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1. Introduction:
The Commercial Courts Act, 2015 (“the CC Act”) has been enacted with the primary goal to expedite the resolution of commercial disputes in a time bound manner and with minimal interference of the higher courts. The Act also grants jurisdiction to the Commercial Court over arbitration matters of a commercial nature. While is intent is noble, the lawmakers have inadvertently left behind jurisdictional inconsistencies in the Act, which leads to conflict with the provisions of the Arbitration and Conciliation Act, 1996. In the previous part, we analysed the provisions in light of the judgment of the Madhya Pradesh High Court in Yashwardhan Raghuwanshi vs. District & Sessions Judge. Now, the High Court of Orissa (“OHC”) has ruled the opposite in its judgment dated 08.04.2022 in M.G. Mohanty & Anr. Vs. State of Odisha & Ors.
2. The Conflict
In the last part, we learnt that the conflict of jurisdiction arises owing to the fact that the Commercial Courts set up under the Act, are at the level of Civil Judge Sr. Div. whereas, as per the Arbitration and Conciliation Act 1996 (“the A & C Act”), only a Principal Civil Court of a district may exercise jurisdiction over disputes arising out of arbitration matters. This has led to uncertainty as to whether the newly established Commercial Courts can entertain applications under the Arbitration Act. Although there is no answer to resolve this conflict of jurisdiction under the legislation, by the Apex Court, the Madhya Pradesh High Court held that irrespective of the value of the claim, arbitration matters are required to be adjudicated Principal Civil Court of a district, it was held that in respect of commercial disputes involving an arbitration dispute only the Commercial Court of the status of District Judge or Additional District Judge would be the competent court to entertain the matters under Sections 9, 14, 34 & 36 of the Arbitration Act and such disputes cannot be entertained by any Court of Civil Judge Class-I or Senior Civil Judge, or any Court of Small Causes.
3. The OHC Judgment in M.G. Mohanty & Anr. Vs. State of Odisha & Ors
The petitions posed the specific question of law as to whether for the purposes of the dealing with applications under Sections 9, 14, 34 and so on of the A&C Act jurisdiction can be conferred on a judicial officer subordinate to the rank of a District Judge, i.e., the Principal Civil Judge in the district notwithstanding Section 2 (1) (e) of the A&C Act?
The OHC in its analysis, looks at the extensive use of the word “Court” in the A & C Act. In that context, the expression ‘Court’ can be only the ‘Principal Civil Court of original jurisdiction in a district’ and, as the provision clarifies, it ‘does not include any Civil Court of a grade inferior to such Principal Civil Court, or any Court of small causes’. In certain States other than Odisha including the State of Madhya Pradesh, the ‘Principal Civil Court of original jurisdiction in a district’ need not be only the District & Sessions Judge (D&SJ) but can be even an ADJ. However, the admitted position is that as far as Odisha is concerned, further purposes of 2(1)(e)(i) of the A&C Act, it is only the D&SJ who is the Principal Civil Court in a district. Therefore, strictly going by Section 42 of the A&C Act, it is D&SJ alone which would have the jurisdiction to entertain the suit notwithstanding any other provision in any other law for the time being force.
The OHC however observes that a significant change has been brought about by the enactment of the CC Act in 2015. The Statement of Objects and Reasons (SOR) of the CC Act state that there was a ‘need to provide for an independent mechanism’ for the early resolution of ‘high value commercial disputes’. Such early resolution, it was expected, ‘shall create a positive image to the
investor world about the independent and responsive Indian legal system’. In 2018, even commercial disputes of lesser value were brought under the ambit of the CC Act.
The OHC further observes that, Section 2 (1) (c) read with Section 10 of the CC Act, clearly stipulates that where arbitration matters are commercial disputes of specified value, it shall be heard and disposed of by the Commercial Courts. Similarly, Section 15 (2) of the CC Act, provides for transfer of all arbitration applications relating to a commercial dispute of a specified value pending in any civil court shall be transferred to the relevant Commercial Court. On top of that, Section 21 of the CC Act, provides the CC Act shall have an overriding effect over other statutes and laws.
The OHC categorically declined to concur with the judgment of the MPHC in Yashwardhan Raghuwanshi vs. District & Sessions Judge. Referring to the Parliamentary intent in enacting the CC Act in 2015 much after the A&C Act, the OHC observed that the legislature appears to have left it open to the High Court and the State government either to appoint a Civil Judge (Senior Division) or an Additional District Judge as the Commercial Court of first instance to expedite the adjudication of commercial disputes as is evident from the fact that the “specified value” of a commercial dispute was lowered from 1 crores to only 3 lakh rupees.
The OHC finally held that the A&C Act must yield to the CC Act and not vice versa given that the objective of both enactments is the speedy disposal of the cases, and the CC Act was a later enactment. There is no apparent conflict between the A&C Act and the CC Act for being resolved. The objective of both is the speedy resolution of the disputes.
4. Conclusion
It is true that with the implementation of the Commercial Courts Act, there has emerged a conflict in the jurisdiction of courts, on account of the Arbitration and Conciliation Act. The Madhya Pradesh High Court in an attempt to provide an answer delivered a simplistic yet rational judgment. The High Court of Orissa on the other hand has taken the opposite view and has sought to recognize the power of the State Government and the High Courts to confer jurisdiction on the courts of the lesser grade than the Principal Civil Court to hear and dispose of arbitration matter. There is no doubt to the fact that the provisions in both legislations are in conflict to the extent of jurisdiction of the courts where the Arbitration Act demands for Principal Civil Court of a jurisdiction, however, there being no parity in grade level of the judicial officers being appointed to the Commercial Courts, almost every state has appointed a Civil Judge of the Senior Division to the Commercial Courts.
It is interesting to note that there are several States that have constituted Commercial Courts both at the District Judge level as well as below the District Judge level. In Gujarat, the Courts of the Additional District Judges in Bhuj, Anjar, Gandhidham and Bhachau have been constituted for hearing arbitration matters whereas the Courts of the Principal Senior Civil Judge in these places are for hearing other commercial disputes. In Karnataka, in some districts, it is the Principal D&SJ and in others the AD&SJ. In Bihar, depending on the pecuniary value, it could be the District Judge or the Sub-Judge. In Uttarakhand, it is the Additional District Judge Commercial Court, Dehradun. The intent clearly was to expand the power and to bring in more Courts under the rubric of ‘Commercial Courts’. Considering that the specified value was being lowered, it was but natural to allow Courts below the rank of the District Judge to be designated as such.
As such, the Madhya Pradesh High Court has in an attempt to harmonize both the statutes, it has interpreted the provisions to mean that irrespective of the value of the claim, arbitration matters are required to be adjudicated Principal Civil Court of a district and in respect of commercial disputes involving an arbitration dispute, only the Commercial Court of the status of District Judge or Additional District Judge would be the competent court to entertain the matters under Sections 9, 14, 34 & 36 of the Arbitration Act and such disputes cannot be entertained by any Court of Civil Judge Class-I or Senior Civil Judge, or any Court of Small Causes. Further, judicial precedence clearly states that a special statute shall override provisions of general statute.1 The OHC differs at this juncture and considers commercial disputes as a special category for the purposes of the CC Act. The OHC considers both the A & C Act and the CC Act as special laws, one being earlier and other later, therefore, the principle of ‘generalia specialibus non-derogant’, has no application whatsoever, in the present context. The CC Act, being the later law, shall override the A & C Act.
At this stage, it is important to highlight the decision of the Bombay High Court, in Gaurang Mangesh Suctancar v. Sonia Gaurang Suctancar. The Bombay High Court, on analyzing these very provisions, came to the conclusion that it is the CC Act provisions that would prevail. In fact, the Arbitration Act and the Commercial Courts Act, both central enactments, have employed this ‘non-obstante clause’ at more than one place. The Bombay High Court has thus held that the Arbitration Act prevails when it concerns the parties’ substantive rights, and the Commercial Courts Act does when it concerns the parties’ procedural rights. The view taken by the Bombay High Court creates the most harmonious interpretation of both the Statutes. However, the conflict continues to exist and thus calls for a thorough interpretation by the highest court of the country, in order to prevent any further uncertainty as regards the jurisdiction of the Courts under both statutes. This is would further improve investor confidence and will be in furtherance of the objective of speedy disposal of commercial disputes.