M/S. BHANDARI UDYOG LIMITED versus INDUSTRIAL FACILITATION COUNCIL AND ANR.
[2015] 2 S.C.R. 498, Supreme Court of India, 2015
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2015] 2 S.C.R. 498 
A 
M/S. BHANDARI UDYOG LIMITED 
B 
c 
v. 
INDUSTRIAL FACILITATION COUNCIL AND ANR. 
(Civil Appeal No. 2077 of 2015) 
FEBRUARY 20, 2015 
[M.Y. EQBAL AND KURIA~ JOSEPH, JJ.] 
Arbitration and Conciliation Act, 1996: ss. 34, 42 
- Jurisdiction - Respondent No. 2 running a cotton 
spinning mill in Latur, Maharashtra purchased cotton 
from the appellant company running business at 
D Raichur in the State of Karnataka - Dispute between 
parties -
Application before Karnataka High Court 
u/s.11 - Appointment of arbitrator - Arbitration award 
-
Respondent no.2 challenged the award by filing 
application u/s.34 of the Act before the District Court 
E at Latur, 
Maharashtra -
Appellant opposed 
application on the ground that District Court at Latur 
lacked jurisdiction -
District Judge, Latur held that 
since respondent no. 2 resided at Latur, delivery of 
cotton bales was taken at Latur and place of 
F business of respondent no. 2 was at Latur, therefore, 
District Judge, Latur has jurisdiction to entertain the 
application u!s.34 of the Act -
High Court upheld 
the same -
Held: Pursuant to the order placed by 
respondent no.2, the cotton bales were dispatched 
G by the appellant from Raichur supported by all bills/ 
invoices specifically mentioning "subject to Raichur 
jurisdiction" - Admittedly, the arbitration proceeding 
was conducted within the jurisdiction of 
Raichur 
H 
498
BHANDARI UDYOG LTD. v. INDUSTRIAL 
499 
FACILITATrON COUNCIL 
court, which has jurisdiction as per s.20, CPC and A 
is subordinate to the High Court of Karnataka which 
entertained s.11 application -
Therefore, the award 
cannot be challenged before a Court subordinate to 
the High Court of Bombay - Jurisdiction -
Code of 
Civil Procedure, 1908 - s.20. cannot be challenged B 
before a Court subordinate to the High Court of 
Bombay -
Jurisdic_tion -
Code of Civil· Procedure, 
1908 -
s.20. 
Allowing the appeal, the Court 
c 
HELD: 1. 
Pursuant to the order placed by 
respondent 
no.2, 
the 
cotton 
bales 
were 
dispatched by the appellant from Raichur 
supported by all bills/invoices specifically D 
mentioning that "subject to Raichur jurisdiction". 
Admittedly, the Arbitration proceeding was 
conducted within the jurisdiction of 
Raichur 
court, which has jurisdiction as per Section 20 
of the Code of Civil Procedure and is subordinate E 
to the High Court of Karnataka which entertained 
Section 11 Application. Hence, the Award cannot 
be challenged before a Court subordinate to the 
High Court of Bombay. 
Exercise of jurisdiction F 
by such court shall be against the provision of 
Section 42 of the Act. The District Court at Latur 
and High Court of Bombay committed error of 
law in entertaining the application under Section 
34 of the Act and dismissing the revision petition. G 
[Paras 8, 10, 11] [502-E,G; 504-A-E] 
State of West Bengal & Ors. v. Associated 
Contractors
(2015) 1 SCC 32 - relied on. 
H

500 
SUPREME COURT REPORTS 
[2015] 2 S.C.R. 
A 
Case Law Reference 
(2015) 1 sec 32 
relied on 
Para 9 
CIVIL APPELLATE JURISDICTION: Civil Appeal 
B No. 2077 of 2015 
From the Judgment and Order dated 21.11.2013 
of the High Court of Judicature at Bombay Bench at 
Aurangabad in Civil Revision Application No. 179 of 
c 2013 
D 
E 
Jayant Bhushan, Nirnimesh Dube, Ankur S. 
Kulkarni, Anand Srivastava, Shubham Jaiswal (for M/ 
s. Lex Regis Law Offices) for the Appellant. 
Shirish K. Deshpande for the Respondents. 
The Judgment of the Court was delivered by 
M.Y. EQBAL, J. 1. Leave granted. 
2. The short question that falls for consideration in 
this appeal is as to whether the Bombay High Court 
has correctly decided the jurisdiction of a Court to 
entertain application under Section 34 of the 
F Arbitration and Conciliation Act, 1996? 
3. The facts of the case lie in a narrow compass. 
4. The Appellant Company is running a small scale 
industry at Raichur in the State of Karnataka and is 
G engaged in the business of cotton ginning, pressing 
while extraction and in marketing the finished 
products. Whereas Respondent No.2 is running a 
cotton spinning mill at Latur in the State of 
H Maharashtra. Respondent no.2 purchased 750 bales
BHANDARI UDYOG LTD. v. INDUSTRIAL 
501 
FACILITATION COUNCIL [M.Y. EQBAL, J.] 
of cotton from the appellant-company and made part A 
payment to the appellant. The balance amount was 
not paid which led to a dispute between the parties. 
5. It further appears that the appellant filed an 
application under Sections 3 and 4 of the Interest B 
on Delayed Payments to Small Scale and Ancillary 
Industrial Undertakings Act,1993 (for short 'IDP Act') 
before respondent no.1, the Industrial Facilitation 
Council (for short 'IFC') to arbitrate the dispute 
between the appellant and respondent no.2. 
The C. 
appellant thereafter filed a petition before the 
Karnataka High Court under Section 11 of the 
Arbitration and Conciliation Act, 1996 (for short 'Act 
of 1996') for appointment of Arbitrator. 
The said 
petition was allowed by the Chief Justice Designate D 
and directed respondent No.1 (IFC) to decide the 
dispute between the parties. The respondent no.1 
passed an Award on 16.8.2010 directing respondent 
no.2 to pay a sum of Rs.20,25,213.54 with interest. 
E 
6. The respondent no.2 challenged the Award by 
filing an application under Section 34 of 1996 Act 
before the District Court at Latur, Maharashtra for 
setting aside the Award. The appellant opposed the 
said application by challenging the jurisdiction of the F 
District Court in Latur. The appellant contended that 
the District Court at Raichur has jurisdiction to hear 
the application under Section 34 of the Act. 
The
District Judge proceeded to decide the jurisdiction 
by referring various provisions including Sections 15 G 
to 20 of the Code of Civil Proce.dure and held that 
since respondent no.2 resides at Latur, delivery of 
cotton ba1es was taken at Lattrr and the place of 
business of respondent no.2 was at Latur, it is the H
502 
SUPREME COURT REPORTS 
[2015] 2 S.C.R. 
A District Judge, Latur, who has jurisdiction to entertain 
the application under Section 34 of the Act. 
7. As against the aforesaid order passed by the District 
Judge, Latur, appellant preferred a revision before the 
B Bombay High Court. 
The Bombay High Court 
dismissed the revision holding that since the Chief 
Justice of the High Court dealing with an application 
under Section 11 of .the Act is not a court, and that no 
application was filed in any court prior to the filing of 
C application under Section 34 of the Act and further the 
bales were supplied at Latur, it is the Latur Court which 
has jurisdiction to entertain the application under 
Section 34 of the Act. 
D 8. We have heard Mr. Jayant Bhushan, learned senior 
counsel appearing for the appellant and Mr. Shrish 
K. Deshpande, learned counsel appearing for 
respondent no.2. It is not in dispute that pursuant to 
the order passed by respondent no.2, the cotton bales 
E were dispatched by the appellant from Raichur 
supported by all bills/invoices specifically mentioning 
that "subject to Raichur jurisdiction". 
The dispute 
arose and the matter was referred to respondent no.1, 
IFC Bangalore. Respondent No.2 participated in the 
F arbitration proceedings in Bangalore without raising 
objection with regard to the jurisdiction of the 
KiHnataka High Court referring the matter to 
arbitration or the jurisdiction of IFC to decide the 
dispute. Admittedly, the
arbitration proceeding was 
G concluded within the jurisdiction of Raichur Court. 
H 
The only forum .available to respondent no.2 was to 
make an application under Section 34 of the Act 
before the Civil Court of original jurisdiction at
BHANDARI UDYOG LTD. v. INDUSTRIAL 
503 
FACILITATION COUNCIL [M.Y. EQBAL, J.] 
Raichur, since the Karnataka High Court has no A 
original jurisdiction. 
9. Recently, when a similar question for consideration 
arose before three Judges Bench of this Court in the 
case of State of West Bengal & Ors. vs. Associated B 
contractors, (2015) 1 SCC 32, this Court held:-
"22. One more question that may arise under 
Section 42 is whether Section 42 would apply 
in cases where an application made in a court 
is .found to be without jurisdiction. Under 
Section 31(4) of the old Act, it has been held 
in FC.I. v. A.M. Ahmed & Co.,(2001) 10 SCC 
532 at p. 532, para 6 and Neycer India Ltd. 
v. GMB Ceramics Ltd.(2002) 9 SCC 489 at 
pp. 490-91, para 3 that Section 31(4) of the 
1940 Act would not be applicable if it were 
found that an application was to be made 
before a court which had no jurisdiction. In 
Jatinder Nath v. Chopra Land Developers (P) 
Ltd.,(2007) 11 sec 453 at p. 460, para 9 
and Rajasthan SEB v. Universal Petro 
Chemicals Ltd. (2009) 2 SCC 107 at p. 116, 
paras 33 to 36 and Swastik Gases (P) Ltd. v. 
Indian Oil Corpn. Ltd. (2013) 9 SCC 32 at 
pp. 47-48, para 32, it was held that where 
the agreement between the parties restricted 
jurisdiction to only one particular court, that 
court alone would have jurisdiction as neither 
Section 31(4) nor Section 42 contains a non 
obstante clause wiping out a contrary 
agreement between the parties. It has thus 
been held that
applications preferred to courts 
c 
D 
E 
F 
G 
H

504 
SUPREME COURT REPORTS 
[2015] 2 S.C.R. 
A 
outside the exclusive court agreed to by 
parties would also be without jurisdiction." 
10. Indisputably, the Arbitration proceeding has been 
conducted within the jurisdiction of Raichur court, 
B which has jurisdiction as per Section 20 of the Code 
of Civil Procedure and is subordinate to the High 
Court of Karnataka which entertained Section 11 
Application. Hence, the Award cannot be challenged 
before a Court subordinate to the High Court of 
C Bombay. Exercise of jurisdiction by such court shall 
be against the provision of Section 42 of the Act. 
11. We, after giving our anxious consideration to the 
matter, are of the view that the District Court at Latur 
o and High Court of Bombay have committed error of 
law in entertaining the application under Section 34 
of the Act and dismissing the revision petition. 
12. We, therefore, allow this appeal and set aside 
E the order passed by the High Court. There shall be 
no order as to costs 
Devika Gujral 
Appeal allowed.