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M/S Bhandari Udyog Ltd v. Industrial Facilitation Council

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 2077 of 2015)Decided 20 Feb 2015
Civil Appeal No. 2077 of 2015
Justice M.Y. Eqbal · Justice Kurian Joseph

Background

The appellant, a small-scale cotton business based in Raichur, Karnataka, sold 750 bales of cotton to a spinning mill (respondent no.2) in Latur, Maharashtra, which paid only part of the price. The appellant obtained an arbitration award from the Industrial Facilitation Council (IFC), Bangalore (appointed via a Section 11 application before the Karnataka High Court) directing the mill to pay the balance with interest. The mill challenged the award under Section 34 of the Arbitration Act before the District Court at Latur, and when the appellant objected to that court's jurisdiction, the District Judge and later the Bombay High Court both held that the Latur court had jurisdiction since the mill resided and received the goods there.

Decision Breakdown

The Supreme Court held that because the arbitration was conducted within the jurisdiction of the Raichur court (which was subordinate to the Karnataka High Court that had entertained the Section 11 application), under Section 42 of the Arbitration Act only a court subordinate to that same High Court could entertain a challenge to the award, not a court under the Bombay High Court. Relying on its own recent three-judge bench ruling in State of West Bengal v. Associated Contractors (2015) on Section 42's effect, the Court found that the District Court at Latur and the Bombay High Court had both erred in law by entertaining and upholding jurisdiction over the Section 34 application. It allowed the appeal and set aside the Bombay High Court's order, with no order as to costs.

Lesson Learnt

Under Section 42 of the Arbitration and Conciliation Act, once one court has been approached in connection with an arbitration (e.g., for appointing an arbitrator), all subsequent applications relating to that arbitration, including a challenge to the award, must go to that same court or its superior court, not to a court closer to where the other party happens to reside or where goods were delivered.

Official source (sci.gov.in)View Judgment (PDF)

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