Gujarat High Court
Indus Projects Ltd vs Fernas Construction India Pvt Ltd & on 13 January, 2017
Author: Akil Kureshi
Bench: Akil Kureshi
O/IAAP/59/2016 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
PETN. UNDER ARBITRATION ACT NO. 59 of 2016
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INDUS PROJECTS LTD....Petitioner(s)
Versus
FERNAS CONSTRUCTION INDIA PVT LTD & 1....Respondent(s)
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Appearance:
MR ZUBIN F BHARDA, ADVOCATE for the Petitioner(s) No. 1
DHRUVIK K PATEL, ADVOCATE for the Respondent(s) No. 1
MR AKSHAT KHARE, ADVOCATE for the Respondent(s) No. 2
MRS SUMAN KHARE, ADVOCATE for the Respondent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
Date : 13/01/2017
ORAL ORDER
1. The petitioner has filed this petition seeking appointment of an arbitrator to resolve the disputes between the petitioner and the respondents. At one stage, in absence of any representation of respondent no.1, under order dated 26.8.2016, it was noted that need to appoint the arbitrator has arisen. Later on respondent no.1 appeared through an advocate and sought recall of the order stating that due to miscommunication, the advocate could not be instructed to appear for respondent no.1. The recall application was granted and that is how this arbitration petition has come up for further hearing.
2. At the outset, learned counsel for the petitioner agreed to the request of counsel for respondent no.2 for deletion of Page 1 of 12 HC-NIC Page 1 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER the said respondent since respondent no.2 was not a signatory to the agreement in question. Respondent no.2 is therefore, deleted without prejudice to the petitioner's pending application under section 9 of the Arbitration and Conciliation Act.
3. It is not in dispute that the agreement governing the petitioner and the respondent no.1 contained an arbitration clause in the following terms :
"Settlement of disputes 67.1 Employer/'s Decision If a dispute of any kind whatsoever arises between the Employer/Engineer and the Contractor in connection with, or arising out of, the Contract or the execution of the Works or any other matter related thereto, whether during the execution of the Works or after their completion and whether before or after repudiation or other termination of the Contract including any dispute as to any opinion, instruction, determination, certificate of valuation of the Employer, the matter in dispute shall, in the first place, be referred in writing to the Employer. Such reference shall state that it is made pursuant to this Clause. No later than the eightyfourth day after the day on which he received such reference the Employer shall give notice of his decision to the Contractor. Such decision shall state that it is made pursuant to this Clause.
Unless the Contract has already been repudiated or terminated as per terms hereof, the Contractor shall, in every case, continue to proceed with the Works with all due diligence and the Contractor shall give effect forthwith to every such decision of the Employer unless and until the same shall be revised, as hereinafter provided, in an Page 2 of 12 HC-NIC Page 2 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER amicable settlement or an arbitral award.
If the Contractor be dissatisfied with any decision of the Employer, or if the Employer fails to give notice of his decision on or before the eightyfourth day after the day on which he received the reference, then the Contractor may, on or before the seventieth day after the day on which he received notice of such decision, or on or before the seventieth day after the day on which the said period of 84 days expired, as the case may be, give notice to the other party, of his intention to commence arbitration, as hereinafter provided, as to the matter in dispute. Such notice shall establish the entitlement of the party giving the same to commence arbitration, as hereinafter provided, as to such dispute and subject to Subclause 67.4, no arbitration in respect thereof may be commenced unless such notice is given.
If the Employer has given the notice of his decision as to a matter in dispute to the Contractor and no notice of intention to commence arbitration as to such dispute has been given by the Contractor on or before the seventieth day after the day of receipt of such notice the said decision shall become final and binding upon the contractor.
67.2 Amicable Settlement Where notice of intention to commence arbitration as to a dispute has been given in accordance with SubClause 67.1, the parties shall attempt to settle such dispute amicably before the commencement of arbitration. Provided that, unless the parties otherwise agree, arbitration may be commenced on or after the fiftysixth day after the day on which notice of intention to commence arbitration of such dispute was given, even if no attempt at amicable settlement thereof has been made.
67.3 Arbitration
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Any dispute in respect of which :
(a) the decision, if any, of the Employer has not become final and binding pursuant to subclause 67.1 and
(b) amicable settlement has not been reached within the period stated in SubClause 67.2 shall be finally settled, unless otherwise specied in the Contract, in accordance with Indian Arbitration and Conciliation Act, 1996 and amendments made thereof by sole arbitrators appointed by the Employer. The said arbitrator shall have full power to open up, review and revise any decision, opinion, instruction, determination, certicate or valuation of the Employer/ related to the dispute.
The award made by the Arbitral Tribunal shall be nal and binding upon the parties and shall be enforced in accordance with applicable provisions of the Arbitration and Conciliation Act, 1996. The Arbitration shall be conducted in English language and the venue of arbitration shall be Delhi, India.
Any award or decision of the arbitrator appointed as per this Clause shall be nal and binding on the parties provided that it shall be open for the Employer to seek any additional remedy, including specic performance or injunction from a court having competent jurisdiction Arbitration may be commenced prior to or after completion of the Works, provided that the obligations of the Employer/Engineer, the Employer/ and the Contractor shall not be altered by reason of the arbitration being conducted during the progress of the Works."
4. When therefore, disputes arose between the petitioner and the respondents, after issuance of notice for appointment of an arbitrator, the petitioner filed this petition.
5. This petition is opposed by respondent no.1 on the sole Page 4 of 12 HC-NIC Page 4 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER ground of lack of territorial jurisdiction. Case of respondent no.1 is that in view of clear recitation in the arbitration clause that arbitration shall be conducted in English and the venue would be in New Delhi, this Court would have no jurisdiction to entertain this petition.
6. On the other hand, counsel for the petitioner pointed out that the entire work under the agreement was executed at Dahej within the local jurisdiction of this Court. This Court would therefore, have the jurisdiction to entertain the arbitration petition.
7. It is undisputed that the work under the agreement was to be executed at Dahej. Even subject to disputes, part of the work has been so executed at Dahej. That being the position, part of the cause of action having arisen within the jurisdiction of this Court, ordinarily, this arbitration petition would be maintainable before the Gujarat High Court also. The only question is, would the agreement between the parties that the venue of arbitration would be at New Delhi divest this Court of such jurisdiction? In this context, counsel for the respondent no.1 had placed reliance on decision of Supreme Court in case of M/s. Swastik Gases P. Ltd. v. Indian Oil Corp. Ltd. reported in JT 2013 (10) SC 35 .
8. It is well known that when more than one Court has the jurisdiction to entertain a particular petition, it is always open for the parties to confine such jurisdiction to one of the Courts to exclusion of the rest by an agreement. However, mere declaration that the venue of arbitration petition shall be at a particular station would not satisfy Page 5 of 12 HC-NIC Page 5 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER this requirement that parties agreed to exclusion of the jurisdiction of a Court. There is no recitation in the entire arbitration clause or anywhere in the agreement pointed out to me which would indicate the intention of the parties to exclude the jurisdiction of this Court from entertaining an application for appointment of arbitrator. Appointment of an arbitrator and the venue of arbitration are two entirely different issues. In the decision of Supreme Court in case of M/s. Swastik Gases P. Ltd.(supra) relied upon by the respondent, the arbitration clause was succeeded by clause 18 of jurisdiction which read as under :
"18.0 The Agreement shall be subject to jurisdiction of the courts at Kolkata."
It was in this background, the Supreme Court had made the following observations :
"30. When it comes to the question of territorial jurisdiction relating to the application under Section 11, besides the above legislative provisions, Section 20 of the Code is relevant. Section 20 of the Code states that subject to the limitations provided in Sections 15 to 19, every suit shall be instituted in a Court within the local limits of whose jurisdiction (a) the defendant, or each of the defendants where there are more than one, at the time of commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or (c) the Page 6 of 12 HC-NIC Page 6 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER cause of action, wholly or in part arises. The explanation appended to Section 20 clarifies that a corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.
31. In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What appellant says is that part of cause of action has also arisen in Jaipur and, therefore, Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11. Having regard to Section 11(12)(b) and Section 2(e) of the 1996 Act read with Section 20(c) of the Code, there remains no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court has jurisdiction in the matter. The question is, whether parties by virtue of clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of clause 18 of the agreement, the jurisdiction of Chief Justice of the Rajasthan High Court has been excluded. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like 'alone', 'only', 'exclusive' or 'exclusive jurisdiction' have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties by having clause 18 in the agreement - is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that Page 7 of 12 HC-NIC Page 7 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. 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. In a recent order in case of Omega Elevators through proprietor Kumarpal Manharlal v. Managing Director in Arbitration Petition No.31/2016, order dated 29.7.2016, I had an occasion to deal with somewhat similar situation and made the following observations :
"10. As noted, the two agreements contained arbitration clauses substantially similar in language. Except that, in the second agreement, there is a reference that the dispute shall be settled by arbitration at New Delhi. In this context, question arises whether this Court would have jurisdiction to entertain this arbitration petition. Undisputably, in the first agreement the arbitration clause does not contain any such reference. It is also not in dispute that the product, which is the subject matter of the dispute, was installed by the respondent and used by the petitioner at Ahmedabad. Defects in the product which allegedly arose also happened at Ahmedabad. Part of cause of action therefore clearly arose within the jurisdiction of this Court. With respect to the first of the two arbitration agreements, therefore, there would be no further discussion needed to hold that the Court would have jurisdiction to appoint the arbitrator.
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11. With respect to the second of the two agreements also, Clause (b) of the Section 11(12) of the Act provides that where the matters referred to in subsections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the term "reference to Supreme Court or the High Court, as the case may be, shall be construed as a reference to the High Court within whose local limits the Principal Civil Court referred in clause (e) of sub section (1) of Section 2 is situate. In turn, in Section 2 (1)(e) the term "Court" means in case of arbitration other than international commercial arbitration, the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of its 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 the suit but would not include any Civil Court of a grade inferior to such principal Civil Court or any Court of Small Causes. It can thus be seen that merely because the parties decided that the arbitration proceedings would be held at New Delhi would not automatically mean that this Court would have no jurisdiction to appoint an arbitrator if otherwise in terms of the such provision the cause of action having arisen within the local limits of the Court the jurisdiction would have vested. In fact, the Delhi High Court judgement in case of Rohit Bhasin and Anr vs. Nandini Hotels was a reverse situation where the respondent had questioned the jurisdiction of Delhi High Court on a similar ground. In this background, Delhi High Court had held that:
"13. From the above, it is clear that the Supreme Court while explaining the meaning of the term "court" as defined in Section 2(1)(e) has held that the subject matter on the basis of which the jurisdiction of a court can be decided is not confined within the barriers of Section 20 CPC but has a wider meaning thereby also concurring jurisdiction upon the Court where the seat of arbitration will be located. It is pertinent to mention here that the meaning of Section 2(1)
(e) of the Act was not in dispute before the Supreme Court Page 9 of 12 HC-NIC Page 9 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER in the above said judgment and the Supreme Court has not overruled any previous law in relation to the same but has clarified the intent of the legislature in ascribing such broad meaning to the term "court" in Section 2(1)(e)."
12. Our High Court in case of Palihill Mercantile Company Pvt. Ltd. vs. Store one retail India Ltd. in Arbitration Petition No. 27 of 2010 in similar circumstances had observed as under:
"7. In the present case, I find that property is situated at Ahmedabad. Respondent had given the property on leave and license basis to the petitioner which agreement was executed at Ahmedabad. Petitioner had enjoyed use of such property under said agreement. Only clause which respondent has pressed in service to oust the jurisdiction of Gujarat High Court is contained in clause14, wherein it is specified that arbitration shall be held in Mumbai and that proceedings shall be conducted in English language. In my opinion this by itself would not be sufficient to oust the jurisdiction of this Court, particularly, when property itself is situated in Ahmedabad and the agreement was also executed at Ahmedabad. Counsel however, submitted that clause also provides that only Courts in Mumbai will have jurisdiction in this matter. This line is preceded by "The parties agree that the Arbitration Award shall be final and may be enforced as decree." Reference to Courts in Mumbai is therefore, for the purpose of execution of arbitral award and cannot be read as excluding jurisdiction of Gujarat High Court to the limited extent of appointment of arbitrator.
8. In somewhat similar circumstances, where arbitration clause in the agreement between the parties provided that arbitration would be in English and venue of arbitration shall be at Hyderabad and further that Courts in Hyderabad alone would have right to entertain suits or other claims arising out of contract, Learned Single Judge in judgement dated 10.5.2010 in Arbitration Petition Page 10 of 12 HC-NIC Page 10 of 12 Created On Sat Aug 12 09:53:38 IST 2017 O/IAAP/59/2016 ORDER No.6/2010 turned down the objection to the jurisdiction of Gujarat High Court for appointment of arbitrator making following observations :
"16. Considering clause30 of the Work Order / Agreement dtd.22/6/2005 and the fact that the registered office of the petitioner is at Ahmedabad and even the registered office of the respondent is at New Delhi and the respondent is carrying its business at New Delhi, it was suggested by the Court to mutually agree to fix the venue of arbitration at Ahmedabad to avoid wastage of time and expenditure, however, Mr.Joshi, learned advocate appearing on behalf of the respondent has not agreed to the same and therefore, as per Clause30 of the Work Order/ Agreement dtd.22/6/2005, the venue of the arbitration shall be at Hyderabad."
9. In case of Rajasthan State Electricity Board(supra), Apex Court was pleased to hold that in view of clause excluding the jurisdiction of other Court, Court at Jaipur alone would have jurisdiction to entertain the proceedings. It was a case where Arbitral Reference was being challenged at a Court other than Jaipur. In context of agreement excluding jurisdiction of other Courts, above observations and findings came to be recorded.
10. In case of Balaji Coke Industry Private Limited(supra), in which on facts, the Apex Court found that parties had voluntarily agreed to the decision of Kolkata High Court even though Court at Gujarat also had jurisdiction to decide arbitration dispute. It was in this background that the Apex Court upheld the objection of the parties to appointment of arbitrator at Ahmedabad and assumption of jurisdiction by Civil Court at Bhavnagar with respect to such arbitration proceedings.
11. In facts of the case, I am of the opinion that objection of territorial jurisdiction is required to be turned down.
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However, clause providing for arbitration proceedings to be conducted in Mumbai must be given sanctity to. In that view of the matter appointment of a Judge retired form Gujarat High Court and settled in Ahmedabad as Arbitrator would not be conducive of smooth and expeditious conduct of the arbitration proceedings."
10. Under the circumstances, parties shall present the declaration of Shri A.R. Dave, former Judge of Supreme Court, by the next date of hearing.
SO to 20.1.2017.
(AKIL KURESHI, J.) raghu Page 12 of 12 HC-NIC Page 12 of 12 Created On Sat Aug 12 09:53:38 IST 2017