Calcutta High Court
Hukum Raj Sajjan Raj Kumbat vs E'L Dorado Guarantee Limited on 22 November, 2001
Equivalent citations: (2002)2CALLT431(HC), 2002(1)CHN438
Author: A.K. Ganguly
Bench: Asok Kumar Ganguly
JUDGMENT A.K. Ganguly, J.
1. In this matter an application was filed under Section 9 of Arbitration and Conciliation Act, 1996 [hereinafter called ACA 96] by the petitioner praying for interim protection in connection with the proposed arbitration proceeding over the dispute between the parties.
2. The material facts which appear from pleadings between the parties are as follows :
The petitioner during the period between 19th April 2000 and 30th April 20C i placed various orders for sale and purchase of different shares with the respondent which is a company carrying on business, inter alia, as a sharebroker. The case of the petitioner is that as a result of such transaction, an amount of Rs. 1,74,54,140.10p. became due and payable to the petitioner. It is the further case of the petitioner that the respondent received all the sums in respect of such transaction carried on by it for and on behalf of the petitioner with various stock exchanges only as a broker and trustee of the petitioner and the respondents are obliged to pay it back to the petitioner after deducting the brokerage.
3. The case of the petitioner is that by a letter dated 15th May, 2001, the respondent acknowledged its liability to the petitioner in the aforesaid sum of Rs. 1,74,54,140. 10p. According to the petitioner, the same would appear from annexure 'F' to the petition. The petitioner further alleged that it is difficult for the petitioner to realise the said amount in the event an award in its favour is passed in the arbitration between the parties. So certain interim protection to secure the amount was prayed for.
4. On such a petition being filed in this Court an interim order on 23rd May, 2001 was passed by this Court appointing a receiver to take possession of the respondent's membership card on Stock-Exchange Mumbai and National Stock-Exchange and the documents and statements in relation thereto. The receiver was also directed to make initials in respect of books and accounts of the respondent-company at Nilhut House, 6th Floor, R.N. Mukherjee Road, Calcutta.
5. Pursuant thereto, the receiver went and submitted a report before the Court on the returnable date. In the affidavit which was filed to the said petition by the respondent-company, the main objection was taken on the question of territorial Jurisdiction. It was stated that the appropriate Court would be the Mumbai Court for adjudication of the controversies between the parties. In support of the said contention, the respondents have referred to the contract note which according to the respondent made it clear that the arbitration shall be held in Mumbai and the appropriate Court for adjudication of any dispute raised in such arbitration shall be the Court in Mumbai. It was also stated that the existence of forum selection clause had been suppressed by the petitioner and the interim order was obtained ex parte by suppressing the said fact. In the affidavit, it has been admitted that there was one Bimal Gandhi who was the Managing Director and main shareholder of the respondent-company and was in sole control and was responsible for the business of the respondent-company. But since the said Bimal Gandhi expired on 8th May, 2001 under a tragic circumstance, there is no other person who is in control of the management of the respondent-company and the respondents have suspended all its business operations both in Mumbai Stock Exchange and National Stock Exchange. The petitioner has however pleaded that Bimal Gandhi committed suicide in view of the financial mess that he unfortunately found him in.
6. The other objection which was taken in the said affidavit is that no arbitration proceedings were filed before the Stock Exchange, Mumbai. In so far as the petitioner's financial claim is concerned, the same was not seriously disputed.
7. A second application was also filed by the petitioner under Section 9 of ACA 96 after the filing of the first application. Both the applications were heard analogously.
8. The main question which was agitated before this Court was the question of the territorial jurisdiction of the Court to entertain this application. Before examining the question of jurisdiction, one thing be made clear that in answering the charge of suppression being levelled against the petitioner, the learned counsel for the petitioner has drawn the contention of this Court to several annexures annexed to the first Section 9 application dated 22nd May, 2001 and from those documents it appears that the forum selection clause has not been suppressed. Apart from that the averments made in para 12 of the petition also stated that the transaction was subject to Mumbai jurisdiction. After this was pointed out, the learned counsel for the respondent did not press the charge of suppression against the petitioner.
9. It also appears that after the filing of the first petition, steps have been taken for initiation of arbitration proceedings and it was stated that it is at the stage of stock exchange nominating the arbitrator for initiation of the arbitration proceedings.
10. So the "only question which survives is the question of territorial jurisdiction of this Court to entertain this petition under Section 9 in the context of the forum selection clause, which, according to the respondents, points out the jurisdiction in Mumbai.
11. In support of the fact that the Calcutta High Court has the Jurisdiction, the petitioner in the first Section 9 application which was moved before this Court on 22nd May, 2001 urged the following facts in para 8 thereof:
"(a) The petitioner placed an order for buy or sale at the respondent's office at Nilhat house, Calcutta;
(b) Instruction for all shares required to be delivered were executed by the petitioner at Calcutta, and the respondent's office at Calcutta was so intimated;
(c) Shares purchased on behalf of the petitioner by the respondent were delivered by it to the petitioner at Calcutta, either through the petitioner's demat account at Calcutta or by physically handling over Share Certificates at Calcutta;
(d) Payments were made by the petitioner at Calcutta through its bankers at Calcutta which cheques were handed-over to the respondent's office at Calcutta and/or deposited with the bank account of the respondent at Calcutta.
(e) The respondent has made payment to the petitioner at Calcutta by cheques received by the petitioners at Calcutta; ,
(f) All contract notes and bills were handed-over by the respondent's Calcutta office to the petitioner at Calcutta."
12. While dealing with those averments the respondents, in paragraph 15 of the affidavit-in-opposition, have come out with bare denials. The factual assertions in paragraph 8 of the petition have not been specifically denied.
13. Under the provisions of ACA 96, Section 2(e) defines the Court and the said definition is as follows ;
"Section 2(e). "Court" means the principal civil Court of original jurisdiction in a District, and includes the High Court in exercise of its ordinary original civil jurisdiction, having Jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court of Small Causes."
14. The next section which is relevant in this context is Section 9 of ACA 96. A perusal of Section 9 of ACA 96 makes it clear that a party has been given a right to approach a Court (a) before, (b) during arbitral proceedings or (c) any time after the making of the award but before its enforcement. This Section has been construed by the Hon'ble Supreme Court in the case of Sundaram Finance Limited v. N.E.P.C., India Ltd. . In the said judgment it has been clearly laid down that in view of Section 9 of ACA 96, a party to arbitration agreement can approach the Court for interim relief not only during the arbitral proceedings but even before such commencement of such proceeding. Construing the expression 'before' occurring in Section 9, the learned judges held that in a fit case Court can pass an interim order before the commencement of arbitration proceedings and the learned judges further held that any other interpretation will have the effect of rendering the expression 'before' in Section 9 redundant.
15. The learned judges explained the rationale of the said provision in paragraph 14 of the said judgment as follows :
"Not only does the language warrant such an interpretation but It was necessary to have such a provision in the interest of justice. But for such a provision no party would have a right to apply for interim measure before notice under Section 21 is received by the respondent. It is not unknown when it becomes difficult to serve the respondents. It was therefore, necessary that provision was made in the Act which could enable a party to get interim relief urgently in order to protect it's interest. Reading the section as a whole it appears to us that the Court has jurisdiction to entertain an application under Section 9 either before arbitral proceedings or during arbitral proceedings or after the making of the arbitral award but before it is enforced in accordance with section 36 of the Act."
16. The learned judges further observed that Section 9 of ACA 96 corresponds to Article 9 of the UNCITRAL Model Law.
17. Now, the question is when even an arbitration proceeding has not commenced, if Section 9 petition is made before this Court with pleadings as stated in paragraph 8 of the present petition, and this Court entertains the petition, can it be said that this Court has no jurisdiction to entertain such a petition?
18. The clause relating to jurisdiction is contained in Section 42 of ACA 96. The said section is set out below :
"Section 42. Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where will respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court."
19. A somewhat similar section occurs in Sub-section 4 of Section 31 of Arbitration Act, 1940. Construing section 31(4) of Arbitration Act, 1940, the Hon'ble Supreme Court in the case of Kumbha Mawji v. Dominion of India, held that the necessary of clothing a single Court with effective and exclusive jurisdiction is to bring about an avoidance of conflict of orders and a scramble. The learned judges also held that this was equally essential whether the question arose during the pendency of the arbitration or after the arbitration was completed or before arbitration proceeding was commenced [please see para 13 of the said judgment].
20. It may be noted that under the provisions of Arbitration Act, 1940, there is no such provision as Section 9 of ACA 96. Even then the learned judges of the Hon'ble Supreme Court held that the necessary of avoiding a conflict was the paramount legislative intent also even at a stage when arbitration proceeding did not commence. Now under ACA 96, in view of the statutory recognition in Section 9 that a Court can be approached for interim protection even before the commencement of the arbitration proceeding, the jurisdiction of the Court to entertain such a prayer in view of the wording of Section 42 of ACA 96 appears to be even wider.
21. This Court is taking this view on a comparison of the two sections. Under Section 31(4) of the Arbitration Act, 1940, the language used is "where in any reference, any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction......" But under Section 42 of ACA 96 it has been provided "where with respect to an arbitration agreement, any application under this part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceeding."
22. A comparison of statutory dispensation in these two sections makes it clear that jurisdiction under Section 42 of ACA 96 is attracted even if at the stage of an arbitration agreement, any application under this part has been made in a Court and that Court alone will have jurisdiction.' But the requirement under Section 31(4) of Arbitration Act, 1940 is little more stringent. Under Section 31(4) there must be an application in any reference under the Arbitration Act, 1940 and same should have to be made in a Court competent to entertain it. In Section 42 of ACA 96 the word 'competent' has been omitted. Legislature is presumed not to do so without any meaning. Therefore, the omission of the word competent before the expression 'Court' in Section 42 of ACA 96 is significant and cannot be interpreted to be by way of inadvertence. But one thing is clear that the 'Court' must satisfy the requirement of Section 2(e) of ACA 96.
23. In the instant case, having regard to the pleadings set out above I am of the view that in this proceeding this 'Court' is certainly the Court within the meaning of Section 2(e) of ACA 96.
24. This Court also finds that by using the words such as 'means', 'includes' and does not include' in Section 2(e) of ACA 96, the legislature has exhaustively explained the meaning of the term 'Court'. Therefore, from a perusal of the definition of Court' under Section 2(e), it is clear that it can only mean a Court having civil jurisdiction over the subject-matter of arbitration agreement.
25. From a further perusal of the said Section 2(e) it appears that in the said section there is no mention that jurisdiction would depend on the question where the parties reside, dwell or carry on business. The jurisdiction is made to depend solely on the subject-matter of the dispute. In the instant case, the subject-matter of dispute is the transaction between the parties relating to sales and purchase of shares. So from para 8 which has not been specifically denied by the respondent, it is difficult for this Court to hold that this Court is not the Court within the meaning of Section 2(e) of ACA 96.
26. From a combined reading of Section 2(e) and Section 42 of ACA 96, one should not be kept in any doubt that the intention of the legislature is to clothe only one Court. It is the principal civil Court of original jurisdiction which may be the High Court in the exercise of its original jurisdiction. In fact the Court which has been approached first will be the Court in all matters connected with arbitral proceedings and award.
27. The expressions where with respect to an arbitration agreement any application under this part has been made in a Court' under Section 42 of ACA 96 are wide enough to include an application under Section 9.
28. Learned counsel for the respondent, however, did not argue on facts. But the learned counsel relied on a few judgments in order to contend that this Court has no jurisdiction. The learned counsel relied on the judgment in the case of Hakam Singh v. Gammon (India) Limited, . The learned counsel relied on the said judgment in order to contend that a forum selection clause in Hakam Singh case was upheld. Therefore, the same should be upheld here also and the Bombay Court should have the jurisdiction. In Hakam Singhs case it was held that where two Courts have jurisdiction to try a suit between the parties, the dispute between them should be determined in one of such Courts. This is not contrary to the public policy. In the facts of the case in Hakam Singh, the Apex Court held that the Courts in Bombay had jurisdiction under the general law to entertain the petition and the said jurisdiction has been chosen by clause 13 of the agreement because the respondent had their Head Office in Bombay where they carry on business. The impact of Section 31(4) of Arbitration Act 1940 on such question never fell for consideration before the Supreme Court in Hakam Singh. Nor was the earlier and the larger Bench decision of the Apex Court in Kumbha Mawji was considered in Hakam Singh. In the context of the facts of the case in Hakam Singh and the forum selection clause, the learned judges held that when dispute arose between the parties the subordinate judge at Varanasi had no objection. In the instant case, the same is not the position. In the instant case, it is clear that the respondents had a regional office in Calcutta and in view of the facts in para 8 noted above, the ratio in Hakam Singh's case cannot be applied in the instant case.
29. The learned counsel also relied on the judgment in the case of . Sundaram Finance Limited v. NEPC India Limited, . The learned counsel relied on the said judgment only for the purpose of contending that for interpretation of the provisions of ACA 96, cases decided under 1940 Act cannot be relied upon. The learned counsel further submitted that the Supreme Court finds ACA 96 is different from 1940 Act. There can be no doubt about the aforesaid finding in Sundaram Finance Limited (supra). But this has to be kept in mind that the sad finding has been reached while construing Section 9 of ACA 96. Section 9 of ACA 96 is totally a different provision and there is no such provision in 1940 Act similar to bection 9 of ACA 96. In that context those observations have been made. Therefore, those observations must be read In the background in which they have been made. This Court had found that in many subsequent decisions of the Supreme Court, while dealing with the provisions of ACA 96, the Apex Court considered the provisions of 1940 Act and also relied on the decision rendered on the provisions of 1940 Act.
30. The learned counsel for the respondent also relied on a decision In the case of T. Gobindaraja Mudaliar Etc. v. The State of Tamil Nadu and Ors., . He said judgment was relied on for he purpose of pointing out the binding effect of a judgment. In fact, attention of the Court was drawn to para 10 of the said judgment where the learned judges after considering various judgments have arrived at the following finding :
'The binding effect of a decision does not depend upon whether a particular argument was considered therein or not provided that the point with reference to which an argument was subsequently advanced was actually decided."
31. This Court does not find the relevance of the said ratio in the context of the points which have been agitated in this case.
32. The learned counsel for the petitioner relied on the decision in Universal Petrochemicals Limited v. Rajasthan State Electricity Board, . In that case, It has been held that a contract between the parties cannot prevail over statutory provision. In the said case also question cropped up as to whether the forum selection clause would prevail over Sub-section (4) of Section 31. The learned judges of the Division Bench, to which I am a party, after considering various judgments, held that the forum selection clause cannot operate ignoring the specific provision of Section 31(4) of the Act of 40 and it was held in that case that since application was made before the Calcutta High Court which is a competent Court, the Court alone is entitled to exercise its jurisdiction and all subsequent applications should be made to the same Court.
33. As such this objection relating to territorial jurisdiction cannot be upheld and is overruled. The order dated 23rd May, 2001 made by this Court will continue until further orders. This Court expects that the arbitration proceeding must have commenced between the parties. This Court makes it absolutely clear that if it can be shown by the respondents that arbitration proceeding has not commenced till today and the delay in the commencement of such arbitration is attributable to the petitioner, in that case, the respondents can make an application for vacation of the interim order before the appropriate Bench of this Court. The preliminary objection relating to jurisdiction of his Court is overruled. No costs.
Later The main application under Section 9 of the Act is pending and be placed before the appropriate Court.
Prayer for stay of the petition of this judgment and order is refused.
All parties are to act on a signed copy of the operative portion of this judgment and order on the usual undertaking.