Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.6316 OF 2011
[Arising out of SLP [C] No.15165/2008]
M/s. Milkfood Pvt. Ltd. ... Appellant
Vs.
M/s. GMC Ice Cream (P) Ltd. ... Respondent
J U D G M E N T
R.V. RAVEENDRAN,J.
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.
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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.
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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
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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
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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.--(1) 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.
(2) 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.
(3) 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.
(4) Notwithstanding anything contained elsewhere in this Act or in any
other law for the time being in force, where in any reference any
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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 :
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(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
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the 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
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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
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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
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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
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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
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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
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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)
New Delhi; ...................................J.
August 4, 2011. (A K Patnaik)
