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Arbitral Award & Jurisdiction of Courts

Updated on May 27, 2014

Case Study

BALCO JUDGEMENT

However, study on BALCO judgement appears to have a more inclusive view:

This judgement has introduced a supervisory jurisdiction of courts. It was held that the “subject matter of suit” is different from the “subject matter of arbitration”. It may happen that the parties to the contract may provide for a neutral place of arbitration i.e. the place which is different from the place where cause of action arose or where the obligations arising from the contract were to be performed. In this case, the courts exercising supervisory jurisdiction over arbitration proceedings and arbitral tribunal, would be the courts to which the appeal must lie from the arbitral awards.

The said judgment has expounded the concept of dual jurisdiction wherein:

  1. The court within whose jurisdiction the subject matter of the suit is situated as per the provisions of the CPC; and
  2. The court within whose jurisdiction the dispute resolution process i.e. arbitration has taken place or seat of arbitration is located. Such courts by virtue thereof are deemed to have supervisory jurisdiction over the matter of arbitration.

Arbitration in India

Arbitration has become the most effective tool in resolving commercial disputes expeditiously and at less cost. It has succeeded in achieving amicable settlements between the parties to the dispute and India, being a party to the New York convention, it allows enforceability of awards by courts in almost any country around the world.

Arbitration is an alternative dispute resolution mechanism in which the dispute is referred to a nominated person who decides the issue in a quasi-judicial manner after hearing the parties to the dispute. These disputes are settled through the intervention of a third person and without recourse to the court of law. The decision arrived by the tribunal is knows as an award.

Thus, Arbitral award is the award rendered by an arbitral tribunal with its seat of arbitration in India or in a country governed either by the New York convention or the Geneva Protocol and Convention on enforcement of Arbitral awards. A domestic award is an award rendered by arbitral tribunal having its seat in India and the same can be challenged under section 34 of the Arbitration and Conciliation Act. (“the Act”).

Pursuant to Section 34 of the Act, recourse can be had against the Arbitral award by way of an application for setting aside such award in accordance with the provisions of the said section.

The Application can be made for setting aside the arbitral award to Court of original jurisdiction in a district having jurisdiction to decide on questions forming part of the subject matter of the arbitration. The definition of the Court is well contained in the Section 2(1)(e) of the Arbitration Act.

How to decide on court having competent jurisdiction to take up the subject matter of the arbitration:

Section 20 of the CPC specifies the jurisdiction of civil courts in India. Therefore, an award can be set aside by making an application to the court which satisfies the criteria specified in Section 20 of CPC which is:

“Every suit shall be instituted in a Court within the local limits of whose jurisdiction—

(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises.”

This clearly provides that an application for setting aside the award can be made either to the court having jurisdiction over the subject matter of suit or to the court having supervisory jurisdiction not disputing the many judgements pronounced by the High Court’s including the Videocon Judgement wherein it was held that simply because parties have chosen a neutral place for arbitration, the court of such place cannot be held as “Court” for the purpose of Section 2(1)(e) of the Act.

Though the Supreme Court judgement is binding on High courts but still the ambiguity as regards the validity of supervisory jurisdiction remains.

Period within which the application for setting aside the award be made to the court

Sec. 5 of the Limitation Act provides that "Any appeal or any application, other than an application under any provisions of Order XXI of CPC, 1908 may be admitted after the prescribed period, if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring appeal or making application within such period.........."

Courts View:

By reason of the inclusion of words "but not thereafter", Hon'ble Supreme Court in "Union of India vs. M/s Popular Construction Co." held that by reason of inclusion of words "but not thereafter" used in the proviso to section 34(3), implies that the application u/s 5 of Limitation Act is excluded in the matters governed by section 34(3).

Hence, following the rules of harmonious construction, it can be construed that any admission of application for setting aside of award post the expiration of period provided in the Arbitration and Conciliation Act, would make the usage of phrase "but not thereafter" wholly redundant.

Therefore, this is an express exclusion within the meaning of *section 29(2) of the Limitation Act and hence, the application u/s 5 is barred.

(*Section 29(2)- where any special or local law prescribed period of limitation, the provisions contained in section 4 to 24 shall apply only in so far as they are not expressly excluded by such special law)

Whether additional grounds of challenge can be added to the original application filed with the court challenging an award, after the expiry of time period pres


The said issue was decided by Hon'ble Supreme Court in "State of Maharashtra vs. Hindustan Construction Co. where it was held that:

"There is no doubt that application for setting aside an award u/s 34 of 1996 Act has to be made within the time prescribed under sub section (3) i.e. within 3 months and further period of 30 days on sufficient cause being shown and not thereafter. Whether incorporation of additional grounds by way of amendment in the application under section 34 tantamount to filing a fresh application in all situations and circumstances. If that were to be treated so, it would follow that no amendment in the application for setting aside the award howsoever material or relevant it may be for consideration by the Court can be added nor existing ground amended after the prescribed period of limitation has expired although application for setting aside the arbitral award has been made in time. This is not and could not have been the intention of Legislature while enacting section 34."

Thus, any additional ground amending the original application can not be added after the expiry of period prescribed where it amounts to a fresh/independent ground irrespective of howsoever it may be material for consideration by the court.


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