Delhi High Court Appoints Arbitrator After Earlier Plea Before UP Court Was Withdrawn

The Delhi High Court has recently allowed a plea to appoint an arbitrator in a dispute between partners of a firm, rejecting an objection that sought to block the case by relying on an earlier, abandoned court proceeding.

Justice Harish Vaidyanathan Shankar said the objection under Section 42 of the Arbitration and Conciliation Act could not succeed because the earlier case filed in another court had been withdrawn without any decision.

Section 42 is meant to prevent different courts from hearing the same arbitration dispute. It says that once one court has taken up the matter, other courts should not deal with it.

The court clarified that this rule applies only when a court has actually taken up and dealt with the case.

The dispute is between partners of Jai Mata Di Packaging. One of the partners moved the Delhi High Court under Section 11 of the Arbitration Act, asking the court to appoint an arbitrator after the partners failed to agree on one.

He alleged that he had been pushed out of the firm's operations and denied access to its affairs. The partnership deed required disputes between partners to be resolved through arbitration.

Earlier, the firm had filed a case under Section 9 of the Arbitration Act before a court in Chitrakoot, Uttar Pradesh. Section 9 allows parties to seek temporary protection from a court, such as orders to prevent interference in business activities. That case was later not pressed and was closed without the court passing any order on the merits.

When the partner later moved the Delhi High Court for appointment of an arbitrator, the other partners objected.

They argued that since the Chitrakoot court had dealt with the case initially, Section 42 barred the Delhi High Court from hearing the matter.

The High Court rejected this argument. It held that a withdrawn case cannot give a court continuing jurisdiction over the dispute. The court said,

“A withdrawn petition cannot be equated with a decided or pending application. To hold otherwise would be to confer upon an abandoned proceeding a jurisdiction-creating effect, which Section 42 neither contemplates nor permits. Jurisdiction under Section 42 crystallises only when a court validly assumes seisin; it does not survive the abandonment of proceedings by the party who invoked the court‟s jurisdiction in the first place.”

Since the earlier case had been withdrawn without any adjudication, the High Court held that Section 42 did not apply. It allowed the petition under Section 11 and appointed a sole arbitrator to decide the disputes between the partners.