Kerala High Court
D Net Malayalam Digitals Pvt.Ltd vs Asianet Satellite Communications Ltd on 25 October, 2014
Bench: V.Chitambaresh, K.Harilal
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE V.CHITAMBARESH
&
THE HONOURABLE MR.JUSTICE K.HARILAL
MONDAY, THE 22ND DAY OF AUGUST 2016/31ST SRAVANA, 1938
FAO.No. 154 of 2015 ()
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AGAINST THE ORDERIN OP(ARB) 12/2011 of II ADDL.DISTRICT
COURT,ERNAKULAM DATED 25.10.2014
APPELLANTS/PETITIONERS:
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1. D NET MALAYALAM DIGITALS PVT.LTD.
ASHOKA ROAD, KALOOR, KOCHI 17, REPRESENTED BY ITS
MANAGING DIRECTOR, V. N.SANTHOSH.
2. V. N. SANTHOSH, AGED 45,
S/O.NARAYANAN, VELUTHEDATH HOUSE, ASHOKA ROAD,
KALOOR, KOCHI 17.
BY ADV. SRI.P.G.JAYASHANKAR
RESPONDENT(S)/RESPONDENT:
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ASIANET SATELLITE COMMUNICATIONS LTD.
KARIMPANAL ARCADE, EAST FORT, THIRUVANANTHAPURAM,
REPRESENTED BY ITS REGIONAL HEAD,
MR.SURESH RAMACHANDRAN.
BY ADV. SRI.SAJI VARGHESE
THIS FIRST APPEAL FROM ORDERS HAVING BEEN FINALLY
HEARD ON 05-08-2016, THE COURT ON 22-08-2016 DELIVERED THE
FOLLOWING:
OKB
C.R.
V.CHITAMBARESH & K.HARILAL, JJ.
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F.A.O. No.154 of 2015
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Dated this the 22nd day of August, 2016
JUDGMENT
Harilal, J.
(i) Is the seat of arbitration or the place where arbitration proceedings were conducted and concluded a determinate factor, in conferring territorial jurisdiction, to file an application under Section 34 of the Arbitration and Conciliation Act, to set aside an Award?
(ii) Where the parties to an agreement have chosen to confer exclusive territorial jurisdiction to a particular place or court, among two or more courts having concurrent jurisdiction, in case of dispute, will it bind the parties and oust the other courts having concurrent jurisdiction. These are the questions that arise for our consideration in this First Appeal from Order.
FAO.154/15 :2:
2. The appellants had preferred O.P.(Arb.)No.12/2011 before the District Court, Ernakulam under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside an arbitration award.
3. The respondent filed an objection in the above O.P. (Arb.), challenging jurisdiction of the District Court, Ernakulam, contending that the parties had agreed, as per Clause 19 of the Franchisee Agreement, that the court at Thiruvananthapuram alone has jurisdiction to decide any dispute between the parties arising out of or consequent on the agreement.
4. The appellants contended that the arbitration proceedings were conducted and concluded in Ernakulam and the seat of arbitration was at Ernakulam. The subject matter is situated at Ernakulam and thereby the alleged breach of contract had arisen fully in Ernakulam and the District Court at Ernakulam alone has jurisdiction to determine the sustainability of the award.
5. The court below accepted the objection raised by the respondent and returned the Original Petition to the FAO.154/15 :3:
appellants for presentation before the District Court, Thiruvananthapuram, by the impugned order. The legality and correctness of the reasonings whereby the District Court, Ernakulam, returned the Original Petition are impugned in this First Appeal from Order.
6. The learned counsel appearing for the appellants and the learned counsel appearing for the respondent advanced arguments in support of their respective contentions. Shri.P.G.Jayashankar, the learned counsel for the appellants cited the decision reported in Dr.Joy P. Chungath v. M/s.Lawkin Ltd. [2012 (1) KHC 565]; The Electrical Manufacturing Co. Ltd., Calcutta and Another v. The Crompton Engineering Co., (Madras) Ltd., Madras [AIR 1974 Mad 261]; Indian Oxygen Ltd. v. National Oxygen Ltd and Another [(1990)1 CALLT 275] and A.B.C. Laminart Pvt. Ltd. and Another v. A.P. Agencies, Salem [1989 KHC 842].
7. Per contra, Shri.Saji, the learned counsel appearing for the respondent cited the decision in Jatinder Nath v. Chopra Land Developers (P) Ltd. and Another [(2007) 11 SCC 453] and Rajasthan State Electricity Board v. Universal FAO.154/15 :4:
Petrol Chemicals Limited [(2009) 3 SCC 107].
8. It stands undisputed that as per Clause 19 of the Franchisee Agreement, the parties agreed that the court at Thiruvananthapuram alone shall have jurisdiction to decide the dispute, if any arises, between the parties. According to the respondent, this clause is binding on the parties and it excludes jurisdiction of other courts having concurrent jurisdiction. But, the case of the appellants is that the seat of arbitration was at Ernakulam and the arbitration proceedings were conducted and concluded in Ernakulam, where the subject matter is situated and the alleged breach of contract has occurred. Thus, the cause of action had arisen fully in Ernakulam. No court, other than the District Court at Ernakulam, has jurisdiction to entertain the challenge against the award.
9. According to Section 2(e) of the Arbitration and Conciliation Act, 'court' means the Principal Civil Court of original jurisdiction in a district having jurisdiction to decide the question forming subject matter of arbitration, if the same had been the subject matter of a FAO.154/15 :5:
suit. Therefore, the basis on which territorial jurisdiction is conferred, to the court under the Civil Procedure Code must be adopted to confer territorial jurisdiction to the courts to set aside the arbitration award, under Section 34 of the Arbitration and Conciliation Act also.
10. On an analysis of the Secs.15 to 20 of the CPC, it is discernible that the conferment of territorial jurisdiction to the courts are based on the place where the subject matter situates or defendant resides, or carries on business or personally works for gain or cause of action arises. The territorial jurisdiction has been conferred to the court on the basis of the place where subject matter situates, if the relief sought for in the suit falls either under (a) to (f) or the proviso to Section 16 of the C.P.C. In the instant case, the application under Section 34 is filed before the District Court to set aside the Award. Hence we are of the opinion that the aforesaid relief will not fall under (a) to (f) or the proviso to Section 16 of the C.P.C. Therefore, the territorial jurisdiction of an application under Section 34 of the Act FAO.154/15 :6:
falls under Section 20 of the C.P.C. and is not maintainable in the courts other than the courts within the local limits of whose jurisdiction the defendant actually and voluntarily resides or carries on business or personally works for gain or the original cause of action, wholly or in part arises.
11. According to Section 20(1) and (2) of the Arbitration and Conciliation Act, the parties are free to agree on the place of arbitration and the place of arbitration shall be determined by the Arbitral Tribunal having regard to the circumstances of the case, including the convenience of the parties. According to sub-section (3) of Section 20, notwithstanding sub-section (1) or sub-
section (2), unless otherwise agreed by the parties, the Arbitral Tribunal may, meet at any place, which considers appropriate for consultation among its members, for hearing witness, experts or the parties or for inspection of document, goods or other property. In short, the convenience of the Tribunal as well as the parties is the basis for fixing the seat or place of arbitration.
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12. Further, Section 16(1)(a) of the Arbitration and Conciliation Act makes it clear that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of contract. The arbitration proceedings which culminated in award is a subsequent event and such proceedings or award does not form a part of original cause of action which determines and confers territorial jurisdiction to the court for challenging the award. Thus, the place where the defendant resides or carries on business or works for gain or the original cause of action arises determines and confers territorial jurisdiction for application under Sec.34 of the Act. It follows that the seat of arbitration or the place, where the arbitration proceedings were conducted and concluded, has no relevancy or significance in the conferment of territorial jurisdiction for challenging the award.
13. Thus, from the above analysis it can be reasonably concluded that the seat of arbitration or place where the arbitration proceedings were conducted and FAO.154/15 :8:
concluded does not fall under any of the bases which determines and confers territorial jurisdiction to the court under Sections 15 to 20 of the CPC. They cannot be taken as a determinate factor in conferring territorial jurisdiction to file an application under Section 34 of the Arbitration and Conciliation Act to set aside the Award.
14. The above finding is fortified by the decision in Jatinder Nath 's case (supra), wherein the Supreme Court held that "merely because the arbitrator chooses to hold the proceedings in a place where no suit could be instituted, and chooses to make an award at that place, it would not give the court of that place territorial jurisdiction to decide the matter under the Act". We have meticulously gone through the decisions cited by the learned counsel for the appellants. But, we do not find anything to cull out in favour of the case advanced by the learned counsel for the appellants.
15. Where the breach of contract is the basis from which the cause of action arose, the cause of action is a determinate factor which confers territorial jurisdiction FAO.154/15 :9:
and thereby the instant case falls under Section 20 of the Code of Civil Procedure. According to Section 20 of the C.P.C., the suit shall be instituted in a court within the local limits of whose jurisdiction the defendant resides or carries on business or personally works for gain or the cause of action wholly or in part arise. In the instant case, the agreement was executed at Thiruvananthapuram and the result of the breach of contract was effected at Ernakulam, the place where the subject matter is situating. In short, the cause of action arose in part at Thiruvananthapuram and Ernakulam. Needless to say, the District Court at Thiruvananthapuram and Ernakulam are having concurrent jurisdiction.
16. As per Clause 19 of the Franchisee Agreement, parties have agreed that courts in Thiruvananthapuram alone have jurisdiction to decide any dispute between the parties arising out of or consequent on agreement. At this juncture, the second question which we have referred above arises for consideration. As rightly contended by the learned counsel for the respondent, this question FAO.154/15 :10:
stands covered by the decisions laid down by the Apex Court, which are extracted below.
17. In the decision in A.B.C. Laminart Pvt. Ltd. and Another v. A.P. Agencies, Salem [AIR 1989 SC 1239], the Apex Court held as follows:
"From the foregoing decisions, it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether there is unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of the ouster clause when words like 'alone', 'only', 'exclusive' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim 'expressio unius est exclusio alterius' -expression of one is the exclusion of another-may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an FAO.154/15 :11:
intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed."
In Hakam Singh v. Gammon (India) Ltd. [(1971) 1 SCC 286], the Apex Court held as follows:
"Where two or more courts have jurisdiction to try a suit or proceeding, an agreement between the parties that the dispute between them shall be tried in one of such courts was not contrary to public policy and that such an agreement did not contravene the provisions of Section 28 of the Contract Act."
Later, in Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd. [(2004 (4) SCC 601], the Apex Court held as follows:
".....when ouster clause is clear, unambiguous and specific, accepted notions of contract would bind parties, and unless absence of ad idem can be shown courts should avoid exercising jurisdiction." In Rajasthan State Electricity Board 's case (supra), after considering the foregoing decisions, the Apex Court again held as follows:
"The aforesaid legal proposition settled by FAO.154/15 :12:
this Court in respect of territorial jurisdiction and applicability of Section 20 of the Code to the Arbitration Act is clear, unambiguous and explicit. The said position is binding on both the parties who were contesting the present proceeding. Both the parties with their open eyes entered into the aforesaid purchase order and agreements thereon which categorically provide that all disputes arising between the parties out of the agreements would be adjudicated upon and decided through the process of arbitration and that no court other than the court at Jaipur shall have jurisdiction to entertain or try the same. In both the agreements in Clause 30 of the general conditions of the contract it was specifically mentioned that the contract shall for all purposes be construed according to the laws of India and subject to jurisdiction only at Jaipur in Rajasthan courts only and in addition in one of the purchase order the expression used was that the court at Jaipur only would have jurisdiction to entertain or try the same."
18. In the light of the decisions referred above, we FAO.154/15 :13:
find that the O.P. (Arbitration ) is maintainable before the Court at Thiruvananthapuram alone and the District Court, Ernakulam is justified in returning the Original Petition for presenting before the District Court, Thiruvananthapuram. We do not find any illegality or impropriety in the impugned order.
Consequently, this Appeal is dismissed.
V.CHITAMBARESH, Judge.
K.HARILAL, Judge.
okb/-