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1978 DIGILAW 550 (CAL)

Sitaram Rice Mills v. Union of India

1978-08-31

SABYASACHI MUKHARJI

body1978
JUDGMENT This is an application under Sec. 20 of the Arbitration Act, 1940. The arbitration clause is contained in Clause 24 of the contract of the lender. The said clause has been set out in extenso in paragraph 9 of the petition. It is of the widest amplitude and it covers any questions, disputes or differences arising under those conditions or the special conditions of contract or in connection with the contract except certain specially exempted matters. Clause 20(3) of the conditions of contract reads as follows: "Jurisdiction of Courts - The courts of the place from where the acceptance of tender has been issued shall alone have jurisdiction to decide any dispute arising out of or in respect of the contract." 2. On behalf of the petitioner, it was contended that there was no averment that the Delhi High Court or the Delhi Court has jurisdiction to entertain this dispute and there was no averment that any part of the cause of action has arisen within the jurisdiction of the Delhi Court. I am, however, unable to accept this contention because paragraph 31 of the affidavit-in-opposition clearly alleges that the acceptance of the tender was issued from New Delhi which is outside the jurisdiction of this Court. Therefore, the position appears to be that a part of cause of action in respect of this contract had arisen both at Calcutta and as well as at Delhi. The question is what is the effect of the aforesaid clause, viz. Clause 20(3) of the Arbitration agreement set out hereinbefore. Under Sec. 20 of the Arbitration Act, 1940, before an arbitration agreement can be directed to be filed, the Court must come to a conclusion that the dispute has arisen to which the agreement relates. Therefore, there must be an adjudication or a finding that disputes or differences to which the agreement relates have arisen. That is a condition precedent under subsection (1) of Sec. 20 of the Arbitration Act, 1940 before directing the filing of the arbitration agreement. This clause, viz. Clause 20 (3) binds the party to go to the forum of that court, that is to say, the place from where the acceptance of tender has been issued. 3. On behalf of the petitioner, it was, however, argued that the choice was only in respect of any dispute arising out of or in respect of the contract. Clause 20 (3) binds the party to go to the forum of that court, that is to say, the place from where the acceptance of tender has been issued. 3. On behalf of the petitioner, it was, however, argued that the choice was only in respect of any dispute arising out of or in respect of the contract. It was submitted that a dispute as to whether a contract should be filed under Sec. 20 of the Arbitration Act, 1940 is not a dispute arising out of or in respect of the contract. I am unable to accept this position because, as I have mentioned before, the first condition required to be fulfilled under Sec. 20 is that there is a dispute arising out of or in respect of the agreement. Therefore, that will be a decision on the question whether there is a dispute arising out of or in respect of the contract. If the parties have chosen to go to a Court having jurisdiction to decide whether a dispute has arisen out of or in respect of the contract then in the absence of any special circumstances, the parties must be made to abide by the said bargain. The principles, are well settled. The parties cannot confer jurisdiction on Courts not having such jurisdiction nor the parties can oust the jurisdiction of a competent Court. But the parties are competent to bargain that out of Courts having jurisdiction one would be preferred to the others. If such is the bargain then the Court would normally hold the parties to that bargain. 4. On behalf of the petitioner, it was contended on the basis of the observations of the Supreme Court in the case (1) Nazir Chand Mahajan &. anr. v. Union of India, AIR 1917 SC 990 at p. 993 that section 20 of the Arbitration Act was merely for the purpose of effectuating the arbitration agreement. Reliance was also placed on certain observations of the Supreme Court in the case of (2) M/s. Parbhat General Agencies v. Union of India 1971 (1) SCR 79 : AIR 1971 SC 2298 for the proposition that Sec. 20 of the Arbitration Act was merely a machinery provision. Reliance was also placed on certain observations of the Supreme Court in the case of (2) M/s. Parbhat General Agencies v. Union of India 1971 (1) SCR 79 : AIR 1971 SC 2298 for the proposition that Sec. 20 of the Arbitration Act was merely a machinery provision. Also reliance was placed on the observations of the Supreme Court in the case of (3) M/s. Dhanrajamal Gobindaram v. M/s. Shamji Kalidas & Co., AIR 1961 SC 1285 at p. 1293-94 in aid of the pro position that Sec. 20 only involved some ministerial act. Some of these aspects of the matter Were considered very exhaustively by Mr. Justice Salil Kr. Roy Chowdhury in the case of (4) Marcandy Prasad Radha Krishna Prasad Pvt. Ltd. v. Union of India (Suit No. 12 of 1975) judgment delivered on 12th September, 1975 where his Lordship came to the conclusion in view of the clause under that contract that disputes as to the filing of the arbitration agreement under Sec. 20 were not disputes arising out of or in respect of the contract. I had also in the case of (5) Hindusthan Laminators v. F. C. I. (Calcutta Division) (Special Suit No. 25 of 1977) judgment delivered on 14 September, 1977 to consider this aspect of the matter. But, there, I felt bound by the ratio of the decision of the Supreme Court in the case of (6) Hakum Singh v. Gammon (India) Limited, AIR 1971 SC 740 and came to the conclusion that clause like present clause 20(3) of the contract binds the parties to the forum they have chosen even in respect of an application under Sec. 20 of the Arbitration Act. In my opinion, the said ratio would have application in the instant case also. As I have noticed that this view is in consonance with the view of the Delhi High Court in the case of (7) S. C. Malik v. Union of India, AIR 1972 Delhi 211 and also the observations of this Court in the case of (8) Sampat Ram Damani v. Toshiba Anand Lamp., (Special Suit no. 12 of 1976) and the decision in the case of (9) The Electrical Manufacturing Co. Ltd. Calcutta & Anr. v. The Cromption Engineering Co. (Madras) Ltd. AIR 1974 Madras 261. 5. 12 of 1976) and the decision in the case of (9) The Electrical Manufacturing Co. Ltd. Calcutta & Anr. v. The Cromption Engineering Co. (Madras) Ltd. AIR 1974 Madras 261. 5. In that view of the matter and in view of the condition, as I have noted, I am of the opinion that the parties have chosen to go to the place from where the acceptance of tender was issued in respect of all disputes arising out of and in respect of contract and one of the main conditions under Section 20 is to adjudicate that there is a dispute arising out of or in respect of the contract by the court and that court alone should have jurisdiction because there arc no special circumstance as such, which would incline not to compel the parties to stick to that bargain. In that view of the matter I am unable to direct the filing of the arbitration agreement in this court. 6. This application, therefore, fails and is accordingly dismissed. This order, however, will not prevent the petitioner from making any appropriate application to the appropriate Court for filing of the arbitration agreement. 7. In view of the facts and circumstances of this case the parties will pay and bear their own costs. 8. There will, however, be a stay of the operation of this order for a fortnight.