Case: HINDUSTAN CONSTRUCTION COMPANY LTD Vs. NHPC LTD. &amp; ORS

By an order dated 14.11.2019 passed by the learned Additional District Judge-cum-Presiding Judge, Special Commercial Court at Gurugram in Arbitration Case No. 252 of 2018, the learned Judge on construing the arbitration clause in the agreement between the parties arrived at the finding that the seat of arbitration was at New Delhi. Yet, by virtue of Bharat Aluminium Company and Ors. vs. Kaiser Aluminium Technical Services, Inc. and Ors. (2012) 9 SCC 552 since both Delhi as well as the Faridabad Courts would have jurisdiction as the contract was executed between the parties at Faridabad, and part of the cause of action arose there, and since the Faridabad Court was invoked first on the facts of this case, Section 42 of the Arbitration Act would kick in as a result of which the Faridabad Court would have jurisdiction to decide all other applications.

Reasoning: This Court in Civil Appeal No. 9307 of 2019 entitled BGS SGS Soma JV vs. NHPC Ltd. delivered a judgment on 10.12.2019 i.e. after the impugned judgment was delivered, in which reference was made to Section 42 of the Act and a finding recorded thus:61. Equally incorrect is the finding in Antrix Corporation Ltd. (supra) that Section 42 of the Arbitration Act, 1996 would be rendered ineffective and useless. 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. This is why the section begins with a non-obstante clause, and then goes on to state …where with respect to an arbitration agreement any application under this Part has been made in a Court… It is obvious that the application made under this part to a Court must be a Court which has jurisdiction to decide such application. The subsequent holdings of this Court, that where a seat is designated in an agreement, the Courts of the seat alone have jurisdiction, would require that all applications under Part I be made only in the Court where the seat is located, and that Court alone then has jurisdiction over the arbitral proceedings and all subsequent applications arising out of the arbitral agreement. So read, Section 42 is not rendered ineffective or useless. Also, where it is found on the facts of a particular case that either no seat is designated by agreement, or the so-called seat is only a convenient venue, then there may be several Courts where a part of the cause of action arises that may have jurisdiction. Again, an application under Section 9 of the Arbitration Act, 1996 may be preferred before a court in which part of the cause of action arises in a case where parties have not agreed on the seat of arbitration, and before such seat may have been determined, on the facts of a particular case, by the Arbitral Tribunal under Section 20(2) of the Arbitration Act, 1996. In both these situations, the earliest application having been made to a Court in which a part of the cause of action arises would then be the exclusive Court under Section 42, which would have control over the arbitral proceedings. For all these reasons, the law stated by the Bombay and Delhi High Courts in this regard is incorrect and is overruledThis was made in the backdrop of explaining para 96 of the Balco (supra), which judgment read as a whole declares that once the seat of arbitration is designated, such clause then becomes an exclusive jurisdiction clause as a result of which only the courts where the seat is located would then have jurisdiction to the exclusion of all other courtsGiven the finding in this case that New Delhi was the chosen seat of the parties, even if an application was first made to the Faridabad Court, that application would be made to a court without jurisdiction.