State Of Chhattisgarh vs. Smec International Pty. LTD

Facts

The State of Chhattisgarh (Appellant) filed an arbitration appeal under Section 37 of the Arbitration and Conciliation Act, 1996, against an order dated 11.07.2023 passed by the Commercial Court. The Commercial Court had returned the appellant's application filed under Section 34 of the Act, holding it lacked jurisdiction to decide the case. The dispute arose from a contract for consultancy services for road projects, valued at Rs. 25,06,90,736/- and USD 3,16,822/-, between the appellant and a joint venture including SMEC International Pty. Ltd. A dispute concerning the reimbursement of service tax and GST led to arbitration. The High Court appointed a Sole Arbitrator, who passed an award on 18.07.2022. The appellant challenged this award before the Commercial Court, which, despite no objection from either party regarding jurisdiction during proceedings, concluded it was an International Commercial Arbitration and thus beyond its purview.

Held

The High Court held that the appeal was not maintainable. It reasoned that Section 37 of the Arbitration and Conciliation Act, 1996, exhaustively enumerates appealable orders, and an order merely returning a petition on the ground of lack of jurisdiction does not fall within the ambit of Section 37(1)(c), which pertains to orders setting aside or refusing to set aside an arbitral award. The Court noted that the respondent company was a joint venture where SMEC International Pty. Ltd., Australia, was the Lead Consultant, as evidenced by the Joint Venture letter and Power of Attorney. Citing the Supreme Court's decision in Amway (supra), the Court concluded that the presence of a foreign entity (SMEC International Pty. Ltd., Australia) as the lead consultant made the arbitration an International Commercial Arbitration, irrespective of business operations in India. Therefore, the Commercial Court correctly held it lacked jurisdiction. The Court dismissed the appeal as not maintainable but clarified that this dismissal would not prevent the appellant from presenting their Section 34 application before the appropriate forum.

Key Issues

1. Whether the Commercial Court erred in holding that it lacked jurisdiction to entertain an application under Section 34 of the Arbitration and Conciliation Act, 1996, in a case arising from an arbitration that the Commercial Court deemed to be an International Commercial Arbitration? (Section 2(e) and 2(f) of the Act, 1996). The appellant argued that the Commercial Court misinterpreted Sections 2(e) and 2(f), that the arbitration was domestic as it involved Indian entities and was performed in India, and that the Commercial Court's finding was inconsistent with the High Court's prior order appointing the arbitrator. The respondent raised a preliminary objection, arguing that the impugned order, merely returning the application due to lack of jurisdiction, was not appealable under Section 37 of the Act, 1996.