Calcutta High Court
Apeejay Oxford Bookstores Private ... vs Hotel Leela Venture Limited on 10 May, 2007
Equivalent citations: (2007)3CALLT43(HC), AIR 2007 (NOC) 1692 (CAL.)
Author: Sanjib Banerjee
Bench: Sanjib Banerjee
JUDGMENT Sanjib Banerjee, J.
1. The question raised, as to the jurisdiction of this Court to receive the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, is a fallout of the present view that a request to a Chief Justice for a reference to arbitration involves the discharge of functions of judicial nature.
2. The parties entered into an agreement on January 31, 2003 for the petitioner to run a bookstore at the respondent's hotel in Bangalore and for the parties to share profits from the bookstore business in addition to the respondent being entitled to a fixed monthly sum. It appears from the correspondence leading up to the respondent's final letter that the respondent was not satisfied with the accounts of the bookstore that it received from the petitioner, the insinuation being that the receipts were underplayed and the expenses overstated so that the payout to the respondent on account of its share of profits would be less. The respondent took the extreme step of demanding that the association be ended and in its letter of January 19, 2006, it required the petitioner to handover vacant possession of the shop in the following words:
We refer to the Agreement dated 31 January, 2003 entered into between us in respect of B4, 5, 6, 7 and 8 at the Leela Galleria, Bangalore ('the Agreement').
The lock-in period provided in clause 15 of the Agreement is expiring on 31st January, 2006, after which either party is entitled to terminate the Agreement by giving 45 days notice.
Accordingly, we hereby give notice of 45 days commencing on 31 January, 2006 terminating the Agreement. The notice period expires on 17 March, 2006.
Kindly arrange to handover vacant possession of the premises to us on 17 March, 2006 in terms of the Agreement.
3. The petitioner's response of March 10, 2006 is summarised in the penultimate paragraph thereof:
We are bonafide occupants of the aforesaid shops. At present we are paying compensation of Rs. 1 Lakh per month and are also liable to pay 50% of profit before interest, depreciation and tax arising out of business operation carried out from the aforesaid shops in terms of the said Agreement. We have not defaulted in payment of any amounts payable by us under the Agreement and we have admittedly observed and performed all covenants and stipulations contained in the Agreement and are thus entitled to peaceful use of the aforesaid shops in terms inter alia of clauses 11 and 21 of the Agreement. Our occupation is protected in terms of the said Agreement and also otherwise and you should not interfere with our peaceful use and occupation of the said shops. The Agreement is initially for a period of 9 years from 1st February, 2003 in terms of clause 1 and your attempts to terminate the same before expiry of the aforesaid period of 9 years are illegal and uncalled for.
4. The respondent invoked the arbitration agreement found in clause 26 of the agreement and indicated its nominee as arbitrator. The petitioner did not agree to the name suggested by the respondent and instituted these proceedings seeking leave under clause 12 of the Letters Patent and requesting for the appointment of an arbitrator.
5. The respondent applied for revocation of the leave granted under clause 12 of the Letters Patent and contends that this Court could not have received the petition. Prior to making such application, the respondent had applied under Section 11(6) of the Act to the Chief Justice of the High Court of Karnataka but that petition was dismissed as an earlier request had already been made and Section 11(11) of the Act provides that it is only the earrlier request that may be pursued. It appears from the order passed by the High Court of Karnataka on October 18, 2006 that the respondent urged the points that it now puts forward, but its request was not entertained on the ground that Section 11(11) of the Act barred a subsequent request being considered when an earlier had been made elsewhere. It was held on such ground that the High Court of Karnataka could not adjudicate upon the competence, or the lack of it, of this Court to receive the petitioner's earlier request.
6. The respondent cites what it calls is a forum selection clause found in the agreement and insists that, quite apart from the jurisdiction clause, that if a suit were to be founded on the same grounds as the petitioner indicates, it would be a suit for land and the land is situated entirely outside the State of West Bengal.
7. Clause 26 of the agreement provides for arbitration and refers to jurisdiction:
In the event of there being any dispute with regards to this agreement or any interpretation thereof or any of the terms hereof the same shall be referred to the arbitration as per the provisions of the Arbitration and Conciliation Act, 1996 and the seal of arbitration and jurisdiction of this agreement shall be at Bangalore.
8. The respondent submits that there is no dispute regarding the validity of the arbitration agreement as both the parties in invoking the provisions of Section 11(6) of the Act have accepted the same. The respondent suggests that the seat of the proposed arbitration has to be at Bangalore and urges that the tail of the relevant clause confers exclusive jurisdiction on the Appropriate Court in Bangalore to receive any matter that must travel to Court in furtherance of the arbitration agreement. The respondent asserts that the final words of the clause should be read as "... and the ... jurisdiction of this agreement shall be at Bangalore" with the definitive "shall" conferring substantial exclusively that tests of a forum selection clause demand. The respondent points out that the subject matter of the agreement is a bookstore which is in Bangalore and the substance of the agreement has to nexus with any place within the original jurisdiction of this Court or within this State.
9. The respondent refers to the latest view of the Supreme Court found in the Judgment reported at (S.B.P. & Co. v. Patel Engineering Ltd.) where it has been held that despite the power under Section 11(6) of the Act (and, on a party of reasoning, under Sections 11(4) and 11(5) thereof) being conferred on the Chief Justice, it is not sufficient to hold that the power thus conferred is merely an administrative power and not a judicial power. Paragraph 17 of the AIR report is relied upon. The thoughts appearing in the last sentence of paragraph 17 have been expanded over the following two paragraphs before the conclusions of majority view are summed up at paragraph 46 of the report. It is necessary that the majority view found in such paragraphs of the AIR report be noticed:
17. It is true that the power under Section 11(6) of the Act is not conferred on the Supreme Court or on the High Court, but it is conferred on the Chief Justice of India or the Chief Justice of the High Court. One possible reason for specifying the authority as the Chief Justice, could be that if it were merely the conferment of the power on the High Court, or the Supreme Court, the matter would be governed by the normal procedure of that Court, including the right of appeal and the Parliament obviously wanted to avoid that situation, since one of the objects was to restrict the interference by Courts in the arbitral process. Therefore, the power was conferred on the highest judicial authority in the country and in the State in their capacities as Chief Justices. They have been conferred the power or the right to pass an order contemplated by Section 11 of the Act. We have already seen that it is not possible to envisage that the power is conferred on the Chief Justice as persona designata. Therefore, the fact that the power is conferred on the Chief Justice, and not on the Court presided over by him is not sufficient to hold that the power thus conferred is merely an administrative power and is not a judicial power.
18. It is also not possible to accept the argument that there is an exclusive conferment of jurisdiction on the arbitral tribunal, to decide on the existence or validity of the arbitration agreement. Section 8 of the Act contemplates a judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement, on the terms specified therein, to refer the dispute to arbitration. A Judicial authority as such is not defined in the Act. It would certainly include the Court as defined in Section 2(e) of the Act and would also, in our opinion, include other Courts and may even include a special tribunal like the Consumer Forum (see: Fair Air Engineers (P) Ltd. and Anr. v. N.K. Modi . When the defendant to an action before a judicial authority raises the plea that there is an arbitration agreement and the subject matter of the claim is covered by the agreement and the plaintiff or the person who has approached the judicial authority for relief, disputes the same, the judicial authority, in the absence of any restriction in the Act, has necessarily to decide whether, in fact, there is in existence a valid arbitration agreement and whether the dispute that is sought to be raised before it, is covered by the arbitration clause. It is difficult to contemplate that the judicial authority has also to act mechanically or has merely to see the original arbitration agreement produced before it, and mechanically refer the parties to an arbitration. Similarly, Section 9 enables a Court, obviously, as defined in the Act, when approached by a party before the commencement of an arbitral proceeding, to grant interim relief as contemplated by the section. When a party seeks an interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, or that the Court which was approached had no jurisdiction to pass any order in terms of Section 9 of the Act, that Court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement. That is no indication in the Act that the powers of the Court are curtailed on these aspects. On the other hand, Section 9 insists that once approached in that behalf, "the Court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it". Surely, when a matter is entrusted to a Civil Court in the ordinary hierarchy of Courts without anything more, the procedure of that Court would govern the adjudication [see: R.M.A.R.A. Adaikappa Chettiar and Anr. v. R. Chandrasekhara Thevar .
19. Section 16 is said to be the recognition of the principle of Kompetenz-Kompetenz. The fact that the arbitral tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can and possibly, ought to decide them. This can happen when the parties have gone to the arbitral tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these sections, before a reference is made, Section 16 cannot be held to empower the arbitral tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the arbitral tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of Section 11(7) of the Act read with Section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence under Section 11 of the Act, are incapable of being reopened before the arbitral tribunal. In Konkan Railway (supra) what is considered is only the fact that under Section 16, the arbitral tribunal has the right to rule on its own jurisdiction and any objection, with respect to the existence or validity of the arbitration agreement. What is the impact of Section 11(7) of the Act on the arbitral tribunal constituted by an order under Section 11(6) of the Act, was not considered . Obviously, this was because of the view taken in that decision that the Chief Justice is not expected to decide anything while entertaining a request under Section 11(6) of the Act and is only performing an administrative function in appointing an arbitral tribunal. Once it is held that there is an adjudicatory function entrusted to the Chief Justice by the Act, obviously, the right of the arbitral tribunal to go behind the order passed by the Chief Justice would take another hue and would be controlled by Section 11(7) of the Act.
46. We, therefore, sum up our conclusions as follows:
(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.
(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another judge of that Court and by the Chief Justice of India to another judge of the Supreme Court.
(iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated judge would be that of the Chief Justice as conferred by the statute.
(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this Judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate.
(v) Designation of a district judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.
(vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.
(vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.
(viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under Section 11(6) of the Act.
(ix) In a case where an arbitral tribunal has been constituted by the parties without haying recourse to Section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.
(x) Since all were guided by the decision of this Court in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd. and orders under Section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this Judgment will govern even pending applications under Section 11(6) of the Act.
(xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the concerned High Court or a judge of that Court designated by the Chief Justice.
(xii) The decision in Konkan Railway Corporation Ltd. and Anr. v. Rani Construction Pvt. Ltd. is overruled.
10. It is urged on behalf of the respondent that upon an application, either under Section 8 or under Section 11 of the Act being made, the powers conferred exclusively on the arbitral tribunal under Section 16 of the Act to rule upon its jurisdiction, are assumed by the Court receiving the application. There is no dispute that is substantially so. There can also be no dispute that the Chief Justice, or his designate, merely probes the objections raised as to the existence of the arbitration agreement or the arbitrability of the disputes. If it appears ex facie to the Chief Justice or his designate that the arbitration agreement is not in existence or the disputes are not arbitrable, the matter need proceed no further. If, however, it is found by the Chief Justice, or his designate, that there is an arguable case, he should yield to the authority reserved unto the tribunal by Section 16 of the Act.
11. But there is the other aspect of challenge on which an application under Section 11(6) [or Section 11(4) or Section 11(5)] of the Act may be resisted; the jurisdiction of the Court in which the application is made. Surely, this will result in the exercise of judicial powers and would be a matter that is to be exclusively dealt with by the Chief Justice or his designate and cannot be deferred to even the preliminary stage of the reference. But it brings an attendant complication. Section 11 empowers a Chief Justice to delegate the authority to act upon a request for a reference to any designate, including an institution. The question that the petitioner raises is whether such a designate or an institution, which may otherwise not have any judicial expertise, be required to discharge a judicial function. According to the petitioner, if the answer is in the affirmative, it may lead to undesirable results. And, if the answer is in the negative, it would go against the present view taken by the Supreme Court and found in the Patel Engineering case (supra). There is an ancillary problem that is indicated by the petitioner - if the question is answered in the affirmative, as it has to be in view of Patel Engineering, it could imply that the authority under Section 11(6) [and sections 11(4) and 11(5)] of the Act cannot be passed on by a Chief Justice to an institution that did not have the trappings of judicial authority or expertise.
12. There are also other aspects that the parties put forward as to the meaning and effect of Section 11 of the Act. The respondent refers to the finality of the decisions rendered under Sub-sections (4), (5) and (6) found in Section 11(7) of the Act:
11....
(4) If the appointment procedure in Sub-section (3) applies and-
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party: or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the parties,-
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution, designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by Sub-section (4) or sub section (5) or Sub-section (6) to the Chief Justice or the person or institution designated by him is final.
13. The respondent says that such finality of the decision has to be understood in the context of Sub-section (12) of Section 11 which imports the meaning of "Court" from Section 2(1)(e) in Clause (b) thereof:
11...
(12)(a) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the "Chief Justice of India".
(b) Where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "Chief Justice" in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in Clause (e) of Sub-section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court."
"2. ...
(1)(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. According to the respondent, since the decision of the Chief Justice or his designate would be final, such finality would involve a pronouncement on the authority to receive the petition and in ruling upon such authority, whether or not challenged, Section 42 of the Act is brought into play:
42: Jurisdiction-Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, 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 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.
15. The respondent points out the wide words used in Section 42 and submits that if the authority receiving an application under Section 11(6) can finally pronounce upon the validity of such request, it conclusively binds the parties as to the applicability of Section 2(1)(e) in respect of the reference and would preclude other applications being made to any Court other than the Court over which the Chief Justice receiving the request, presides, in the event such Court has original jurisdiction or a Court over which the relevant High Court exercises superintendence.
16. The petitioner submits that Section 42 would not cover any application made under Section 11 and refers to the view expressed by the Hon'ble single Judge of the Supreme Court in the Judgment reported at (Rodemadan India Ltd. v. International Trade Expo Centre Ltd.). Paragraphs 8 to 14 of the report set out the nature of the objections taken:
8. In short, the power under Section 11(6) is the power of a designate referred to under the section and not that of the Supreme Court, albeit that it has now been held to have judicial characteristics by reason of the Judgment in Patel Engg. Since this is the power of the Chief Justice and not the power of the Supreme Court, the specification in Order 7 Rule 1 of the Rules as to the minimum number of judges, would have no application thereto. If the argument of the learned Counsel is right, then even the Chief Justice cannot pass such an order unless he is sitting in a Bench with one or more companion Judges. No such intention is evidenced by Parliament in enacting Section 11(6) of the Act. Since Parliament has enacted a law under which the power is exercisable by the Chief Justice or his designate, who could be "any person or institution", I do not think that the requirement of Order 7 Rule 1 of the Rules would apply to such a situation at all. The contention is, therefore, rejected.
9. The respondent's main opposition to this petition is on the ground that there is no arbitration agreement in existence since the Management Agreement was merely a proposal, which was subject to approval of the shareholders of the Company; that a meeting was called for the shareholders of the Company at which the said proposal was put forward for approval and was specifically rejected by a resolution passed by the shareholders; that the nomination of Justice Jain was without prejudice to the rights and contentions of the respondent and that this petition was misconceived and untenable as the High Court of Delhi would have exclusive jurisdiction in the matte, as it had already been moved under Section 9 of the Act. For the said reasons, the respondent has sought dismissal of this petition.
10. Before examining the facts of the present petition, it is necessary to encapsulate the conditions necessary for the exercise of the designate's power under Section 11(6) and the judicial determinations necessary by the designate at the stage of Section 11(6). In addition to the conditions already enumerated in the section, the Judgment in Patel Engg. provides that:
(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this Judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators.
11. Further, it has also been held that determination of certain preliminary jurisdictional issues is mandatory for the designate:
39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. If will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act.
12. I am, therefore, required to decide whether the preliminary conditions necessary for the exercise of the designate's power under Section 11(6) are satisfied, especially whether there exists a valid arbitral agreement.
13. One more issue needs appraisal here: What kind of evidence is the designate under Section 11(6) required to place reliance on to arrive at a finding on the preliminary jurisdictional issues? According to the Judgment in Patel Engg.:
For the purpose of taking a decision on these aspects [preliminary jurisdictional issues], the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the Court at various stages of the proceedings before the Arbitral Tribunal.
14. Accordingly, I am given wide discretion to decide what evidence - oral or documentary - is necessary for me to make an effective finding on the preliminary jurisdictional issues.
17. Upon finding that there was a valid arbitration agreement, the contention as to the applicability of Section 42 was noticed and decided in paragraph 25 of the report:
25. Finally, it is contended that as recourse had been taken by the petitioner under Section 9 of the Act to obtain interim relief by moving the Delhi High Court by their original petition OMP No. 98 of 2005 dated 24.3.2005, by reason of Section 42 of the Act that Court alone could have jurisdiction upon the Arbitral Tribunal. In my view, this contention has no merit as I have held earlier, neither the Chief Justice nor his designate under Section 11(6) is a "Court" as contemplated under the Act. Section 2(1)(e) of the Act defines the expression "Court". The bar of jurisdiction under Section 42 is only intended to apply to a "Court" as defined in Section 2(1)(e). The objection, therefore, has no merit and is rejected.
18. The challenge to the jurisdiction of the Chief Justice or his designate in respect of a domestic arbitration is quite different from the nature of challenge that can be made in respect of an international commercial arbitration. Section 11(12)(b) in which reference to Section 2(1)(e) of the Act is found, applies to cases other than international commerical arbitrations. The matter before the Supreme Court in the Rodemadan India Ltd. case related to an international commercial arbitration. The distinction between the two kinds of arbitration for which different procedures for reference have been charted out in Section 11, has been made in clauses (a) and (b) of Sub-section (12) thereof. Since a request for reference or constitution of an arbitral tribunal in respect of an international commercial arbitration can only be made to the Chief Justice of India, there can be no situation of the kind that has arisen out of the agreement between the parties herein. It is only in respect of domestic arbitrations that requests may be validly made to more than one Chief Justice for reference. The validity of each request will be tested upon the conditions found in Section 2(1)(e) of the Act. Simply put, a request under Section 11(6) [or Section 11(4) or Section 11(5)] would have been validly made if such Chief Justice presides over a Court that could have received a suit founded on the same cause of action of the referring party, if such Court exercises original jurisdiction, or, otherwise, if the Court over which the Chief Justice presides, exercises superintendence within the meaning of Article 227 of the Constitution over the Court which would have been entitled to receive a suit founded on the same cause of action of the referring party. If an agreement is made at an office in the Dalhousie area of Calcutta which is required to be performed in Bangalore and is repudiated by a notice communicated to a party's office in Ahmedabad, the Chief Justice of this Court, the High Court of Karnataka and the High Court of Gujarat, or their respective designates, would be empowered to receive a request for a reference in respect of matters covered by the relevant arbitration agreement.
19. Section 11(12)(b) of the Act merely points to the Chief Justice, and there may be more than one who would have authority to take up a request for reference. But despite the wide words of Section 42 and the finality of the decision upon a request for reference found in Section 11(7), the receipt of such request or the making of a reference thereupon would not preclude other Courts from receiving applications under other provisions of Part I of the said Act. There are at least four reasons that immediately come to mind.
20. First, if Section 42 were to be interpreted as suggested by the respondent, an interim application in respect of an international commercial arbitration would be required only to be made to the Supreme Court. But that would not be appropriate as the Supreme Court does not receive original maters of such nature. The reference to Part I in Section 42 and the exception carved out in Section 11(12)(a) in respect of international commercial arbitrations would indicate that Part I was not intended to apply to international commercial arbitrations. But as it is now recognised that an interim application in respect of an international commercial arbitration would lie to a Court in India otherwise having jurisdiction to entertain it, that Court cannot be the Supreme Court if a prior request for reference in respect of such international commercial arbitration has been made to the Supreme Court.
21. Secondly, if by virtue of a previous application under Section 11 being filed, Section 42 were to come to operation for a domestic arbitration, Section 11(11) would not have specifically found space. If we read Section 11 by deleting Sub-section (11) therefrom and applying the principles recognised by Section 42, a previous valid request for a reference to the Chief Justice of one High Court would preclude a further request to the Chief Justice of another High Court. But that is not the case. Section 11(11) incorporates the same principle as in Section 42 but restricted to the context of a request for reference. There can be no clearer indication that a previous application made under Section 11 would not decide upon the destination of subsequent applications under the other provisions of Part I of the Act.
22. Thirdly, in respect of an agreement governed by an arbitration clause, the Court referred to in Section 2(1)(e) of the Act could be two or more of Courts in the same State. Say, an agreement is entered into at Alipore which requires performance at Alipurduar and the notice repudiating the same is issued to and received at Asansol. The principal Civil Court at Alipore or Alipurduar or Asansol would be competent to receive any application under any of the provisions contained in Part I of the Act, except an application under Section 11. The request for reference being made to the Chief Justice of this Court in respect of such an agreement, would be irrelevant, for the purpose of Section 42. Any of the three Courts at Alipore, Anpurduar and Asansol would still be competent to receive an application founded on any other provision under Part I of the Act in respect of such agreement.
23. Fourthly, and notwithstanding the judicial power that has to be exercised in course of an application under Section 11(6) [and Section 11(4) and Section 11(5)], it is confined to the request for reference for being considered and for no other. The effect of such decision on the authority to receive the request cannot spill over to affect the status of an application under Section 9 or Section 14 or Section 34 or like provisions of Part I of the Act.
24. In discharge of such judicial function, now that it is settled that it is a judicial function, the composition of the designated institution or the wherewithal of the designated person, is of no significance. If the Chief Justice of a High Court were to delegate his powers under Section 11(6) [or Section 11(4) or Section 11(5)] to say, a chamber of commerce, the apprehension that chamber of commerce would not have the tools to answer an issue of jurisdiction raised, is unfounded. Quasi-judicial functions can be discharged by non-judicial persons or institutions. Hypothetically, there is also no bar to a party questioning the validity of a request on the ground of jurisdiction from applying directly to the Chief Justice to suggest that his designate cannot take up such request and, in course of such application, obtain an adjudication on its challenge.
25. With this preclude, the challenges put forth by the respondent on the twin grounds, require to be seen. The respondent states that the closing words of clause 26 of the agreement clearly indicate that the parties had agreed that only the appropriate Court at Bangalore would have jurisdiction. The respondent submits that if there is a valid forum selection clause, then such clause would decide "the Court" within the meaning of Section 2(1)(e) of the Act. It is argued that if only the appropriate Court at Bangalore could have received the petitioner's suit, in the event there was no arbitration agreement, then the Chief Justice of High Court of Karnataka would be the only Chief Justice before whom a valid request of reference could have been made. On a reading of Section 11(12)(b), there cannot be any argument with what has been urged on such score by the respondent. However, to proceed to such conclusion, there has to be a finding as to the existence and validity of the forum selection clause.
26. Before the petitioner could cite the Judgment reported at (ABC Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem), the respondent referred to the decisions reported at (Shriram City Union Finance Corporation Ltd. v. Rama Mishra); (Andhra Pradesh State Trading Corporation v. Auro Logistic Limited and Anr.); (Nariman Films v. Dilip Mehta) and (Rite Approach Group Ltd. v. Rosoboronexport) in aid of its contention that words of exclusivity should not be the sole guiding factor in ascertaining whether exclusive jurisdiction under an agreement was conferred on a particular Court, it is a test of substance. The ABC Laminart case and an unreported Judgment rendered by a single Judge of this Court in A.P. No. 237 of 1998 (Akla Builders Pvt. Ltd. v. Cityscape Developers Pvt Ltd.) on December 11, 2001 were cited by the petitioner. The petitioner insists that it is a litigant's right to choose his forum and upon such forum otherwise having authority to receive his action, such forum is obliged to deal with it on merits. Such right of a litigant, according to the petitioner, is not to be trifled with on the vague words of an apparent forum selection clause until clear intention of the parties in evinced thereby.
27. In the view that is' ultimately taken on the reading of the relevant clause in this case, the reference to the various authorities may be academic once it is noticed that both the parties are agreed on the fundamental proposition that it is the reading of the forum selection clause that is paramount.
28. In the ABC Laminart case the forum selection clause which was ultimately found inadequate ran thus:
Any dispute arising out of this sale shall be subject to Kaira jurisdiction.
29. Despite use of the word "any" with the word "shall" in the ABC Laminart clause, it was held that in the absence of exclusionary words like "exclusive", "alone", "only" and the like, the maxim "expressio unius est exclusio alterius" could not be applied in that case. The petitioner here particularly stressed on the third last sentence of paragraph 15 in the ABC Laminart report that in case of repudiation of a contract, the place where notice of repudiation is received is the place where the suit would lie. The petitioner cites the notice of January 19, 2006 and the receipt thereof at its office at Park Street, Calcutta, within the original jurisdiction of this Court, to suggest that a part of its cause of action in the reference arose within the original jurisdiction of this Court and the request for reference was appropriately made to the Chief Justice of this Court.
30. In the Akla Builders case, this Court held that as the reference did not involve any adjudication as to the title to the land, despite the agreement relating to a land situated outside the original jurisdiction of this Court, the petition under Section 9 of the Act could be received by this Court on its original side. The respondent places page eight of the unreported Judgment to demonstrate that it was an admitted position that the agreement in the Akla Builders case was concluded within the original jurisdiction of this Court and the disputes between the parties thereto did not involve any adjudication as to the title or possession of the land but involved the right of a partnership firm to nominate the lessee, receive premium, reimburse the cost of construction and enjoy the residue.
31. The respondent has also relied on the decision reported at (Adcon Electronics Pvt. Ltd. v. Daulat and Anr.) and paragraph 15 thereof which relied on the old principles laid down by the Federal Court in the Moolji Jatha case:
From the above discussion it follows that a "suit for land" is a suit in which the relief claimed relates to title to or delivery of possession of land or immoveable property. Whether a suit is a "suit for land" or not has to be determined on the averments in the plaint with reference to the reliefs claimed therein; where the relief relates to adjudication of title to land or immovable property or delivery of possession of the land or immovable property, it will be a "suit for land". We are in respectful agreement with the view expressed by Mahajan, J. in Moolji Jatha case.
32. In the Shriram City Union Finance Corporation case, the relevant clause did not have the exclusionary words other than the "any" and "shall" that the ABC Laminart clause also used. On a construction of the relevant clause it was held that it implied that the Courts in Calcutta had exclusive jurisdiction to entertain legal proceedings in respect of matters relating to the agreement.
33. Similar views were taken in the Madras and Delhi cases where, despite the strict ABC Laminart test not being met by the relevant clauses, the Courts understood the words to confer jurisdiction on a particular forum to the exclusion of all others.
34. Even if clause 26 in the present case is read as the respondent suggests, the expression "the jurisdiction of this agreement shall be at Bangalore" does not appear to confer any degree of exclusivity on the appropriate Court in Bangalore to receive an action relating to this agreement. The agreement has obviously been prepared by an expert; the language of the agreement, the other clauses found therein and the format obviously suggest that. There is no need to read it in a layman's language where the use of the word "jurisdiction" would suffice to indicate exclusivity. That the bookstore is in Bangalore and the parties wanted the reference to be conducted in Bangalore would not be enough to conclude that the parties had bargained that legal proceedings in respect of the reference could only be made to the appropriate Court in Bangalore.
35. It is, thus, the other ground urged by the respondent that remains. And this is the more difficult Lest since there is neither any plaint to go by nor are disputes required to be enumerated in the modern request for a reference, unlike in Section 20 of the old Act. It is the same problem that a Court receiving a pre-reference application under Section 9 of the Act is faced with. Tests as to "suit for land" are generally to be applied on the basis of the averments contained in a plaint. In an application under Section 11(6) [or under Section 11(4) or Section 11(5)] or a pre reference application under Section 9 of the Act, the statement of claim in the reference is yet unborn. The party approaching a Chief Justice (or the Court under Section 9 of the Act) has to satisfy the tests found in Section 2(1)(e) of the Act without the Court having a statement of claim before it. Such problem may be overcome if an industrious applicant were to append its proposed statement of claim to its request for reference or to its pre-reference interim application. Again, this would lessen the Court's need to hypothesise but would not altogether remove it.
36. The applicant has first to meet the letter of Section 2(1)(e) before the compliance with the spirit of such provision can be enquired into. It is a test of substance that has to be carried out.
37. The petitioner here cites the tenor of the respondent's demands leading up to its letter of repudiation to suggest that it was only a demand for higher rent in respect of the alleged tenancy that was being made. The petitioner refers to the opening clauses of the agreement to contend that it had a right to continue in possession at least up to the end of January, 2012 and the proposed reference would involve no question of title or possession. The respondent presses clause 15 into service and asserts that the agreement recognised either party's right to terminate it after the initial lock-in period of 36 months upon issuing a 45-day notice. The respondent claims that it has exercised its right under clause 15 and the dexterity of the petition notwithstanding the petitioner's right to continued possession was principally in issue.
38. The respondent contends that the petitioner cannot be heard to urge what is contrary to the opening lines of the agreement in support of its contention that this Court would have jurisdiction to receive an action arising out of the agreement.
39. The petitioner has stressed on paragraphs 2, 5, 6, 7, 8, 9, 11 and 14 of the petition in support of its Contention that a part of its cause of action has arisen within the original jurisdiction of this Court and as such Section 2(1)(e) of the Act would permit its request for reference being entertained by the Chief Justice of this Court. In paragraph 2 of the petition, the petitioner has alleged that the agreement was executed on its behalf at its Park Street office within jurisdiction. Paragraphs 5, 6, 7, 8 and 9 refer to letters received by the petitioner at its office within the original jurisdiction of this Court. Paragraph 11 refers to the notice of repudiation received at the petitioner's Park Street office and paragraph 14 refers to the respondent's suggestion as to arbitrator having also been received by the petitioner at its Park Street office.
40. The accidental receipt of some letters by a suitor would not permit it to approach the Court exercising jurisdiction over the place where such letters were received, merely on that Court. The receipt of such letters must be part of its cause of action, however infinitesimal. The letter issued by the petitioner forwarding the name of its choice of arbitrator cannot be said to be any part of the petitioner's cause of action on which it could have founded a suit. The averments contained in paragraphs 5, 6, 7, 8, 9 and 14 of the petition are not central to the petitioner's cause. That leaves the petitioner with the averments contained in paragraphs 2 and in paragraph 11 in support of its invocation of clause 12 of the Letters Patent.
41. The agreement records that it was made and entered into at Bangalore. Even if it were permissible for the petitioner to contradict such recording in the agreement, which is doubtful, the petitioner does not, in fact, contradict what is recorded in the opening words of the agreement. It merely suggests that the document was executed on its behalf in Calcutta which is not the same as to suggest that the agreement itself was entered into or made at Calcutta. The last straw that the petitioner clutches as to invoke the territorial jurisdiction of this Court, is its admitted receipt of the letter of termination at its office within the original jurisdiction of this Court. But despite founding a part of its cause of action on such repudiation, the petitioner disowns it in course of submission as its recognition of the notice of termination would require it to challenge the same and, thereby, raise an issue as to possession of the bookstore.
42. The substance of the dispute is the possession of the bookstore. It cannot be, as the petitioner wants it to be, that its reference would be restricted to the determination of quantum of monthly rent payable to the respondent and the respondent being precluded in such reference from making a counter-claim for possession in continuance of its letter of termination. In the context of the disputes that have arisen, it is not possible to accept the petitioner's simplistic view thereof. Though the petitioner refers to Section 23 of the Act, the provisions contained therein do not restrict a respondent in a reference to limit his counter-claim to the narrow claim made by the claimant. On the substantive test, at which the petitioner fails, it is apparent that the immediate and principal cause for the petitioner's present request and for the disputes, is the respondent's termination of the agreement and the attendant matters that such termination, whether valid or not, raises, questions as to possession, if not title, have arisen and need to be answered.
43. The petitioner's claim, if a suit were to be founded on the substance thereof, would touch upon its right to retain possession and the status of the land in question is beyond this State. The position is liable to be rejected on such preliminary ground and leave granted under clause 12 of the Letters Patent is revoked. G.A. No. 1319 of 1997 succeeds and A.P. No. 164 of 2006 fails in its wake. The respondent would be entitled to recover actual costs of these proceedings if a reference is ultimately made.
Urgent photostat certified copies of this order, if applied for, be issued to the parties upon compliance with requisite formalities.