M/S. BHANDARI UDYOG LIMITEDversusINDUSTRIAL FACILITATION COUNCIL AND ANR.

                      [2015] 2 S.C.R. 498


A           M/S. BHANDARI UDYOG LIMITED

                              v.

     INDUSTRIAL FACILITATION COUNCIL AND ANR.
B             (Civil Appeal No. 2077 of 2015)

                      FEBRUARY 20, 2015

           [M.Y. EQBAL AND KURIA~ JOSEPH, JJ.]
c        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.
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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

          Jayant Bhushan, Nirnimesh Dube, Ankur S.
      Kulkarni, Anand Srivastava, Shubham Jaiswal (for M/
      s. Lex Regis Law Offices) for the Appellant.
D        Shirish K. Deshpande for the Respondents.

         The Judgment of the Court was delivered by

         M.Y. EQBAL, J. 1. Leave granted.
E
      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
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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.
  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
H
    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     c
    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            D
   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)        E
   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          F
   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        G
   obstante clause wiping out a contrary
   agreement between the parties. It has thus
   been held that applications preferred to courts
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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.