Reportable  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.6316 OF 2011 [Arising out of SLP [C] No.15165/2008]

M/s. Milkfood Pvt. Ltd. … Appellant

Vs.

M/s. GMC Ice Cream (P) Ltd. … Respondent

J U D G M E N T

R.V. RAVEENDRAN,J.

Leave granted.  

2. Under  an  agreement  dated  7.4.1992,  respondent  agreed  to  

manufacture  and  pack  appellant’s  product  (ice  cream)  as  per  the  

specifications  and  standards  of  the  appellant.  Clause  20  of  the  said  

agreement provided for settlement of disputes by arbitration. The said clause  

provided  that  the  venue of  arbitration  should  be  Delhi  and contract  was  

subject to Delhi jurisdiction.

3. Respondent  filed  a  suit  (T.S.No.40/1995)  in  the  court  of  learned  

Munsif,  Gaya  (Bihar)  for  an  injunction  to  restrain  the  appellant  from  

interfering with the manufacture and supply of ice cream by the respondent.  

On  being  served  with  the  notice  of  the  said  suit,  the  appellant  filed  an  

application under section 34 of Arbitration Act, 1940 (‘Act’ for short) for  

stay of proceedings in the suit on the ground that the contract between the  

parties provided for arbitration. The learned Munsif by order dated 3.8.1995  

allowed the appellant’s application under section 34 of the Act and stayed  

further proceedings in the suit.  

4. The respondent filed a revision under section 115 of the Code of Civil  

Procedure (‘Code’ for short) before the Patna High Court against the order  

dated 3.8.1995. The High Court disposed of the said revision petition by the  

following order dated 6.5.1997 :

“Before this court parties have agreed that the dispute between them may  be referred, as per the agreement to Arbitrators chosen by the parties. The  plaintiff  has  chosen Shri  Uday Sinha  a  retired judge  of  this  court  and  Senior Advocate of the Supreme Court, while the defendants have chosen  Shri Hari Lal Agrawal, Senior Advocate of the Supreme Court, a former  judge of this court and Chief Justice of Orissa High Court as Arbitrators.  The dispute between the parties is referred to arbitrator.

I  hope  that  the  learned  Arbitrators  will  dispose  of  the  arbitration  proceedings within three months of the entering the reference.

Let  a  copy of this  order  be sent  to  both Shri  Hari  Lal  Agarwal  at  his  address Nageshwar Colony, Boring Road, Patna-1 and Shri Uday Sinha at  his Patna address 308 Patliputra Colony, Patna.

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Parties are directed to appear before the Arbitrators within a month from  today.

Let  all  necessary documents be filed before the Arbitrators  within four  weeks thereafter.  

This application is disposed of.”

It may be mentioned that long before the disposal of the revision petition, by  

notice dated 14.9.1995 the appellant had appointed its arbitrator and called  

upon the respondent to concur in that appointment or alternatively nominate  

its  arbitrator.  When  respondent  also  appointed  its  arbitrator,  the  two  

arbitrators appointed an umpire. The arbitral tribunal made an award dated  

17.8.2004 in favour of the respondent.

5. The respondent filed a suit under section 14 (2) of the Act in the court  

of Sub-Judge, Gaya on 28.8.2004 praying that the award be made a rule of  

the  court.  The appellant  entered appearance  on 28.10.2004 and made  an  

application under Order 7 Rule 10 of the Code read with section 31(4) of the  

Act contending that only the Delhi High Court had jurisdiction to entertain  

the application and Gaya court did not have jurisdiction.

6. The appellant  also  challenged the award by filing  a  petition  under  

sections 30 and 33 of the Act before Delhi High Court on 16.10.2004. On  

25.10.2005 the appellant’s petition under sections 30 and 33 of the Act was  

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disposed of by Delhi High Court on the ground that the award had been filed  

before the learned Sub-Judge,  Gaya,  prior to filing of the petition by the  

appellant  under  sections  30  &  33  of  the  Act  and  since  the  matter  was  

pending in the Gaya court and the appellant had challenged the jurisdiction  

of that court, the Gaya court would decide whether it had jurisdiction; and if  

it came to the conclusion that it had no jurisdiction, that court could forward  

the record to Delhi  High Court,  in which event  the appellant  could seek  

revival of the petition under sections 30 and 33 of the Act.

7. The Sub-Court Gaya heard and dismissed the application filed by the  

appellant  (for  return  of  the  plaint  to  the  respondent)  by  order  dated  

23.3.2006  holding  that  it  had  jurisdiction  to  entertain  and  decide  the  

application under section 14(2) of the Act. The said order was challenged by  

the appellant by filing a revision petition before the Patna High Court. A  

learned single Judge of the Patna High Court dismissed the revision petition,  

by the impugned order dated 25.5.2008. He noted that the parties had earlier  

consented  before  the  Patna  High  Court  for  referring  the  disputes  to  

arbitration and that Patna High Court had recorded the said agreement and  

referred the disputes to arbitration by order dated 6.5.1997. He held that the  

said order dated 6.5.1997 should be considered to be an order under section  

8 of the Act; and if so, the order dated 6.5.1997 would be the order in the  

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first application under the Act in the reference; and as Patna High Court did  

not  have  original  jurisdiction,  the  Sub-Judge,  Gaya  which  was  the  

corresponding  civil  court  having  original  jurisdiction  would  have  

jurisdiction  to  entertain  the  application  under  section  14(2)  of  the  Act,  

having regard to section 31(4) of the Act. The said order is challenged in this  

appeal by special leave.

8. On  the  contentions  urged,  the  only  question  that  arises  for  

consideration  is  whether  the  proceedings  under  section  14(2)  of  the  Act  

could have been initiated only in the Delhi High Court and not before the  

Sub-court, Gaya, having regard to section 31(4) of the Act.

9. Section 31 of the Act deals with jurisdiction and the same is extracted  

below :

“31. Jurisdiction.—(1) Subject to the provisions of this Act, an award may  be  filed  in  any  Court  having  jurisdiction  in  the  matter  to  which  the  reference relates.       (2) Notwithstanding anything contained in any other law for the time  being in force and save as otherwise provided in this Act, all questions  regarding the validity, effect or existence of an award or an arbitration  agreement between the parties to the agreement or persons claiming under  them  shall  be  decided  by  the  Court  in  which  the  award  under  the  agreement has been, or may be, filed, and by no other Court.       (3) All applications regarding the conduct of arbitration proceedings or  otherwise  arising  out  of  such  proceedings  shall  be  made  to  the  Court  where the award has been, or may be, filed, and to no other Court.       (4) Notwithstanding anything contained elsewhere in this Act or in any   other  law  for  the  time  being  in  force,  where  in  any  reference  any  

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application  under  this  Act  has  been  made  in  a  Court  competent  to   entertain it, that Court alone shall have jurisdiction over the arbitration   proceedings-,  and  all  subsequent  applications  arising,  out  of  that   reference, and the arbitration proceedings shall be made in that Court   and in no other Court.”

(emphasis supplied)

Sub-section (4) of section 31 provides where any application under the Act,  

in any reference, had been made in a court competent to entertain it, then  

notwithstanding anything contained in the Act (or in any other law for the  

time  being  in  force),  that  court  alone  shall  have  jurisdiction  over  the  

arbitration proceedings and all  subsequent applications arising out of that  

reference and therefore all arbitration proceedings shall be made in that court  

alone and not in any other court. Sub-section (4) of section 31 of the old Act  

corresponds to section 42 of the new Act.

10. As  the  court  where  the  first  application  was  made  is  the  court  

competent  to  entertain  all  subsequent  applications  under  the  Act,  it  is  

necessary to decide where the first application in the reference was made  

under the Act. In chronological order, the four applications in the reckoning  

for being considered as the first application in the reference under the Act, in  

a competent court are :

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(i) The  application  dated  19.6.1995  filed  by  the  appellant  under  

section 34 of the Act, in the court of Munsif, Gaya (resulting in the  

order dated 3.8.1995).

(ii) The  revision  petition  dated  2.7.1996  filed  by  the  respondent  

against the order dated 3.8.1995, under section 115 of the Code, in  

the Patna High Court (resulting in the order dated 6.5.1997).

(iii) The application made in April 1998 by the appellant under Section  

33 of the Act, in the Delhi High Court (resulting in the order dated  

13.10.1998).

(iv) The application dated 16.8.2000 by the respondent under section  

27 of Arbitration & Conciliation Act, 1996 in the Delhi High Court  

(resulting in the order dated 1.10.2000).

The appellant contends that the first application in the reference was filed  

under  the  Act  in  Delhi  High  Court  in  April,  1998  and  therefore  all  

subsequent proceedings including the application under section 14(2) should  

be filed in Delhi High Court. The respondent contends that the application  

made either in the Gaya Court on 19.6.1995 or in the Patna High Court on  

2.7.1996 should be considered to be the first application in the reference in a  

competent court; and as that Patna High Court did not have original civil  

jurisdiction, the corresponding civil court namely the Sub-Judge, Gaya was  

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the court where all applications, including an application under section 14(2)  

of the Act should be filed.

11. In  Kumbha Mawji  vs.  Union of  India -  1953 SCR 878,  this  Court  

explained that the words ‘in any reference’ would mean ‘in the matter of a  

reference to arbitration’. In Union of India vs. Surjeet Singh Atwal - 1969 (2)  

SCC 211, this Court held that an application under section 34 of the Act is  

not  to  be  considered  as  an  application  under  the  Act  in  a  reference.  

Therefore, the application under section 34 of the Act filed by the appellant  

on 19.6.1995 cannot be considered to be the first application to a court in the  

reference to arbitration.  Let us next examine whether the first application  

under the Act in the reference was first made to the Patna High Court. A  

Revision Petition  (C.R.No.1020/1996)  was  filed in  the  Patna High Court  

under section 115 of the Code, aggrieved by the order dated 3.8.1995 passed  

in an original suit  filed by the respondent.  The order dated 3.8.1995 was  

made allowing an application filed by respondent for stay of proceedings  

under section 34 of the Act. Therefore, the order dated 6.4.1997 appointing  

the arbitrators was made by Patna High Court, not in an application under  

the Act, but in a revision petition under section 115 of the Code. Further the  

said revision did not  arise  out  of  arbitration proceedings,  but  against  the  

rejection  of  an  application  under  section  34  of  the  Act  to  stay  the  

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proceedings  in  a  civil  suit.  If  the  proceedings  in  which  the  order  dated  

6.5.1997 was made by the Patna High Court did not relate to an application  

under the Act in a reference, nor is it a revision arising from an application  

under  the  Act  in  a  reference,  it  is  not  possible  to  hold  that  the  first  

application under the Act in a reference was made before the Patna High  

Court.  

12. At this juncture, it is necessary to notice the argument put forth by the  

respondent. The respondent contends that even though the revision petition  

did not arise from an application under the Act, the order dated 6.5.1997  

made therein by the Patna High Court, recorded the consent of the parties  

that  the  disputes  may  be  referred  to  arbitrators  chosen  by  the  parties,  

recorded the names of the arbitrators appointed by them, and referred the  

disputes between the parties to arbitration. According to the respondent, a  

court can appoint an arbitrator either under section 20 or section 8 of the  

Act; as there was no application for filing the agreement under section 20 of  

the Act, the order dated 6.5.1997 should be deemed to have been made in an  

application under section 8 of the Act to the High Court. The respondent  

therefore contends that the Patna High Court should be treated as a court  

where first application under the Act was filed and therefore all subsequent  

applications  should  be  filed  in  that  court.  There  is  no  merit  in  this  

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contention.  Section  8  relates  to  the  power  of  civil  court  to  appoint  an  

Arbitrator or umpire. With reference to the facts of this case the power under  

section  8  of  the  Act  can  be  exercised  only  if  the  following  conditions  

mentioned in the section are fulfilled : (i) the parties did not concur in the  

appointments of arbitrators, when differences arose; (ii) one of the parties to  

the  arbitration  agreement  served  on  the   other  party  a  written  notice  

nominating  its  arbitrator  and  calling  upon  the  other  party  to  make  its  

nomination;  (iii) the other party did not appoint its arbitrator within 15 clear  

days after the service of such notice; and (iv) an application was made by the  

party who gave the notice under section 8 of the Act for appointment of the  

arbitrator.  The  order  dated  6.5.1997  of  the  Patna  High  Court  cannot  be  

considered  to  be  an  order  under  section  8  of  the  Act,  as  neither  an  

application  was  filed  under  section  8  of  the  Act  nor  the  conditions  for  

making an application under section 8 of the Act existed in this case.

13. As  noticed  above  the  said  order  was  made  in  a  revision  petition  

against the grant of an application under section 34 in a suit filed by the  

respondent. All that the High Court did was to record the submission that  

both  parties  had  appointed  their  respective  arbitrators  and  therefore  the  

disputes stood referred to them. Such an order recording the nomination of  

arbitrators by consent and referring the disputes to arbitration, can be made  

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in  any  suit  or  other  proceedings,  even  if  they  do  not  arise  under  the  

arbitration agreement or under the Act. If for example a civil suit is filed by  

a party against the other and there is no arbitration agreement between them,  

but  during  the  course  of  the  said  suit  both  parties  agree  that  the  matter  

should  be  referred  to  a  named  arbitrator  for  arbitration  and  the  court  

accordingly refers it  to arbitration,  is  not  an appointment of an arbitrator  

under section 8 of the Act, but a consent order referring the disputes to the  

arbitrators already appointed by the parties. Therefore we can not accept the  

contention that the order dated 6.5.1997 of the Patna High Court should be  

treated as an order in a proceeding under section 8 of the Act. If the order  

dated 6.5.1997 is not an order made in an application under the Act in a  

reference, it follows that the question of making all subsequent applications  

arising out of the reference under the Act, to that court does not arise.  

14. In this case the appellant filed an application (OMP No.94/1998)  in  

the Delhi High Court under section 33 of the Act in April 1998 praying for a  

clarification as to whether the arbitration proceedings between the parties  

would be governed by the provisions of Arbitration Act,  1940 or  by the  

provisions  of  Arbitration  and  Conciliation  Act,  1996.  Thereafter  the  

respondent made an application (OMP No.217/2000) to Delhi High Court  

for summoning and examining one O.P.Singh as a witness in respect of the  

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pending arbitration, to produce certain documents. Therefore the application  

(OMP No.94/1998) made by the appellant under section 33 of the Act will  

have to be treated as the first application under the Act in the reference. If  

that is so all subsequent applications will have to be made in the High Court  

of Delhi.

15. Learned counsel for respondent submitted that the application filed by  

it  in  OMP  No.217/2000  for  issue  of  summons  to  a  witness  to  produce  

documents, cannot be treated as an application under the Act as it was filed  

under section 27 of the Arbitration and Conciliation Act, 1996 and not under  

the provisions of section 43 of Arbitration Act, 1940. OMP No.217/2000  

was made for issue of processes for appearance of witness and production of  

documents, in a pending arbitration proceedings. When the application was  

filed in the year 2000, there was some confusion as to whether the new Act  

applied or the old Act applied. In fact that question was pending before the  

Delhi High Court in OMP NO.94/1998 filed by the appellant. That issue was  

decided by Delhi  High Court  on 13.10.1998 holding that  the matter  was  

governed  by  1996  Act,  but  that  order  was  reversed  by  the  order  dated  

5.4.2004 of this court in Milkfood Ltd. Vs. GMC Ice Cream (P) Ltd. [2004  

(7)  SCC  288]  holding  that  the  old  Act  applied  with  the  following  

observations : “For the reasons aforementioned, we are of the view that in  

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this case, the 1940 Act shall apply and not the 1996 Act. …. The award shall  

be filed in the court having jurisdiction whereafter the parties may proceed  

in terms of the old Act.” Therefore OMP No.217/2000 could be deemed to  

have  been  made  under  section  43  of  the  Act.  At  all  events  as  OMP  

No.94/1998 has to be treated as the first application under the Act, Delhi  

High  Court  alone  will  have  jurisdiction  to  entertain  any  subsequent  

applications and therefore the court at Gaya will not have jurisdiction.  It is  

also relevant to note that the Arbitration clause provides that the venue of  

arbitration shall be Delhi and Delhi courts will have jurisdiction.  

16. In view of the above we allow this appeal,  set aside the impugned  

order of the Patna High Court as also the order of Sub-Court, Gaya and hold  

that all applications should be filed in Delhi High Court.                  

17. The respondent shall therefore obtain return of the application under  

section 14(2) of the Act from the Gaya court and file it before Delhi High  

Court within two months from today. If it is so filed, Delhi High Court shall  

entertain the same and dispose it of in accordance with law. We may note  

that when the matter had come up before this court in the first round, in the  

order dated 5.4.2004, this court had expressed the hope that the award will  

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be made and all legal proceedings should come to an end within four months  

from the date of communication of that order. More than seven years have  

elapsed thereafter and the proceedings have not ended. We therefore request  

the High Court to dispose of the matter expeditiously.

……………………………J. (R V Raveendran)

New Delhi; ……………………………..J. August   4, 2011. (A K Patnaik)

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