Kerala High Court
V.M. Jose vs The Branch Manager on 24 August, 2005
IN THE HIGH COURT OF KERALAAT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON
&
THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN
FRIDAY, THE 8TH DAY OF APRIL 2016/19TH CHAITHRA, 1938
Arb.A.No. 7 of 2006 ( )
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AGAINST THE ORDER IN OPARB 253/2001 of DISTRICT COURT,THODUPUZHA
DATED 24-08-2005
APPELLANTS/PETITIONER IN OP (ARBITRATION:
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1. V.M. JOSE, S/O. MATHEW,
AGED 52, VATTAKUZHIYIL HOUSE,
KALLOORKKAD P.O.,, MUVATTUPUZHA, KERALA.
2. ALOSIOUS GEORGE, S/O. VARKEY,
AGED 38, EDATHATTEL HOUSE,
KALLOORKKAD P.O.,, MUVATTUPUZHA, KERALA.
3. FRANCIS MATHEW, S/O. MATHEW,
AGED 36, VATTAKUZHIYIL HOUSE, KALLOORKKAD P.O.,
MUVATTUPUZHA, KERALA.
BY ADV. SRI.ALEXANDER JOSEPH
RESPONDENT(S)/RESPONDENTS IN OP(ARBITRATION)::
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1. THE BRANCH MANAGER,
I.C.D.S. LTD., THOTTUMPURAM BUILDING,
THODUPUZHA, KERALA.
2. I.C.D.S. LTD.,
REPRESENTED BY IT'S AUTHORIZED SIGNATORY,
SYNDICATE HOUSE, MANIPAL, KARNATAKA STATE.
3. S. VITTALA SHETTIYAR,
ADVOCATE,ARBITRATOR, MARUTHI,
VEETHIKA,, UDUPPI, KARNATAKA STATE.
R1 BY ADV. SRI.S.R.DAYANANDA PRABHU
THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 20.1.2016,
THE COURT ON 8.4.2016 DELIVERED THE FOLLOWING:
APPENDIX IN ARB.A.7/06
APPELLANT'S ANNEXURES:
ANNEXURE A1: COPY OF LAWYER NOTICE DT.3.5.2000 OF THE PETITIONERS
TO RESPONDENTS 1 AND 2.
ANNEXURE A2: COPY OF HIRE PURCHASE AGREEMENT DT.29.3.97 OF
RESPONDENTS 1 AND 2.
ANNEXURE A3: COPY OF CLAIM STATEMENT DT.27.3.2000 OF THE 1ST AND 2ND
RESPONDENTS.
ANNEXURE A4: COPY OF WRITTEN STATEMENT DT.7.5.2000 OF THE
PETITIONERS TO THE 3RD RESPONDENT.
ANNEXURE A5: COPY OF EXAMINATION OF THE CHIEF OF WITNESS DATED
15.7.2000 IN ARBITRATION PROCEEDINGS BEFORE THE THIRD RESPONDENT.
ANNEXURE A6: COPY OF WRITTEN STATEMENT DT.16.10.2001 IN
O.S.No.73/2000 OF THE SUB COURT, THODUPUZHA.
ANNEXURE A7: COPY OF AWARD IN A.P.No.96/2000 DT.16.10.2001 OF THE 3RD
RESPONDENT.
ANNEXURE A8: COPY OF ORIGINAL PETITION DT.11.12.2001 OF THE DISTRICT
COURT,THODUPUZHA.
ANNEXURE A9: COPY OF WRITTEN OBJECTION DT.9.1.2004 OF THE 1ST AND
2ND RESPONDENTS IN OP (ARBITRATION).
ANNEXURE A10: COPY OF ARGUMENT NOTE OF THE PETITIONERS IN O.P.
(ARBITRATION).
ANNEXURE A11: COPY OF ARGUMENT NOTE OF THE 1ST AND 2ND
RESPONDENTS IN OP (ARBITRATION).
ANNEXURE A12: CERTIFIED COPY OF ORDER DT.24.8.05 IN OP (ARBITRATION )
No.253/2001 OF THE DISTRICT COURT,THODUPUZHA.
P.R.RAMACHANDRA MENON & ANIL K.NARENDRAN, JJ.
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Arb.A.No.7 of 2006
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DATED THIS THE 8th DAY OF APRIL, 2016
JUDGMENT
ANIL K.NARENDRAN , J.
This appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act') arises out of the order dated 24.8.2005 of the District Court, Thodupuzha in O.P. (Arb.) No.243/2001, a petition filed by the appellants under Section 34 of the Act, challenging the arbitral award passed by the arbitrator, namely, the 3rd respondent herein, in A.P.No.96/2000, in favour of the 2nd respondent herein. On 16.10.2001, the arbitrator passed the award in favour of the 2nd respondent for a sum of 7,13,053/- together with future interest at the rate of 18% per annum on 4,73,305/- from 30.1.2000 till payment and a cost of 3,520/-. By the impugned order dated 24.8.2005, the court below held that, the District Court having jurisdiction at Uduppi alone has jurisdiction to entertain a petition under Section 34 of the Act challenging the award passed by the arbitrator. After arriving at such a finding, the court below proceeded with the matter on merits Arb.A.No.7 of 2006 -2 and arrived at a finding that the appellants have not succeeded in establishing any of the grounds enumerated under Section 34 of the Act, in order to set aside the award passed by the arbitrator. Hence, the appellants were held not entitled to get the aforesaid award set aside. Accordingly, the court below dismissed O.P. (Arb.)No.253/2001 by its order dated 24.8.2005. Aggrieved by the said order of the court below, the appellants are before this Court in this appeal, under Section 37 of the Act.
2. The issues that arise for consideration in this appeal are as follows;
(i) Whether the finding of the court below that it lacks jurisdiction to entertain a petition filed under Section 34 of the Act against the award passed by the 3rd respondent arbitrator at Uduppi is legally sustainable; and
(ii) Whether, after arriving at a finding regarding lack of jurisdiction to entertain the petition, the court below was justified in considering the merits of the case and dismissing the petition on the ground that the appellants have not succeeded in establishing any of the grounds enumerated under Section 34 of the Act to set aside the award passed by the arbitrator.
3. We heard the arguments of the learned counsel for the Arb.A.No.7 of 2006 -3 appellants and also the learned counsel for respondents 1 and 2.
4. The award passed by the arbitrator arises out of a hire purchase agreement dated 29.3.1997 alleged to have been executed between the M/s.ICDS Ltd., the 2nd respondent herein, having its Registered Office at Manipal in the State of Karnataka, through its Branch Manager at Thodupuzha in the State of Kerala, the 1st respondent herein, as 'the Owner' on the First Part; the 1st appellant herein, a resident of Muvattupuzha in the State of Kerala as 'the Hirer' on the Second Part; and the 2nd and 3rd appellants herein, residents of Muvattupuzha as 'the Guarantors' on the Third Part, in respect of a used stage carriage bearing Registration No.KL-7/J-4035. Schedule 'A' of the agreement contains the particulars of the vehicle under hire purchase and Schedule 'B' specifies the hire instalments payable.
5. Clause VII(a) of the hire purchase agreement provides that, all disputes, differences and or claims arising out of the hire purchase agreement shall be settled by arbitration, in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory amendments thereof and shall be referred to the sole Arb.A.No.7 of 2006 -4 arbitration of Mr.S.V.Shettigar, Advocate, the 3rd respondent herein, or in case of his death, refusal, neglect or incapability to act as an arbitrator to the sole arbitration of Mr.B.I.Sharma, Advocate. Clause VII(a) provides further that, the reference to the arbitrator shall be within the Clauses, Terms and Conditions of the hire purchase agreement and the award passed by the arbitrator shall be final and binding on all the parties concerned. Clause VII(h) of the hire purchase agreement provides that, the arbitrator may, if so requested by any party to the agreement, file the award to the court of competent jurisdiction. Clause VII(i) of the hire purchase agreement provides further that, the arbitrator shall hold the enquiry at Uduppi only. However, the arbitrator may change the place of enquiry if he decides so.
6. As per Clause 20 of the conditions of agreement, which forms part of the hire purchase agreement, the said agreement is made and accepted at Manipal and hire instalments specified in Schedule 'B' shall be payable at Manipal or such other places specified by the 'Owner' and all the terms and conditions of the agreement are to be observed and performed at there Arb.A.No.7 of 2006 -5 itself and the courts in the Dakshina Kannada alone and no other courts whatsoever will have jurisdiction to try all or any suits in respect of any claim or disputes arising out of the agreement or in any way relating to the same.
7. Alleging that, a sum of 7,12,953/- is due from the appellants as on 9.2.2000 in respect of the hire purchase agreement dated 29.3.1997, the 2nd respondent raised a claim before the 3rd respondent arbitrator. On receipt of notice of enquiry, the appellants filed written statement denying the execution of the hire purchase agreement dated 29.3.1997. However, the execution of a hire purchase agreement in the year 1995, for purchasing the stage carriage bearing No.KL-7/J-4035, has been admitted in the written statement filed by them. In the written statement, the appellants contended that, if signed blank papers and printed matters originally procured at the time of execution of the hire purchase agreement of the year 1995, by the 2nd respondent Branch Manager is used for fabricating the hire purchase agreement dated 29.3.1997, those documents are not binding on them. The appellants contended further that, since Arb.A.No.7 of 2006 -6 there is no arbitration agreement, the arbitration proceedings initiated by the 3rd respondent arbitrator is illegal and without jurisdiction.
8. The appellants filed O.S.No.73/2000 before the Sub Court, Thodupuzha challenging the arbitral proceedings and the jurisdiction of the 3rd respondent arbitrator to arbitrate the matter. It was contended before the Sub Court that, the hire purchase agreement dated 29.3.1997 is void and without consideration. The Sub Court by its order in I.A.No.655/2000 stayed the arbitral proceedings. On receipt of notice, the 1st and 2nd respondents herein entered appearance and filed written statement, contending that, the hire purchase agreement executed on 29.3.1997 was in continuation of the original agreement of the year 1995 and that, a lien has already been recorded in the registration certificate of stage carriage bearing No.KL-7/J-4035. Further, the hire purchase agreement dated 29.3.1997 contained an arbitration clause to refer the disputes to the 3rd respondent arbitrator, as per which the arbitration proceedings shall take place only at Uduppi. After hearing both Arb.A.No.7 of 2006 -7 sides, the Sub Court by order dated 25.7.2001 dismissed I.A.No.655/2000 for lack of jurisdiction and it was made clear that the appellants can challenge the validity of the agreement in a proceedings under Section 34 of the Act. In terms of the said order, the Sub Court dismissed O.S.No.73/2007.
9. After the dismissal of I.A.No.655/2000 by the Sub Court, Thodupuzha, the 3rd respondent arbitrator issued notice of enquiry to the appellants, for which there was no response from their side. Therefore, the arbitrator proceeded with the matter and passed an award dated 16.10.2001, in favour of the 2nd respondent for a sum of 7,13,053/- together with future interest at the rate of 18% per annum on 4,73,305/- from 30.1.2000 till payment and a cost of 3,520/-.
10. As borne out from the award, during the enquiry Exts.P1 to P6 were marked and PW1 was examined on the side of the 2nd respondent herein. In spite of granting several opportunities, the appellants have not chosen either to cross- examine PW1 or to adduce any oral or documentary evidence on their side. In such circumstances, the arbitrator proceeded with Arb.A.No.7 of 2006 -8 the matter and passed an award dated 16.10.2001 in favour of the 2nd respondent.
11. The appellants filed O.P.(Arb.)No.253/2001 before the District Court, Thodupuzha, under Section 34 of the Act, seeking an order to set aside the award of the arbitrator dated 16.10.2001 in A.P.No.96/2000. On receipt of notice, the 1st and 2nd respondents herein entered appearance and filed their objections contending, inter alia, that the arbitral proceedings conducted at Uduppi are in terms of the hire purchase agreement dated 29.3.1997, with proper notice to the appellants, and they have also filed their written statement before the arbitrator.
12. Before the court below, Exts.A1 to A8 were marked on the side of the appellants herein and Exts.B1 to B3 were marked on the side of the 1st and 2nd respondents herein. Both sides have not chosen to adduce any oral evidence. After considering the pleadings and materials on record, the court below came to the conclusion that, the District Court at Uduppi alone is having jurisdiction to entertain an application under Section 34 of the Act to set aside the award passed by the arbitrator and as such, Arb.A.No.7 of 2006 -9 it lacks jurisdiction to entertain such a petition.
13. As we have already noticed, the hire purchase agreement is one executed between the 2nd respondent herein having its registered Office at Manipal in the State of Karnataka through its Branch Manager at Thodupuzha in the State of Kerala, namely, the 1st respondent herein, on the First Part and the 1st appellant herein, a resident of Muvattupuzha in the State of Kerala on the Second Part and the 2nd and 3rd appellants, residents of Muvattupuzha on the Third Part. Schedule A of the agreement contains the particulars of the vehicle under hire purchase and Schedule B specifies the hire instalments payable. Clause 20 of the conditions of agreement which forms part of the hire purchase agreement specifically provides that the hire purchase agreement is made and accepted at Manipal and all the hire instalments specified in Schedule B shall be payable at Manipal or such other places specified by the 2nd respondent herein and all the terms and conditions of the agreement are to be observed and performed at there itself and the courts in Dakshina Kannada and no other courts whatsoever will have no Arb.A.No.7 of 2006 -10 jurisdiction to try all or any suits in respect of any claim or disputes arising out of the agreement or in any way related to the same.
14. Clause VII(a) of the hire purchase agreement provides for arbitration of all disputes, differences and or claims arising out of the hire purchase agreement, in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory amendments thereof, which shall be referred to the sole Arbitrator named in the hire purchase agreement. Clause VII(i) of the hire purchase agreement provides further that, the Arbitrator shall hold the enquiry at Udupi only. However, the Arbitrator may change the place of enquiry, if he decides so.
15. Therefore, the pleadings and materials on record would show that the courts at Dakshina Kannada and the courts at Thodupuzha in State of Kerala have jurisdiction to entertain any matter arising out of the hire purchase agreement referred to above. Out of the aforesaid two courts, the parties, going by the terms of the hire purchase agreement and the conditions attached thereto, opted to confer exclusive jurisdiction on courts Arb.A.No.7 of 2006 -11 in Dakshina Kannada to try all or any suits in respect of any claim or disputes arising out of the hire purchase agreement or in any way relating to the same. In that view of the matter, the courts in Dakshina Kannada alone will have jurisdiction to entertain an application under Section 34 of the Act seeking an order to set aside the Award passed by the 3rd respondent Arbitrator dated 16.10.2001.
16. In M/s. Pattel Roadways Limited v. Prasad Trading Company (1991 (4) SCC 270), a decision relied on by the learned counsel for the appellant, the Apex Court, in the context of Section 20 of the Code of Civil Procedure,1908 held that, it is not open to the parties by agreement to confer jurisdiction on any court which it did not otherwise possess under the Code. But where two courts have jurisdiction under the Code to try any suit or proceedings an agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to public policy nor does such an agreement contravene Section 28 of the Contract Act. A reading of the said judgment would show that, the respondent in Civil Appeal Arb.A.No.7 of 2006 -12 No.3050 of 1991, who was a dealer in cardamom entrusted a consignment of 850 Kgs. of cardamom to the appellant therein (M/s. Patel Roadways Ltd.) at its subordinate office at Bodinaikkannur in Tamil Nadu to be delivered at Delhi. After the goods have been transported by the appellant and kept in a godown at Delhi, the same got destroyed and damaged in fire as a result whereof, the consignee refused to take delivery. The respondent instituted a suit in the Court of Subordinate Judge, Periyakulam within whose territorial jurisdiction the subordinate office of the appellant, where the goods were entrusted for transportation is situate claiming damages, alleging that the fire was due to the negligence and carelessness on the part of the staff of the appellant. In the connected case, i.e., Civil Appeal No.3051 of 1991, the Apex Court, certain packets of pesticides were entrusted to the appellant therein (M/s. Patel Roadways Ltd.) at its subordinate office at Madras for being carried to New Delhi. The respondents therein contended that the goods aforesaid were delivered at New Delhi in a damaged condition resulting in loss to the 1st respondent and a suit was instituted for Arb.A.No.7 of 2006 -13 recovery of the loss so sustained by the respondents in the Court of the Third Assistant Judge, City Civil Court, Madras. In both the suits, the appellant, inter alia, took the plea in his defence that in the contract entered into with the them, the parties had agreed that jurisdiction to decide any dispute between them would be only with the courts at Mumbai and consequently, the courts in Madras where the two suits referred to above had been instituted had no jurisdiction. The Apex Court noticed that, the appellant has no case that the cause of action either wholly or in part arose in Mumbai and as such clause (c) Section 20 of the Code is not attracted. What has been urged with the aid of the Explanation to Section 20 of the Code was that, since the appellant has its principal office in Mumbai, it shall be deemed to carry on business at Mumbai and consequently, the courts at Mumbai will also have jurisdiction. The Apex Court held that clause (c) of Section 20 of the Code is not attracted to confer jurisdiction on courts at Mumbai and the appellant has admittedly its subordinate offices at the respective places where the goods in these two cases were delivered to it for purposes of Arb.A.No.7 of 2006 -14 transportation. As such, the court at Mumbai had no jurisdiction to entertain the suits filed by the appellant and the parties could not confer jurisdiction on the courts at Mumbai by an agreement.
17. In Hanil Era Textiles Limited v. Puromatic Filters (P) Limited (2004 (4) SCC 671), another decision relied on by the learned counsel for the appellant, the Apex Court, in the context of Section 20 of the Civil Procedure Code, 1908 reiterated that it is not open to the parties to confer by their agreement jurisdiction on a court which it does not possess under the Code. But where two courts or more have under the Code jurisdiction to try a suit or a proceeding, an agreement between the parties that the dispute between them shall be tried in one of such courts is not contrary to public policy. Such agreement does not contravene Section 28 of the Contract Act, 1872. A reading of the said judgment would show that, part of the cause of action had occurred in both the places namely Delhi and Mumbai. Condition No.17 of the delivery instructions which forms part of the purchase order provides that any legal proceedings arising out of the purchase order shall be subject to the jurisdiction of Arb.A.No.7 of 2006 -15 the Courts in Mumbai. Therefore, the question that came up for consideration before the Apex Court is as to whether the aforesaid clause, which is not qualified by words like 'alone', 'only' or 'exclusively' will, oust the jurisdiction of all other courts except courts in Mumbai. Having regard to the fact that the order was placed by the defendant at Mumbai; the said order was accepted by the Branch Office of the plaintiff at Mumbai; the advance payment was made by the defendant at Mumbai; and as per the plaintiff's case, the final payment was to be made at Mumbai, the Apex Court held that there was a clear intention to confine the jurisdiction of the courts in Mumbai and as such the court of Additional District Judge, Delhi had no territorial jurisdiction to try the suit.
18. In Abdul Haque v. ICDS Ltd. (2003 (2) KLT 166), a Division Bench of this Court had occasion to interpret a similar clause in a hire purchase agreement executed between the 2nd respondent herein and another hirer/guarantor, with reference to Section 2(e) of the Act. After referring to the terms of the aforesaid agreement, which is made and accepted at Manipal, as Arb.A.No.7 of 2006 -16 per which the hire installments specified in Schedule B shall be payable at Manipal and that all the terms and conditions of the agreement are to be observed and performed at Manipal, this Court held that the courts in Dakshina Kannada alone will have jurisdiction to try all or any suits in respect of any claim or dispute arising out of that hire purchase agreement or in any way relating to the same. Para.2 of the aforesaid judgment reads thus:
"2. Interpreting Clause.20 of the agreement as well as S.2
(e) of the Arbitration and Conciliation Act, the court below took the view that the courts in Dakshina Kannada alone have the jurisdiction. Counsel for the appellants relied on a decision reported in National Starch & Chemicals v.
Weikfield Products Co. (India) (1990 (1) KLT 217). A reference was made in Para.7 of the judgment. It is very clear from Cl.20 of the agreement that the Courts in Dakshina Kannada alone and no other Courts whatsoever will have the jurisdiction to try any disputes arising out of the agreement. In view of the clear terms contained in Cl.20 of the agreement, we are of the view that the Courts in Dakshina Kannada alone have jurisdiction to try the case. One months time is granted to the parties for moving the courts in Dakshina Kannada as stipulated in the agreement. We make it clear that we are expressing our opinion on the merits of the case."
Arb.A.No.7 of 2006 -17
19. In the instant case, as we have already noticed, the courts at Dakshina Kannada and the courts at Thodupuzha have jurisdiction to entertain any matter arising out of the hire purchase agreement and the parties, going by the terms of the hire purchase agreement and the conditions attached thereto, opted to confer exclusive jurisdiction on courts in Dakshina Kannada to try all or any suits in respect of any claim or disputes arising out of the hire purchase agreement or in any way relating to the same. In that view of the matter, we find absolutely no grounds to interfere with the finding of the court below that the District Court at Udupi alone is having jurisdiction to entertain an application under Section 34 of the Act to set aside the award passed by the Arbitrator dated 16.10.2001. Therefore, the order passed by the court below to the extent of dismissing the application on the ground that it lacks jurisdiction to entertain such an application is confirmed.
20. The next question that arises for consideration is as to whether, after arriving at a finding regarding lack of jurisdiction to entertain a petition under Section 34 of the Act, the court Arb.A.No.7 of 2006 -18 below was justified in considering the merits of the case. Regarding this issue, we are of the firm view that once the court below finds that it lacks jurisdiction to entertain such an application, the proper course that could be adopted by it is to dismiss the petition for lack of jurisdiction, thereby enabling the appellant herein to have the award challenged before the appropriate court having jurisdiction by filing an application under Section 34 of the Act. Instead of adopting such a course, the court below proceeded to consider the merits of the petition and held that the appellants have not succeeded in establishing any of the grounds enumerated under Section 34 of the Act, in order to set aside the award passed by the Arbitrator dated 16.10.2001. In such circumstances, the finding of the court below on Point No.2 is set aside and all the contentions raised by both sides before the court below and before this Court are left open (including the validity of the hire purchase agreement dated 29.3.1997) so as to enable them to raise all such contentions before the appropriate court having jurisdiction to entertain a petition under Section 34 of the Act against the award passed by Arb.A.No.7 of 2006 -19 the 3rd respondent Arbitrator dated 16.10.2001.
The appeal is disposed of as above.
Sd/-
P.R.RAMACHANDRA MENON, JUDGE Sd/-
ANIL K.NARENDRAN, JUDGE dsn True copy P.S.to Judge