1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY O. O. C. J. ARBITRATION PETITION (LODG.) NO.248 OF 2008 PBA Infrastructure Ltd. and another ..Petitioners. Vs. National Highways Authority of India and another ..Respondents. .... Mr. M.M. Vashi i/b M/s. M.P. Vashi & Associates for the Petitioners. Mr. V.A. Thorat, Senior Advocate with Mr. S.D. Shetty with Mr. A.B. Ketkar with Mr. D.G. Dhaure i/b M.V. Kini & Co. for Respondent Nos.1 and 2. ..... CORAM: DR. D.Y. CHANDRACHUD, J. 26th March, 2008. P.C. : This Petition was mentioned before the Court for urgent orders this morning with notice to the Respondents on the ground that on 24th March, 2008 the Respondent has invoked 23 bank guarantees furnished by the Petitioners and that the monies due thereunder are likely to be paid over. Counsel appearing for the Respondents requested the Court to take up the matter in the afternoon session so as to enable the learned counsel to take instructions. Accordingly the matter has been taken on Board by 2 consent at 3.00 p.m. and arguments have been heard of the learned counsel appearing on behalf of the contesting parties. 2. A contract was awarded by the Respondents to the Petitioners for the construction of the Lucknow bypass of a total value of Rs.158 Crores. Twenty three bank guarantees were furnished by the Petitioner under three heads viz. (i) four performance guarantees; (ii) seven retention money guarantees and (iii) twelve discretionary advance guarantees. The Petitioners are two limited companies which had together formed a joint venture to whom the contract was allotted in the year 2001. The arbitration clause contained in the contract was invoked by the Petitioners and an arbitral award came to be passed by the Arbitral Tribunal on 26th June, 2004. The award has been challenged by the Respondents before the Delhi High Court and the arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996 is pending. The bank guarantees furnished by the Petitioners have been invoked by letters dated 24th March, 2008, copies whereof have been annexed at Exhibits B-1 to B-3 of the Petitions. 3 3. During the course of the hearing of the Arbitration Petition which has been instituted under Section 9 of the Arbitration and Conciliation Act, 1996, counsel appearing on behalf of the Respondents has raised a preliminary objection to the jurisdiction of this Court to entertain the arbitration petition. 4. Section 9 of the Arbitration and Conciliation Act, 1996 empowers a party before or during the arbitral proceedings or any time after the award is made but before it is enforced to apply to a Court for an interim measure of protection. The expression 'Court' is defined in Section 2(e) as follows : “2(e) “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.” 5. For the purposes of these proceedings it would also be necessary to advert to the provisions of Section 42 of the Act which 4 are to the following effect : “42. Jurisdiction – 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.” 6. The objection which has been raised on behalf of the Respondents to the jurisdiction of this Court must be sustained on both grounds viz. (i) that in view of the fact that an arbitration application under Section 34 of the Act has already been instituted before the Delhi High Court, it is only that Court and no other Court which would have jurisdiction to entertain a proceeding under Section 9 of the Act; and (ii) even otherwise, having regard to the provisions of Section 2(e), this Court would have no jurisdiction to entertain this Petition. 7. Section 42 commences with a non obstante provision which overrides everything else contained in Part I of the Act or in any other law for the time being in force. The effect of Section 42 5 is that where, with respect to an arbitration agreement any application under Part I has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings as well as all subsequent applications arising out of that agreement. The words “with respect to an arbitration agreement” are of a wide amplitude. An application under Section 34 is an application under “this part” within the meaning of Section 42. Once an application under Part I has been made in Court, it is only that Court which has jurisdiction not merely over the arbitral proceedings but also over all subsequent applications arising out of the arbitration agreement. Not only does Section 42 provide that it is that Court which has jurisdiction but it also contains a negative mandate that an application cannot be filed in any other Court. In the circumstances, the plain effect of the institution of a proceeding by the Respondents before the Delhi High Court under Section 34 is that it is only that Court which would have jurisdiction in the matter of all subsequent applications arising out of the arbitration agreement. 6 8. Secondly the expression “Court” is defined to mean the principal Civil Court of original jurisdiction and to include the High Court in the 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. In the present case it is undisputed that the contract between the parties was entered into at Delhi and it was to be performed in Lucknow. Undoubtedly the bank guarantees were furnished by banks at Bombay. It is, however, important to note that the banks are not parties to the arbitration agreement. The jurisdiction to decide questions forming the subject matter of the arbitration, if the same had been the subject matter of a suit, would therefore lie in the Court where either the contract was entered into or where as a matter of fact the contract was to be performed. The mere circumstance that bank guarantees were issued by banks in Mumbai would not vest jurisdiction in this Court to entertain an arbitration petition under Section 9 of the Arbitration and Conciliation Act. In these circumstances, the arbitration Petition shall accordingly stand disposed of solely on the ground which has 7 been accepted by the Court in the present judgment viz. the absence of jurisdiction to entertain the arbitration petition. *****