Madras High Court
Om Sakthi Renergies Limited vs Megatech Control Limited on 7 February, 2006
Equivalent citations: AIR 2006 (NOC) 872 (MAD.)
Bench: Ajit Prakash Shah, F.M.Ibrahim Kalifulla
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 07/02/2006
CORAM
THE HON'BLE MR.AJIT PRAKASH SHAH, CHIEF JUSTICE
and
THE HON'BLE MR.JUSTICE F.M.IBRAHIM KALIFULLA
O.S.A.No.205 of 2005
and
C.M.P.No.14938 of 2005
Om Sakthi Renergies Limited,
Rep. by its Managing Director Mr.M.Jayathirth,
H.No.16-11-20/F, Post Office Lane,
Malakpet, Hyderabad 500 03. ..Appellant.
-Vs-
1. Megatech Control Limited,
rep. by its Managing Director Mr.N.Ramkhumar,
Adyar Business Court,
1st Floor No.51,
1st Main Road,
Gandhi Nagar, Adyar,
Chennai 600 020.
2. A.P.TRANSCO,
rep. by its Management,
Vidyut Sowtha,
Somajiguda,
Hyderabad 560 082. ..Respondents.
PRAYER: Appeal filed under Section 37(1)(a) of the Arbitration and
Conciliation Act, 1996 against the order of the learned single Judge passed in
Application Nos.4149 of 2004 and 2232 of 2005, dated 15.07.2005.
!For Appellant :: Mrs.Nalini Chidambaram, Senior Counsel
For Mr.M.Rajaraman.
^For Respondent 1 :: Mr.Sriram Panchu, Senior Counsel
For Mr.Sivam Sivanandraj.
:J U D G M E N T
THE HONBLE THE CHIEF JUSTICE This appeal is directed against the order of the learned single Judge in an application under Section 9 of the Arbitration and Conciliation Act, 1996 (for short the Act) making absolute the prohibitory order restraining the Garnishee, the second respondent in this appeal, from making any payment to the appellant.
2. The appeal arises under the following circumstances: - The appellant is a company incorporated under the Companies Act, 19 56 having its Registered Office at Hyderabad. In or around January, 2003 the appellant had called for tenders for the works of Erection, Testing and Commissioning and Power Evacuation and distribution system for the Biomass Best Power Plant of 6 MW capacity. The tender submitted by the first respondent was accepted, and seven purchase orders were issued by the appellant to the first respondent with annexures specifying the works and prices. As per Clause 11 of the agreement any difference in the interpretation of the terms of the agreement or dispute arising in executing the contract shall be resolved by reference to arbitrators under the provisions of the Arbitration and Conciliation Act, 1996. Clause-14 stipulates that for all practical purposes the jurisdiction of Hyderabad Courts will be final. There is no dispute that the first respondent completed the works covering all the purchase orders and a completion certificate was issued.
3. The first respondent filed Application No.4149 of 2004 before this Court under Section 9 of the Act praying for a prohibitory order restraining the second respondent/Garnishee from paying to the appellant the amounts, and consequently restraining the appellant from receiving monies and directing the second respondent to deposit the amount to the credit of the above application. According to the first respondent, there was an outstanding amount of Rs.60.50 lakhs payable by the appellant to the first respondent. The first respondent sent several letters demanding payment of monies, the receipt of which is not denied by the appellant. However, the appellant failed to pay the monies or replied to any of the letters. Further, according to the first respondent the appellant is in financial crisis. It owes more than Rs.1.6 crore to various persons and all its assets are encumbered.
4. On 24.3.2005 an ex parte prohibitory order came to be passed restraining the Garnishee/second respondent in this appeal, from making any payment to the appellant. The appellant filed a counter in Application No.4149 of 2004 and filed Application No. 2322 of 2005 for vacating the interim order. The appellant contended that the cause of action arose within the State of Andhra Pradesh where the Project was located and executed and from where the payments were made. It has been specifically agreed between the parties under the jurisdiction clause that for all practical purposes the jurisdiction of Hyderabad Courts will be final, and therefore the Courts at Hyderabad will have jurisdiction excluding the jurisdiction of all other Courts. The appellant further contended that the first respondent has totally paid a sum of Rs.1,58,02,685.80 against the total supplies of Rs.1,39,03.280.72 without going into the correctness of quantity and value of supply. The total value of the supply figures is only Rs.1,39,03,280.72 as per the statement of accounts of the first respondent. However, the correct amount due as verified by the Chartered Accountant would be only Rs.1,38,58,280. Thus, the appellant has made excess payment of Rs.19,44,405.80, which is to be reimbursed by the first respondent, and no amount is due to the first respondent. It w as pointed out that there is a Power Purchase Agreement with the Garnishee for a period of 20 years from January 2004 onwards. Any prohibitory order restraining the Garnishee in releasing the payment due to the appellant would cause severe financial hardship and cripple the day-to-day activities of the appellant company.
5. Application Nos. 4149 of 2004 and 2232 of 2005 were heard by the learned single Judge. It seems that at the time of hearing, the objection with regard to jurisdiction was not pressed. The learned single Judge proceeded to hear the parties on merits and came to the conclusion that a prima facie case has been made out for grant of interlocutory reliefs, and by order under appeal made absolute the prohibitory order restraining the Garnishee from making any payment to the appellant.
6. Mrs.Nalini Chidambaram, learned Senior Counsel appearing in support of the appeal has not disputed that the objection to jurisdiction was not raised before the learned single Judge, but she contends that the defect of jurisdiction would go to the root of the matter and strike at the very authority of the Court to pass the order. According to her such defect has always been treated as basic and fundamental, and an order passed by a Court having no jurisdiction is a nullity, and validity of such an order can be challenged at any stage even in execution or collateral proceedings. She submits that in view of Clause 14 of the Purchase Order it is clearly understood and agreed by both the parties that the jurisdiction of the Court in Hyderabad will be final. Therefore, the Courts at Hyderabad alone will have jurisdiction and the first respondent cannot invoke the jurisdiction of this Court under the provisions of Section 9 of the Act for interim measures. She also contends that even assuming that this Court is competent to entertain the application under Section 9, the Court ought to have considered that the first respondent has failed to make out any prima facie case in their favour and no irreparable injury or damage would be caused if the relief of injunction is not passed. According to her the principles of Order 38 Rule 5 and Order 39 Rules 1 & 2 of the CPC would apply, since the prayer is in the nature of attachment before judgment and injunction. She contends that the claim of the first respondent has been seriously disputed and due to the interim order, the appellant is put to untold hardship, as they have to run the units continuously with biomass products to be bought from the farmers, who have to be paid immediately.
7. In reply, Mr.Sriram Panchu, learned Senior Counsel for the first respondent submits that as per Section 21 of the Code of Civil Procedure an objection to jurisdiction ought to have been taken at the earliest opportunity, and failing to do so would amount to waiver. He submits that the objection as to local jurisdiction does not stand on the same footing as the objection to the competence of the Court to try a case. This is not a case where the Madras High Court does not have jurisdiction. The agreements were signed by the first respondent at Chennai and the goods and materials were sent from Chennai and the payments were also made at Chennai, and therefore, this Court has jurisdiction to try the application made by the first respondent. He submits that the issue of jurisdiction was in fact conceded by the appellant before the learned single Judge and should not be subsequently permitted to raise it at the appellate stage. In any event, according to him, the ouster clause relied upon by the appellant is vague, uncertain and ambiguous. The clause does not define what constitutes practical purpose and what is final, and it cannot be construed as exclusion of jurisdiction. He submits that in addition to the several works under the contracts undertaken to perform by the first respondent, the first respondent had also taken works not contracted. Part payments have been made towards the extra work done, and the case of the appellant that there was excess payment is false and after thought. He submits that if the orders are vacated the first respondent will have no other means of safeguarding their interests and will be subjected to tremendous loss.
8. At the outset, we may mention that the agreements were signed by the first respondent at Chennai, goods and materials were sent from Chennai and payments were also made at Chennai. Therefore, a part of cause of action arises at Chennai within the jurisdiction of this Court. Thus, the Court at Madras is a competent Court to entertain the lis but for the ouster clause relied upon by the appellant. However, when the appellant had submitted themselves to the jurisdiction of this Court and went to trial on merits, they are clearly prevented from raising the question of jurisdiction, in view of the provisions of Section 21 of the Code of Civil Procedure. Section 21(1) of the Code of Civil Procedure runs thus:-
No objection as to the place of suing shall be allowed by any Appellate or Revisional Court unless such objection was taken in the Court of first instance at the earliest possible opportunity and in all cases where issues are settled, at or before such settlement, and unless there has been a consequent failure of justice.
9. In order that an objection to the place of suing may be entertained by an appellate or revisional Court the fulfillment of the following three conditions is essential:-
(i)the objection was taken in the Court of first instance;
(ii)it was taken at the earliest possible opportunity, and in cases where issues are settled, at or before such settlement; and
(iii)when there has been a consequent failure of justice.
All these three conditions must co-exist. Now, in the present case, though objection to the jurisdiction was raised in the counter it was not pressed at the time of hearing. If a party does not press the objection to the jurisdiction and allows trial to go on in the usual course on merits, he would be bound by his own conduct, and he should be deemed, in such circumstances, to have waived his objection as to jurisdiction. If he does not press the objection to the jurisdiction at the trial stage, he cannot at the appellate stage be allowed to raise the objection, as Section 21 of the CPC makes it imperative that such an objection has to be raised at the earliest possible opportunity, and in all cases where issues are settled, at or before such settlement. In spite of this if the appellant was not diligent to pursue the objection before the trial Court, but ultimately suffered a judgment, it cannot be said that there has been a consequent failure of justice within the meaning of Section 21 of the Code of Civil Procedure.
10. In Kiran Singh Vs. Chaman Paswan, AIR 1954 SC 340 the Supreme Court laid down the salient principle thus:
The policy underlying Section 11 of the Suits Valuation Act, as also of Sections 21 and 99 of the Code of Civil Procedure, is that when a case has been tried by a Court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds, unless a failure of justice has resulted. The policy of the legislature has been to treat objections as to jurisdiction, both territorial and pecuniary as technical and not open to consideration by an appellate Court, unless there has been prejudice on the merits.
11. In Bahrein Petroleum Co. Ltd. Vs. P.J.Pappu, AIR 1966 SC 634 the Supreme Court held as follows:
Counsel for the plaintiff-respondent submitted that it was open to the defendants to waive this objection, and if they did so, they could not subsequently take the objection. This submission is well founded. As a general rule, neither consent nor waiver nor acquiescence can confer jurisdiction upon a Court, otherwise incompetent to try the suit. But, Section 21 of the Code provides an exception, and a defect as to the place of suing, that is to say, the local venue for suits cognizable by the Courts under the Code may be waived under this Section. The waiver under Section 21 is limited to objections in the appellate and revisional Courts. But, Section 21 is a statutory recognition of the principle that the defect as to the place of suing under Sections 15 to 20 may be waived. Independently of this Section, the defendant may waive the objection and may be subsequently precluded from taking it, see Hira Lal Patni Vs. Sri Kali Nath, 1962 (2) SCR 747 at pp.751-752: AIR 1962 SC 199 at p.201.
12. It is also required to be noted that this is not a case of lack of territorial jurisdiction, but only a waiver of a contractual clause. If a party allows the trial Court to proceed to judgment without raising the objection as to the place of suing and takes a chance of verdict in his favour, he clearly waives the objection and will not subsequently be permitted to raise it. The present proceedings under Section 9 are in effect final proceedings. The objection to the jurisdiction though taken before the trial Court should have been pressed to its normal end and failure to do so would amount to waiver as per Section 21 of the Code of Civil Procedure. It is true that Section 21 of the CPC is not specifically made applicable to the proceedings arising under the Act, but there is no express prohibition against the application of the Code to the proceedings arising out of the Act before the civil Court. In M/s.I.T.I. Ltd. Vs. M/s.Siemens Public Communications Network Ltd., AIR 2002 SC 2308 a two Judge Bench of the Supreme Court has clearly held that the jurisdiction of the civil Court to which a right to decide a lis between the parties has been conferred can only be taken away by a statute in specific terms and such exclusion of right cannot be easily inferred because there is always a strong presumption that the civil Court has the jurisdiction to decide all questions of civil nature, therefore, if at all there has been an inference the same should be in favour of the jurisdiction of the Court rather than the exclusion of such jurisdiction and there being no such exclusion of the Code in specific terms except to the extent stated in Section 37(2) of the Act an inference that merely because the Act has not provided the CPC to be applicable, the Code is inapplicable cannot be drawn.
13. Coming then to the merits of the case, there is no dispute that the appellant has a Power Purchasing Agreement with the Garnishee for 20 years commencing from 24.01.2004 and each month there would be a billing of Rs.80 lakhs approximately. Even, if the first respondent ultimately succeeds in the arbitration proceedings, there will be no difficulty in recovering the money in terms of the ultimate award, since the Garnishee is liable to pay the monthly bills based on the Power Purchasing Agreement, and there is no danger or apprehension that the first respondent could not recover the money, in case they succeed in the arbitration proceedings. In view of the continuous earning from the very same Garnishee at the rate of Rs.80 lakhs per month, there is no apprehension that the first respondent will not be able to realize the money due in case the first respondent gets a favourable award. In our opinion, the first respondent has failed to make out any prima facie case in their favour and no irreparable damage or injury would be caused if prohibitory order was not granted. No irreparable loss would be caused to the first respondent as they can be well compensated by the arbitrator, if ultimately it is found that they are entitled to the claim. Mr. Panchu, however, submitted that the power to grant interim relief cannot be controlled or restricted by invoking the provisions of Order 38 Rule 5 or Order 39 Rules 1 and 2 of the Code of Civil Procedure. He placed strong reliance on the decision of a Division Bench of this Court reported in Ganesh Benzoplast Ltd., Mumbai Vs. Sundaram Finance Ltd., Chennai, 2002 (2) CTC 238. We have carefully analysed the said judgment. The judgment merely states that when Section 9 of the Act does not specifically require any averment in any particular form as contemplated either under Order 38 Rule 5 of the CPC or under Section 18 of the Arbitration Act, 1940, there is no need to make such averment in the affidavit filed in support of the application seeking a prohibitory order. It is true that the provisions like Order 38 Rule 5 or Order 39 Rules 1 and 2 of the Code of Civil Procedure are not contained in the Arbitration and Conciliation Act, 1996 but its principles will be applicable as has been held by the Supreme Court in M/s. I.T.I. Ltd., Vs. M/s. Siemens Public Communications Network Ltd. (supra) wherein it was held that for want of specific exclusion of CPC in the Act of 1996, it cannot be inferred that the Code was not applicable, but that would mean that the provisions of the Code have to be read into as it is, when the Court exercises powers as prescribed under the Act of 1996.
14. Our attention was brought to the decision of the Delhi High Court in Goel Associates Vs. Jivan Bima Rashtriya Avas Samiti Ltd., 2004 (3) R.A.J. 658 where a Division Bench of the Delhi High Court following the decision of the Supreme Court in M/s. I.T.I. Ltd., Vs. M/s. Siemens Public Communications Network Ltd. (supra) held that the procedural aspect provided in the Code of Civil Procedure about which the Act of 1996 is silent, shall be a guiding factor for exercise of power by the Court under Section 9 (ii)(b) of the Act, to determine whether such order deserves to be passed for justice to the cause. We are in respectful agreement with the view taken by the Division bench of the Delhi High Court.
15. In the present case, under the Power Purchase Agreement the Garnishee is liable to pay to the appellant a sum of Rs.80 lakhs per month for a period of 20 years. In our opinion, there is no good ground for issuing interim reliefs as prayed for by the first respondent in view of the continuous earning from the 2nd respondent at the rate of Rs.80 lakhs per month. In the circumstances of the case, therefore, we are of the opinion that the order passed by the learned single Judge cannot be sustained. Accordingly, the appeal is allowed. The impugned judgment and order of the learned single Judge is set aside. No costs. Consequently, connected miscellaneous petition is closed.
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