Calcutta High Court
I.K. Merchants (P) Ltd. vs Sirpur Papers Mills Ltd. on 17 March, 2005
Equivalent citations: AIR2006CAL84, (2005)3CALLT308(HC), AIR 2006 (NOC) 84 (CAL), 2006 A I H C 1276, (2005) 3 CALLT 499, (2006) 62 ALL LR 50, (2006) 4 ICC 479, (2006) CAL WN 205, (2005) 3 CALLT 308, 2005 ARBILR(SUPP) 124, (2005) CAL WN 481, (2006) 39 ALLINDCAS 297 (CAL), (2006) 2 CIVLJ 595
Author: Ashim Kumar Banerjee
Bench: Ashim Kumar Banerjee
JUDGMENT Ashim Kumar Banerjee, J.
1. Parties before me entered into a contract for supply of goods at Andhra Pradesh. The petitioner before me is carrying on business at Calcutta whereas the respondent is situated at Andhra Pradesh. Clauses 16 and 17 of the contract stipulate as follows:
"16) That for the purpose of jurisdiction of Court, this contract shall be deemed to have been entered into at Sirpur-Kagaznagar, South Central Railway, District - Adilabad, Andhra Pradesh.
17) That in case of any dispute, the decision of the General Manager of our Mills shall be final and binding on you."
2. The petitioners allege that they were not paid their dues, for that they were compelled to file a Civil Suit in the City Civil Court at Calcutta. The said suit has, however, been stayed at the instance of the respondent under Section 34 of the Arbitration Act, 1940. The present application has been made by the petitioner under Section 11 of the Arbitration & Conciliation Act, 1996, inter alia, praying for appointment of Arbitrator. Clause 17 did not stipulate reference to arbitration. However, the parties understood the said clause as such. The respondent has filed the affidavit-in-opposition contending that this Court has no territorial jurisdiction, rather lacks territorial jurisdiction to entertain the present application.
3. Mr. Surajit Nath Mitra, learned counsel appearing in support of this application, contends as follows :
i) Clause 16 of the contract does not put any ouster or fetter on this Court from entertaining the present application in absence of specific words i.e. 'exclusive', 'only', 'alone' etc.
ii) The plea of territorial jurisdiction should have been taken at the earliest opportunity. The respondent did not take such plea before the City Civil Court making the application under Section 34 of the Act of 1940 and as such, they are debarred from taking this plea at this belated stage.
iii) Part of the cause of action arose within the jurisdiction in view of the fact that the goods were supplied from Calcutta being the petitioners' place of business and the money was also payable at Calcutta. Hence, this Court is otherwise competent to entertain this application.
4. Mr. Mitra, in support of his contention has relied upon two decisions of the Apex Court, i.e. in the case of New Moga Transport Company v. United India Insurance Company Ltd. and Ors. and in the case of R.S.D.V. Finance Co. Pvt. Ltd. v. Shree Vallabh Glass Works Ltd. and a single Bench decision of this Court in the case of Prakash Ores Carrier v. Steel Authority of India and Ors. reported in 2003(3) CHN 596.
5. The first Apex Court decision in the case of New Moga Transport Company (supra) has been relied upon by Mr. Mitra for the proposition that the intention of the parties should be curled out from the use of expression of these words 'only', 'alone' or 'exclusive' or the like to exclude jurisdiction of the other competent Courts. Paragraph 19 of this decision has been relied upon by Mr. Mitra in this regard.
6. Citing the second decision of the Apex Court in the case of R.S.D.V. Finance (supra), more particularly, relying upon paragraph 9 of the said decision, Mr. Mitra submits that .mere mentioning of forum would not per se operate as ouster of jurisdiction of other competent Courts having jurisdiction to entertain the dispute.
7. In the third derision cited by Mr. Mitra in the case of Prakash Ores Carrier (supra), the learned single Judge of this Court observed that the question of territorial jurisdiction of this Court to entertain an application under Section 11 of the Act of 1996. in His Lordship's view, cannot be gone into at the time of hearing of the said application.
8. Opposing the application, Mrs. Ipsita Banerjee, learned counsel, contends that this Court, while entertaining an application under Section 11, should give due regard to the intention of the parties expressed in the contract entered into by and between them.
9. In support of her contention, she has relied upon two Apex Court decisions i.e. in the case of A.B.C. Laminart Ltd. and Anr. v. A.P. Agencies, Salem and in the case of Man Roland Druckimachinen AG v. Multicolour Offset and Anr. reported in 2004(2) Company Law Journal 435 SC.
10. To counteract the submissions of Mr. Mitra to the effect that the plea of jurisdiction was not Laken before the City Civil Court, Mrs. Banerjee has cited an Apex Court decision in the case of Union of India v. Surjeet Singh Atwal . In this regard Mrs. Banerjee contends that under the scheme of the Act of 1940, the party would have to approach the Judicial Authority for stay of the said proceeding pending before it and that would not in any way prevent the said party to approach the competent Court under Section 2(c) of the said Act, 1940, subsequently for appointment of Arbitrator.
11. It is well settled principle of law that to apply a ratio decided in a precedent, the Court has to apply the same considering the particular facts and circumstances involved therein. One small departure or dissimilarity of the facts would make a wide difference. Starting from the decision of the Apex Court in the case of A.B.C. Laminart (supra), reiterated in the case of R.S.D.V. Finance (supra) as well as in the case of New Moga Transport Company (supra), the Apex Court observed that when the jurisdiction of a particular Court is selected by the parties as forum, to the exclusion of the other competent Courts, the Court has to honour such wish of contracting parties. Similar view was taken by the Court in the latest decision in the case of Man Roland (supra). However, here the Apex Court elaborated the issue and explained it in paragraph-9 of this decision which is quoted below:-
"9. Undoubtedly, when the parties have agreed on a particular forum, the Courts will enforce such agreement. This is not because of a lack or ouster of its own jurisdiction by reason of consensual conferment of jurisdiction on another Court, but because the Court will not be party to a breach of an agreement. Such an agreement is not contrary to public policy, nor does it contravene Section 28 or Section 23 of the Contract Act. This has been held in Hakkam Singh v. Gammon (India) Ltd. ; A.B.C. Laminart (P) Ltd. v. A.P. Agencies and Modi Entertainment Network v. W.S.G. Cricket Pvt. Ltd.. . The decision of the Delhi High Court in Rajendra Sethia v. Punjab National Bank, relied on by the Commission which holds to the contrary is, therefore, clearly erroneous."
12. In the case of Man Roland (supra) the parties agreed that in case of reference of dispute to arbitration it must be exclusively within the jurisdiction of international Chamber of Commerce, Paris under the rules framed thereunder. The parties therein further agreed that when there was no arbitration the contracting parties would be free to approach any competent Court at the place where the registered office of the defendant in such action situated. In the second eventuality, however, there was no ouster clause. When the Indian party approached the MRTP Commission against the German party. Under the contract the German party took the plea that such action was not maintainable in view of the forum selection clause. The MRTP Commission overruled such contention on the ground that such a condition was violative of Sections, 23 and 28 of the Contract Act. The Apex Court in paragraph 9 observed that such observation and/ or finding of the Commission was wrong. While doing so, the Apex Court observed that ouster of jurisdiction is honoured by the Court as the Court would not be a party to breach of an agreement entered into by and between the parties. The Court further observed that such an agreement was not contrary to public policy. The Apex Court, however, later on observed that a complaint before MRTP Commission was not a proceeding within the meaning of that clause and as such that Clause would not have any application in that case as it was a statutory remedy available under the Act.
13. Taking a some total of the situation my understanding of the law after reading from ABC Laminart to Man Roland is that when there is a forum selection clause excluding jurisdiction of the other competent Courts the party must approach the said Court and the said Court only. If such an exclusion is absent or not clear the Court would have to apply the ratio considering the facts and circumstances of the particular case meaning thereby the Court has to consider the intention of the parties at the time of executing the contract. Borrowing the language of the Apex Court in Man Roland, the Court has to honour the wishes of the contracting parties as it cannot commit a breach of the agreement. In the of ABC Laminart the clause was not clear and ambiguous. In the case of RSDP Finance a similar situation arose. In the said case money paid from Bombay. The cheques were encashed at the defendants. Considering that particular fact, the Apex Court observed that the forum selection clause would not be applicable. In the case of New Moga Transport, the Apex Court considered the clause coupled with the fact of the case and ultimately honoured the forum selection clause which contained the word 'only'.
14. Coming back to the present case, the parties entered into contract admittedly at Andhra Pradesh as appears from Clause 16. It is not the contention of the petitioner that the contract was executed within the jurisdiction of this Court. The goods were supplied admittedly at Andhra Pradesh. The petitioner has pleaded that the respondent has an office at R.N. Mukherjee Road, Calcutta. They, however, could not place a single document to show that any transaction and/or correspondence was exchanged by and between the parties from the said office. On a query made by the Court, Ms. Banerjee submits that the address given in the cause title is a sales office of the defendants and had nothing to do with the transaction the parties had for supply of goods by the petitioner to the respondent. Merely the respondent is having an office at Calcutta which had nothing to do with the subject matter of the dispute, in my view, cannot be considered as a place which can be said to be part of cause of action. Similarly the earlier suit filed in City Civil Court cannot give right to the petitioner ipso facto for maintaining the present proceeding in this Court and the decision of the Apex Court in the case of Union of India v. Surjit Singh Atwal (supra) is a complete answer to the said contention.
15. The contract was executed by the parties outside the jurisdiction of this Court. The materials were supplied outside jurisdiction of this Court. These are the two relevant facts which would constitute a cause of action entitling the petitioner to sue the respondent for the unpaid price. Section 11 read with Section 2(1)(e) of the said Act of 1996 empowers the principal Civil Court having jurisdiction to try and determine the controversy between the parties having territorial jurisdiction therefor, to entertain application for invocation of arbitration clause.
16. With due respect to the Hon'ble Judge and His Lordship's view expressed in the case of Prakash Ores Carrier (supra) the Court while entertaining section 11 application must satisfy itself that it has territorial jurisdiction to entertain the controversy in case a civil suit is filed on the self same cause of action. In my view, Arbitrator is appointed under Section 11 by the Hon'ble Chief Justice. The Arbitrator under Section 16 of the said Act of 1996 is empowered to decide the disputes brought under him as well as the plea of jurisdiction depending upon the scope of reference. The territorial Jurisdiction in my humble view cannot be gone into by the Arbitrator as there cannot be any such Jurisdiction vested upon an Arbitrator. An Arbitrator is approached by the parties to resolve the dispute In a domestic forum. He is only empowered to resolve dispute brought before him by the parties through an agreement and If one party brings any action beyond the scope of the reference and/or agreement that would give rise to a question of jurisdiction which the Arbitrator is competent to decide under Section 16 and nothing else, that Is the law as decided by Konkan Railways .
17. Again with due apology to His Lordship and with all' humility I am of the humble view that the decision in the case of Prakash Ores Carrier is not appropriate and 1 am not In a position to accept the same. I, however, do not feel it necessary to refer this question to a larger Bench in view of the clear mandate of the statute as. well as the Interpretation given by the Apex Court referred to above.
18. Hence, I hold that this application cannot be entertained by me for lack of territorial Jurisdiction. The application thus fails for want of territorial Jurisdiction. It Is made clear that 1 have not gone into the merits of the matter. The petitioner would be at liberty to approach the appropriate Court on the self-same cause of action. In case the petitioner approaches the appropriate Court Within, four weeks from date, they will be entitled to seek, protection under Section 14 of the Limitation Act. If required.
There would be no order as to costs.
Urgent xerox certified copy of this order be supplied to be parties, If applied for, upon compliance of all formalities.