Sanchayita Lahkar

The High Court at Calcutta Division Bench of Justice Arijit Banerjee and Justice Om Narayan Rai has held that an order passed by a court lacking jurisdiction is incurably void and amounts to a nullity. The court allowed an appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996, and set aside a prior order dated April 5, 2023, which had allowed an application under Section 34 of the same Act. The Bench concluded that the earlier order was passed by a Judge who, at the relevant time, did not possess the requisite determination over commercial matters, and hence, the decision lacked jurisdiction.

The Division Bench directed that the arbitration petition in question be placed before the appropriate Commercial Division of the Calcutta High Court for fresh adjudication. It refrained from commenting on the merits of the matter, stating that all contentions raised by both parties remain open for consideration before the competent forum. The court further clarified that its decision to allow the appeal rested solely on the jurisdictional defect, not on any substantive analysis of the dispute.

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The appellant issued a tender for the repair of a Wet Basin Flat Gate at its main yard on a turnkey basis. The respondent emerged as the successful bidder, following which a letter of intent and a purchase order were issued, detailing the scope of work.

After the respondent completed the contractually stipulated works, it alleged that payments due were not made by the appellant. Attempts to secure payment through representations to the appellant proved unsuccessful. Consequently, the respondent filed a writ petition under Article 226 of the Constitution, registered as W.P. No. 18603(W) of 2015.

While the writ was pending, the respondent, claiming to be a Micro, Small and Medium Enterprise (MSME), approached the West Bengal State Micro and Small Enterprises Facilitation Council on May 11, 2016, under Section 18 of the MSME Development Act, 2006. Upon receiving notice from the Council to appear for conciliation, the appellant unilaterally invoked the arbitration clause in the work order and appointed an arbitrator on September 23, 2016.

The respondent challenged the arbitrator's jurisdiction under Section 16 of the Arbitration and Conciliation Act, 1996. This challenge was dismissed by order dated February 28, 2017. Subsequently, the respondent again approached the High Court through W.P. 11108 (W) of 2017 seeking expedited resolution of its MSME Council proceedings. This petition was disposed of by an order directing the Council to decide the matter within 90 days.

The appointed arbitrator proceeded with the case and issued an award in favour of the appellant on September 23, 2018. Aggrieved, the respondent filed an application under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award. This application was registered as A.P. 831 of 2018.

The Single Judge allowed the application under Section 34, effectively setting aside the arbitral award. This order, dated April 5, 2023, formed the basis of the present appeal under Section 37.

Mr. Debnath Ghosh, Senior Advocate for the appellant, submitted that the impugned order was passed by a court that lacked jurisdiction under the Commercial Courts Act, 2015. He argued that as the dispute was a commercial one, it should have been heard by the Commercial Division of the High Court. Mr. Ghosh referred to Section 2(1)(c)(vi), Section 2(1)(xviii), and Section 15 of the 2015 Act.

The appellant further contended that the work executed by the respondent constituted a composite contract involving both work and supply elements. Relying on precedents such as Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu and Sterling and Wilson Pvt. Ltd. v. Union of India, counsel argued that such composite contracts fall outside the MSME Council's jurisdiction under the 2006 Act.

Additionally, it was contended that the respondent was not registered under the MSME Act when the contract was executed. The letter of intent and purchase order were dated September 27, 2012, and November 6, 2012, respectively, whereas the respondent's registration was obtained only after April 19, 2013. Therefore, according to the appellant, the respondent could not invoke benefits under the 2006 Act for a pre-registration contract.

On the other hand, Mr. Sabyasachi Chowdhury, Senior Advocate for the respondent, submitted that at the relevant time, the Judge who decided A.P. 831 of 2018 was exercising jurisdiction over both civil and commercial matters. He argued that this was a curable error of description and not one of inherent lack of jurisdiction.

He also countered the appellant’s argument on the nature of the contract, relying on Larsen & Toubro Ltd. v. State of Karnataka, and NBCC (India) Ltd. v. State of West Bengal, to show that works contracts can include goods and services and still fall within the scope of the MSME Act.

Mr. Chowdhury submitted that the appellant was aware of the proceedings before the MSME Council but still proceeded with appointing an arbitrator. He further asserted that the respondent completed the work after obtaining registration under the MSME Act, which validated its claim under the said statute.

The Division Bench recorded the following observations regarding jurisdiction: "Since the order impugned is clearly without determination and hence without jurisdiction, therefore, we set aside the order dated April 05, 2023."

The Bench reviewed the judicial roster in effect when the matter was first taken up by the Single Judge. It noted: "As on December 05, 2019 and December 13, 2019... the determination that rested with the Hon'ble Judge who has passed the order impugned was... applications under Section 34... filed up to 2018... [but] not relating to commercial disputes."

According to the court, the matter should have been heard by a different Judge who was designated to handle commercial disputes under Section 10 of the Commercial Courts Act, 2015. The Division Bench stated: "The defect of jurisdiction cripples the order impugned incurably."

The Bench relied on Garden Reach Shipbuilders & Engineers Ltd. v. GRSE Ltd. Workmens Union & Ors., quoting the Supreme Court: "An adjudication, beyond allocation, is void and such adjudication has to be considered a nullity."

On the jurisdictional issue, the court observed: "It is not open for this Court to await the outcome of a reference or a review petition and refuse to follow a judgment that the same has been doubted by a later co-ordinate Bench."

Given this, the Bench stated: "We allowed the appeal only on the ground of jurisdiction... We refrain from commenting on the merits of the matter and we leave all points open."

The Division Bench issued the following directive: "We set aside the order dated April 05, 2023 passed in A.P.831 of 2018 and allow the appeal with a direction that A.P. 831 of 2018 be placed before the appropriate Bench under the commercial division of this Court having jurisdiction over arbitration petitions pertaining to commercial matters for fresh hearing."

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It further clarified: "Since we have allowed the appeal only on the ground of jurisdiction, we refrain from commenting on the merits of the matter and we leave all points open to be urged by the parties before the appropriate Court, in accordance with law."

The court permitted both parties: "Since the matter pertains to the year 2018, the parties would be at liberty to pray for expeditious disposal of the application under Section 34 of the said Act of 1996 before the appropriate Bench."

It also ordered: "Urgent photostat certified copy of this judgment, if applied for, be supplied to the parties upon compliance of all formalities."

Advocates Representing the Parties:

For the Appellant: Mr. Debnath Ghosh, Senior Advocate; Mr. Biswaroop Mukherjee, Advocate; Mr. Debsoumya Basak, Advocate

For the Respondent: Mr. Sabyasachi Chowdhury, Senior Advocate; Mr. S. E. Huda, Advocate; Mr. Shounak Mukhopadhyay, Advocate; Mr. Shreyaan Bhattacharyya, Advocate; Ms. Anwesha Guha Ray, Advocate; Mr. Abhijit Guha Ray, Advocate

Case Title: Garden Reach Shipbuilders & Engineers Limited vs. Marine Craft Engineers Private Limited

Neutral Citation: 2025: CHC-OS:126-DB

Case Number: A.P.O. 84 of 2023 with A.P. 831 of 2018

Bench: Justice Arijit Banerjee and Justice Om Narayan Rai