Delhi High Court
M/S. R.K. Constructions vs National Thermal Power Corporation ... on 1 March, 1996
JUDGMENT Devinder Gupta, J.
1. Petition under Section 20 of the Arbitration Act was filed against National Thermal Power Commission and Canara Bank praying for filling of the arbitration agreements pertaining to three different contracts in court and directing Chairman of respondent No. 1 corporation to appoint an Arbitrator in terms of arbitration clause 56 as reproduced in para 14 of the petition. Along with the petition, an application for interim relief has also been preferred praying that respondent No. 1 be restrained from invoking various bank guarantees and restraining Canara Bank from making payment of the bank guarantees. After notice respondent No. 1 filed its reply and raised a preliminary objection as regards territorial jurisdiction of this court to entertain and try the petition. Be it stated that respondent No. 2 was ordered to be deleted from the array of parties.
2. The petitioner firm was awarded three different contracts by M/s. National Thermal Power Corporation Ltd. (for short 'NTPC') and it is not disputed that its head office of respondent No. 1 Corporation is located at Delhi Petition was filed in this court alleging that since respondent No. 1 Corporation has its Head Office in Delhi, therefore, this court has jurisdiction to entertain this petition. After the parties exchanged their respective affidavits, the facts which have emerged and which are not in dispute are that for the award of the works, three contracts were executed at Bhubneshwar. Under the first contract the petitioner was required to carry out construction of 58 Type I, II AND III Quarters in the Construction Township at Talchar Super Thermal Power Project in District Dhenkanal in Orissa. Second contract was for Construction Township of 34 units of Type I and 10 units of Type III Quarters in the township of Talchur Thermal Power Project, Orissa and the third contract was for construction of 2H Block Officer for Talchur Thermal Power Project, Orissa. The objection is as regards territorial jurisdiction that the contracts were signed and executed at Bhubneshwar. The site of work was Township of Talchur Thermal Power Project at Talchur in Distt. Dhenkanal, Orissa. No part of cause of action arose at Delhi. As such courts in Delhi have no territorial jurisdiction to entertain and try this petition.
3. Learned counsel for the parties were heard at length.
4. The objection raised on behalf of the respondent and arguments addressed in reply by the learned counsel for the petitioner do not require much discussion since the point raised stands decided by various decisions of this court and of the Supreme Court. Section 31 of the Arbitration Act regulates the forum for entertainment of all matters connected with an arbitration agreement and award and to make applications regarding conduct of arbitration proceedings. Scope of Section 31 of the Act was explained by the Supreme Court in Kumbha Mawji v. Union of India , saying that while sub-section (1) determines the jurisdiction of the court in which an award can be filed the remaining three sub-sections are intended to make that jurisdiction effective in three ways :
(1) by vesting in one court the authority to deal with all questions regarding the validity, effect or existence of an award or arbitration agreement;
(2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one court; and (3) by vesting exclusive jurisdiction in the court in which the first application relating to the matter is filed.
5. Applications covered by sub-section (3) of Section 31 of the Act would also include an application under Section 20 of the Act and the same will have to be filed in the court having jurisdiction in the matter to which the reference relates and no other court. The court has been defined in Section 2(c) of the Act to mean :
"a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, expect for the purpose of arbitration proceedings under Section 21, include Small Cause Court."
6. In the matter of a Corporation like the defendant in this case court will mean that Civil Court which would be competent to decide a suit in respect of the matter which is the subject-matter of reference. The defendant is a Corporation which does not have a sole office. It has a principal office at Delhi and has various subordinate offices at other places. One of the subordinate office being at Bhubneshwar (Orissa).
7. In Patel Roadways Limited, Bombay v. M/s. Prasad Trading Company , the Apex Court interpreted the explanation to Section 20 of the Code of Civil Procedure saying that the explanation clarifies the scope of clause (a) of Section 20, and is in two parts. One before the word "or" occurring between the words "office in India" and the words "in respect of" and the other thereafter. The explanation applies to the defendant, which is a Corporation. The first part of the explanation applies to such Corporation which has its sole or principal office at a particular place. In that event the courts within whose jurisdiction the sole or principal office of defendant is situate will also have jurisdiction in as much as even if the defendant may not be actually carrying on business at that place, it will "be deemed to carry on business" at that place of the fiction created by the explanation. The later part of the explanation refers to the defendant which does not have a sole office but has a principal office at one place and has also a subordinate office at another place. If the case falls within the later part of the explanation, it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone shall have jurisdiction in respect of any cause of action arising at any place where it has also a subordinate office.
8. This court in Kamal Pushp Enterprises v. Chairman-cum-Managing Director G.A.I.L. and others - held that determination of the territorial jurisdiction of a court depends upon the determination of the questions, namely, what are the questions which form the subject-matter of reference to arbitration and secondly which would be the competent court to decide a suit in respect of the questions which would be the subject-matter of reference. Relying upon the decision in Patel Roadways' case (supra) it was held that where the Corporation has a subordinate office at the place where the cause of action arises, it cannot be heard to say that it cannot be sued there because it does not carry on business at that place. It would be a great hardship if, inspite of Corporation having a subordinate office at the place where cause of action arises such plaintiff is to be compelled to travel to the place where the Corporation has its principal office.
9. In Arun Khosla v. Union Bank of India , also it was held that under Section 2(c) of the Arbitration Act territorial jurisdiction of the court has to be determined on the basis of the claims made in a petition seeking revocation of the authority of the Arbitrator. Court at a place where contract was performed alone will have jurisdiction and not where it was signed or revoked nor where the appointing authority is situate. It was also held that Section 20 of the Code of Civil Procedure had no application.
10. Kamal Pushp's case (supra) was followed in a later decision in Haryana Breweries Limited v. Haryana Beer Agencies and others (58 (1995) ALT 682 = 1995 (2) Arb. LR. 44).
11. In Aligarh Muslim University and another v. Vinay Engineering Enterprises (P) Ltd. and another , the controversy stands settled that proceedings pertaining to all matters connected with an arbitration agreement, award and regarding conduct of arbitration proceedings can be initiated only in a court within whose territorial jurisdiction cause of action has arisen. In that case the contract was executed at Aligarh. Construction work was also to be carried out at Aligarh and even the contract provided that in the event of disputes Aligarh alone will have jurisdiction. The Arbitrator was also from Aligarh and was to function from that place. The mere fact that the contractor was a Calcutta based firm, where no part of cause of action had arisen, it was held that High Court of Calcutta had no jurisdiction in the matter. This decision would also answer the submission of learned counsel for the plaintiff that by virtue of Section 120 of the Code of Civil Procedure. Section 20 thereof is not applicable to the Delhi High Court while exercising original civil jurisdiction. In Aligarh Muslim University's case also same was the position. Calcutta High Court being a Charted High Court, by virtue of Section 120 of the Code, Section 20 of Indian Panel Code is not applicable to that court.
12. In the instant case the questions on which a reference is sought to Arbitrator are enumerated in para 19 of the petition, namely, non payment of the claims of the petitioner, the legality or validity of the action rescinding of the contract, the act of invoking of the bank guarantee and other ancilliary disputes arising out of the execution of the contract. Since the contract was executed at Bhubneshwar and the same was to be performed at Talchar Thermal Power Project. Talcher, Distt. Dhenkanal, Orissa, the mere fact that the respondent Corporation has its head office at Delhi will not confer jurisdiction on this court to entertain the petition under Section 20 of the Arbitration Act, for filling of the arbitration agreement and for making directions for the appointment of the arbitrator. Contract was awarded by the respondent to the petitioner at Bhubneshwar by the respondents' Regional Office. The entire performance of the contract was to be at Orissa. The act of invocation of the bank guarantee was also at Orissa. Bank guarantee was also furnished by Canara Bank, Chandni Chhak, Cuttack. On invocation of the bank guarantee, the amount was also payable at Bhubneshwar.
13. In the circumstances aforementioned, the petition is not at all entertainable in this court and since petition is not maintainable, no interim relief can be granted. Interim relief which has been granted appropriate court having jurisdiction over the matter.
14. Ordered accordingly.