Delhi High Court
International Breweries Pvt. Ltd vs Mohan Meakins Ltd. & Anr on 4 September, 2008
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ I.A. No. 9781/2008 in OMP No. 337/2008
% Date of decision : 04.09.2008
INTERNATIONAL BREWERIES PVT. LTD.....Petitioner
Through: Mr. Pradeep Dhingra,
Advocate
Versus
MOHAN MEAKINS LTD. & ANR. ....... Respondents
Through: Mr. Dinesh Agnani, Advocate
for the Applicant/Respondent
No. 1
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. Whether reporters of Local papers may Yes
be allowed to see the judgment?
2. To be referred to the reporter or not? Yes
3. Whether the judgment should be reported Yes
in the Digest?
RAJIV SAHAI ENDLAW, J.
1. The Respondent/Applicant seeks dismissal at the threshold of the petition under Section 34 of the Arbitration and Conciliation Act, 1996, notice whereof was ordered to be issued to the Respondent on 23rd July, 2008.
2. The Respondent/Applicant in its application for such rejection of the petition under Section 34 of the Act has stated that the Agreement leading to the Arbitration contained a jurisdiction clause that all the disputes or differences between the parties thereto shall I.A. No. 9781/2008 in OMP No. 337/2008 Page 1 of 11 be subject to the jurisdiction of the courts of competent jurisdiction in Ghaziabad; that the Arbitration proceedings were held at Ghaziabad and the ex parte Award in favour of the Respondent/Applicant and against the Petitioner was announced at Ghaziabad; that no cause of action had arisen within the territorial jurisdiction of this court and in any case in view of the jurisdiction clause in the Agreement, the parties had agreed to the jurisdiction of the courts at Ghaziabad.
3. The petition under Section 34 of the Arbitration Act had come up for admission first on 4th July, 2008. Notice of the said petition was on that date not issued and the Petitioner was asked to satisfy as to how this court had the territorial jurisdiction to entertain the petition under Section 34 of the Arbitration Act. The Respondent/Applicant was also represented on that date and had argued that it had applied for execution of the Award in this court after first filing the Execution petition in the courts at Ghaziabad, which alone had jurisdiction and after having the Execution transferred to this court. However, on the next date, 23rd July, 2008 when the file of the Execution was called, it transpired that the proceeding which had been filed by the Respondent/Applicant in this court was not Execution of a transferred decree but an application under Section 9 of the Act. Notice of the application under Section 34 of the Act was accordingly issued to the Respondent/Applicant, the Petitioner having got over the impediment of territorial jurisdiction owing to Section 42 of the Act.
4. The Respondent/Applicant has stated it had filed an appeal to the Division Bench of this court against the order dated 23rd July, I.A. No. 9781/2008 in OMP No. 337/2008 Page 2 of 11 2008 but which is stated to have been withdrawn by making a statement that appropriate application will be moved in this court with respect to territorial jurisdiction. Hence, the application under adjudication.
5. The Respondent/Applicant has sought to get over Section 42 of the Arbitration Act by stating that the Respondent/Applicant had in fact, applied for execution of the Award by filing an Execution petition in the courts at Ghaziabad for seeking the transfer of the decree for Execution to this court. Copy of the Execution application and the orders made thereon of issuance of transfer certificate to the Petitioner have been filed alongwith the application. It is further urged that the transferred decree was in fact, received by this court but since till then the time before which the Execution could be applied had not lapsed, application under Section 9 of the Act was filed in this court for interim measures. The said application was registered as OMP No. 332/2008 of this court. The counsel for the Respondent/Applicant has argued that the OMP No. 332/2008 under Section 9 of the Act was filed in pursuance to the transfer of the Execution to Delhi and would thus, not come in the way of the Respondent/Applicant contending that this court has no territorial jurisdiction to entertain the petition under Section 34 of the Act. It is urged that this court is not the court within the meaning of Section 2 (1) (e) of the Act. Reliance is also placed on Section 20 of the Code of Civil Procedure to urge that no part of the cause of action accrued within the jurisdiction of this court. It is argued that Section 42 of the Act does not confer any jurisdiction on this court and in any case since the Execution petition was first filed at Ghaziabad even prior to preferring the application under Section 9 of the Act in this court, as I.A. No. 9781/2008 in OMP No. 337/2008 Page 3 of 11 per the provisions of Section 42 of the Arbitration Act also it will be the courts at Ghaziabad only which will have jurisdiction to entertain the application under Section 34 of the Act. Reliance is placed in the application itself on Union of India vs. S.R. Construction Co. and Anr. 144 (2007) DLT 580 and Apparel Export Promotion Council vs. Prabhati Patni, Proprietor Comfort Furnishers and Anr. 125 (2005) DLT 511.
6. The Petitioner has opposed the application and has contended that this court has territorial jurisdiction and has referred to para 23 of the application under Section 34 of the Act invoking the territorial jurisdiction of this court and has also referred to the Contract Brewing Agreement dated 1st May, 2007 between the parties referring to a letter dated 22nd July, 2006 of extension of Agreement and which the Respondent/Applicant is claimed to have suppressed. The counsel for the Petitioner has also stated that the merits of the petition are relevant in as much as it is the case in the petition under Section 34 of the Act that the Respondent/Applicant in collusion with some ex-Directors of the Petitioner has committed a fraud and with respect to which FIR No. 632/2007 since transferred to the Crime Branch has also been lodged.
7. Though application under Section 9 of the Arbitration Act filed by the Respondent/Applicant has since been disposed of but a copy of the same was handed over during the course of hearing. It is the case of the Respondent/Applicant in the said application under Section 9 of the Act that monies were due to it from the Petitioner under the Award; that since the time for the Petitioner herein to file the objections under Section 34 of the Act had not expired till then, I.A. No. 9781/2008 in OMP No. 337/2008 Page 4 of 11 the Respondent herein was applying for attachment of the bank accounts of the Petitioner herein. The Respondent herein in invoking the territorial jurisdiction of this court stated as under:
"23. That this Hon'ble Court has the territorial jurisdiction to entertain and hear the present petition as the respondents are carrying on its business within the jurisdiction of this Hon'ble Court. It is submitted that to avoid any technical objections the petitioner has also obtained the Transfer certificate, which has been sent/forwarded directly to this Hon'ble Court by the courts at Ghaziabad."
8. Section 42 of the Act contains a non-obstante clause and is nothwithstanding anything contained elsewhere in that part of the Arbitration Act or in any other law for the time being in force. The said provision mandates that where with respect to an Arbitration Agreement any application under Part I of the Act 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. The Section ends with a negative covenant/embargo that all subsequent applications shall not be made in any other court.
9. It has neither been disputed nor can be disputed that, (i) both, application under Section 9 of the Act as well as under Section 34 of the Act fall in Part I of the Arbitration Act and are thus covered by the ambit of Section 42 of the Act, (ii) that both the applications i.e. OMP No. 332/2008 filed by the Respondent herein under Section 9 of the Act and the present petition filed by the Petitioner under Section 34 of the Act arise out of the same Arbitration Agreement and Arbitral proceedings.
I.A. No. 9781/2008 in OMP No. 337/2008 Page 5 of 11
10. The only question which remains to be considered is that even if the pleas of the Respondent/Applicant that this court has no jurisdiction at all is to be accepted, whether the same permits a departure to be made from Section 42 of the Act. This is where the non-obstante clause at the beginning and the negative covenant at the end of Section 42 provides guidance. The Apex Court in Iridium India Telecom Ltd v Motorola Inc AIR 2005 SC 514 has reiterated that such a non obstante clause is appended to a section with a view to give the enacting part of the section in the case of a conflict an overriding effect. It is equivalent to saying that in spite of law in force being to the contrary, the provision beginning with the non obstante clause will have full operation and the law in force will not be an impediment to the operation of the enactment.
11. The law in force today is that the parties by consent cannot vest jurisdiction in a court. The apex court recently in Harshad Chiman Lal Modi v DLF Universal Ltd (2005) 7 SCC 791 has reiterated the said principle and also held that territorial jurisdiction strikes at the root of the matter making the decree a nullity. Thus, but for the non-obstante clause at the beginning of Section 42, even if the Respondent/Applicant had initiated the proceedings in this court, the same could have at best been treated as a consent to the jurisdiction, which the Apex court in the judgment aforesaid has held cannot confer jurisdiction on the court, if otherwise it did not have. However, the Legislature made the provisions of Section 42 nothwithstanding any other law for the time being in force. Thus, the law for the time being in force that the parties by consent cannot vest jurisdiction in a court, has to be ignored as far as Section 42 is I.A. No. 9781/2008 in OMP No. 337/2008 Page 6 of 11 concerned. For the same reason the reliance by the counsel for the Respondent/Applicant on Section 20 of the CPC is also not relevant as far as Section 42 of the Arbitration Act is concerned. Thus, even if the court where a second application under Part I of the 1996 Act is filed, is not the court within the meaning of Section 2(1)(e)of the Act (and thus does not have territorial jurisdiction) the second application will still lie in that court only, if an earlier application under Part I of the Act has been filed in that court.
12. I also do not find force in the contention of the Respondent/Applicant that because even prior to filing of application under Section 9 of the Act, the Execution proceedings had been filed in the courts at Ghaziabad, by virtue of Section 42 of the Act, the courts at Ghaziabad alone will have jurisdiction. The filing of the Execution petition by the Respondent/Applicant in the courts at Ghaziabad is not the filing of an application under Part I of the Arbitration Act. The Apex court in Rodemadan India Limited v. International Trade Expo Centre Limited (2006) 11 SCC 651 has held in para 8 that the power under Section 11 (6) of the Act is the power of a designate referred to under the Section and not of the court. It was further held in para 25 of the judgment that neither the Chief Justice nor his designate under Section 11 (6) is a court as contemplated under Section 2 (1) (e) and further that the power of jurisdiction under Section 42 is only intended to apply to a court as defined under Section 2 (1) (e) of the Act. The aforesaid judgment of the Apex court was followed by this court in S.R. Construction Co. supra.
I.A. No. 9781/2008 in OMP No. 337/2008 Page 7 of 11
13. The Apex Court in Pandey & Co Builders (P) Ltd v State of Bihar and Another (2007) 1 SCC 467 has further held that Section 42 only applies to applications and not to appeals under Section 37 of the Act. In my view, the said principle equally applies to Execution petitions. The Execution petition is not an arbitral proceedings or an application under Part I of the Arbitration Act. In fact, the arbitral proceedings have come to an end at the time of filing the Execution Petition and the Execution petition is an enforcement of the Award which takes the colour of the decree under the CPC by virtue of the provisions of Section 36 of the Act. Thus, in my view, the filing of the Execution application by the Respondent/Applicant in the courts at Ghaziabad would not make it incumbent for the application under Section 34 of the Act to be filed in that court. I also have my doubt whether the Execution application in the courts at Ghaziabad, which admittedly was made prior to the expiry of the time for making an application to set aside the Award under Section 34 of the Act was maintainable or not. However, the adjudication of the same is not essential for the present.
14. I also notice that it has been held in Shiva Carriers v Royal Projects Ltd AIR 2000 Calcutta 138 that the provisions of Section 42 are mandatory and operate as ouster of jurisdiction of all other courts. Similarly, it has been held in ITI Ltd v District Judge Allahabad AIR 1998 Allahabad 313 that the Parliament intended to make only one court whichever is approached earlier as the venue for all the matters connected with Arbitration Agreement. I.A. No. 9781/2008 in OMP No. 337/2008 Page 8 of 11
15. I may also notice that the present is not a case where the Petitioner itself had earlier filed an application under Part I of the Act before this court. In such a situation it may still be open to the opposite party to contend that merely because the Petitioner had on an earlier occasion wrongly invoked the jurisdiction of this court would not entitle it to file subsequent applications in the same court, nothwithstanding objection to the jurisdiction having not been taken earlier in as much as there could be no waiver with respect to territorial jurisdiction as held in Harshad Chiman Lal Modi supra. Here the Respondent/Applicant itself first filed an application under Part I of the Arbitration Act in this court by contending as aforesaid that this court had territorial jurisdiction. The Respondent/Applicant for the purposes of filing an application under Section 9 of the Act was not required to have the decree transferred to this court and the order was not made in execution but in exercise of powers under Section 9 of the Act. It is also significant that the Respondent/Applicant referred to having obtained the transfer of the decree only to avoid technical objection. Thus, the argument of having obtained the transfer of the decree prior to filing Section 9 application, in my opinion is misconceived. S.R. Construction Co. and Apparel Export Promotion Council supra relied upon by the Respondent/Applicant do not advance the case of the Respondent/Applicant. In Apparel Export Promotion Council, the question of jurisdiction had not been adjudicated. On the contrary in the present case, the Respondent/Applicant has already availed benefit of the order under Section 9 of the Act obtained from this court and cannot now be permitted to object to the jurisdiction of this court.
I.A. No. 9781/2008 in OMP No. 337/2008 Page 9 of 11
16. I may in this regard also notice judgment of this court in Sasken Communication Technologies Ltd v Prime Telesystems Ltd 99 (2002) DTL 640 holding that the bar of Section 42 arises only when the earlier application is before a court of competent jurisdiction. However, it further held that whether the earlier application is before court of competent jurisdiction or not has to be adjudicated by that court only and other courts cannot come into picture and entertain subsequent applications till earlier court holds that it has no jurisdiction. In the present case, the OMP 332/2008 filed by Respondent/applicant was pending till filing of present petition by the Petitioner. The Respondent/applicant even then pressed OMP 332/2008 and obtained relief therein. Not only so, the Respondent/applicant is also stated to have filed appeal to Division Bench of this court, arising from OMP 332/2008, contending that this court has jurisdiction. The Respondent/applicant cannot be permitted to approbate and reprobate and now contend that this court has no jurisdiction.
17. Even otherwise, in my view, the procedure as adopted by the Respondent/Applicant ought not be permitted. The Respondent/Applicant instead of filing reply to the application under Section 34 of the Act wants a piecemeal adjudication. It was put to the counsel for the Respondent/Applicant on 29th August, 2008 that he may file the reply to the objections but he refused to do so. The Petitioner has, in the application under Section 34 of the Act invoked the jurisdiction of this court by stating that a part of the cause of action has arisen at Delhi and the Respondent/Applicant has its sales office in Delhi and the orders to the Respondent/Applicant were placed from Delhi and all the payments against the invoices were I.A. No. 9781/2008 in OMP No. 337/2008 Page 10 of 11 made at Delhi and numerous communications were made between the parties at Delhi. The Respondent/Applicant is as yet to reply to the application. The record of the Arbitral proceedings has also not been received by this court as yet and without the same, no view on the respective contentions of the parties with respect to territorial jurisdiction could be taken, leave apart the provisions of Section 42 of the Act.
18. The application of the Respondent/Applicant is dismissed with costs of Rs 10,000/- to the Delhi Legal Services Authority.
RAJIV SAHAI ENDLAW (JUDGE) September 4, 2008 smp I.A. No. 9781/2008 in OMP No. 337/2008 Page 11 of 11