Gujarat High Court
Rmg Alloy Steel Limited vs Paragon Construction on 28 September, 2018
Author: N.V.Anjaria
Bench: N.V.Anjaria
C/SCA/8801/2016 CAV ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 8801 of 2016
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RMG ALLOY STEEL LIMITED Versus PARAGON CONSTRUCTION ========================================================== Appearance:
MS SANGEETA PAHWA, ADVOCATE FOR THAKKAR AND PAHWA ADVOCATES(1357) for the PETITIONER(s) No. 1 MR NL RAMNANI(2400) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE N.V.ANJARIA Date : 28/09/2018 CAV ORDER Heard learned advocate Ms.Sangeeta Pahwa for Thakkar & Pahwa Advocates for the petitioner and learned advocate Mr.N.L. Ramani for the respondent.
2. By filing the present petition, the petitioner company has challenged, praying to set aside order dated 03rd March, 2016 passed by learned 6th Additional District Judge, Ankleshwar, below application Exh.10 in Civil Miscellaneous Application No.80 of 2013. By the impugned order, the court below held that the District Court, Ankleshwar, Bharuch, did not have the jurisdiction to entertain the application filed under Section 34 of the Arbitration and Conciliation Act, 1996 and the application was returned to the applicant-petitioner for presentation of the same before the appropriate court.
3. Noticing the facts of the case from the record of the petition, the petitioner was engaged in the business of manufacturing of the metal products Page 1 of 13 C/SCA/8801/2016 CAV ORDER whereas the respondent dealt in the business of civil and structural construction work. It appears that petitioner approached the respondent for construction of fifteen flats of particular type to provide accommodation to its staff at Bharuch and for that the work order was placed on 12th October, 1994. On account of the delay in completion of the work and dispute over the quality of construction etc., as per the case of the petitioner, it suffered loss. Arbitration clause No.24 in the work order executed between the parties was invoked by filing application under Section 11 of the Arbitration Act, the Arbitrator was appointed by this Court and the arbitral tribunal gave its award dated 18th July, 2012.
3.1 The petitioner filed Civil Miscellaneous Application No.80 of 2013 before the District Court, Ankleshwar, under Section 34 of the Arbitration Act to challenge the award of the arbitral tribunal. In that proceedings, the respondent filed application Exh.10 to question the jurisdiction of the court at Bharuch.
4. The case of the applicant of Exh.10 application-the respondent herein, was that in view of clause 24 by which the parties have agreed that disputes and claims shall be subject to Bombay jurisdiction, the application under Section 34 before the court at Bharuch was not liable to be entertained as the Bharuch court cannot be said to be the proper court to exercise the territorial jurisdiction.
Page 2 of 13C/SCA/8801/2016 CAV ORDER Learned advocate for the petitioner sought to rely on the decision of the Supreme Court in A.B.C. Laminart Pvt. Limited v. A.P. Agency, Salem [(1989) 2 SCC 163] in support of his submission that the Court at Ankleshwar, Bharuch could have exercised the jurisdiction.
4.1 On the other hand, according to the submission of the petitioner, the work order was given at Bharuch and the work was carried out a Bharuch, therefore part of cause of action had arisen at Bharuch which would enable the court at Ankleshwar, Bharuch, to exercise the territorial jurisdiction. It was submitted that in the facts of the case, both the courts at Bharuch as well as Mumbai could be said to be competent to exercise of jurisdiction, therefore the application under Section 34 was filed before the court of competent jurisdiction and ought to have been entertained by the court concerned at Ankleshwar. As against this, learned advocate for the respondent-applicant pressed into service decision of the Supreme Court in Khaleel Ahmed Dakhani v. Hatti Goldmines Company Limited [(2000) 2 SCC 755].
5. In order to appreciate the aforesaid controversy otherwise falling in narrow compass, clause 24 agreed upon between the parties in the work order may be looked at which is reproduced herein below.
"24. JURISDICTION/ARBITRATION::
Any dispute or difference arising out of or in connection with this works order shall be referred to Page 3 of 13 C/SCA/8801/2016 CAV ORDER the arbitration for settlement in accordance with the provisions of the Indian Arbitration Act 1940 and rules made thereunder or in statutory re-enactments, modifications or extensions thereof. The reference will be made in Bombay. Any disputes/claims arising out of this works order shall be subject to Bombay Jurisdiction."
5.1 It may be possible to submit on behalf of the petitioner that since the work was done at Bharuch, part of cause of action could be said to have arisen at Bharuch, so as to attract the territorial jurisdiction of the Court at Ankleshwar for filing the proceedings in question, however, the principle is well settled that where two or more courts have jurisdiction to try the 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 would operate as valid between the parties. Nor such agreement would contravene the provision of Section 28 of the Contract Act. This principle is laid down in Hakam Singh v. Gammon (India) Limited [(1971) 1 SCC 286] as also in Angile Insulations v. Davy Ashmore India Limited [(1995) 4 SCC 153].
5.2 In A.B.C. Laminart Pvt. Limited (supra), the appellant, a manufacturer and supplier of metallic Yarn who had its registered office at Udhyognagar, Gujarat, within the jurisdiction of the civil court at Kaira, entered into a contract with the respondent for supply of metallic yarn. Clause 11 of the contract which was included in the general terms and conditions of the sale provided: 'Any dispute arising out of this sale shall be subject to Kaira Page 4 of 13 C/SCA/8801/2016 CAV ORDER jurisdiction'. The order of confirmation with the aforesaid condition was sent to the respondent who was at Salem, Tamil Nadu. Upon disputes arising out between the parties, the respondent filed suit against the appellant in the court of subordinate Judge at Salem, in which the trial court allowed preliminary issue and held that it had no jurisdiction to entertain the suit in view of clause
11. The High Court allowed the appeal and directed the trial court to take the plaint on file. The question before the Supreme Court was whether clause 11 was valid and whether the court at Kaira would be the court of proper jurisdiction and whether clause 11 could be construed to have excluded the jurisdiction of the court at Salem.
5.2.1 In A.B.C. Laminart Pvt. Limited (supra) the Apex Court proceeded to held that as the parties had transacted the business inter alia on the basis of clause 11, this clause form part of the agreement and the parties would be bound by it so long as they would be bound by the contract itself and that it was not open to the respondent to deny the existence of clause 11. It was held that each of the citizen has right to have his legal position determine by the ordinary tribunal except in a contract when there is an arbitration clause which is valid and binding and secondly when the parties to a contract agree as to jurisdiction to which dispute in respect of the contract shall be subjected to. It was held that parties can chose a particular territorial court for resolution of dispute and the agreement will be Page 5 of 13 C/SCA/8801/2016 CAV ORDER unlawful only where the parties oust absolutely the jurisdiction of the court.
5.2.2 The decision in A.B.C. Laminart Pvt. Limited (supra), which was subject matter of consideration and interpretation in subsequent decisions of the Apex Court referred to and discussed hereinafter, leads to invariable conclusion that reliance placed by learned advocate for the petitioner on A.B.C. Laminart Pvt. Limited (supra) would not help him, rather would go against the proposition sought to be canvassed by the petitioner once intention of the parties could be gathered in this case.
5.3 In Hanil Era Textiles Limited v. Puromatic Filters (P) Limited [(2004) 4 SCC 671] the Court considered the scope of Section 20 of the Code of Civil Procedure to re-emphasise the principle that it is permissible to have an agreement between the parties restricting the place of suing where two or more courts have jurisdiction under the Code. It was however held that while the parties may chose one of the courts having jurisdiction to be the court for initiating proceedings, the parties cannot by agreement confers jurisdiction on a court which otherwise does not possess the jurisdiction. In Hanil Era Textiles Limited (supra) it was observed, "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".
Page 6 of 13C/SCA/8801/2016 CAV ORDER 5.3.1 While arriving at the aforesaid findings,
the Supreme Court referred to its own decision in A.B.C. Laminart Pvt. Limited (supra) in which it was held, "From the foregoing decisions it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see whether three is outer of jurisdiction of other courts. When the clause is clear, 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 intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed." (Para 21) 5.4 Decision in Khaleel Ahmed Dakhani (supra) relied on by the respondent contained the facts where the contract was awarded by the respondent government company to the appellant for construction of building in Raichur. The arbitration clause stipulated that courts in Bangalore would only have jurisdiction to entertain any claim for enforcement of the award. The disputes arose between the parties, the arbitration was held in Bangalore, the award was rendered by the Arbitrator and the respondent filed application under Section 34 before the court of Principal City Civil Judge, Bangalore, for setting aside the award. During the pendency of this application, the appellant- decree holder filed application under Section 36 of the Act before the court at Raichur for execution of Page 7 of 13 C/SCA/8801/2016 CAV ORDER the award. The Supreme Court hold in light of the clause agreed upon by the parties in which they had chosen the court at Bangalore for the territorial jurisdiction, that the Raichur court should not have entertained the appellant's application. The principle laid down in this case lends support to what is held herein.
5.5 In Rajasthan State Electricity Board v. Universal Petrol Chemicals Limited [(2009) 3 SCC 107], the question arose whether the Calcutta court had jurisdiction or the court at Jaipur. After considering various decisions, the Apex Court held as under, "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 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."
(Para 27) 5.6 In clause of jurisdiction as may be agreed upon by the parties, the words like 'alone', 'only' or 'exclusive' are often used. The question had have come up for consideration before the Apex Court about Page 8 of 13 C/SCA/8801/2016 CAV ORDER the effect and import of the words of such nature in the exclusion clause. In Shriram City Union Finance Corporation Ltd. v. Rama Mishra [(2002) 9 SCC 613] in clause 34 in question regarding jurisdiction in such words like 'alone', 'only' were not used but it was provided that legal proceedings with regard to any matter, claims, differences and disputes arising out of the agreement shall be filed and referred to the courts in Calcutta for the purpose of jurisdiction. The Supreme Court viewed that the parties had agreed that courts in Calcutta only had jurisdiction, therefore civil court at Bhuvneshwar ought not to have entertained the proceedings. Thus in that case, though exclusion clause did not use the word 'alone', but such position was read into the jurisdiction clause by drawing inference that intention of the parties was to exclude all other jurisdictions.
5.7 The precise question whether the absence of words 'alone', 'only' or 'exclusive jurisdiction' would render the territorial exclusion clause ineffective, came up for consideration before the Apex Court in Swastik Gases Private Limited v. Indian Oil Corporation Limited [(2013) 9 SCC 32]. The Apex Court was called upon to construe Clause 18 of the agreement between the parties which made the contract subject to jurisdiction of the courts at Calcutta but in the clause, any of the words like 'alone', 'only' or 'exclusive' jurisdiction were not used. The Supreme Court negatived the contention that in view of absence of such words in clause 18, though it conferred the jurisdiction to the courts at Calcutta, Page 9 of 13 C/SCA/8801/2016 CAV ORDER the said clause did not specifically bar the jurisdiction of the courts at Rajasthan where part of the cause of action had arisen.
5.7.1 The Court held that what was essential was intention of the parties to the agreement. It was sated, "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." (Para 31) 5.7.2 The Court proceeded to hold, "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 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 Page 10 of 13 C/SCA/8801/2016 CAV ORDER 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." (Para 32) 5.8 In Swastik Gases (supra) in concurring judgment, decision of the Apex Court in A.B.C. Laminart Pvt. Limited (supra) was referred to, to emphasise that notwithstanding absence of the words 'alone', 'only' or 'exclusive' and the like, the very fact that the ouster clause was included in the agreement between the parties, their intention was to exclude the jurisdiction of the courts other than mentioned in the agreed clause.
5.8.1 It was held and observed, "It will be seen from the above decisions that except in A.B.C. Laminart where this Court declined to exclude the jurisdiction of the Courts in Salem, in all other similar cases an inference was - drawn (explicitly or implicitly) that the parties intended the implementation of the exclusion clause as it reads notwithstanding the absence of the words "only", "alone" or "exclusively" and the like. The reason for this is quite obvious. The parties would not have included the ouster clause in their agreement were it not to carry any meaning at all. The very fact that the ouster clause is included in the agreement between the parties conveys their clear intention to exclude the jurisdiction of Courts other than those mentioned in the concerned clause. Conversely, if the parties had intended that all Courts where the cause of action or a part thereof had arisen would continue to have jurisdiction over the dispute, the exclusion clause would not have found a place in the agreement between the parties." (Para 55)
6. Adverting to the case on hand, on the footsteps of aforesaid position of law emerging from the analysis of the judgments, the jurisdictional Page 11 of 13 C/SCA/8801/2016 CAV ORDER clause in paragraph 24 of the work order could be clearly viewed to evince the intention of the parties who opted the jurisdiction to be in the courts at Bombay. The fact that the parties included the clause to confer jurisdiction on Bombay Court show that they opted the territorial jurisdiction at Bombay to the exclusion of court having jurisdiction at any other place. The parties bound themselves willingly by contractual obligation to select court having territorial jurisdiction, which was permissible in law and subsequently either party cannot resile from it to pose the stand differently. They agreed to this position with open eyes and translated the agreement into the clause in the work order.
6.1 In these circumstances, it will be only reasonable and correct to read the clause and the agreement between the parties to exclude the jurisdiction of other courts except at Bombay. Therefore, even if the part of the cause of action had arisen within the territorial jurisdiction of the court other than Bombay, in view of clause 24 which will have the exclusionary effect, the court at Bombay shall be the proper court for jurisdiction whereat the parties would have to invoke the aids of legal machinery to agitate their disputes and rights arising out of the contract.
7. In light of above discussion, when the court below at Ankleshwar had held that court at Ankleshwar has no jurisdiction, no error could be booked in the order. The impugned order is not liable to be Page 12 of 13 C/SCA/8801/2016 CAV ORDER interfered with. The petition is dismissed.
However, as requested, the petitioner shall be entitled to the time of 30 days to be reckoned from the date of receipt of certified copy of this order, to file appropriate proceedings before the court of appropriate jurisdiction.
(N.V.ANJARIA, J) Anup Page 13 of 13