Madras High Court
M/S Nrp Projects Private Limited vs M/S Bharat Petroleum Corporation ... on 9 March, 2018
Author: M.M.Sundresh
Bench: M.M.Sundresh
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:09.03.2018 CORAM THE HONOURABLE MR.JUSTICE M.M.SUNDRESH O.P.No.737 of 2016 M/s NRP Projects Private Limited, Level-1, Deshbandhu Plaza, No.47, Whites Road, Royapettah, Chennai-600 014. .. Petitioner Vs. 1.M/s Bharat Petroleum Corporation Limited, No.1, Ranganathan Gardens, Off: 11th main road, Anna Nagar, Chennai-600 040. 2.Mr.T.Thangavelu, Sole Arbitrator, No.1, Ranganathan Gardens, Off: 11th main road, Anna Nagar, Chennai-600 040. .. Respondents Original Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the second part/second sentence of relief VIII(A) of the Award dated 30.06.2016 passed by the second respondent directing the petitioner to furnish an indemnity bond supported with reliable security arrangement to be kept valid till the litigation pending before the High court of Telangana and Andhra Pradesh. For Petitioner : Mr.Menon For 1st Respondent : Mr. O.R.Santhanakrishnan ORDER
The petitioner and the respondent entered into an agreement on 02.12.2010 to carry out, construct and complete the work of site grading at Gooty Depot in the State of Andhra Pradesh. This work involves two activity qua the petitioner. One is to carry out levelling and another is to supply earth for the abovesaid purpose. The activities undertaken by the petitioner was construed as a mining operation by the State of Andhra Pradesh and accordingly, royalty was imposed both on the earth brought by the petitioner and the earth removed during excavation. The petitioner had to pay the royalty for the earth brought in. For the earth removed, the royalty was imposed on the first respondent. It was also challenged before the High Court of Andhra Pradesh in a writ petition in W.P.No.33417 of 2013, which is stated to be pending, though it was dismissed as against the petitioner. The said writ petition was admittedly filed by the first respondent. The first respondent did not make the payment inter alia contending that the petitioner has to make good the royalty payable on the excavation done. Reliance has been made on Clause 17 of the Agreement signed inter se parties.
2. The agreement contains a specific clause, which states that the Courts in the city of Bombay shall have the jurisdiction to entertain any application arisen under the agreement and any award shall be filed in such Courts only. The agreement was also deemed to have been made in Mumbai. The following are the relevant clauses.
19.The parties hereby agree that the courts in the city of Bombay alone shall have jurisdiction entertain any application or other proceedings in respect of anything arising under this agreement and any award or awards made by the Sole Arbitrator hereunder shall be filed in the concerned Courts in the city of Bombay only.
20.The parties to this agreement shall not be responsible for any failure of performance or delay in performance of their obligations hereunder if such failure or delay shall be a result of any Government directive relevant to this agreement or due to war, hostility, act of public enemy riots or civil commotions, strikes, lockout, fire, floods, epidemic or acts of God, arrests and resptraints of rulers and peoples, political or administrative acts of recognised or defactor Government, import or export restriction compliance with orders of any governmental/local authority or any other cause or causes beyond their control.
21.Jurisdiction: This agreement shall be deemed to have been made in Mumbai and shall be construed according to the laws of India and the performance by the Contractor of and act on his part herein contained shall be considered due in Mumbai for the purpose of jurisdiction.
In witness whereof the said contracting parties have set their hands and seals on the day and year first hereinabove witness.
3. There is no dispute on the basic facts. The agreement was signed within the jurisdiction of this Court. The work was done within the jurisidction of the State of Andhra Pradesh. The proceedings also conducted within the jurisidction of this Court. As Section 16(2) of the Civil Procedure Code did not have application in view of Section 120, invoking the clause 12 of the Letters Patent, the present petition was filed. The Tribunal, passed an award though in favour of the petitioner, did ask it to indemnify and give security awaiting orders from the High Court of Andhra Pradesh. Though the award was not challenged by the first respondent, it was accordingly challenged by the petitioner.
4. Before going to the merits of the case, an issue pertaining to the maintainability qua the jurisdiction of this Court was raised by the learned counsel for the first respondent and therefore, the same has to be addressed as the hurdle.
5. The learned counsel appearing for the petitioner would submit that in view of the admitted facts as narrated above, there is no cause of action within the territorial jurisdiction of the Courts in Mumba. By an agreement between the parties, such a jurisdiction cannot be conferred. Even as per Clause 12 of the Letters Patent, a part of cause of action has arisen through the agreement signed, proceedings conducted, preceded by admitted payment made earlier. The learned Arbitrator also hails from Chennai. In support of his contention, the learned counsel would submit that a conjoint reading of Section 2 of the Arbitration and Conciliation Act, 1996 with Section 20 would lead to the conclusion that this Court has got jurisdiction as against the Courts in Mumbai. To butress his submissions, the learned counsel has relied on the recent judgment of the Apex Court in INDUS MOBILE DISTRIBUTION PRIVATE LIMITED V. DATAWIND INNOVATIONS PRIVATE LIMITED AND OTHERS ((2017) 7 Supreme Court Cases 678).
6. The learned counsel appearing for the first respondent would submit that when once it is agreed between the parties on the jurisdiction of the Court, then it is not open to anyone of them to question it otherwise, as the clause governing the jurisdiction is very clear. Merely because, the arbitration was conducted at Chennai, the aforesaid clause cannot be made redundant. In support of his contention, the learned counsel extensively relied upon the following judgments of the Apex Court and the Division Bench judgment of the Kerala High Court, which are as under.
(1)HAKAM SINGH V. M/S GAMMON (INDIA) LTD.,((1971) 1 SCC 286);
(2)A.B.C. LAMINART PVT. LTD., AND ANOTHER V. A.P.AGENCIES, SALEM ((1989) 2 SCC 163);
(3)ANGILE INSULATIONS V. DAVY ASHMORE INDIA LTD., AND ANOTHER ((1995) 4 SCC 153);
(4)MEW MOGA TRANSPORT CO., V. UNITED INDIA INSURANCE CO. LTD., AND OTHERS ((2004) 4 SCC 677);
(5)RAJASTHAN STATE ELECTRICITY BOARD V. UNIVERSAL PETROL CHEMICALS LIMITED ((2009) 3 SCC 107);
(6)SWASTIC GASES PRIVATE LIMITED V. INDIAN OIL CORPORATION LIMITED ((2013) 9 SCC 32); and (7)D.NET MALAYALAM DIGITALS PVT. LTD., VS. ASIANET SATELITE COMMUNICATIONS LTD., (CDJ 2016 KER HC. 836);
7. We are not concerned with Sections 16 to 20 of the Civil Procedure Code. It is no doubt true a cause of action is nothing but bundle of facts if proved by the plaintiff would lead to the relief. Admittedly, the parties signed the agreement by consent. Though the seat of arbitration has not been specified under the Agreement, the same can be safely inferred from the clauses, which provide for the jurisdiction of the Court. Clause 21 of the Agreement in specific terms speaks about the deeming effect. A fiction is created giving jurisdiction to the Courts in Mumbai by construing the agreement as the one made therein.
8. In SWASTIK GASES PRIVATE LIMITED V. INDIAN OIL CORPORATION LIMITED ((2013) 9 Supreme Court Cases 32), the Apex Court has held that the intention of the parties will have to be given utmost importance. When a clause is introduced, the explanation qua the jurisdiction of the Court does not hit by Section 23 of the Indian Contract Act, 1872. The following paragraph would be apposite.
Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner.
9. Thus, even assuming that this Court has got jurisdiction, if the dispute is construed, like that of normal suit holding that part of the cause of action has arisen under Section 12 of the Letters patent, the same stands ousted by virtue of the specific clause between the parties. Similar view was also expressed by the Apex Court in RITE APPROACH GROUP LTD., V. ROSOBORON EXPORT ((2006) 1 Supreme Court Cases 206), which is apposite.
In view of the specific provision specifying the jurisdiction of the Court to decide the matter, this Court cannot assume the jurisdiction. Whenever there is a specific clause conferring jurisdiction on particular Court to decide the matter then it automatically ousts the jurisdiction of other Court. In this agreement, the jurisdiction has been conferred on the Chamber of Commerce and Trade of the Russian Federation as the authority before whom the dispute shall be resolved. In view of the specific arbitration clause conferring power on the Chamber of Commerce and Trade of the Russian Federation, it is that authority which alone will arbitrate the matter and the finding of that arbitral tribunal shall be final and obligatory for both the parties.
10. Section 20 of the Arbitration and Conciliation Act, 1996 speaks about the place of arbitration. This provision came up for consideration in BHARAT ALUMINIUM COMPANY V. KAISER ALUMINIUM TECHNICAL SERVICES INC.,(2012) 9 Supreme Court Cases 552). The following passage in the said judgment could be apposite.
A plain reading of Section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any place or seat within India, be it Delhi, Mumbai etc. In the absence of the parties agreement thereto, Section 20(2) authorizes the tribunal to determine the place/seat of such arbitration. Section 20(3) enables the tribunal to meet at any place for conducting hearings at a place of convenience in matters such as consultations among its members for hearing witnesses, experts or the parties.
99. The fixation of the most convenient venue is taken care of by Section 20(3).
11. The aforesaid passage has been quoted with approval by the latest judgment rendered by the Apex Court in INDUS MOBILE DISTRIBUTION PRIVATE LIMITED V. DATAWIND INNOVATIONS PRIVATE LIMITED AND OTHERS ((2017) 7 Supreme Court Cases 678). Thus under Section 20 of the Arbitration and Conciliation Act, 1996, the parties are free to agree to any place or seat within India. Section 20(3) thus speaks about meeting, which can be made relatable to venue. Therefore, merely because a venue is at a different place, conducting the proceedings by the Arbitrator would not nullify a binding clause, which gives exclusivity to a Court. In other words, what is important is seat of arbitration and not the venue.
12. In the judgment quoted supra in INDUS MOBILE DISTRIBUTION PRIVATE LIMITED V. DATAWIND INNOVATIONS PRIVATE LIMITED AND OTHERS, the Apex Court has held that once the seat of arbitration is fixed, the exclusive jurisdiction of the Court would come into play. The following paragraphs would be apposite.
13. This Court reiterated that once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration. (See: paragraph 138).
14. In Reliance Industries Ltd. v. Union of India, (2014) 7 SCC, 603, this statement of the law was echoed in several paragraphs. This judgment makes it clear that juridical seat is nothing but the legal place of arbitration. It was held that since the juridical seat or legal place of arbitration was London, English courts alone would have jurisdiction over the arbitration thus excluding Part I of the Indian Act. (See: paragraphs 36, 41, 45 to 60 and 76.1 and 76.2). This judgment was relied upon and followed by Harmony Innovation Shipping Limited v. Gupta Coal India Limited and Another, (2015) 9 SCC 172 (See: paragraphs 45 and 48). In Union of India v. Reliance Industries Limited and Others, (2015) 10 SCC 213, this Court referred to all the earlier judgments and held that in cases where the seat of arbitration is London, by necessary implication Part I of the Arbitration and Conciliation Act, 1996 is excluded as the supervisory jurisdiction of courts over the arbitration goes along with seat.
15. In a recent judgment in Eitzen Bulk A/S v. Ashapura Minechem Limited and Another, (2016) 11 SCC 508, all the aforesaid authorities were referred to and followed. Paragraph 34 of the said judgment reads as follows:
34. As a matter of fact the mere choosing of the juridical seat of arbitration attracts the law applicable to such location. In other words, it would not be necessary to specify which law would apply to the arbitration proceedings, since the law of the particular country would apply ipso jure. The following passage from Redfern and Hunter on International Arbitration contains the following explication of the issue:
It is also sometimes said that parties have selected the procedural law that will govern their arbitration, by providing for arbitration in a particular country. This is too elliptical and, as an English court itself held more recently in Breas of Doune Wind Farm it does not always hold true. What the parties have done is to choose a place of arbitration in a particular country. That choice brings with it submission to the laws of that country, including any mandatory provisions of its law on arbitration. To say that the parties have chosen that particular law to govern the arbitration is rather like saying that an English woman who takes her car to France has chosen French traffic law, which will oblige her to drive on the right-hand side of the road, to give priority to vehicles approaching from the right, and generally to obey traffic laws to which she may not be accustomed. But it would be an odd use of language to say this notional motorist had opted for French traffic law. What she has done is to choose to go to France. The applicability of French law then follows automatically. It is not a matter of choice.
Parties may well choose a particular place of arbitration precisely because its lex arbitri is one which they find attractive. Nevertheless, once a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory so far as arbitration are concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard. [para 34]
13. In the light of the aforesaid clear pronouncement, if this Court has to consider the clauses governing the jurisdiction and the exclusive jurisdiction of the Court, then there is no difficulty in holding that merely because the proceedings were conducted within the jurisdiction of this Court, the aforesaid provisions cannot be pressed into service. To put it differently, it should be deemed, as if, the seat and place of the arbitration continued to be in Mumbai, but for convenience sake, it was merely conducted at Chennai. Otherwise, it would amount to setting aside the binding clauses, which exercise cannot be done by the Court in exercising power under Section 34 of the Arbitration and Conciliation Act, 1996. After all, the intention of the Tribunal and this Court is to give effect to the agreement and the intention, which lead to the clauses incorporated.
14. A similar view has also taken by the Division Bench of the Kerala High Court in D NET MALAYALAM DIGITALS PVT. LTD., V. ASIANET SATELLITE COMMUNICATIONS LTD., (CDJ 2016 Ker HC 836) after taking note of the law laid down by the Apex Court. The relevant paragraphs are hereunder.
HANIL ERA TEXTILES LTD., V. PUROMATIC FILTERS (P0 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 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 t0 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.
15. Thus, the original petition stands dismissed as not maintainable. However, it is made clear that liberty is given to the petitioner to file a petition before appropriate Court, as the merits of the case have not been gone into, though this Court finds that there is something which can be said in favour of the petitioner.
09.03.2018 Note:
1. Issue order copy on 16.03.2018
2. Return the original impugned order.
raa M.M.SUNDRESH,J.
raa O.P.No.737 of 2016 09.03.2018