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Karnataka High Court

Sanjay Kumar v Elior India.

Bench- HON’BLE MR. JUSTICE M. NAGAPRASANNA

WRIT PETITION No.2584 OF 2023 (GM – RES)

Decided On 02-06-2023

Facts of the case-

The petitioner, who was initially employed by Elior India Food Services LLP (referred to as “the firm”), later became a partner and minor partner in the firm with a specific share. Due to certain actions and omissions on the part of the petitioner, the firm initiated an inquiry by issuing a charge sheet on 10-05-2022. 

In response to these proceedings, the petitioner filed a Commercial Arbitration Application (Com.AA.No.88 of 2021) invoking Section 9 of the Arbitration and Conciliation Act, 1996, before the Commercial Court on 13-05-2021, based on an arbitration clause in the employment agreement.

While the Section 9 application was pending, the petitioner was terminated from service by the firm. On 08-06-2021, the petitioner invoked arbitration under Section 21 of the Act and issued a notice to the firm. However, the application under Section 9 filed before the Commercial Court was dismissed during the Section 21 proceedings. 

The petitioner then filed a commercial appeal (Com.A.P.No.161 of 2021) before the Court, but it was also dismissed by a Division Bench on 22-10-2021, affirming the order of the lower Court. The petitioner did not challenge this dismissal by the Division Bench.

As per the arbitration clause in the Employment Agreement, a three-member Arbitral Tribunal was constituted. The first hearing of the Arbitral Tribunal took place on 08-12-2021, during which the parties were represented, and the Tribunal directed the completion of pleadings. On 15-12-2022, the Arbitral Tribunal issued an order in response to the claimant’s application under Section 17 of the Act. 

In response to this order, the firm filed a Commercial Miscellaneous Application (Commercial M.A.No.1 of 2023) before the Commercial Court, and the petitioner filed objections, claiming that the Commercial Court lacked jurisdiction.

The Commercial Court, in its order dated 30-01-2023, directed the petitioner’s counsel to provide a copy of the objections filed and decided to hear the matter on both jurisdiction and merits, scheduling it for 01-02-2023. This order, which determined that the matter would be heard on both jurisdiction and merits, prompted the petitioner to approach the present Court with the current petition.

 

Relevant Provision

Arbitration and Conciliation Act, 1996	Related to
Sec. 9	Interim measures, etc. by Court.
Sec. 21	Commencement of arbitral proceedings.

 

Judgement

The Court delivered a judgment stating that a pure and simple employment contract cannot be considered a commercial dispute merely by labeling it as a provision of services. Justice M Nagaprasanna emphasized that if every employment agreement is treated as a commercial dispute, it would overwhelm the commercial courts and result in an excessive influx of litigation. Such an outcome would defeat the purpose for which commercial courts were established.

The Court relied on a Supreme Court judgment in the case of Ambalal Sarabhai Enterprises Limited v KS Infraspace LLP, which held that issues unrelated to commercial disputes should not be entertained by commercial courts solely on the basis of their high value and the desire for swift resolution.

The Court further clarified that even if a party mistakenly invokes the wrong jurisdiction and the concerned court makes a determination without any objections from the parties, such jurisdiction does not become binding in subsequent proceedings.

Based on the aforementioned analysis, the High Court concluded that the dispute between the parties in the present case did not qualify as a commercial dispute as defined under Section 2(1)(c)(xviii) of the Act. Therefore, the commercial court should not have entertained the dispute.

JUDGEMENT REVIEWED BY ABHAY SHUKLA

Click here to view judgment

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