INTRODUCTION

Arbitration is a form of Alternate Dispute Resolution, that resolves disputes outside of the court, it is a form of unconventional dispute resolution mechanism. In arbitration, the parties to the dispute try resolving their conflicts before an arbitrator in an amicable manner, and thus towards the end of the arbitration proceedings the arbitrator passes an arbitral award which is legally binding upon both the parties.

Once an award is passed by the arbitrator, the next step in the procedure is the execution of the arbitral award. The arbitral award is executed by the court following the procedure of CPC. An arbitral award is hence considered equivalent to an order or a decree made by the court.

Although arbitration is an out of court settlement, yet courts play a significant role throughout the arbitration proceedings. Section 2(1)(e) of the Arbitration and Conciliation Act defines court as –

“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.”

There are basically two kinds of Arbitration, namely Domestic and International arbitration. Domestic arbitration involves cases wherein the subject matter as well as the parties are Indian. On the other hand, international arbitration involves foreign subject matter. Thus, the definition of court may vary in cases of international arbitration. Herein we would be discussing about the jurisdiction of courts in domestic matters.

There are several functions of the court throughout the arbitration proceedings. Some of them are as follows-

1. Supervisory Function- The courts supervise the entire arbitral proceedings, ensuring and ascertaining that the entire proceedings are concluded in the right and just manner.

2. Appointment of the Arbitrator- if the party to the dispute fails to appoint an arbitrator, then in that case they may request the chief justice of the high court to appoint one under section 11 of the arbitration and conciliation act.

3. Challenge arbitral award and interim orders – Either of the parties to the dispute can challenge an arbitral award made by the arbitrator under section 34 of the arbitration and conciliation act, the parties can also challenge any interim order passed by the arbitral tribunal under section 37 of the act.

4. Power to refer to arbitration – where there is an arbitration agreement yet either of the party comes before court for resolving the dispute, the court in that circumstance has the power to refer the parties to arbitration, this acts as a remedy for the other party in case of breach of arbitration agreement under section 8 of the arbitration and conciliation act.

5. Execution of the arbitral award – the courts execute the arbitral award passed by the arbitral tribunal under section 36 of the arbitration and conciliation act, award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court.

Jurisdiction of the courts

The jurisdiction of the courts is decided considering the place of the arbitration, section 20 of the arbitration and conciliation act defines the term place of the arbitration, and as stated above the parties to the dispute are given full freedom as to decide the place of the arbitration proceedings, and if they fail to do so, the tribunal may decide the place considering the convenience of the parties and circumstances of the case. 

Section 31(4) of The Act provides that the arbitral award shall state its date and place of arbitration as determined in accordance with Section 20. 

There may be circumstances where the arbitration agreement is silent about the place of the arbitration, thus in such cases, the principles embodied in sections 16 to 20 of the Civil Procedure Code would apply, and the Courts within whose jurisdiction the cause of action arose or the Defendant conducts its business would have jurisdiction over the matter.

The territorial jurisdiction of the case is decided considering the following factors, namely-

The place where the immovable property as the subject matter of the suit is situated,

The place where cause of action arises,

The place where the defendant (s) actually and voluntarily resides,

The place where the defendant (s) works for personal gains,

Or The place where the defendant (s) carries on business.

The pecuniary jurisdiction on the other hand may vary from state to state, the regulations of each state’s pecuniary jurisdiction is then considered. The only precondition to section 2(1)(e) is that the Courts should have been of competent jurisdiction to deal with the subject-matter of the arbitration if the same would have arisen in a suit. The courts must have original jurisdiction for addressing any concerned arbitration dispute.

What happens in the case of concurrent jurisdiction?

There may be circumstances wherein more than one court has the jurisdiction over the specific subject matter, in that case, the parties are permitted to agree on a particular court to have exclusive jurisdiction among the courts having concurrent jurisdiction.

Section 42 of the arbitration and conciliation act is really significant for understanding the jurisdiction of court over the entire arbitration procedure.

Section 42 states that “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 sequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.”

So, section 42 lays down the fact that once an application concerning the arbitration has been made in any particular court, that court from then on shall have jurisdiction over the entire arbitral proceedings.

Whether the appointment of the arbitrator under section 11, makes the high court the exclusive court of jurisdiction?

In the landmark judgement of Vijay Kumar Gupta v. Renu Malhotra, the Delhi High Court resolved the debate surrounding sections 11 and 42 of the arbitration and conciliation act, the Court remarked that as has been well-established through precedents, ‘Chief Justice’ under Section 11 of the Act is not equivalent to “Court” under Section 2(e) of the Act. Therefore, the mere appointment of the Arbitrator does not vest the Delhi High Court with the jurisdiction to deal with execution proceedings. The Delhi High Court asserted that the meaning of the term “Court” under Section 42 must be read in conformity with Section 2(e). 

The Court found that the High Court lacked jurisdiction because of the pecuniary limits (The petition was valued at Rs. 5 lakh), hence the arbitral award cannot be executed by the High court, irrespective of the fact that the arbitrator was appointed by the chief justice of high court.

Are the parties to the dispute allowed to choose supervisory courts which do not possess jurisdiction under the CPC?

Although the Arbitration Act gives the parties freedom to agree on the seat of arbitration, however, such freedom was initially limited as they were permitted to choose a seat only among the courts which have jurisdiction under the CPC. In other words, the parties were not allowed to choose supervisory courts which do not possess jurisdiction under the CPC. This was a settled view of the Indian courts that parties cannot transfer jurisdiction over a court that does not have jurisdiction under the CPC or any other applicable legislation by contractual agreement.

But this was overruled by the apex court in its landmark judgements, In Indus Mobile Distribution Pvt. V. DataWind Innovations Pvt. Ltd, the supreme court overruled the decision of the Delhi high court and concluded that once the parties mutually agree to designate a court of competent jurisdiction as the seat of arbitration under Section 2 (1) (e) of the Arbitration Act, such court would have exclusive authority to hear issues arising from the arbitration. The Supreme Court reasoned that the seat of arbitration under the Arbitration Law is a notion in which the parties can mutually decide a seat of arbitration regardless of the courts having jurisdiction therein under Sections 16 - 20 of the CPC. It clarified that even if no portion of the cause of action occurs in the seat of arbitration, the courts there have jurisdiction to hear the arbitration issues.

What happens when the seat of arbitration is not decided by the parties yet they decide the place of the arbitration which is nowhere close to the subject matter of the case?

When the seat of arbitration is not decided upon by the parties, it cannot confer jurisdiction to a place where no part of cause of action has arisen or has no nexus with the parties.

It would be totally illegal for the parties to bestow jurisdiction on a place that has no link with the cause of action or the parties without first designating the location of arbitration. In such cases, sections 16 to 20 of the Civil Procedure Code would apply.

In the recent judgement of Delhi High Court namely, Aarka Sports Management Pvt. Ltd Vs. Kalsi Buildcon Pvt. Ltd, a similar question aroused, The Petitioner applied to the Delhi High Court for the appointment of an arbitrator under Section 11 of the Act. The Courts of Delhi were granted exclusive jurisdiction under the Arbitration Clause, although the agreement was vague on the parties' choice of the venue of arbitration. The Respondent contested the Delhi High Court's jurisdiction to hear the aforementioned case. According to the respondent, neither the arbitration nor the cause of action arose in Delhi. The agreement was drafted in Ranchi, signed in Lucknow, and the location of performance/execution was in Patna, Bihar. 

So, in the said case it was held that, if the parties have not agreed on the seat of the arbitration, the Court competent to entertain an application under Section 11 of The Act would be the “Court” as defined in Section 2(1) (e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure.

Conclusion

A special law always prevails over a general law, according to the generalia specialibus non derogant principle, which is typically invoked when interpreting conflicting provisions of two statutes. The CPC is a broad code that establishes procedures for resolving disputes resulting from common contractual interactions. It has no bearing on any special law or any particular authority granted on a court under any other law now in existence. The Arbitration Act is a unique legislation established to control arbitration procedures. It recognises the idea of party autonomy by allowing the parties to pick which courts shall have supervisory jurisdiction under the seat of arbitration. As a result, the Arbitration Act's requirements should take precedence over the CPC's general rules.

As a result, special jurisdiction granted on the court by parties' agreement must not be curtailed or impacted by CPC requirements. As a result, the Supreme Court's approach was correct in upholding the exclusive jurisdiction of the courts at the seat of arbitration, regardless of the requirements specified in Sections 16-20 of the CPC.

Thus, the seat of the arbitration plays the primary role in determining the jurisdiction of the courts over the arbitral proceedings, the parties to the dispute can freely decide upon any place of the arbitration, following which the arbitral award is executed by the court, only in cases wherein the arbitration agreement is silent about the place of the arbitration, section 16-20 of CPC comes into the picture.