Emkay Global Financial V/S Gindhar Sondhi

“There is an exclusive jurisdiction clause vesting such jurisdiction only in the courts at Mumbai”

Case name:Emkay Global Financial V/S Gindhar Sondhi
Case number:Civil appeal number- 8367 of 2018
Court:The supreme court of india
Bench:Justice R.F Nariman
Decided on:AUGUST 20, 2018
Relevant Act/Sections:
  • The present appeal arises out of a dispute between the Appellant, who is a registered broker with the National Stock Exchange, and the Respondent, its client, regarding certain transactions in securities and shares.
  • The Respondent had initiated an arbitration proceeding against the Appellant, claiming an amount of Rs.7,36,620/-, which was rejected by the Sole Arbitrator vide an Arbitration Award dated 08.12.2009.
  • The bye-laws go on to describe the relevant authority prescribing regulations for creation of seats of arbitration for different regions, or prescribing geographical locations for conducting arbitrations, and prescribing the courts which shall have jurisdiction for the purpose of the Act see Chapter XI dealing with Arbitration clause 4(a)(iv).
  • Equally, under sub- clause (xiv), the place of arbitration for each reference and the places where the Arbitrator can hold meetings have also to be designated. It is common ground that the National Stock Exchange referred the dispute to one Shri Mahmood Ali Khan, who held sittings in Delhi, and delivered an award dated 08.12.2009, whereby the Respondents claim was rejected.
  • The Respondent then filed a Section 34 application under the Arbitration and Conciliation Act, 1996 on 17.03.2010 before the District Court, Karkardooma, Delhi. By a judgment dated 22.09.2016, the learned Additional District Judge referred to the exclusive jurisdiction clause contained in the agreement, and stated that he would have no jurisdiction to proceed further in the matter and, therefore, rejected the Section 34 application filed in Delhi.
  • The record of the Arbitrator was held to be sufficient in order to furnish proof of whether the grounds under Section 34 had been made out?
  • The court held after considering all the submissions by learned counsels that section 34 is application for setting aside arbitral award. (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if

(a) The party making the application furnishes proof that

(i) A party was under some incapacity; or

(ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case.

(iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside.

  • The court observed that exclusive jurisdiction clause was dealt with by this Court in several judgments, the most recent of which is the judgment contained in Indus Mobile Distribution Pvt. Ltd. (supra). In this case, the arbitration was to be conducted at Mumbai and was subject to the exclusive jurisdiction of courts of Mumbai only. After referring to the definition of Court contained in Section 2(1)(e) of the Act, and Section 20 and 31(4) of the Act, this Court referred to the judgment of five learned Judges in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, in which, the concept of juridical seat which has been evolved by the courts in England, has now taken root in our jurisdiction.
  • It is clear that once courts in Mumbai have exclusive jurisdiction thanks to the agreement dated 03.07.2008, read with the National Stock Exchange bye-laws, it is clear that it is the Mumbai courts and the Mumbai courts alone, before which a Section 34 application can be filed. The arbitration that was conducted at Delhi was only at a convenient venue earmarked by the National Stock Exchange, which is evident on a reading of bye-law 4(a)(iv) read with (xiv) contained in Chapter XI.
  • The court stated that an application under Section 34 of the Act is a single issue proceeding, where the very fact that the application has been instituted under that particular provision declares the issue involved. Any further exercise to frame issues will only delay the proceedings. It is thus clear that issues need not be framed in applications under Section 34 of the Act.
  • Applications under Section 34 of the Act are summary proceedings with provision for objections by the respondent-defendant, followed by an opportunity to the applicant to prove the existence of any ground under Section 34(2). The applicant is permitted to file affidavits of his witnesses in proof. A corresponding opportunity is given to the respondent-defendant to place his evidence by affidavit. Where the case so warrants, the court permits cross-examination of the persons swearing to the affidavit. Thereafter, the court hears arguments and/or receives written submissions and decides the matter. This is of course the routine procedure. The court may vary the said procedure, depending upon the facts of any particular case or the local rules. What is however clear is that framing of issues as contemplated under Rule 1 of Order 14 of the Code is not an integral part of the process of a proceedings under Section 34 of the Act.
  • The court observed that speedy resolution of arbitral disputes has been the reason for enacting the 1996 Act, and continues to be the reason for adding amendments to the said Act to strengthen the aforesaid object. Quite obviously, if issues are to be framed and oral evidence taken in a summary proceeding under Section 34, this object will be defeated. It is also on the cards that if Bill No.100 of 2018 is passed, then evidence at the stage of a Section 34 application will be dispensed with altogether.
  • The court observed that the two early Delhi High Court judgments, cited by us hereinabove, correctly reflect the position in law as to furnishing proof under Section 34(2)(a). So does the Calcutta High Court judgment (supra). The court hastened to add that if the procedure followed by the Punjab and Haryana High Court judgment (supra) is to be adhered to, the time limit of one year would only be observed in most cases in the breach.
  • This court were constrained to observe that Fiza Developers (supra) was a step in the right direction as its ultimate ratio is that issues need not be struck at the stage of hearing a Section 34 application, which is a summary procedure. However, this judgment must now be read in the light of the amendment made in Section 34(5) and 34(6). So read, the court clarifies the legal position by stating that an application for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the Arbitrator.
  • However, if there are matters not contained in such record, and are relevant to the determination of issues arising under Section 34(2)(a), they may be brought to the notice of the Court by way of affidavits filed by both parties. Cross- examination of persons swearing to the affidavits should not be allowed unless absolutely necessary, as the truth will emerge on a reading of the affidavits filed by both parties.
  • The court set aside the judgment of the Delhi High Court and reinstate that of the learned Additional District Judge dated 22.09.2016.
  • The appeal is accordingly allowed with no order as to costs.

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