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This blog is written by Alisha Khatoon, she is a 1st year law student pursuing B.A. LL.B (Hons.) from Aligarh Muslim University, Aligarh.
Introduction
In the case of Globe Cogeneration Power Limited v. Sri Hiranyakeshi Sahakari Karkhane Niyamit, the Karnataka High Court addressed the issue of interim awards under Section 9 of the Arbitration and Conciliation Act, 1996 which allows a party to apply to a court for interim measures of protection during arbitral proceedings. These measures can include injunctions, preservation of assets, or appointment of receivers. The appellant, Globe Co-generation Power Limited, had entered into a Project Development Agreement with Sri Hiranyakeshi Sahakari Karkhane Niyamit for a bagasse-fired co-generation facility. The dispute arose due to alleged breaches of contract and termination of the project development agreement. The court’s judgment clarified the applicability of Section 9 in such cases.
Facts of the case
On 18 October 2000, a registered sugar mill in Sankeshwar, Karnataka (the respondent), and a developer of co-generation power projects (the appellant) signed a Project Development Agreement to develop a co-generation power project at the respondent's sugar mill. The required land lease agreement was delayed by 13 months, despite the appellants being tenants on 40 acres of non-agricultural land for 22 years. This delay prevented the project from meeting its 18-month start deadline, even after a 3-month extension. Additional agreements extended the term to 24 months and 3 months respectively. The appellants began Phase 1 on September 19, 2002, but were forced to stop by the respondent due to sugarcane crushing preparations, making it impossible to complete Phase 1 by October 31, 2002.
The respondent then falsely accused the appellant and illegally demanded Rs. 6 crores in security. On May 5, 2003, the respondent notified the expiry of the project development agreement. The appellant suspected the respondent of negotiating with other parties and feared eviction from the leased property. To address these concerns, the appellant filed an application under section 9 of the Arbitration and Conciliation Act of 1996 with the Court of City Civil and Session Judge, Bangalore. The application sought the appointment of a court receiver for the leased land and interim measures to prevent new project agreements with third parties, protecting third-party rights on the leased land. However, the Bangalore court declared it lacked jurisdiction over the application. Consequently, the appellant appealed to the Karnataka High Court under section 37(1)(a) of the Arbitration and Conciliation Act, 1996, seeking appropriate relief and resolution of the jurisdictional issue.
Issues raised
Whether section 9 of the Arbitration and Conciliation Act of 1996 authorizes the Principal City Civil and Sessions Court in Bangalore to hear the appellant's application?
Respondent arguments - The evidence presented in the case indicates that on October 18, 2000, the respondent and the appellant signed a project development agreement with the aim of developing a co generation project at the respondent's sugar mill in Sankeshwar, in the Belgaum district of Karnataka. The facts state that the parties included an arbitration clause in the Project development agreement, and the respondent has never contested the existence of the arbitration agreement. The clause specified that disagreements would be resolved through arbitration in Bangalore and that disputes arising from the agreement would be heard by Bangalore courts. As stated in the facts, the respondent accused the appellant of not finishing the work and demanded an illegal security deposit of Rs. 6 crores, despite the appellant's expressed desire in doing the remaining work.
Appellant arguments - The facts state that the respondent's delays and latches prevented the appellant from meeting the agreed-upon 18-month deadline for the execution of the land lease agreement. As a result, the project start date was moved up twice, to three and twenty-four months, respectively. Due to preparation of sugarcane crushing operations at the respondent's sugar mill, the appellant was forced to halt work by the respondent. The respondent subsequently informed the appellant in writing of the project development agreement lapse. Based on the available information, the appellant had grounds to think that the respondent was trying to engage into agreements with third parties and that they would likely remove them from the leased land because they were not receptive to negotiations. Thus, the appellant requested the interim measures from the Court of City Civil and Sessions Judge, Bangalore, by filing an application under section 9 of the Act. The application was submitted prior to the start of the arbitral proceedings, as the facts make clear. By order, the trial court determined that it lacked the authority to consider this application. Thus, in accordance with section 37(1)(a) of the Act, an appeal was filed with the Karnataka High Court.
Judgement and Rationale
The court determined that the appeal filed under Section 9 of the Act could not be heard by the Court of Principal City Civil and Session Judge, Bangalore, and that the challenged order issued by that court was valid. The court in question would not have the authority to hear an action seeking the reliefs covered by the arbitration conflicts if the litigation included determining a right or interest in real estate located outside the court's jurisdiction. Applying the same ratio to the facts of this case, we can conclude that the Bangalore court lacks jurisdiction to consider the appellant's application filed under section 9 of the Act because the arbitration's question-forming subject matter is located in the Belgaum district. A court that is qualified to decide a question involving a question of that nature is also qualified to decide an application filed under section 9 of the Act. In the event that a court of law lacks the authority to consider a suit, application, or petition within the legal framework specified by the statute, neither the court nor the parties involved may assume jurisdiction to consider the suit, application, or petition by consent or agreement.
Analysis of the case
In order to determine whether Bangalore court has the authority to consider the appellant's application filed under section 9 of the Arbitration and Conciliation Act, 1996, it is necessary to consider whether a purposive interpretation of the term "Court" should be adopted when construing section 2(1)(e) of the Act.In order to address this matter, we must examine the Arbitration provision included in the project development agreement that both parties signed. The parties may agree on the location of the arbitration under Section 20 of the Act. Bangalore was selected by the parties as the arbitral location in accordance with this clause. It is not up for debate where the arbitration will take place, but rather whether the Bangalore court qualifies as a court under section 2(1)(e) of the Act. It has been established, however, that a court cannot be granted jurisdiction by the parties to resolve conflicts if the court lacks the legal authority to consider them. From this, we might infer that, in relation to the case's facts and circumstances, the Bangalore court shall not be interpreted as a court under section 2(1)(e).
Conclusion
The judgement of this case reinforces that a court cannot assume jurisdiction if it is not conferred by the statute, nor can the parties confer jurisdiction on a court by agreement or consent. The Court of Principal City Civil and Sessions Judge, Bangalore, does not have jurisdiction to entertain the appellant's application filed under Section 9 of the Arbitration and Conciliation Act, 1996. The court’s decision is based on the principle that if the reliefs sought in the arbitration involve the determination of rights or interests in immovable properties situated outside its jurisdiction, it cannot entertain such matters. In this case, since the subject matter of the arbitration is situated in Belgaum district, the appropriate court with jurisdiction over Belgaum district should handle the application filed under Section 9 of the Act.
Source:-
Ram Mohan Reddy ‘Congeneration Power Limited vs Sri Globe Hiranyakeshi Sahakari Sakkere ... on 16 March, 2004’( Indian kanoon) < https://indiankanoon.org/doc/574519 > accessed 21 may 2024.
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