Mere Filing Of One Plea Before A Court Doesn't Confer Jurisdiction For Subsequent Arbitration Pleas: Delhi HC

The Delhi High Court has held that merely filing a petition before a particular court cannot fix jurisdiction under Section 42 of the Arbitration and Conciliation Act, 1996, especially where the petition is withdrawn without any adjudication.

Section 42, which centralises all subsequent applications in the first court approached, cannot be invoked in such circumstances as the jurisdiction contemplated must be “real, effective, and legally sustainable”, the court said.

A Single Bench of Justice Harish Vaidyanathan Shankar observed that " Section 42 cannot be construed in a manner that forecloses a party‟s right to raise a fundamental jurisdictional objection, particularly when such objection could never be raised or was never adjudicated upon at any prior stage. Indeed, if this court otherwise lacks jurisdiction in accordance with the settled principles of law, the mere prior filing of a petition under Section 9 or any other petition of application under the A&C Act, without any determination thereon, cannot operate as a binding factor so as to confer jurisdiction by default or estoppel"

Refusing to entertain a Section 29A plea filed by SP Singla Constructions Pvt. Ltd. seeking an extension of the arbitrator's mandate, the court held that it lacked jurisdiction as the arbitration clause under the agreement expressly provided for exclusive jurisdiction of courts at Ranchi.

The dispute arose out of an agreement dated May 25, 2019 between SP Singla Constructions Pvt Ltd and the State of Jharkhand for the construction of a four-lane elevated corridor with a cable-stayed bridge at Jamshedpur.

Following alleged breaches, the agreement came to be terminated on October 22, 2020.

Arbitration was thereafter invoked, and disputes were referred to a sole arbitrator appointed on June 3, 2022 under the rules of the Society for Affordable Redressal of Disputes (SAROD), 2016.

In the meantime, SP Singla had approached the Delhi High Court under Section 9, seeking protection of a performance bank guarantee of Rs 6.93 crore.

While the Court passed an interim status quo order on the same date, the petition was withdrawn on March 4, 2021 at a nascent stage without any adjudication or examination of jurisdiction.

While SAROD eventually constituted a tribunal in June 2022, the proceedings also saw a jurisdictional challenge by the State of Jharkhand before the Jharkhand High Court, which was dismissed as not maintainable.

The mandate of the arbitrator eventually lapsed on December 3, 2023, and when the State of Jharkhand refused to consent to an extension, the construction firm approached the Delhi High Court under Section 29A seeking extension of the arbitrator's mandate.

SP Singla contended that once the Delhi High Court had been approached, Section 42 barred any challenge to its jurisdiction. It further argued that since the arbitration was governed by SAROD Rules, which designate New Delhi as the seat in the absence of an agreement to the contrary, courts at Delhi would have jurisdiction.

The State of Jharkhand opposed the plea, contending that the agreement expressly designated Ranchi as the venue of arbitration and conferred exclusive jurisdiction on courts at Ranchi. It further argued that the earlier Section 9 petition, having been withdrawn without adjudication, could not anchor jurisdiction under Section 42.

The court sided with the State of Jharkhand's objections.

It held that Section 42, a non-automatic and non-mechanical provision, cannot be invoked to manufacture jurisdiction where none exists.

As the earlier proceedings were merely ex parte and involved an uncontested and unadjudicated withdrawn application, it held that such proceedings cannot operate to confer jurisdiction so as to attract Section 42.

It also cautioned that permitting reliance on such withdrawn proceedings would amount to a “manifest distortion and misuse of the statutory framework”.

The bench further observed that filing and withdrawing petitions before even the State of Jharkhand could contest them was used to create an “artificial basis” for jurisdiction, amounting to forum shopping.

Accordingly, it dismissed the plea in view of the agreement conferring exclusive jurisdiction on courts at Ranchi.

For Petitioner (SP Singla Constructions Pvt Ltd): Advocates Anirudh Wadhwa, Kartik Gupta, Vibhu Pahuja.

For Respondent (State of Jharkhand & Anr.): Advocates Sachin Kumar, Kumar Anurag Singh, Zain A. Khan; Astha Sharma, Nikhil Anand.