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‘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  

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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.

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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  

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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  

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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  

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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   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  

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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.

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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.

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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]