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We, after giving our anxious consideration to the matter, are of the view that the District Court at Latur 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.= Indisputably, the Arbitration proceeding has been conducted within the jurisdiction of Raichur court, 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 Bombay. Exercise of jurisdiction by such court shall be against the provision of Section 42 of the Act.

‘REPORTABLE’

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2077 OF 2015
(Arising out of SLP (C) NO. 8675 OF 2014)

M/S. BHANDARI UDYOG LIMITED …..Appellant(s)
versus
INDUSTRIAL FACILITATION COUNCIL
AND ANOTHER …..Respondent(s)
JUDGMENT

M. Y. EQBAL, J.

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 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 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
Maharashtra. Respondent no.2 purchased 750 bales of cotton from the
appellant-company and made part 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 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
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 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.

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 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 to 20 of the Code of Civil Procedure and
held that since respondent no.2 resides at Latur, delivery of cotton bales
was taken at Latur and the place of business of respondent no.2 was at
Latur, it is the 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 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 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.

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 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 arbitration proceedings in Bangalore without raising
objection with regard to the jurisdiction of the Karnataka High Court
referring the matter to arbitration or the jurisdiction of IFC to decide
the dispute. Admittedly, the arbitration proceeding was concluded within
the jurisdiction of Raichur Court. 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 Raichur, since the Karnataka High
Court has no 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 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 [pic]found
to be without jurisdiction. Under Section 31(4) of the old Act, it has been
held in F.C.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
SCC 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 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, 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
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 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 the order passed by
the High Court. There shall be no order as to costs.

…………………………….J.
(M.Y. Eqbal)

…………………………….J.
(Kurian Joseph)
New Delhi,
February 20, 2015.

ITEM NO.1A COURT NO.11 SECTION IX
[FOR JUDGMENT]

S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS

C.A. No. 2077 of 2015 @ Petition(s) for Special Leave to Appeal (C) No(s).
8675/2014

(Arising out of impugned final judgment and order dated 21/11/2013 in CRA
No. 179/2013 passed by the High Court Of Bombay Bench at Aurangabad)

M/S BHANDARI UDYOG LTD Petitioner(s)

VERSUS

INDUSTRIAL FACILITATION COUNCIL & ANR Respondent(s)
Date : 20/02/2015 This appeal was called on for judgment today.
For Petitioner(s) Mr. Anand Shrivastava, Adv. for
M/s. Lex Regis Law Offices
For Respondent(s) Mr. Shirish K. Deshpande,Adv.

Hon’ble Mr. Justice M.Y. Eqbal pronounced the judgment of the
Bench comprising His Lordship and Hon’ble Mr. Justice Kurian Joseph.
Leave granted.
Appeal is allowed in terms of signed reportable judgment. No
costs.

(INDU POKHRIYAL) (PARDEEP KUMAR)
COURT MASTER AR-cum-PS
[SIGNED REPORTABLE JUDGMENT IS PLACED ON THE FILE]

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