Jurisdiction of Civil Court, where there is an arbitration clause between the parties

In this particular matter the dispute was between lender-Sundram Finance and borrowers-Respondent no. 1 and 2. A suit was instituted by the Respondents, wherein an application under Section 8 of Arbitration and Conciliation Act, 1996 was moved by  Sundram Finance. The High Court of Kerala held as follows:

 

“Going by Section 8 of the Arbitration and Conciliation Act, I am of the opinion that mere inclusion of an arbitration clause in the agreement does not bar or cause to oust the jurisdiction of the civil court provided Under Section 9 of the Code of Civil Procedure. The above view is further supported by Section 5 of the Arbitration and Conciliation Act, which says that “in the matters governed by first part of the Arbitration and Conciliation Act, no judicial authority shall intervene except where so provided in the first part”. It means that jurisdiction of the Civil Court is not completely ousted by Section 8 of the Arbitration and Conciliation Act. Section 5 of the Arbitration and Conciliation Act does not bar the exercise of general power of the civil court to grant interim relief including specific injunctive relief Under Order XXXIX of the Code of Civil Procedure and the Specific Relief Act….”

 

The Supreme Court disagreed with the views of High Court and held as following

 

“Once an application in due compliance of Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statue, the civil court should first see whether there is ouster of jurisdiction in terms or compliance of the procedure under the special statute. The general law should yield to the special law-generalia specialibus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court”

 

In our view the latest judgement of the Supreme Court would apply to only those suits/proceedings wherein both the parties are bound by Arbitration agreement, however where the one of reliefs/parties is outside the scope of arbitration clause, Civil Court shall have the jurisdiction to entertain the suit, notwithstanding the Arbitration clause with some of the parties, in view of earlier judgement of Supreme Court in the matter of Sukanya Holding Private Limited Vs. Jayesh H Pandya, AIR 2003 SC 2252, wherein it was held as follows

 

Sundram Finance Limited Vs. T. Thakan, Civil Appeal no. 2079 of 2015