Commercial Arbitration Matters Must Be Heard Only By Commercial Division After 2015 Act: Calcutta High Court

The Calcutta High Court on 9 April held that once a Commercial Division is constituted under the Commercial Courts Act, 2015, non-commercial benches cease to have jurisdiction to decide commercial arbitration matters, and any judgment delivered thereafter is a nullity.

A Division Bench of Justices Debangsu Basak and Md. Shabbar Rashidi set aside the orders passed by a Single Judge in 2020 and 2023 in proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, and directed that the matters be transferred for fresh adjudication before the appropriate Commercial Division.

The Court held:

“If a non- Commercial Court or a non-Commercial Division proceeds to decide a commercial dispute involving a specified value, subsequent to the constitution of the Commercial Division, in which such proceedings was pending before the Court, then, on the score that such non-Commercial Court decided the rights between the parties on a procedural regime different to those prescribed under the Act of 2015, the decision rendered would be vitiated.”

The dispute arose out of two arbitration matters. One involved Starlift Services Private Limited and Syama Prasad Mookerjee Port, Kolkata, concerning a crane maintenance contract. The other involved the State of West Bengal and Rajpath Contractors and Engineers Ltd in relation to a works contract.

In both cases, arbitral awards dated 18 April 2011 were challenged under Section 34 of the Arbitration and Conciliation Act, 1996. The proceedings remained pending even after the enactment of the Commercial Courts Act, 2015, which requires commercial disputes of specified value to be heard exclusively by the Commercial Division and mandates transfer of pending matters under Section 15.

The appeals before the Division Bench arose under Section 37 of the 1996 Act, challenging Single Judge orders dated 24 December 2020 and 4 May 2023, which had set aside the arbitral awards.

Starlift Services and the State of West Bengal argued that the disputes qualified as commercial disputes under Section 2(1)(c) and crossed the specified value threshold of Rs. 10 lakh, making transfer under Section 15 mandatory. They contended that failure to transfer divested the Single Judge of jurisdiction.

Syama Prasad Mookerjee Port and Rajpath Contractors, however, argued that the proceedings were validly instituted in 2011 when no commercial division regime existed. They also contended that no objection to jurisdiction was raised during the proceedings and, therefore, the challenge could not be entertained later.

Rejecting the objections, the Court held that jurisdiction at the stage of institution is distinct from jurisdiction at the stage of adjudication, and emphasised the mandatory nature of the transfer mechanism under Section 15 of the 2015 Act.

The Court observed that Sections 7 and 10 of the Act mandate that all commercial disputes of specified value “shall” be heard exclusively by the Commercial Division, and that pending matters must be transferred. It further held that any adjudication by a non-commercial bench thereafter is vitiated for want of jurisdiction.

It also held that such a defect goes to the root and cannot be cured by waiver. The Court further clarified:

“Therefore, a non- Commercial Court considering a proceeding involving a commercial dispute of the specified value, pending before it, subsequent to the constitution of the Commercial Division, possess the limited jurisdiction of transferring such proceedings and deciding as to whether or not, such proceedings capable of being transferred.”

The Court added that the non-commercial bench could only examine whether a matter is capable of transfer, but could not adjudicate it on merits. It also clarified that since the orders were passed by a non-commercial bench, the appeals were maintainable under Clause 15 of the Letters Patent, 1865.

Accordingly, the Court declared the 2020 and 2023 orders a nullity, set them aside, and directed transfer of the Section 34 proceedings to the Commercial Division for fresh adjudication.

Appearances for appellant (Starlift Services Private Limited / State of West Bengal): Advocates Sabyasachi Choudhury, Rajarshi Dutta, Soorjya Ganguli, Shounak Mukhopadhyay, Arti Bhattacharyya; Suman Kr. Dutt, Noelle Banerjee, Nilanjana Adhya, Paritosh Sinha, Arindam Mandal, Swagata Ghosh.

Appearances for respondent (Syama Prasad Mookerjee Port, Kolkata / Rajpath Contractors and Engineers Ltd): Advocates Tilak Kr. Bose, Ashok Kr. Jena; Sakya Sen, Priyankar Saha, Srijani Mukherjee.