Jurisdiction in Arbitration: Supreme Court Ruling on Ravi Ranjan Developers vs. Aditya Kumar Chatterjee

The case of M/S Ravi Ranjan Developers Pvt. Ltd. vs. Aditya Kumar Chatterjee is a significant judgment on the jurisdiction of courts in arbitration disputes. The Supreme Court had to determine whether the Calcutta High Court had jurisdiction to appoint an arbitrator despite the fact that the property in question was situated in Bihar, and no part of the cause of action had arisen within the jurisdiction of the Calcutta High Court.

Background of the Case

The appellant, M/S Ravi Ranjan Developers Pvt. Ltd., and the respondent, Aditya Kumar Chatterjee, had entered into a Development Agreement on 15th June 2015 for the development of a property in Muzaffarpur, Bihar. This agreement contained an arbitration clause which stated:

“In case of any dispute or difference between the parties arising out of and relating to this development agreement, the same shall be settled by reference of the disputes or differences to the arbitrators appointed by both the parties, and such arbitration shall be conducted under the provisions of the Indian Arbitration and Conciliation Act, 1996 as amended from time to time, and the sitting of the said Arbitral Tribunal shall be at Kolkata.”

Disputes arose between the parties, and the respondent terminated the agreement on 24th April 2019. The appellant, however, did not accept this termination. Multiple legal proceedings followed:

The appellant filed a petition before the Real Estate Regulatory Authority (RERA) in Patna.
The respondent filed a petition under Section 9 of the Arbitration and Conciliation Act in the Muzaffarpur District Court, seeking interim relief.
The respondent also filed a complaint before the Muzaffarpur Municipal Corporation, which was dismissed.
The respondent initiated an arbitration petition before the Calcutta High Court for the appointment of an arbitrator.

Petitioner’s Arguments (Ravi Ranjan Developers)

The appellant argued that:

The Calcutta High Court lacked territorial jurisdiction as the agreement was executed and registered in Bihar, and the property was located in Muzaffarpur.
The arbitration clause only mentioned that sittings of the Arbitral Tribunal would be held in Kolkata, which did not mean that the seat of arbitration was in Kolkata.
No part of the cause of action had arisen in Kolkata.
The dispute had already been brought before the Muzaffarpur District Court under Section 9 of the Arbitration Act.
Under Section 42 of the Arbitration Act, once a court is approached for any arbitration-related matter, only that court retains jurisdiction over the arbitral proceedings.

Respondent’s Arguments (Aditya Kumar Chatterjee)

The respondent countered by arguing:

The parties had agreed that the sittings of the Arbitral Tribunal would be in Kolkata, implying an exclusive jurisdiction clause for the Calcutta High Court.
As per Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited, once a seat of arbitration is designated, that court has exclusive jurisdiction.
The Calcutta High Court had jurisdiction since the arbitration agreement referred to Kolkata.
The appellant had acquiesced by participating in the arbitration proceedings after the appointment of the arbitrator.

Supreme Court’s Observations

The Supreme Court examined the case and made the following key observations:

The Development Agreement was executed and registered in Bihar, and the property was situated in Bihar. Thus, the courts in Bihar had jurisdiction.
Section 42 of the Arbitration Act states that once an application related to arbitration is filed in a court, that court retains jurisdiction. The first arbitration-related petition was filed in the Muzaffarpur District Court, meaning subsequent petitions should also be heard in Bihar.
The arbitration clause did not explicitly designate Kolkata as the seat of arbitration. Instead, it only mentioned that the sittings of the tribunal would be held in Kolkata, which is different from the seat of arbitration.
The mere fact that the arbitrator’s sittings were to be held in Kolkata did not confer exclusive jurisdiction on the Calcutta High Court.
The appellant’s consent to the arbitrator’s appointment was without proper instructions, and a lack of jurisdiction cannot be cured by consent.

The Supreme Court quoted Kiran Singh & Ors. v. Chaman Paswan & Ors. (1955) SCR 117, stating:

“A decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings.”

Final Judgment

The Supreme Court ruled in favor of the appellant, setting aside the Calcutta High Court’s orders. The key rulings included:

The appointment of the arbitrator by the Calcutta High Court was without jurisdiction and was quashed.
The arbitration proceedings would not continue under the arbitrator appointed by the Calcutta High Court.
The Supreme Court appointed Justice Bhaskar Bhattacharya, Former Chief Justice of the Gujarat High Court, as the new arbitrator.
Status quo regarding the property was to be maintained for 15 days to allow the parties to seek interim relief under Section 17 of the Arbitration Act.

Key Takeaways from the Judgment

Jurisdiction in Arbitration: The Supreme Court clarified that mere mention of a location for arbitration sittings does not confer jurisdiction on courts in that location.
Significance of the Seat of Arbitration: The judgment reinforced that the seat of arbitration determines jurisdiction, not just the venue of arbitration sittings.
Application of Section 42 of the Arbitration Act: Once a court has been approached regarding an arbitration agreement, that court retains jurisdiction over all arbitration-related proceedings.
Limits of Consent in Jurisdictional Matters: Even if a party participates in arbitration, it cannot validate an otherwise invalid jurisdiction.

Conclusion

This ruling is a landmark judgment on arbitration jurisdiction in India. It prevents parties from forum-shopping and ensures that jurisdiction is determined based on legal principles rather than convenience. The Supreme Court’s emphasis on the distinction between the seat and venue of arbitration provides clarity for future disputes, reinforcing the importance of correctly drafting arbitration clauses in contracts.

Petitioner Name: M/S Ravi Ranjan Developers Pvt. Ltd..
Respondent Name: Aditya Kumar Chatterjee.
Judgment By: Justice Indira Banerjee, Justice A.S. Bopanna.
Place Of Incident: Muzaffarpur, Bihar.
Judgment Date: 24-03-2022.

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