Steel Authority of India Limited Vs Balaji Industrial Products Limited (Calcutta High Court)
The Calcutta High Court allowed the jurisdictional objection arising in an appeal filed by Steel Authority of India Limited against Balaji Industrial Products Limited under Section 37 of the Arbitration and Conciliation Act, 1996. The appeal challenged an order dated August 8, 2023, passed in a petition under Section 34 of the Arbitration and Conciliation Act, 1996, concerning an arbitral award arising from a contract for the sale of iron ore. The High Court held that the challenge petition involved a commercial dispute and ought to have been transferred to the Commercial Division under Section 15 of the Commercial Courts Act, 2015. Since the petition had instead been decided by the Non-commercial Division, the impugned order was set aside for lack of jurisdiction, without any adjudication on the merits of the underlying arbitration dispute.
Background of the Arbitration Dispute
The dispute originated from a tender issued by Steel Authority of India Limited inviting offers for the sale of 60,000 metric tonnes of Run of Mines (Iron Ore) from the mining face of Ranichua Bench of Gua Ore Mines. Balaji Industrial Products Limited emerged as the highest bidder and was awarded the contract. Disputes subsequently arose between the parties in connection with the contract and were referred to arbitration.
The arbitral tribunal delivered its award on June 19, 2013. The award was challenged through AP/1097/2013 under Section 34 of the Arbitration and Conciliation Act, 1996. The challenge petition remained pending when the Commercial Courts Act, 2015 came into force. The underlying contractual dispute qualified as a commercial dispute within the meaning of Section 2(1)(c) of that Act.
Mandatory Transfer to the Commercial Division
The High Court examined the effect of Section 15 of the Commercial Courts Act, 2015 on the pending arbitration challenge. The provision required the Section 34 petition to be transferred from the Non-commercial Division to the Commercial Division. However, the transfer was not undertaken. Neither party applied for transmission of AP/1097/2013 to the Commercial Division, and the Court itself did not effect the transfer.
Consequently, the learned Single Judge heard and decided the Section 34 petition in the Non-commercial Division, passing the order dated August 8, 2023. The appellate court held that the petition should have been dealt with by the Commercial Division in accordance with the statutory transfer requirement.
Court’s Failure to Transfer Cannot Prejudice the Parties
The Division Bench observed that an act of the Court should not prejudice any party. Although neither party had requested transfer, the Court also bore responsibility for ensuring that the pending commercial dispute was transmitted to the appropriate Division.
The decisive defect was jurisdictional: the Section 34 petition was required to be heard by the Commercial Division, but the impugned judgment had been delivered by the Non-commercial Division. Accordingly, the Division Bench held that the order dated August 8, 2023 could not stand.
Directions for Transfer and Fresh Hearing
The High Court set aside the impugned judgment and directed the Department to transmit AP/1097/2013 to the Commercial Division forthwith. On transmission, the Department was required to treat the matter as disposed of in the Non-commercial Division and renumber it as a commercial matter. The learned Judge of the Commercial Division was requested to hear and dispose of the transferred Section 34 petition as expeditiously as possible.
Bank Guarantee Protection to Continue
The appeal also involved an existing order requiring Steel Authority of India Limited to furnish a bank guarantee of Rs.5 crores and increase its amount by 7% annually until the appeal was decided.
The Division Bench directed that the bank guarantee arrangement, including its annual increase of 7%, would continue until disposal of the Section 34 petition. The bank guarantee and its accruals would abide by the result of that petition.
Final Outcome
The High Court expressly clarified that it had not entered into the merits of the arbitration dispute and that all points raised by the parties remained open. APO/65/2024 was disposed of without any order as to costs.
The decision underscores the jurisdictional significance of transferring pending commercial arbitration challenges to the Commercial Division under Section 15 of the Commercial Courts Act, 2015. It also demonstrates that a procedural omission by the Court cannot justify allowing a judgment delivered without the required jurisdiction to stand.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The Court: The appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is directed against a judgment and order dated August 8, 2023 passed in a petition under Section 34 of the Act of 1996.
A tender notice was issued by the appellant inviting offers for sale of 60,000 metric tonnes of Run of Mines (Iron Ore) from the mining face of Ranichua Bench of Gua Ore Mines. The respondent was the highest bidder and was awarded the contract.
Disputes and differences arose between the parties in terms of such contract. The disputes and differences referred to arbitration, are commercial disputes within the meaning of Section 2 (1) (c) of the Commercial Courts Act, 2015.
The arbitral tribunal passed an award on June 19, 2013. It was assailed under Section 34 of the Act of 1996. The petition under Section 34 of the Act of 1996 was pending till such time it was disposed of by the impugned judgment and order.
During the pendency of the petition under Section 34 of the Act of 1996, the Commercial Courts Act, 2015 came into force.
Under Section 15 of the Act of 2015, the challenge petition under Section 34 of the Act of 1996 was required to be transferred to the Commercial Division. Court failed to do so. None of the parties also applied for transmission of AP/1097/2013 from the Non-commercial Division to the Commercial Division of the High Court.
Learned Judge passed the impugned judgment and order dated August 8, 2023 by not treating the petition under Section 34 of the Act of 1996 as a matter under the Commercial Division. In fact, the impugned judgment and order was passed in the Non-commercial Division.
Act of the Court should not prejudice any of the parties. In the facts and circumstances of the present case, it was also the failure of the Court not transmitting AP/1097/2013 from the Non-commercial Division to Commercial Division.
Since, the impugned judgment and order was passed in the Non-commercial Division and since, the petition under Section 34 of the Act of 1996 was required to be transmitted to the Commercial Division under Section 15 of the Act of 2015 and since, it was not done so, we are of the view that, the impugned judgment and order, should be set aside on the ground of lack of jurisdiction of the learned Single Judge in hearing and deciding the challenge petition in the non-commercial division.
In such circumstances, we set aside the impugned judgment and order dated August 8, 2023. We direct that, AP/1097/2013 to be transmitted to the Commercial Division by the Department forthwith. Upon such transmission, Department will treat AP/1097/2013 to be disposed of in the Non-commercial Division. On transmission to the learned Commercial Division, the Department will renumber the AP/1097/2013 as a commercial matter. Learned Judge is requested to hear and dispose of AP/1097/2013 on transmission to the Commercial Division, as expeditiously as possible.
In the appeal, there subsists an order requiring the appellant to furnish a bank guarantee for a sum of Rs.5 crores and to increase the quantum of the bank guarantee by 7 % every year till the decision in the appeal.
In such circumstances, we direct that, the order passed by the Appeal Court, requiring the appellant to furnish bank guarantee and to keep the same renewed with an increase of 7% per annum to continue till the disposal of the petition under Section 34 of the Act of 1996. The bank guarantee and its accruals will abide by the result of the petition under Section 34 of the Act of 1996.
We clarify that we did not enter into the merits of the case. All points raised by the parties are kept open.
APO/65/2024 is disposed of accordingly without any order as to costs,.
