Research › Browse › Judgment

Patna High Court · body

1991 DIGILAW 225 (PAT)

National Thermal Power Corporation v. Engineers Enterprises

1991-05-16

S.B.SINHA

body1991
Judgment S.B.Sinha, J. 1. These two civil revision applications involving similar questions of fact and law were heard together and are being disposed of by this common judgment. 2. In both these applications, the impugned order dated 18-1-1991 has been passed by the Subordinate Judge, Ist Court, Saraikella in Title Suit Nos. 7 of 1990 and 8 of 1990 arising out of two applications filed by the plaintiff/opposite party under Sec. 20 of the Arbitration Act, 1940 whereby and whereunder the said learned court rejected on application filed by the petitioner that the said court had no jurisdiction to try the suit in view of Clause 11 of the Agreement entered into by and between the parties thereto ; as a result whereof jurisdiction was conferred only upon the Delhi Courts. 3. The fact of the matter lies in a very narrow compass. A tender dated 17-1-1988 was floated by the petitioner company from Patna. Pursuant to the said notice inviting tender, the opposite party submitted its tender and the same was accepted by the petitioner. The said acceptance of tender was communicated to it at the office situated at Durgapur though the said contract was to be performed at Adityapur within the jurisdiction of the learned court below: Disputes and differences having arisen between the parties, the opposite party invoked the arbitration clause which is contained in Clause 56 of the general conditions of contract. The opposite party filed an application under Section 20 of the Arbitration Act before the court below. The petitioner, however filed an application on 15-9-1990 before the learned court below contending therein that as in terras of Clause 11 of the contract the parties had agreed that they would get the disputes settled by the Courts having jurisdiction within the territory of Delhi, the learned Court below had no jurisdiction to entertain the said application and the said issue may be decided as a preliminary issue. 4. 4. The petitioner filed an objection alleging inter alia therein that as the tender was invited from Patna and acceptance thereof was communicated to Durgapur and the work site being located at Gamharia within the jurisdiction of the learned court below, no part of the cause of action having arisen within the jurisdiction of Delhi Court, the aforementioned Clause 11 is hit by Sec. 28 of the Indian Contract Act and in any event the said provision has no application in the facts circumstances of the case. 5. It was further submitted that as the petitioner-company has a branch office at Adityapur, the court below has the jurisdiction also in terms of Explanation II appended to Sec. 20 of the Code of Civil Procedure. 6. By reason of the impugned order, the learned court below relying upon a decision of the Orissa High Court in Patnaik Industries Pvt. Ltd. V/s. Kalinga Iron Works and Anr. , held that the agreement between parties ousting the jurisdiction of a particular court may not be given effect to if the same is held to be oppressive in character, inequitable and unfair, for the ends of justice. If by reason of the impugned order, therefore, held that it had the jurisdiction to entertain the applications under Sec. 20 of the Arbitration Act filed by the opposite party. 7. Mr. Debi Prasad learned Counsel appearing on behalf of the petitioner submitted that admittedly the registered office of the petitioner company being situated at Delhi, apart of the cause of action for the suit arose at Delhi within the meaning of Sec. 20(c) of the Code of Civil Procedure. Learned Counsel, therefore, submitted that in this view of the matter, the aforementioned Clause 11 of the agreement whereby and whereunder the parties agreed that only Delhi Court alone will have exclusive jurisdiction to settle the dispute between the parties is protected under Sec. 28 of the Indian Contract Act. Learned Counsel in this connection has relied upon Hakam Singh V/s. Gammon (India) Ltd. reported in -- ; Associated Traders and Engineers V/s. F.C.S. Industries (P.) Ltd. reported in -- and A, B. C. Laminari Pvt. V/s. A.P. Agencies Salem . 8. Mr. N. K. Prasad learned appearing on behalf of the opposite party, on the other hand, raised three contentions in support of the impugned order. 8. Mr. N. K. Prasad learned appearing on behalf of the opposite party, on the other hand, raised three contentions in support of the impugned order. Learned Counsel firstly submitted that upon a true construction of the provisions of Sec. 2(c), Sec. 20 and Sec. 31(1) of the Arbitration Act, the court, where the agreement was entered into and/or where the disputes and differences leading to filing of an application under Sec. 20 of the Arbitration Act have arisen would be the court having jurisdiction to entertain an application under Sec. 20 of the Arbitration Act. According to the learned Counsel counsel, therefore, as the contract was entered into at Patna and/or at Durgapur and the site of work being within the jurisdiction of the Saraikella court, the disputes and differences having arisen within the jurisdiction of the learned court below, the courts situated at Delhi will have no jurisdiction under the agreement or under the provisions of the Indian Arbitration Act to settle the dispute and, thus, Clause 11 aforementioned will have no application in the facts and circumstances of this case. Learned Counsel in this connection has relied upon Electric Manufacturing Co. V/s. The Crompton Engineering Co. Ltd. reported in -- Chandra Dhan Singh V/s. State of Bihar and Ors. reported in -- ; Ramkripal Sharma V/s. Union of India and Anr. . 9. Learned Counsel further submitted that in any event, as the petitioner has a branch office, at Adityapur, the cause of action has also Arisen at Adityapur within the meaning of explanation 2 appended to Sec. 20 of the Code of Civil Procedure. Learned Counsel next contended that even assuming that the aforementioned Clause 11 is valid, the same being oppressive in nature the petitioner should be freed from the said burden. Learned Counsel in this connection has relied upon Paradeep Port Trust V/s. Hindustan Mercantile Transport Corporation, , in Ajanta Enterprisers V/s. Hoechst Pharmaceutical Ltd. reported in -- . 10. Learned Counsel further contended that in any event, this Court should not exercise its extraordinary jurisdiction under Sec. 115 of the Code of Civil Procedure keeping in view that the petitioner has not in any way been prejudiced nor would suffer any irreparable injury if the impugned order is allowed to stand. Learned Counsel in this connection has relied upon Renown Biscuit Co. V/s. Kamalanathan, . 11. Learned Counsel in this connection has relied upon Renown Biscuit Co. V/s. Kamalanathan, . 11. Clause 11 of the agreement reads at follows: Settlement of Disputes.-It is specifically agreed between the parties that all differences or disputes arising out of the contract shall be settled by arbitration in accordance with Clause 56 of General Conditions of Contract and the provisions of Indian Arbitration Act, 1940 shall apply. Delhi Court alone shall have exclusive jurisdiction over the same. 12. In this case, the basic facts are not in dispute. 13. Sec. 28 of the Indian Contract Act, 1872 reads as follows: Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent. Exception 1.-This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. When such a contract has been made, a suit may be brought for its specific performance, and if a suit, other than for such specific performance, or for the recovery of the amount so awarded, is brought by one party to such contract against any other such party in respect of any subject which they have so agreed to refer, the existence of such contract shall be a bar to the suit. Exception 2.-Nor shall this section render illegal any contract in writing by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration. 14. This section, therefore, postulates: (A) where a party to an agreement is restricted absolutely from enforcing his rights under or in respect of any contract; (B) by the usual proceedings in the ordinary tribunals ; or (C) where the agreement limits the time within which he may enforce his rights in the aforesaid manner ; (D) such agreement is void to that extent. Exceptions to the section are: (1) where the parties to a contract agree to- (a) refer any dispute that may arise between them. (b) in respect of any subject or class of subjects to arbitration. (c) and also agree that the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred: (2) where the contract is in writing by which two or more persons agree to: (a) refer to arbitration any question between them which had already arisen ; or (b) affect any provision of any law in force for the time being as to reference to arbitration. 15. It is, thus, evident that the object of the aforementioned provision is not to permit parties to oust the jurisdiction of the ordinary court in respect of causes of action arising under a contract but where one or more courts have jurisdiction, there is anything contrary to law in agreement between the parties that the dispute between them should be tried by one of the courts having jurisdiction in the matter. However, thereby neither jurisdiction can be vested in any court nor the jurisdiction of any competent court can be taken away which has the jurisdiction to try the case. Where a contract merely contains a printed clause that the transaction is subject to jurisdiction of a particular court, it cannot be implied that the jurisdiction of all other courts is excluded. 16. It is now well known that if there was a consensus between the parties as to choice of one out of the two courts having jurisdiction there can be no plea of ouster of jurisdiction of the other court. The said agreement does not contravene Sec. 28. 17. This aspect of the matter has been considered in Hakam Singh V/s. Gammon (India) Ltd. . In that case, the relevant clause relating to ouster of courts jurisdiction was as follows: Notwithstanding the place where the work under this contract is to be executed it is mutually understood and agreed by and between the parties hereto that this contract shall be deemed to have been entered into by the parties concerned in the City of Bombay and the Court of law in the City of Bombay alone shall have jurisdiction to adjudipate thereon. It was held in that decision that a corporation includes a company registered under the Indian Companies Act. It was held in that decision that a corporation includes a company registered under the Indian Companies Act. It was further held that in view of explanation 2 appended to Sec. 20(c) of the Code of Civil Procedure; such a company was liable to be sued at Bombay where it had its principal place of business. It was also held that in ordinary course, evidently even a suit will be maintainable at Bombay within the meaning of the aforementioned provision as the corporation has its Head office in as much as in that event also the Corporation would be deemed to be carrying on business at such place also apart from its principal office. 18. Mr. N. K. Prasad, however, submitted that in view of the explanation 2 appended to Sec. 20 of the Code of Civil Procedure read with Clause 13 of the contract, the Supreme Court held that in that case, Bombay courts will have jurisdiction but not in a case where the contract was not entered into at other place. The Supreme Court in that decision held as follows: Since as application for filing an award in respect of a dispute arising out of the terms of agreement could be filed in the Courts in the City of Bombay, both because of the terms of Clause 13 of the agreement and because the respondents had their head office where they carry on business at Bombay, the agreement between the parties that the Courts in Bombay alone shall have jurisdiction to try the proceeding relating to arbitration was binding between them. (underlining is mine for emphasis) In view of the aforementioned decision, the submission of Mr. Prasad cannot be accepted. 19 In Associated Traders and Engineers (P.) Ltd. V/s. V.C.S. Industries Pvt. Ltd., Coimbatore and Anr. , the Supreme Court followed Hakam Singhs case (supra) as also Kiran Singh V/s. Chaman Paswan -- and held: No doubt the contention of the learned Counsel in this behalf is well founded. The learned Subordinate Judge has clearly failed to see that even if no part of the cause of action arose within the limits of the courts situate in Delhi City, nevertheless, these courts would certainly have jurisdiction to entertain the actions of the plaintiffs, inasmuch as the registered office of the petitioner company is situated in the city of Delhi. 20. 20. Without multiplying the decisions on the subject, reference may be made to the latest pronouncement of the Supreme Court in A. B. C, Laminari Pvt. Ltd. and Anr. V/s. A.P. Agencies reported in -- where the Supreme Court considered various earlier decisions. It held: When the Court has to decide the question of jurisdiction pursuant to an ouster clause it is necessary to construe the ousting expression or clause properly. Often the stipulation is that the contract shall be deemed to have been made at a particular place. This would provide the connecting factor for jurisdiction to the courts of that place in the matter of any dispute or arising out of the contract. It would not, however, ipso facto take away jurisdiction of other Courts. It was further held: From the foregoing decisions, it can be reasonably deduced that where such an ouster clause occurs, it is pertinent to see where there is ouster of jurisdiction of other courts. When the clause is clear unambiguous and specific accepted notions of contract would bind the parts and unless the absence of ad idem can be shown, the other Courts should avoid exercising jurisdiction. As regard construction of the ouster clause where words like alone only exclusive and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim expression unius est exclusion alterius, expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has, therefore to be properly construed. 21. In view of the aforementioned authoritative pronouncements of the Supreme Court, there cannot be any doubt that Clause 11 of the agreement as referred to hereinbefore, is not hit by Sec. 28 of the Indian Contract Act. 22. The question, however, which arises for consideration is as to whether this Court, should exercise its jurisdiction under Sec. 115 of the Code of Civil Procedure. 23. It is not disputed that the petitioner has a branch office at Adityapur. 22. The question, however, which arises for consideration is as to whether this Court, should exercise its jurisdiction under Sec. 115 of the Code of Civil Procedure. 23. It is not disputed that the petitioner has a branch office at Adityapur. The petitioner, therefore, could be sued in terms of Explanation 2 appended to Sec. 20(c) of the Code of Civil Procedure even at Adityapur. 24. It is also not disputed that the contract was entered into within the jurisdiction of the Patna Court and the same was to be executed within the jurisdiction of the court below. In A. B. C. Laminari Pvt. Ltd. (supra) it was held that the jurisdiction of the Court in matter of contract will depend upon citus of the contract and the cause of action arising through connecting factors. In that case it was held: However, such will be the result only it can be shown that the jurisdiction to which the parties have agreed to submit had nothing to do with the contract. If on the other hand it is found that the jurisdiction agreed would also be a proper jurisdiction in the matter of the contract it could not be said that it ousted the jurisdiction of the Court. This leads to the question in the facts of this case as to whether Kaira would be proper jurisdiction in the matter of this contract. It would also be relevant to examine if some other courts than that of Kaira would also have had jurisdiction in the absence of Clause 11 and whether that would amount to ouster of jurisdiction of those courts and would thereby affect the validity of the clause. It was further held: In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. It was further held: The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have (been) performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and no where else. 25. The Supreme Court approved the note of caution sounded by M.P. Thakkar, J, as he then was in Snehal Kumar Sarabhai V/s. E.T. Orgn. reported in -- wherein it was observed: the ouster clause could operate as estoppel against the parties to the contract, but it could not tie the hands of the Court and denude it of the powers to do justice. In that case, it was further held: Ordinarily, the courts would respect the agreement between the parties which was borne out of the meeting of their mines out of consideration of convenience, but the Courts were not obliged to do so in every case, and that a new approach to the question deserved to be made where the ouster clause was calculated to operate as an engine of oppression and as a means to defeat the ends of justice. In such a case the free consent may be wanting and injustice may be avoided. 26. In its application under Sec. 20 of the Arbitration Act, the opposite party stated as follows: That there was a clause in the letter of award setting that the Delhi Court would alone have jurisdiction to decide all disputes between the parties. The said clause is not applicable to filing of applications under the Arbitration Act and in view of the deliberate acts of breach committed by the defendants, they have no right to drag the plaintiffs to Delhi for the filing of an application under Sec. 20 of the Arbitration Act thereby imposing prohibitive expenses on them, even though the defendants have a Branch of office at Adityapur itself. 27. In this case, therefore, it is evident that the petitioners eastern regional office is situated at Patna ; the branch office at Adityapur and only the corporate office at New Delhi. 27. In this case, therefore, it is evident that the petitioners eastern regional office is situated at Patna ; the branch office at Adityapur and only the corporate office at New Delhi. The tender was issued from Patna; the tender submitted by the opposite party was accepted at Patna. 28. The opposite party, on the other hand, has its office at Durgapur. It has also not been disputed that all correspondences between the parties were made between the Patna office of the defendant and the Durgapur of the plaintiff. 29. In terms of arbitration agreement as contained in Clause 56 of the General Conditions of Contract and as referred to in the civil revision application itself, the Arbitrators may hold their sittings, at any place they require. According to the petitioner itself, the Chariman of the petitioner-company has referred the matter to arbitration. 30. In such a situation, the question which arises for consideration is as to whether if the learned court below has not denuded itself from exercise of the jurisdiction of this Court, can it be said to be illegal? The answer to the said question evidently has to be rendered in negative. 31. In Pattnaik Industries Pvt. Ltd. V/s. Kalinga Iron Works and Anr. reported in -- , the Orissa High Court followed the decision of Snehal Kumar Sarabhai (supra) and other decision on the point and held: The principle that can be called from the aforesaid decision is that the agreement between the parties does not gust the jurisdiction of the Court, It may operate as an estoppel against the parties but it cannot deprive the Court of its power to do justice. Ordinarily the Court would have regard to the choice of the parties ; where, however, the Court whose jurisdiction has been ousted is satisfied that the stipulation would operate harshly, is oppressive in character, inequitable or unfair, for the ends of justice, it can relief the party of the bargain. The ouster clause can be ignored. The same principle was followed by the Orissa High Court in the Paradeep Port Trust V/s. Hindustan Mercantile Transport Corporation and Anr. reported in -- and in Ajanta Enterprisers V/s. Hoechst Pharmaceutical Ltd. and Ors. . 32. The Gujarat High Court in the Rajasthan Golden Transport Co. P. V/s. United India Fire and General Insurance Co. Ltd. , reiterated the decision in Snehal Kumar Sarabhais case (supra). reported in -- and in Ajanta Enterprisers V/s. Hoechst Pharmaceutical Ltd. and Ors. . 32. The Gujarat High Court in the Rajasthan Golden Transport Co. P. V/s. United India Fire and General Insurance Co. Ltd. , reiterated the decision in Snehal Kumar Sarabhais case (supra). 33. In Renown Biscuit Co. V/s. Kamalanathan, , the Madras High Court after following the decision in Nanak Chand Shadurain V/s. Tinnevelly Tuticorin Electric Supply Co. Ltd. reported in -- and the decision of the Gujarat High Court in Snehal Kumar Sarabhi V/s. Economic Transport Organisation reported in -- held as follows: Thus is will be seen that even if the learned District Munsif of Coimbatore entertains and disposes of the suit it will only be an irregular exercise of jurisdiction and the resultant decree will not be a nullity. In such a situation, when the matter is brought before this Court under Sec. 115 of the Civil P. C. this Court has a discretion not to interfere with the order complained of, unless, if the order is allowed to stand it would occasion failure of justice or cause irreparable injury to the party against whom it was made. In this particular case, having regard to the stake involved and the distance between Coimbatore and Bombay, it will be causing failure of justice if the plaintiff is driven to go to Bombay for the purpose of instituting the suit for the recovery of this small amount. Therefore, even if the decision of the Gujarat High Court is not correct and, therefore, the learned District Munsif is wrong in holding that he had jurisdiction to try the suit, yet I am not bound to interfere with that conclusion in exercise of the powers of this Court under Sec. 115 of Civil P.C. 34. It is well known that this Court may not exercise its discretion while exercising its power under Sec. 115 of the Code of Civil Procedure only because it is lawful to do so. Reference in this connection may be made to Major S.S. Khanna V/s. P.J. Dillon reported in -- and in Brij Gopal Mathur and Anr. V/s. Kishan Gopal Mathur and Ors. . 35. In Chairman and Anr. V/s. Mahadeo Prasad and Ors. Reference in this connection may be made to Major S.S. Khanna V/s. P.J. Dillon reported in -- and in Brij Gopal Mathur and Anr. V/s. Kishan Gopal Mathur and Ors. . 35. In Chairman and Anr. V/s. Mahadeo Prasad and Ors. reported in 1990(1) PLJR 92, it was held: It is now well known that even if there be some jurisdictional error in an order passed by the inferior court, the High Court in exercise of its revisional jurisdiction may refuse to interfere with the same if substantial justice has been done between the parties to the suit. 36. In terms of Proviso (b) appended to Sub-sec. (1) of Sec. 115 of the Code of Civil Procedure, the High Court has been prohibited from exercising its discretion by varying or reversing any order made except where the order if allowed to stand would occasion failure of justice or cause irreparable injury to the party against whom it was made. 37. From the facts as mentioned hereinbefore, it is absolutely clear that no irreparable injury would be caused to the petitioner if the impugned order is allowed to stand. It has accepted the existence of a contract as also existence of a dispute or difference between the parties and only in that view of the matter it has taken a stand that the Chairman of the petitioner-company has already invoked the arbitration clause and referred the dispute and difference to an Arbitrator in terms of the arbitration agreement as contained in Clause 56 of the General Conditions of Contract. 38. In Mohammad Swalleh and Ors. V/s. Third Addl. District Judge, Meerut and Anr. , the Supreme Court held: It is true that there has been some technical breach because if there is no appeal maintainable before the learned District Judge, in the appeal before the learned District Judge, the same could not be set aside. But the High Court was exercising its jurisdiction under Article 226 of the Constitution. The High Court had come to the conclusion that the order of the Prescribed Authority was invalid and improper. The High Court itself could have set it aside. Therefore, in the facts and circumstance of the case justice has been done though, as mentioned hereinbefore, technically the appellant had a point that the order of the District Judge was illegal and improper. The High Court itself could have set it aside. Therefore, in the facts and circumstance of the case justice has been done though, as mentioned hereinbefore, technically the appellant had a point that the order of the District Judge was illegal and improper. If we reiterate the order of the High Court as it is setting aside the order of the Prescribed Authority in exercise of the jurisdiction under Article 226 of the Constitution then no exception can be taken. As mentioned hereinbefore, justice has been done and as the improper order of the Prescribed Authority has been set aside, no objection can be taken. Apparently enough, the exercise of the discretion under Article 226 of the Constitution of India is discretionary. Such is the position in law also with regard to the discretionary exercise of jurisdiction under Sec. 115 of the Code of Civil Procedure. 39 Taking thus all the facts and circumstances into consideration, I am of the view that this Court should not exercise its revisional jurisdiction under Sec. 115 of the Code of Civil Procedure. 40. In the result, these revision applications are dismissed. However, in the facts and circumstances of this case, there will be no order as to costs.