Litigation Newsletter – Concurrent Jurisdiction under Arbitration Act
Introduction
When an arbitration clause does not specify the seat of arbitration in case of domestic arbitrations, determining the court having exclusive supervisory jurisdiction over the entire arbitral proceedings becomes a critical issue.
Jurisdictional Factors Under CPC
When the arbitration agreement does not specify a seat, the Supreme Court and High Courts have consistently held that supervisory jurisdiction of the court shall be determined in accordance with Sections 16 to 20 of the Code of Civil Procedure, 1908 (CPC).
When determining jurisdiction under Sections 16 to 20 of the CPC, the following factors are considered:
1. Place where the defendant resides or carries on business (Section 20 CPC)
2. Place where the cause of action, wholly or in part, arises (Section 20 CPC)
Concurrent Jurisdiction
However, when two or more courts have concurrent jurisdiction under the Arbitration Act, Section 42 of the Act comes into play to determine which court’s jurisdiction prevails.
Section 42 of the Arbitration Act provides:
“Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement 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.”
The Principle of “First Filing”
When multiple courts have jurisdiction, Section 42 establishes the principle of “court of first filing” to address situations where multiple courts might have jurisdiction. It ensures that once an application related to an arbitration matter is filed in court, that court alone has exclusive jurisdiction over all subsequent applications arising from the same arbitration agreement.
This means:
1. The first court where an application (eg. Section 8, 9, 11 applications) is validly filed (in a court having proper jurisdiction) becomes the exclusive forum for all subsequent proceedings.
2. All other courts, even if they would otherwise have jurisdiction, are divested of their jurisdiction once an application is filed in one court.
Prerequisite: The Court Must Have Jurisdiction
It is crucial to note that for Section 42 to apply, the court where the first application is filed must be a court having proper jurisdiction. As emphasized in judicial decisions, “the application made under this part to a Court must be a Court which has jurisdiction to decide such application”.
Filing in a court without jurisdiction does not trigger Section 42.
Section 42 in Recent Jurisprudence
Recent Supreme Court decisions have further clarified the application of Section 42:
1. In BGS SGS Soma JV v. NHPC, the Court explained that Section 42 “is meant to avoid conflicts in jurisdiction of Courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one Court exclusively”.
2. The Court held that where a seat is designated, or place of arbitration is fixed under Section 20(2) all applications must made exclusive to the court where the seat is located, and that court alone has jurisdiction over the arbitral proceedings and subsequent applications. This can only be changed by express mutual consent of the parties.
3. For cases where no seat is designated or the “seat” is only a convenient “venue,” Section 42 ensures that the court where the first application is filed gets exclusive jurisdiction.
Conclusion
When two courts have concurrent jurisdiction under the Arbitration Act, the legal position can be summarized as follows:
1. Primacy of Seat: If a seat of arbitration is designated in the agreement, only the courts of that seat have jurisdiction, rendering questions of concurrent jurisdiction largely moot in such cases.
2. Section 42 Application: In cases where multiple courts might have jurisdiction (no designated seat or the “seat” is merely a “venue”), Section 42 ensures that the court where the first application is filed acquires exclusive jurisdiction over all subsequent applications.
3. Prerequisite of Valid Jurisdiction: For Section 42 to apply, the first application must be filed in court that actually has proper jurisdiction over the matter.
This legal framework provides clarity and certainty in determining which court has jurisdiction when multiple courts might potentially hear arbitration-related applications, thereby avoiding conflicts of jurisdiction and promoting efficiency in the arbitration process.