Karnataka High Court
Mr Vivek R Nair vs Tata Elxsi Limited on 17 March, 2025
Author: Hanchate Sanjeevkumar
Bench: Hanchate Sanjeevkumar
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NC: 2025:KHC:11016
MFA No. 4314 of 2016
IN THE HIGH COURT OF KARNATAKA AT BENGALURU R
DATED THIS THE 17TH DAY OF MARCH, 2025
BEFORE
THE HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR
MISCELLANEOUS FIRST APPEAL NO. 4314 OF 2016 (AA)
BETWEEN:
1. MR. VIVEK R NAIR,
S/O RAVEEDRAN NAIR,
AGED 31 YEARS,
KIZHAKKEKARA HOUSE,
UZHAVOOR EAST P.O.
KOTTAYAM DIST,
KERALA-686634.
2. MR. RAVEENDRAN NAIR,
S/O SREEDHARAN NAIR,
AGED ABOUT 63 YEARS,
KIZHAKKEKARA HOUSE,
UZHAVOOR EAST P.O.
KOTTAYAM DIST,
KERALA-686634.
...APPELLANTS
(BY SRI. K.P.THRIMURTHY, ADVOCATE)
Digitally signed AND:
by RAMYA D
Location: HIGH
COURT OF
KARNATAKA 1. TATA ELXSI LIMITED,
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT 1956 AND
HAVING ITS REGISTERED OFFICE AT ITPB ROAD,
WHITEFIELD ROAD,
MAHADEVAPURA POST,
HOODY, BANGALORE-560 048
REPRESENTED BY ITS AUTHORIZED SIGNATORY
SRI. SRIMANTA MUKHERJEE.
2. B.S.N. BHAT,
ADVOCATE & ARBITRATOR
NO.28, 1ST FLOOR, I MAIN,
3RD STAGE, BASAVESWARANAGARA,
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NC: 2025:KHC:11016
MFA No. 4314 of 2016
BANGALORE-560 079.
...RESPONDENTS
(BY SRI. VENKATESH S ARBATTI., ADVOCATE FOR R1;
R2 - NOTICE SERVED)
THIS MFA IS FILED U/S 37(1)(C) OF THE ARBITRATION ACT,
AGAINST THE JUDGMENT AND DECREE DATED 22.3.2016 PASSED IN
A.S.NO.85/2012 ON THE FILE OF THE 6TH ADDITIONAL CITY CIVIL &
SESSIONS JUDGE, BENGALURU CITY, DISMISSING THE SUIT FILED
U/SEC 34 OF THE ARBITRATION AND CONCILIATION ACT AND ETC,.
THIS APPEAL, COMING ON FOR FURTHER ARGUMENTS, THIS
DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR
ORAL JUDGMENT
The appellants who were plaintiffs in the Arbitration Suit have challenged the judgment and decree dated 22.3.2016 passed in AS No.85/2012, whereby the Arbitration Suit filed by the plaintiffs is dismissed.
2. The respondent - company has appointed the first appellant as a Senior Engineer in the first respondent - company situated at Tiruvanantapuram, Kerala State. Accordingly, an arbitral agreement was entered into between the first appellant and the respondent - company and one of the clauses in the agreement is that the first appellant shall work for a minimum period of 18 months and within that time, if the first appellant leaves the job in the respondent - -3-
NC: 2025:KHC:11016 MFA No. 4314 of 2016 company, then a compensatory cost is payable by the appellants to the respondent - company as stipulated in the said clause. Admittedly, the first appellant worked in the respondent - company only for a period of three months. Therefore, the respondent - company has initiated arbitral proceedings for recovery of the said compensatory cost. Also it is a clause in the arbitral agreement that the venue of the arbitral proceedings would be in Bengaluru to the exclusion of all other Courts. Therefore, arbitral proceedings were conducted at Bengaluru and the Arbitrator holding that the appellants herein have violated the terms of the agreement, passed an award directing the appellants to pay a compensatory cost of ` 3,00,000/- to the respondent - company.
3. The appellants being aggrieved by the said award have preferred AS No.85/2012 before the VI Additional City Civil and Sessions Judge, Bengaluru City (for short 'City Civil Court') by invoking Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'A & C Act'). The City Civil Court has dismissed the Arbitration Suit. Being aggrieved by -4- NC: 2025:KHC:11016 MFA No. 4314 of 2016 the same, the appellants have preferred the present appeal by invoking Section 37 of the A & C Act.
4. Learned counsel for the appellants in consonance with the grounds raised in the memorandum of appeal has argued that the Arbitrator does not have jurisdiction to conduct arbitral proceedings at Bengaluru. The agreement between the appellants and the respondent - company was executed at Tiruvanantapuram, Kerala State and the appellants are residing in Kerala State and the first appellant worked in the respondent
- company situated at Tiruvanantapuram, Kerala State. Therefore, no part of the cause of action arose at Bengaluru and therefore, the Arbitrator at Bengaluru did not have jurisdiction. He submitted that the jurisdiction of the Court is statutory and therefore, the jurisdiction cannot be conferred by agreement between the parties. In support of the same, he places reliance on the judgment of the Hon'ble Supreme Court in the case of Hakam Singh v. M/s. Gammon (India) Ltd., reported in AIR 1971 SC 740. He further submitted that the Arbitrator has not issued notices and the appellants have not received notices from the Arbitrator. Had the Arbitrator issued notices, then the appellants would have participated in the -5- NC: 2025:KHC:11016 MFA No. 4314 of 2016 arbitral proceedings. Therefore, the arbitral award passed is behind the back of the appellants. He further submitted that the appellants have been appointed by the respondent - company in the State of Kerala. Therefore, quite naturally left the job in the respondent - company, for which the appellants cannot be found fault with and therefore, imposition of compensatory cost of `3,00,000/- is arbitrary and opposed to public policy. Therefore, on all these grounds prays to set aside both the judgment passed by the City Civil Court in the Arbitration Suit and the award passed by the Arbitrator.
5. On the other hand, learned counsel for the respondent - company submitted that there is difference in Section 20 of the Code of Civil Procedure, 1908 (for short 'CPC') and Section 2(1)(e) with reference to Sections 19 and 20 of the A & C Act . Therefore, he submitted that as per Section 2(1)(e) read with Section 20 of the A & C Act, the venue of the arbitration is as per the clauses in the arbitration agreement and that is having binding nature on both the parties. Therefore, when the appellants on their own will have chosen the venue of the arbitration at Bengaluru, then the appellants could not resile from the said clause in the arbitral agreement. -6-
NC: 2025:KHC:11016 MFA No. 4314 of 2016 In support of said submission, he places reliance on the judgments of the Hon'ble Supreme Court in the cases of Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and others, reported in (2017) 7 SCC 678, Brahmani River Pellets Limited v. Kamachi Industries Limited, reported in (2020) 5 SCC 462 and Vijaya Bank and Another v. Abhimanyu Kumar, rendered vide judgment dated 28.2.2025 passed in WA No.138/2024. He further submitted that the clause in the arbitral agreement is that the first appellant shall work for a minimum period of 18 months in the respondent - company and if, in any event, he leaves the job in the respondent - company, the appellants shall pay a compensatory cost of `3,00,000/- to the respondent
- company and that is correctly held by the Arbitrator. He further submitted that before conducting arbitral proceedings, due notices were issued and served on the appellants, but the appellants did not choose to participate in the arbitral proceedings. Therefore, the arbitral award passed is fully in consonance with the due procedure of law and natural justice. Therefore, justifies the award passed by the Arbitrator and also -7- NC: 2025:KHC:11016 MFA No. 4314 of 2016 the judgment passed by the City Civil Court. Hence, prays to dismiss the appeal.
6. Having heard the submissions of both the counsels, the points that arise for consideration are as follows:
i. Whether under the facts and circumstances of the case, the award passed by the Arbitrator suffers from jurisdiction?
ii. Whether under the facts and circumstances of the case, the arbitral award is opposed to public policy and thus requires interference by this Court including the judgment passed in the Arbitration Suit?
7. The fact that the first appellant was selected and appointed by the respondent - company as a Senior Engineer in the respondent - company situated at Tiruvanantapura, Kerala State, is not in dispute. The first appellant worked in the respondent - company from July 2011 to October 2011 for a period of 3 months. The appellants have not denied the arbitral agreement, in which one of the clauses is that the first appellant shall work at least for a minimum period of 18 months in the respondent - company and if he leaves or -8- NC: 2025:KHC:11016 MFA No. 4314 of 2016 resigns from the job in the respondent - company within that period of 18 months, then the appellants shall pay a compensatory cost of ` 3,00,000/- to the respondent - company. Also there is one clause in the arbitral agreement that, in case of any dispute that arises between the parties, for resolving the said dispute, the venue of the arbitration shall be at Bengaluru to the exclusion of all other Courts. These facts are all not disputed by the appellants and respondents.
8. Learned counsel for the appellants vehemently submitted that the jurisdiction of the Court is as per the statute i.e., according to the provisions of CPC, as per Sections 19 and 20 of the CPC. Therefore, the jurisdiction cannot be conferred by virtue of the agreement. In support of this submission, he places reliance on the judgment of the Hon'ble Supreme Court in the case of Hakam Singh, referred to supra.
9. The judgment in Hakam Singh's case is rendered under the provisions of Arbitration Act of 1940. Section 41 of the Arbitration Act of 1940 stipulates "the provisions of CPC shall apply to all proceedings before the Court and to all appeals under this Act", but thereafter the said Act was repealed and a new enactment of A & C Act of 1996 was -9- NC: 2025:KHC:11016 MFA No. 4314 of 2016 enacted. As per Section 19 of the A & C Act of 1996, the Arbitral Tribunal shall not be bound by the Code of Civil Procedure or the Indian Evidence Act. Therefore, the Arbitral Tribunal is not bound by the CPC or the Indian Evidence Act.
10. Section 2(1)(e) of the A & C Act stipulates as follows:
2(1)(e) "Court" means-
(i)in the case of an 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 ordinary 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 a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;
(ii)in the case of international commercial arbitration, the High Court in exercise of its ordinary 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 a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;
Section 20 of the A & C Act stipulates as follows:
"Section 20. Place of arbitration.
(1) The parties are free to agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral
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NC: 2025:KHC:11016 MFA No. 4314 of 2016 tribunal having regard to the circumstances of the case, including the convenience of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property."
11. As per a combined reading of these two provisions, the parties are at liberty to agree on the place of arbitration. Therefore, the venue of arbitration is as per the agreement between the parties. The object behind it is, for the parties to choose a neutral place of arbitral proceedings. Therefore, venue of the arbitration shall be as per the agreement clause.
12. In the present case, the appellants being parties to the agreement, with all their consciousness have chosen the venue of the arbitration at Bengaluru as stipulated in the arbitration clause. Thereafter, they are not supposed to deviate from the clauses in the agreement. In similar circumstances, the Hon'ble Supreme Court in the case of Indus Mobile Distribution Private Limited, referred to supra and in the case of Brahmani River Pellets Limited has held that the venue of the arbitration should be as per the agreement between the parties.
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NC: 2025:KHC:11016 MFA No. 4314 of 2016
13. The Hon'ble Supreme Court in Indus Mobile Distribution Private Limited, after discussing catena of decisions rendered by it previously has held at para 19 as follows:
"19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction -- that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties."
14. Further, in Brahmani River Pellets Limited's case by referring to the provisions of law and Indus Mobile Distribution Private Limited's case at para 18 has held as follows:
"18. Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the "venue" of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration,
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NC: 2025:KHC:11016 MFA No. 4314 of 2016 the intention of the parties is to exclude all other courts. As held in Swastik [Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., (2013) 9 SCC 32 : (2013) 4 SCC (Civ) 157] , non-use of words like "exclusive jurisdiction", "only", "exclusive", "alone" is not decisive and does not make any material difference."
15. Therefore, when the appellants have agreed in the arbitral agreement choosing the venue of the arbitration at Bengaluru, then the appellants cannot resile from the terms of the arbitral agreement. Therefore, the arbitral proceedings held at Bengaluru cannot be held to be without jurisdiction, but it is completely according to the conscious decision taken by both the parties as per the arbitral agreement. Therefore, the argument canvassed by the learned counsel for the appellants regarding jurisdiction cannot be accepted.
16. As submitted by the learned counsel for the appellants the first appellant has worked only for three months from July 2011 to October 2011, therefore, the award of compensatory cost payable by the appellants is arbitrary and opposed to public policy. It is not disputed that the appellants have entered into agreement by receiving appointment order that the first appellant is willing to work in the respondent - company for a minimum period of 18 months and if resigns or
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NC: 2025:KHC:11016 MFA No. 4314 of 2016 leaves the job, then they are willing to pay the compensatory cost to the respondent - company. The Division Bench of this Court in Vijaya Bank and Another's case, referred to supra, has observed the similar circumstances at paras 4.1 to 5.6. In that case also the respondent in the said writ appeal was appointed as an employee in the appellant - bank and there was a stipulation in the agreement that, in case, the respondent resigns or leaves the job, then the respondent agreed to pay the compensatory cost of `3,00,000/-. The Division Bench of this Court has held at para 5.4 that when the respondent in the said appeal has willfully agreed, then it cannot be said that there was fraud, coercion, duress or undue influence while executing the agreement. It was held in the said appeal that when the respondent on his own willingness and with all consciousness entered into the agreement by accepting the terms and conditions, then he cannot resile from the terms of the agreement. The principles laid down in the said judgment squarely applies to the present case.
17. In the present case also the first appellant has executed the agreement while receiving the appointment order to be appointed as Senior Engineer that he would work for a
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NC: 2025:KHC:11016 MFA No. 4314 of 2016 minimum period of 18 months and in case, that is not honoured, then a compensatory cost would be payable by the appellants to the respondent -company.
18. Therefore, upon considering the facts and circumstances involved in the present case and in the light of principle laid down as discussed above, there is no merit found in the appeal. Therefore, the appeal is liable to be dismissed. Accordingly, it is dismissed.
SD/-
(HANCHATE SANJEEVKUMAR) JUDGE ND List No.: 1 Sl No.: 18