The Rare Case Where Section 42 of the Arbitration Act Fails

In the year 2000, the State of Maharashtra awarded a contract for some construction work to a certain Atlanta Limited. Disputes borne out of the contract were to be decided through arbitration. A dispute arose and an award was granted. Recourse to a “Court” against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3) of Section 34 of the Arbitration and Conciliation Act, 1996 (the “Act”). This “Court”, as is indicated in Section 2(1)(e) of the Act, means a “principal Civil Court of original jurisdiction in a district” and includes the “High Court exercising its “ordinary original civil jurisdiction”. While the State of Maharashtra preferred its challenge to the arbitral award before the relevant “principal Civil Court of original jurisdiction” – Atlanta Limited raised its challenge before the Hon’ble High Court of Judicature at Bombay (“High Court”). Since, the same award was the subject matter of challenge before two different Courts – Atlanta Limited prayed in an application before the High Court, under Section 24 of the Code of Civil Procedure, 1908, that the State of Maharashtra’s applications before the “principal Civil Court of original jurisdiction” be transferred to the original side of the High Court. That application was allowed and was subsequently challenged before the Hon’ble Supreme Court of India in the matter of, Executive Engineer, Road Development Division No. III, Panvel and Anr. v. Atlanta Limited, 2014 (1) SCALE 277.

Usually, Section 42 of the Act is sufficient to break the impasse. “Section 42…reveals a clear acknowledgement by the legislature, that the jurisdiction for raising a challenge to the same arbitration agreement, arbitral proceeding or arbitral award, could most definitely arise in more than one Court simultaneously.” In the present case it was not doubted that neither the State of Maharashtra nor Atlanta Limited had violated the mandate of Section 2(1)(e) of the Act. They had both chosen a “rightful Court” for its challenge to the said (same) arbitral award. “To remedy such a situation, Section 42 of the Arbitration Act mandates that the Court wherein the first application arising out of such a challenge is filed, shall alone have the jurisdiction to adjudicate upon the dispute(s), which are filed later in point of time”. However, herein lies the beauty of the matter – the State of Maharashtra and Atlanta Limited had preferred their applications, challenging the arbitral award, in their respective “rightful” Courts, on the same day! Section 42 was therefore of little assistance.

The SC had to arrive at its conclusions though! And not by noting the hours and minutes. It has now been held that “under the scheme of the provisions of the Arbitration Act …. if the choice is between the High Court (in exercise of its “ordinary original civil jurisdiction”) on the one hand, and the “principal civil Court of original jurisdiction” in the District i.e. the District Judge on the other, Section 2(1)(e) of the Arbitration Act has made the choice in favour of the High Court.”  The impugned order of the High Court was thus, upheld. The State of Maharashtra’s Section 34 applications before the relevant “principal Civil Court of original jurisdiction” now stand transferred to the High Court.

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