Interim Reliefs Through Courts In Arbitral Proceedings: Question Of Territorial Jurisdiction
Updated: Jun 3
“Swift justice demands more than just swiftness”
-Justice Potter Stewart
Hon’ble Supreme Court,
The United States of America.
Whilst in principle swiftness is an integral cog in the wheels of justice, reality would beg to differ. The justice system is intricate, complex and it requires careful consideration of a number of variables before the impugned matter can be adjudicated upon. Arbitration is no different. Though it was devised as a technique to provide swift and efficacious resolution to disputes, it is not without its challenges. Oftentimes parties may not be in a position to wait for the final adjudication, and they may need a stop-gap arrangement to either protect the dissipation of the impugned property or to maintain the status quo till final adjudication. This is the essential idea behind the concept of interim relief. In India, the Arbitration and Conciliation Act, 1996 (“Act”) deals with the provisions regarding interim relief in arbitration proceedings.
THE QUESTION OF TERRITORIAL JURISDICTION
Under the Act, upon commencement of the arbitration, powers are vested on the tribunal to entertain and dispose of petitions for interim relief. However, it may so happen that often parties are in need of interim relief at the outset of a dispute and before the tribunal is constituted. For such instances, the Act confers upon the Courts of our nation, authority to entertain petitions seeking interim reliefs. Herein lies the obscurity. Because, while the Act does confer the power on the Courts, Section 9 is silent as to which courts will have territorial jurisdiction in entertaining these petitions for interim reliefs.
Civil Courts of our nation are subject to the procedural norms prescribed under the Code of Civil Procedure, 1908 (“CPC”). CPC lays down the tests for determining the jurisdiction of the Courts. The incertitude occurs when the seat of the Arbitration and the designated jurisdictional Court belong to a place that does not satisfy any of the tests laid down under CPC for it to have the jurisdiction to entertain the petition for interim relief. Let us consider a hypothetical scenario where the designated jurisdictional court is that of Bangalore as per the arbitration clause of the contract. The subject matter of the arbitration is an immovable property situated in Delhi.
As per provisions of Section 16 of CPC, territorial jurisdiction of suits with regard to immovable poverty shall be vested with the Courts within whose local limits the property is situated. The aggrieved party now wants to seek interim relief from the Court. As per the terms of the contract, the party approaches the District court in Bangalore, Karnataka. Will this Court have jurisdiction in entertaining this petition?
What happens if the opposing counsel raises a preliminary objection saying the Court does not have territorial jurisdiction under Section 16 (assuming the relief sought involves third party obedience in which case the provision of proviso under Section 16 won’t apply). Will the Court be bound to not entertain the petition since it fails the test of jurisdiction as laid down under CPC?
The quandary of Territorial Jurisdiction was addressed by the Hon’ble Supreme Court of India in the matter of Indus Mobile Distribution Pvt. Ltd v. Datawind Innovations Pvt. Ltd. (“Indus Mobile Case”). The facts of the case are analogous to the hypothetical posited above.
The parties to the dispute had an arbitration clause in their agreement which provided for Mumbai as the seat of arbitration.
The terms of the contract also provided for the Courts in Mumbai as the exclusive jurisdiction for resolving all disputes arising out of the Contract.
Subsequently, a dispute arose between the parties and the Respondent in the above case filed a petition for interim relief under Section 9 of the Act before the High Court of Delhi along with another application under Section 11 of the Act.
Both applications were disposed of by the Hon’ble High Court of Delhi who opined that the Courts in Mumbai did not have any jurisdiction in the matter as no part of the cause of action arose therein.
Delhi High Court held that only three courts had prima facie jurisdictional power to entertain the matter viz., Delhi, Chennai (since goods were supplied between these two places) and Amritsar (since the Defendant’s place of business was located there).
The Judgment was challenged by the Appellant in Indus Mobile Case before the Hon’ble Supreme Court of India. The contention put forth by the Respondents in the above case was that the Courts in Mumbai did not have any jurisdiction as it did not fulfil even one of the tests mandated under CPC for vesting on a court the jurisdiction power to entertain a matter.
The Hon’ble Supreme Court set aside the impugned judgment of the Delhi High Court on the ground that Courts in Mumbai alone would have jurisdiction in the matter.
The reasoning given by the Hon’ble Apex Court in reaching such a decision is that:
Once a seat of arbitration is designated, then, in effect, it shall operate as an exclusive jurisdiction clause.
The Court pointed out that Arbitration as a method of dispute resolution accords the parties the ability to decide on a mutually neutral place as the seat of arbitration.
The place so chosen (seat) will be the legal place of the arbitration. The place chosen need not pass the litmus test of ‘cause of action’ or for that matter, it need not be in conformity with the provisions of Section 16 to 20 of CPC.
The Court iterated that once a seat has been designated in an arbitration proceeding, the Courts thereof will have exclusive jurisdiction in exercising supervisor control over the arbitration proceedings and accordingly in the instant case, the Courts in Mumbai will have exclusive jurisdiction.
The decision of the Court in the Indus Mobile Case is germane to the matter under discussion as it accords coherence to the issue of territorial jurisdiction.
The Court has upheld the principles of party autonomy by affirming the fact that parties are at liberty to decide matters including the selection of a neutral seat of arbitration and that the same shall not be invalidated on the grounds of it not satisfying the tests mandated under CPC for vesting on a court the jurisdictional power to entertain a matter or because of the fact that no cause of action has arisen from the place of the seat chosen.
This decision also brings about a uniformity in the matter of jurisdiction in Arbitration. The judicial pronouncements, as they stand today, supposedly allow two Indian parties to an arbitral agreement to choose a foreign seat of arbitration and ergo bind themselves to the jurisdiction of a foreign court, where no cause of action has arisen.
This being the case, had the Supreme Court in the Indus Mobile Case upheld the jurisdiction of the Delhi Court, there would certainly have arisen an incongruity, which would have put domestic arbitration in a predicament. The decision of the Court is also a clear indication that parties should select a seat of arbitration after careful consideration and deliberations. This is because choosing a seat of arbitration, as far as the matter of jurisdiction is concerned, will have the effect of the “Exclusive Jurisdiction” Clause and the Courts thereof will have exclusive jurisdiction in exercising supervisor control over the arbitration proceedings.
This post has been written by Anup Menon
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