reference to
arbitration'. In Union of India vs. Surjeet Singh Atwal - 1969 (2) SCC 211,
this Court held that an application under section 34 of the Act is not to be considered
as an application under the Act in a reference. Therefore, the application
under section 34 of the Act filed by the appellant on 19.6.1995 cannot be
considered to be the first application to a court in the reference to
arbitration. Let us next examine whether the first application under the Act in
the reference was first made to the Patna High Court.
A Revision Petition (C.R.No.1020/1996)
was filed in the Patna High Court under section 115 of the Code, aggrieved by
the order dated 3.8.1995 passed in an original suit filed by the respondent. The
order dated 3.8.1995 was made allowing an application filed by respondent for stay
of proceedings under section 34 of the Act. Therefore, the order dated 6.4.1997
appointing the arbitrators was made by Patna High Court, not in an application
under the Act, but in a revision petition under section 115 of the Code.
Further the said revision did not arise out of arbitration proceedings, but against
the rejection of an application under section 34 of the Act to stay the proceedings
in a civil suit. If the proceedings in which the order dated 6.5.1997 was made
by the Patna High Court did not relate to an application under the Act in a
reference, nor is it a revision arising from an application under the Act in a reference,
it is not possible to hold that the first application under the Act in a reference
was made before the Patna High Court.
12.
At
this juncture, it is necessary to notice the argument put forth by the
respondent. The respondent contends that even though the revision petition did not
arise from an application under the Act, the order dated 6.5.1997 made therein
by the Patna High Court, recorded the consent of the parties that the disputes may
be referred to arbitrators chosen by the parties, recorded the names of the arbitrators
appointed by them, and referred the disputes between the parties to arbitration.
According to the respondent,
a court can appoint an arbitrator either under section 20 or section 8 of the
Act; as there was no application for filing the agreement under section 20 of
the Act, the order dated 6.5.1997 should be deemed to have been made in an
application under section 8 of the Act to the High Court. The respondent therefore
contends that the Patna High Court should be treated as a court where first
application under the Act was filed and therefore all subsequent applications should
be filed in that court. There is no merit in this contention. Section 8 relates
to the power of civil court to appoint an Arbitrator or umpire. With reference
to the facts of this case the power under section 8 of the Act can be exercised
only if the following conditions mentioned in the section are fulfilled :
i.
the
parties did not concur in the appointments of arbitrators, when differences
arose;
ii.
one
of the parties to the arbitration agreement served on the other party a written
notice nominating its arbitrator and calling upon the other party to make its
nomination;
iii.
the
other party did not appoint its arbitrator within 15 clear days after the
service of such notice; and
iv.
an
application was made by the party who gave the notice under section 8 of the
Act for appointment of the arbitrator. The order dated 6.5.1997 of the Patna High
Court cannot be considered to be an order under section 8 of the Act, as neither
an application was filed under section 8 of the Act nor the conditions for
making an application under section 8 of the Act existed in this case.
13.
As
noticed above the said order was made in a revision petition against the grant of
an application under section 34 in a suit filed by the respondent. All that the
High Court did was to record the submission that both parties had appointed their
respective arbitrators and therefore the disputes stood referred to them. Such
an order recording the nomination of arbitrators by consent and referring the
disputes to arbitration, can be made in any suit or other proceedings, even if they
do not arise under the arbitration agreement or under the Act. If for example a
civil suit is filed by a party against the other and there is no arbitration
agreement between them, but during the course of the said suit both parties agree
that the matter should be referred to a named arbitrator for arbitration and the
court accordingly refers it to arbitration, is not an appointment of an arbitrator
under section 8 of the Act, but a consent order referring the disputes to the
arbitrators already appointed by the parties. Therefore we can not accept the contention
that the order dated 6.5.1997 of the Patna High Court should be treated as an
order in a proceeding under section 8 of the Act. If the order dated 6.5.1997 is
not an order made in an application under the Act in a reference, it follows
that the question of making all subsequent applications arising out of the
reference under the Act, to that court does not arise.
14.
In
this case the appellant filed an application (OMP No.94/1998) in the Delhi High
Court under section 33 of the Act in April 1998 praying for a clarification as to
whether the arbitration proceedings between the parties would be governed by the
provisions of Arbitration Act, 1940 or by the provisions of Arbitration and Conciliation
Act, 1996. Thereafter the respondent made an application (OMP No.217/2000) to Delhi
High Court for summoning and examining one O.P.Singh as a witness in respect of
the pending arbitration, to produce certain documents. Therefore the
application (OMP No.94/1998) made by the appellant under section 33 of the Act will
have to be treated as the first application under the Act in the reference. If
that is so all subsequent applications will have to be made in the High Court
of Delhi.
15.
Learned
counsel for respondent submitted that the application filed by it in OMP No.217/2000
for issue of summons to a witness to produce documents, cannot be treated as an
application under the Act as it was filed under section 27 of the Arbitration
and Conciliation Act, 1996 and not under the provisions of section 43 of Arbitration
Act, 1940. OMP No.217/2000 was made for issue of processes for appearance of
witness and production of documents, in a pending arbitration proceedings. When
the application was filed in the year 2000, there was some confusion as to
whether the new Act applied or the old Act applied. In fact that question was
pending before the Delhi High Court in OMP NO.94/1998 filed by the appellant.
That issue was
decided by Delhi High Court on 13.10.1998 holding that the matter was governed by
1996 Act, but that order was reversed by the order dated 5.4.2004 of this court
in Milkfood Ltd. Vs. GMC Ice Cream (P) Ltd. [2004 (7) SCC 288] holding that the
old Act applied with the following observations : "For the reasons
aforementioned, we are of the view that in this case, the 1940 Act shall apply
and not the 1996 Act. .... The award shall be filed in the court having
jurisdiction whereafter the parties may proceed in terms of the old Act."
Therefore OMP No.217/2000 could be deemed to have been made under section 43 of
the Act. At all events as OMP No.94/1998 has to be treated as the first application
under the Act, Delhi High Court alone will have jurisdiction to entertain any subsequent
applications and therefore the court at Gaya will not have jurisdiction. It is
also relevant to note that the Arbitration clause provides that the venue of
arbitration shall be Delhi and Delhi courts will have jurisdiction.
16.
In
view of the above we allow this appeal, set aside the impugned order of the
Patna High Court as also the order of Sub-Court, Gaya and hold that all
applications should be filed in Delhi High Court.
17.
The
respondent shall therefore obtain return of the application under section 14(2)
of the Act from the Gaya court and file it before Delhi High Court within two
months from today. If it is so filed, Delhi High Court shall entertain the same
and dispose it of in accordance with law. We may note that when the matter had
come up before this court in the first round, in the order dated 5.4.2004, this
court had expressed the hope that the award will be made and all legal
proceedings should come to an end within four months from the date of
communication of that order. More than seven years have elapsed thereafter and
the proceedings have not ended. We therefore request the High Court to dispose
of the matter expeditiously.
.................................J.
(R V Raveendran)
..................................J.
(A K Patnaik)
New
Delhi;
August
4, 2011.
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