India: Jurisdiction Of A Court To Decide An Application Under Section 9 Of Arbitration Act During The Pendency Of Proceedings To Enforce A Foreign Award

The Bombay High Court (BHC) has passed a judgment in Trammo DMCC v Nagarjuna Fertilizers And Chemicals Limited on the issue of whether for the purpose of determining the jurisdiction of a court to entertain an application under Section 9 of the Arbitration and Conciliation Act, 1996 (Act) (during the pendency of proceedings to enforce a foreign award), the definition of "Court" as provided in Section 2(1)(e)(ii) (under Part I of the Act) or as prescribed in the proviso to Section 47 (under Part II of the Act) would be applicable.

Background

The Petitioner had obtained certain awards against the Respondent in a foreign seated international commercial arbitration. Neither did any part of the cause of action arise within the jurisdiction of the BHC nor did the Respondent have any place of business, as required under law, within the jurisdiction of the BHC. However, on the basis of certain bank accounts of the Respondent located within the jurisdiction of BHC alone, the Petitioner filed proceedings under Sections 47 and 49 of the Act to enforce the awards along with a separate petition seeking interim measures under Section 9 of the Act before the BHC.

A preliminary objection to the Section 9 petition was taken by the Respondent on the ground that the BHC did not have jurisdiction to entertain the same. It was the contention of the Respondent that "Court", for the purpose of an application under Section 9 of the Act, would be the "Court" as defined in Section 2(1)(e)(ii) of the Act, i.e. the High Court having ordinary original civil jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit. In such a case, BHC would have jurisdiction to hear the dispute only if, inter alia, the cause of action arose within its jurisdiction or if the Respondent had a place of business within its jurisdiction. It was contended that since neither the cause of action arose within the jurisdiction of the BHC nor did the Respondent have any place of business therein, thus, the BHC would not have jurisdiction to entertain the Section 9 petition filed by the Petitioner.

The Petitioner contended since the awards were passed in a foreign seated arbitration, and Section 9 of the Act had been made specifically applicable to it by virtue of the proviso to Section 2(2) of the Act, the reference to "Court" in Section 9 should be to a "Court" as defined in the Explanation to Section 47 of the Act. "Court", in the said Explanation, is defined as a High Court having jurisdiction to decide the questions forming the subject matter of the arbitral award. It was contended that considering the Respondent, in the present case, held bank accounts within the jurisdiction of the BHC, which formed the subject matter of the arbitral award, the BHC would have jurisdiction to entertain both the Section 9 petition as well as the Section 47 and 49 petition seeking recognition and enforcement of such a foreign award. The Petitioner added that in the scenario envisaged by the Respondent, the purpose of amendment of Section 2(2) would be defeated, as the court would have the jurisdiction to entertain a petition for enforcement, but not to grant interim relief under section 9 pending the enforcement proceedings. A purposive construction was, accordingly, sought.

Judgment

The BHC held that for the purpose of Section 9 of the Act, once a foreign award is passed, the jurisdiction of a court would have to be determined on the basis of the definition of "Court" provided in the proviso to Section 47 of the Act. As a result, thereof, once a foreign award has been passed, the award holder can approach any court where the award is capable of being enforced under Section 47 and 49 of the Act, for obtaining an interim relief under Section 9 of the Act.

The BHC has, while passing the said judgment, proceeded by applying the principle of purposive construction to ascertain the object and intention of the legislation. The BHC was of the view that applying the definition of "Court" as provided in Section 2(1)(e)(ii) of the Act, to a post award scenario in a foreign seated arbitration, would create an incongruity in enforcing the provisions of Section 9 of the Act in as much as a party would be prevented from seeking interim reliefs, while enforcing a money award, as the monies may be lying beyond the jurisdiction of the court, being the court as per Section 2(1)(e)(ii) of the Act. The BHC was of the view that it could not have been the legislative intent to have two different courts for enforcement of foreign award and for securing the same foreign award.

The BHC, therefore, held that since Section 2 of the Act begins with "In this Part, unless the context otherwise requires", by applying the principles of contextual interpretation, in the context where a party is holding a foreign award and where the monies/assets of the award debtor is available/located in the jurisdiction of a particular court, it is inferred that in view of the definition of "Court" under Section 47, that court would be the appropriate court under Section 9 of the Act.

Comment

While the above judgment may appear to be progressive, it brings along with it certain anomalies that have not been thought through. Firstly, the law laid down by the judgment is completely contrary to the express language contained in the Act and has led to a dichotomy in the jurisdiction of courts regarding applications under Section 9 of the Act. Importantly, by virtue of this judgment, different courts will have jurisdiction to decide an application under Section 9 of the Act prior to the conclusion of a foreign seated arbitration, and post the passing of an award. While the entire judgment is premised on legislative intent, it is difficult to accept that the legislature intended for a situation wherein different courts would have jurisdiction at different stages of an arbitration.

The judgment appears to have attempted to fix a lacuna in the law. However, it is important to remember that the last time a court tried to fix a lacuna in the law instead of following the law as laid down, it led to consequences which it did not intent. The effects of which are being felt even today.

It remains to be seen whether or not the parties carry such a judgement to appeal.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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