In CR No.259 of 2022(O&M)-PUNJ HC- Unlike CPC, in arbitration law, when "seat" is determined, concerned Court situated at such “Seat” is vested with exclusive jurisdiction for regulating arbitral proceedings arising out of agreement between parties: P&H HC
Justice Raj Mohan Singh [30-09-2022]

Read Order: National Highway Authority of India and Another v. Yashpreet Singh and Another 

Monika Rahar

Chandigarh, October 15, 2022: The Punjab and Haryana High Court has held that Section 42 of the Arbitration and Conciliation Act, 1996 is not applicable after passing of the award and for enforcement of award, its execution can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of decree from the Court, which would have jurisdiction over the arbitral proceedings.

Further, the Bench of Justice Raj Mohan Singh held, “Under the law of arbitration, unlike the Code of Civil Procedure which applies to suits … a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction i.e. no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of the Code of Civil Procedure be attracted.”

In arbitration law however, the Bench added, the moment "seat" is determined, the fact that the seat is at Faridkot (in the present case) would vest Faridkot Court with exclusive jurisdiction for the purposes of regulating arbitral proceedings arising out of the agreement between the parties. 

The petitioners had acquired the land for widening/four laning of NH-15 of Bathinda Section in District Bathinda. The first respondent filed an application under Section 3G(5) of the National Highways Act, 1956 before the Arbitrator, which was allowed. Against the aforesaid award of the Arbitrator, the NHAI filed an objection petition under Section 34 of the Act of 1996 in the District Court at Bathinda as the acquired land was situated in District Bathinda. 

The first respondent filed an execution petition in the District Court at Faridkot as the arbitration proceedings took place at Faridkot. The petitioner filed an application under Section 42 of the Act of 1996 read with Section 151 CPC for transfer of execution proceedings to the Court of competent jurisdiction at Bathinda on the ground that the land is situated in Bathinda and the parties are also residents of Bathinda. This application was dismissed by the Additional District Judge. 

It was the case of the petitioner’s counsel that the executing Court at Faridkot has no jurisdiction to carry on with the execution proceedings as no assets of the petitioners were located in District Faridkot, rather the assets were situated in District Bathinda and therefore, the execution petition filed at Faridkot was liable to be transferred to the Court of competent jurisdiction at Bathinda. 

Further, the Counsel added that as per the mandate of Section 42 of the Act of 1996, the proceedings arising out of the award ought to have been filed in the Court of Principal Civil Court of original jurisdiction, where the party to the arbitration proceedings has approached at the first instance. Since the petitioners approached the Principal Civil Court of original jurisdiction at the first instance at Bathinda, therefore, subsequent execution petition filed by respondent at Faridkot was liable to be transferred to the competent Court at Bathinda as the executing Court at Faridkot has no territorial jurisdiction to entertain the execution petition, the Counsel added. 

Also, it was the case of the Counsel that the concept of seat and venue as interpreted in reference to commercial arbitration governed by an agreement cannot be applied to statutory arbitration under the National Highways Act. Also, the Counsel argued that the seat of arbitration and venue of arbitration cannot be used interchangeably and that in the light of the scheme of statutory arbitration, the seat of the arbitration under National Highways Act has to be construed as the place where the land is situated.

Lastly, the Counsel argued that Arbitrator did not determine the seat of the arbitral Tribunal at Faridkot and in the absence of the same, merely the arbitral proceedings were held at Faridkot, will not ipso facto designate the seat of the Arbitrator at Faridkot, particularly when the subject matter of the acquired land is situated in Bathinda.

After hearing the Parties, the Court opined at the very outset that Section 42 of the Act of 1996  is not applicable after passing of the award and for enforcement of award, its execution can be filed anywhere in the country where such decree can be executed and there is no requirement for obtaining a transfer of decree from the Court, which would have jurisdiction over the arbitral proceedings.

“Under Section 36 of the Arbitration and Conciliation Act, 1996, an award under Section 36 of the Act is equated to a decree of the Court for the purposes of execution. No deeming fiction is attached to hold that the Court within whose jurisdiction the arbitral award has been passed should be taken to be the Court, which passed the decree. Arbitration Act actually transcends all territorial barriers”, the Bench held. 

Further, the Court observed that no stay was granted by the Court at Bathinda in the objection petition under Section 34 of the Act of 1996. It was also observed that the petitioners deposited the awarded amount as per the award by the Arbitrator at Faridkot and it was only the enhanced amount for which this method was adopted by the petitioners under the garb of Section 42 of the Act. “The respondents are losing huge amount per by the petitioners in the executing Court. Petitioners are not going to lose anything if the amount is released to the claimants”, the Bench added. 

Further, it was held that the term "venue" is often confused with the term "seat" but it is more a place often chosen as a convenient location by the parties to carry out arbitration proceedings but the same should not be confused with "seat". The term "seat" carries more weight than "venue" or "place". 

Adverting to the present case, it was observed that the Arbitrator fixed the seat at Faridkot and therefore, Faridkot shall have the exclusive jurisdiction to entertain and hear the dispute under Section 34 of the Act of 1996. “Once the seat has been chosen, it would then amount to an exclusive jurisdiction, so far as the seat is concerned”, the Court held while also adding, 

“If no seat of Arbitration was specified and the parties agreed about the venue of Arbitration and the arbitration proceedings took place at such a venue and award is passed, then… if the venue of arbitration is designated without specifying the seat of arbitration, the stated venue would be the juridical seat of the arbitration and the objection petition under Section 34 of the Act would lie at that place only”. 

Coming to the instant case, it was observed that the seat of the Arbitrator has been fixed at Faridkot, therefore, by no stretch of imagination, Bathinda Court has any jurisdiction. 

“The provision of Section 42 of the Act provides that any application for arbitration shall be made to that Court who has supervisory jurisdiction over the arbitral Tribunal and in no other Court. The language itself is explanatory and it is applicable till the finalization of the arbitral proceedings and after termination of the arbitral proceedings i.e. after pronouncement of award in terms of Section 32 of the Act, arbitral proceedings stand terminated and thereafter, Section 42 of the Act has no application”, the Court asserted. 

Further, on a bare perusal of the aforesaid Rule 3 of the National Highways Act, it was observed that the Rules only govern the internal functioning of the Government and has nothing to do with the enforcement of the arbitral award. “The Rules cannot create a law, which has already been legislated and does not provide for automatic stay”, the Court opined.

Also, it was opined that Section 2(e)(i) of the Act of 1996 would reveal that Faridkot Court has only jurisdiction to entertain and decide the objection petition under Section 34 of the Arbitration and Conciliation Act and also the execution and therefore, the objection petition filed at Bathinda Court is not maintainable. 

Further, the Court held that Section 3G(6) of the National Highways Act clearly states that subject to the provisions of this Act, provisions of Arbitration and Conciliation Act shall apply to every arbitration under this Act. Thus, it was held, “once the matter has been decided by the Arbitrator and the award has been passed, it becomes a decree to be enforced by the executing Court after following procedure as mentioned under Code of Civil Procedure. The provisions of National Highways Act shall not govern the proceedings once the award has been passed”.

Also, it was opined that under the law of arbitration, unlike the Code of Civil Procedure which applies to suits filed in Courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. 

“The neutral venue may not in the classical sense have jurisdiction i.e. no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of the Code of Civil Procedure be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Faridkot would vest Faridkot Court with exclusive jurisdiction for the purposes of regulating arbitral proceedings arising out of the agreement between the parties”, the Court held.  

Accordingly, it was held that the Court at Faridkot had the exclusive jurisdiction to the exclusion of other Courts in the country as the juridical seat of the arbitration was fixed at Faridkot and that  Section 42 of the Act of 1996 has no application and the award has to be executed in the Principal Civil Court at Faridkot.