The Industrial Gases Limited Vs. Kusum Ingots and Alloys Limited - Court Judgment

Excerpt:
arbitration - jurisdiction - sections 9 and 11 of the arbitration & conciliation act, 1996 - appellant company entered into contract with respondent for sale and supply of industrial gases - subsequently appellant issued notice for termination of contract on ground of breach of contract - arbitration clause was invoked by parties - but arbitrator could not be appointed due to some dispute - thereafter appellant filed application under section 9 of act before district court for interim relief - application dismissed on ground of lack of jurisdiction - hence, present appeal by appellant against rejection of application under section 9 of act of 1996 - held, according to sections 9 of act of 1996 application for interim relief can only be filed before district judge who is principal.....ordera.k. gohil, j.1. this appeal has been filed under section 37 of the arbitration & conciliation act, 1996 (for short 'the act of 1996') being aggrieved by the order dated 26-7-1997 passed by xii additional district judge, indore in m.j.c. no. 13/97, dismissing the application filed by the appellant under section 9 of the act of 1996 for interim relief on the ground that the courthas no jurisdiction to decide the application since the amount of dispute between the parties is more than 25 lacs.2. the brief facts giving rise to this appeal are that the appellant-company entered into an agreement dated 5-6-1995 with the respondent for sale and supply of industrial gases. on 16-1-1997, a notice for termination of the contract was given by the appellant due to breach of contract and on.....

Judgment:
ORDER

A.K. Gohil, J.

1. This appeal has been filed under Section 37 of the Arbitration & Conciliation Act, 1996 (for short 'the Act of 1996') being aggrieved by the order dated 26-7-1997 passed by XII Additional District Judge, Indore in M.J.C. No. 13/97, dismissing the application filed by the appellant under Section 9 of the Act of 1996 for interim relief on the ground that the Courthas no jurisdiction to decide the application since the amount of dispute between the parties is more than 25 lacs.

2. The brief facts giving rise to this appeal are that the appellant-Company entered into an agreement dated 5-6-1995 with the respondent for sale and supply of industrial gases. On 16-1-1997, a notice for termination of the contract was given by the appellant due to breach of contract and on 4-2-1997, the respondent gave a reply of the notice proposing to appoint an arbitrator as per the arbitration Clause 15 of the agreement. But due to the dispute between the parties, the arbitrator could not be appointed mutually. Thereafter, the appellant applied for appointment of an arbitrator before the High Court but subsequently the prayer was withdrawn by the appellant. In the meantime on 15-2-1997, an application under Section 9 of the Act of 1996 was filed by the appellant before the District Court seeking interim relief pending arbitration on the ground that there was an arbitration agreement dated 5-6-1995 between the parties. In that application, certain objections were raised by the respondent and the Court below by order dated 26-7-1997, returned the application for want of jurisdiction and also for presentation of the same before the Competent Court having jurisdiction to hear the petition, which is impugned in this appeal.

3. As submitted by the parties, the matter is not pending before any arbitrator nor the arbitrator is acting in this case. It is submitted by the learned Counsel for the appellant that the Court below has not properly considered the provisions of Section 9 of the Act of 1996 and has wrongly dismissed the application on the ground of having no jurisdiction. It is further submitted by the Counsel for the appellant that admittedly the valuation of the dispute is more than Rs. 25 lacs and as per Section 9 of the Act of 1996, the jurisdiction to pass interim directions during arbitral proceedings lies with the Court. Section 2(1)(e) of the Act of 1996 defines Court and according to which in cases where High Court is having ordinary original civil jurisdiction, the High Court can be treated as a Court within the meaning of Section 9 but in cases where the High Court is not having ordinary original civil jurisdiction, the petition under Section 9 can be filed before the District Court which is the Principal Civil Court of original jurisdiction in a district. It is, therefore, submitted by the Counsel for the appellant that the Trial Court has wrongly recorded the finding that the District Court is not having any jurisdiction to pass any interim direction.

4. Counsel for the appellant further submits that the Court has wrongly considered the provisions of Section 42 of the Act of 1996 which is about the jurisdiction of the Court in arbitral proceedings in relation to all subsequent applications and this Section is pari materia with the provisions of Section 31(4) of the Arbitration Act, 1940 (for short 'the Act of 1940') with some minor changes. The Counsel for the appellant has placed reliance on thedecisions by the Supreme Court in the case of Sundaram Finance Ltd, v. NEPC Ltd. [(1999) 2 SCC 479] and Ador Samia Ltd. v. Peekay Holdings Ltd. [(1999) 8 SCC 572]. He has further placed reliance on a decision in the case of P. Anand. Gajapathy Raju v. P. KG. Raju [(2000) 4 SCC 539] in which the word 'Court' as defined in Section 2(1)(e) of the Act of 1996 has been interpreted and in the case of Konkan Railway Corporation Ltd. v. Rani Constructions Pvt. Ltd. [(2002) 2 SCC 388], in which it has been held by the Supreme Court that the order of the Chief Justice or his designate under Section 11 of the Act in appointing arbitrator is not an adjudicatory order and the Chief Justice or his designate is not a Court or a Tribunal. Therefore, his sole submission is that in the State of Madhya Pradesh, the District Judge is the only Principal Court of original civil jurisdiction having jurisdiction to decide the application under Section 9 of the Act of 1996.

5. In reply the Counsel for the respondent has placed reliance on a decision in the case of The State of M.P. v. Saith and Skelton (P) Ltd. and Ors. (AIR 1972 SC 1507) and submitted that in this case an arbitrator was appointed by the Supreme Court and the subsequent application for challenging the award was also entertained by the Supreme Court. He further submitted that since the amount in this case is more than Rs. 25 lacs and for that under the scheme, the Chief Justice or his designate has to entertain the application for appointment of an arbitrator under Section 11 of the Arbitration Act of 1996. Therefore, it is to be construed that the original jurisdiction to decide an application under Section 9 vests in the High Court and not in the District Court and the Court below has rightly rejected the application.

6. Having heard learned Counsel for the parties and having considered the rival contentions as advanced by the learned Counsel for the parties, I am of the view that this appeal deserves to be allowed and the impugned order passed by the Additional District Judge is liable to be set aside solely on the ground that in M.P. High Court is not the Principal Court of original civil jurisdiction. This position is not disputed by the Counsel for the parties appearing before me. In M.A. No. 329/97 (Midex Overseas Ltd. v. Marval Agro Ltd. and Anr.), this Court has held that this High Court does not have original civil jurisdiction and cannot function as Principal Court of original civil jurisdiction, therefore, cannot entertain original suits and petition unless such jurisdiction is conferred specifically and extra-ordinarily.

7. Section 7 of the M.P. Civil Courts Act provides that the Court of the District Judge shall be the Principal Civil Court of original jurisdiction in the civil district. In the High Court Rules also there is no provision which provides original civil jurisdiction to the High Court to hear the original suits. Therefore, admittedly, in M.P. the High Court is not having the original civil jurisdiction to entertain any petition or suit except in cases where jurisdiction has been conferred to the High Court under the special laws.

8. Section 2(1)(e) of the Act of 1996 defines the Court as under :--

'Court means the Principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject matter of a suit, but does not include any Civil Court of a grade inferior to such Principal Civil Court, or any Court of Small Causes.'

9. Section 9 of the Act of 1996 reads as under :--

'Interim measures, etc. by Court.--A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court :--

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purpose of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely :--

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient;

and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.'

10. From the aforesaid two definitions it is obvious that interimorders under Section 9 can only be passed by the Principal Civil Court of original jurisdiction in a district, though the High Court has also been included in the definition when it exercises its ordinary original civil jurisdiction. Now it is also clear that in M.P. the High Court does not exercise its ordinary original civil jurisdiction and as per Section 7 of the M.P. Civil Courts Act it is the District Judge who is the Principal Civil Court of original jurisdiction in the civil district. Therefore, application under Section 9 of the Act of 1996 can be filed before the Principal Civil Court of original jurisdiction in a district which is the Court of District Judge. The jurisdiction contemplated under Section 42 is the jurisdiction of the original application with respect to an arbitration agreement. If any application under this part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court. This clearly mean that a Court having jurisdiction over the subject-matter of the arbitration agreement shall have jurisdiction of concluding the further arbitration proceedings. Though the provisions of Section 42 are similar to that of Section 31(4) of the Act of 1940, with minor changes which ensures that all matters arising out of an arbitration agreement shall be decided by one and the same Court.

11. In view of the aforesaid discussion, it is clear that the Court below has not properly applied the provisions of Section 42 of the Act of 1996 in this case and has wrongly refused to entertain the application. Even in cases where the valuation of the dispute is more than 25 lacs and as per the scheme framed under Section 11 of the Act of 1996 the Chief Justice or his designate is authorised to appoint arbitrator but if the High Court is not having original civil jurisdiction to entertain a suit or application then the application under Section 9 can only be filed before the District Judge who is the Principal Civil Court of original civil jurisdiction in a district and not before the High Court. Therefore, order of the Trial Court on the question of jurisdiction is not sustainable under the law and the application cannot be returned for proper presentation to the Competent Court of original civil jurisdiction. Thus, it is clear in this State the District Judge is the Principal Civil Court of original civil jurisdiction in the district and the function of the High Court under Section 11 for appointment of an arbitrator is not the adjudicatory function and for that purpose neither the Chief Justice nor his designate is a Court or Tribunal as has been held by the Constitution Bench of the Supreme Court in the case of Konkan Railway Corporation Ltd. v. Rani Constructions (supra).

12. In the case of Sundaram Finance Ltd. v. NEPC Ltd. (supra), the Supreme Court has further clarified the legal position as under :--

'The 1996 Act is very different from the Arbitration Act, 1940, The provisions of this Act have, therefore, to be interpreted andconstrued independently and in fact reference to the 1940 Act may actually lead to misconstruction. In other words, the provisions of the 1996 Act have to be interpreted being uninfluenced by the principles underlying the 1940 Act. In order to get help in construing these provisions, it is more relevant to refer to the UNCITRAL Model Law rather than the 1940 Act.'

'Under the 1996 Act, the Court can pass interim order under Section 9. Arbitral proceedings, as we have seen, commence only when the request to refer the dispute is received by the respondent as per Section 21 of the Act. The material words occurring in Section 9 are 'before or during the arbitral proceedings'. This clearly contemplates two stages when the Court can pass interim orders, i.e., during the arbitral proceedings or before the arbitral proceedings. There is no reason as to why Section 9 of the 1996 Act should not be literally construed. Meaning has to be given to the words 'before occurring in the said section. The only interpretation that can be given is that the Court can pass interim orders before the commencement of arbitral proceedings. Any other interpretation, like the one given by the High Court will have the effect or rendering the 'before' in Section 9 as redundant. This is clearly not permissible. Not only does the language warrants such an interpretation but it was necessary to have such a provision in the interest of justice.'

13. In view of the aforesaid position under the law the finding of the Court below that the High Court is having jurisdiction to entertain a petition under Section 9 of the Act of 1996 on the basis of scheme framed under Section 11 for appointment of an arbitrator cannot be accepted. Such an application can only be filed before the District Judge, who is the Principal Civil Court of original civil jurisdiction in a district. Consequently, this appeal is allowed. The impugned order is set aside and the case is remanded back to the District Court to decide the application afresh filed by the appellant in accordance with law. Parties are directed to appear before the Court on 25-11-2002. Parties shall bear their own costs.