Karnataka High Court sets up Commercial Division to hear challenges to international commercial arbitration awards

Pursuant to a judicial order, the Karnataka High Court has constituted a Commercial Division to hear challenges to international commercial arbitration awards. .A circular to this effect was issued by the High Court on Thursday."The Hon’ble Chief Justice has ordered that in view of Section 2(e)(ii) of the Arbitration and Conciliation Act, a challenge to an award in an International Commercial Arbitration can be made before the Hon’ble High Court of Karnataka and accordingly has constituted a Commercial Division Under Section 4(1) of the Commercial Courts Act, 2015, consisting of Single Judge at the Principal Bench at Bengaluru and Benches at Dharwad and Kalaburagi," the circular said..The circular was issued pursuant to a judicial order passed by the High Court on February 16. In that case, the Division Bench of Chief Justice Ritu Raj Awasthi and Justice Suraj Govindaraj had also held that the High Court alone has jurisdiction in a challenge to an award passed in an international commercial arbitration..The Court noted that in terms of Section 10 (1) [jurisdiction in respect of arbitration matters] of the Commercial Courts Act, a challenge to an international commercial arbitral award would have to be considered by a Commercial Division established in the High Court consisting of a single-judge..Judgment in a nutshell.- A challenge to an award passed in an international commercial arbitration can be made before the High Court of Karnataka in view of Section 2 (e) (ii) of the Arbitration and Conciliation Act;- In terms of Section 10(1) if the Commercial Courts Act, a challenge to an international commercial arbitral award would have to be considered by a Commercial Division established in the High Court consisting of a single-judge;- Commercial Divisions were constituted as a special division; ordinary limitation of the pecuniary jurisdiction for the exercise of powers of the single-judge would not apply and the pecuniary jurisdiction would be unlimited;- Section 37 of the Arbitration Act mandates the provision of an appellate remedy. The Commercial Appellate Division which exercises jurisdiction under Section 37 of the Arbitration Act would also be the forum for challenging a decision of the Commercial Division of the High Court.- A fresh classification of cases would have to be made as regards such proceedings. One relating to proceedings under Section 34 as regards the challenge to an International Commercial Arbitral Award and another relating to the orders of the Commercial Divisions challenging the order passed under Section 9 of the Arbitration Act would have to be introduced.- Any proceedings seeking execution of an international commercial arbitral award or seeking interim relief would also have to be dealt with by the Commercial Division comprising a single-judge.- All pending proceedings which meet the above criteria pending before the Commercial Appellate Division are directed to be reclassified and transferred to the single-judge exercising jurisdiction over the Commercial Division..The petition before the Court had been filed under Section 34 (application for setting aside arbitral awards) of the Arbitration and Conciliation Act 1996, challenging an award passed by an arbitral tribunal..The dispute had arisen out of a Technology Collaboration Agreement (TCA) between ITI Limited and Alphion Corporation for the purpose of developing products and rendering services to prospective customers, including BSNL and MTNL in the telecom sector..The primary questions for consideration before the Court were whether a challenge to an award passed in an international commercial arbitration can be made before the Karnataka High Court, and if so, whether it would have to be considered by a single-judge or a Division Bench. .The Court said that the question as to whether a proceeding challenging an international commercial arbitral award can be instituted in India is no longer a point of contention and has been decided by the Supreme Court in Bharat Aluminium Company v. Kaiser Aluminium Technical Services. In that judgment, the top court had held that an international commercial arbitral award can be challenged in an Indian court so long as the arbitration proceedings are held in India even though the arbitration may be an international commercial arbitration.Such a court is the supervisory court possessed of the power to annul the award, in keeping with international instruments such as the Geneva Convention, the New York Convention and the United Nations Commission on International Trade Law (UNCITRAL) Model Law, the BALCO judgment had said..In the present case, given that the arbitration was held in India, the Court held that it would have the jurisdiction to entertain any challenge to an international commercial arbitral award..Regarding the specific issue of which court would have the jurisdiction to decide the issue, the judgment adverted to Section 2(e)(ii) of the Arbitration and Conciliation Act, which states that a Court under the Act in the case of international commercial arbitration would be the High Court of that jurisdiction.The judgment noted that the High Court of Karnataka does not exercise ordinary original civil jurisdiction, and therefore, it is the later portion of Section 2(e)(ii) which would be applicable. The roster judge of the High Court having jurisdiction to hear appeals from decrees of courts subordinate to it, is the roster judge who would have the jurisdiction to consider any aspect relating to international commercial arbitration."Suffice it to say that in respect of an international commercial arbitration it is only the High Court which could exercise jurisdiction and not the District Court or a Commercial Court constituted under the Commercial Courts Act," the Court held. Specifically regarding jurisdiction of the High Court, the Court referred to Section 10 of the Commercial Courts Act "In terms of sub-clause (1) of Section 10, where a Commercial Division is constituted in the High Court, all applications or appeals arising out of International Commercial Arbitration would have to be filed in the Commercial Division where such Commercial Division has been constituted by such High Court," the Court noted.But Section 10 does not contemplate a situation where a Commercial Division has not been constituted, the Court observed.Nevertheless, Section 10 requires an application or an appeal as regards an international commercial arbitration to be filed before the Commercial Division. The Court further opined that Section 10 does not distinguish between a High Court exercising ordinary original civil jurisdiction and one that does not."A meaningful reading when given to the said provisions would lead to the irresistible conclusion that even in so far as the High Court not exercising ordinary original civil jurisdiction, a Commercial Division is required to be established for purposes of consideration of applications and appeals arising out of international commercial arbitrations," the judgment stated.Such Commercial Divisions would have to comprise single-judges which would give meaning and purport to clause (1) of Section 10 of Commercial Courts Act."Thereby any application or appeal in respect of International Commercial Arbitration could be filed before the Commercial Division and in the event of challenge required to be made to the orders passed by the Commercial Division, the same could be filed before the Commercial Appellate Division constituted under Section 5 of Commercial Courts Act," the judgment said..The Court directed that the order be placed before the Chief Justice on the administrative side for necessary orders. Pursuant to the same, the present circular came to be issued..Senior Advocate CK Nandakumar appeared of ITI Limited..[Read Circular].[Read Order]