Research › Search › Judgment

Madhya Pradesh High Court · body

2003 DIGILAW 1306 (MP)

B. B. Verma and Co. v. Clear Water Works Ltd.

2003-12-02

S.P.KHARE

body2003
Judgment ( 1. ) THIS is an application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred to as new Act) for appointment of Arbitrator. ( 2. ) IT is not in dispute that there was an agreement dated 10-10-1990 between the applicant and the non-applicant. A copy of that agreement is Annexure P-1. There is arbitration clause in Para 9. The relevant sub-paras of Para 9 are as under :- ""9. 1. In case of any dispute arising between the client and CWL regarding the civil engineering portion of the work, meaning/interpretation of the clauses of the contract entered into between CWL and the client, the decision of the Arbitrator so appointed under the clauses o the said agreement shall also be binding on the second party in so for their involvement in the work/dispute is concerned and expenses incurred in the arbitration proceedings shall be to the account of second party. 93. For claims beyond Rs. 50,000/- the disputes shall be referred by either party for arbitration as per the Indian Act, 1940. 9. 4. Arbitration between 1st and 2nd party shall be held at Delhi only. " ( 3. ) DISPUTES arose between the parties. The applicant submitted an application under Section 20 of the Arbitration Act, 1940 for appointment of Arbitrator before the 11th Additional District Judge, Jabalpur. That was registered as Civil Suit No. 13-A of 1995. By order dated 7-4-1997 the Court held that it has no territorial jurisdiction to appoint the Arbitrator in view of the words used in several clauses in the agreement. Before this order was passed the new Act had come into force on 26-9-1996. ( 4. ) THE applicants case is that the work in the contract was to be executed at Birsinghpur in District Shahdol of State of Madhya Pradesh and the payments were to be made there. Therefore, according to the applicant, the cause of action arose in Madhya Pradesh. It is also the applicants case that the old Act has been repealed and, therefore, his application under Section 11 of the new Act for appointment of Arbitrator is maintainable. ( 5. ) THE reply of the non-applicant is that this Court has no territorial jurisdiction to entertain the application under Section 11 of the new Act. It is also the applicants case that the old Act has been repealed and, therefore, his application under Section 11 of the new Act for appointment of Arbitrator is maintainable. ( 5. ) THE reply of the non-applicant is that this Court has no territorial jurisdiction to entertain the application under Section 11 of the new Act. It is also stated that the application for appointment of Arbitrator was made under Section 20 of the old Act and that having been rejected on the ground that the Court has no territorial jurisdiction to entertain it, the fresh application for appointment of Arbitrator under Section 11 of the new Act is not maintainable. ( 6. ) THE points for determination are (a) Whether the application under Section 20 of the old Act having been rejected, the fresh application under Section 11 of the new Act is maintainable, and (b) Whether this Court has territorial jurisdiction to entertain the application under Section 11 of the Act. ( 7. ) POINTS (a) and (b): The learned Counsel for both the sides have been heard on the two points referred above. In Shettys Constructions Co. Pvt. Ltd v. Konkan Railway Construction, (1998) 5 SCC 599 : 1998 Arb. W. LJ. 625 (SC), it has been held that in view of Section 85 (2) (a) of the new Act the provisions of the old Act of 1940 shall apply in relation to arbitral proceedings which commenced before the new Act came into force and the provisions of the new Act shall apply in relation to arbitral proceedings which commenced on or after the new Act came into force. It has been further held that in view of Section 21 of the new Act the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondents. ( 8. ) AGAIN in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd. , AIR 1999 SC 3923 : 1999 Arb. W. LJ. 665 (SC), the same view has been taken. The following propositions have been laid down in this decision :- " (1) The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before coming into force of the new Act (The Arbitration and Conciliation Act, 1996 ). W. LJ. 665 (SC), the same view has been taken. The following propositions have been laid down in this decision :- " (1) The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before coming into force of the new Act (The Arbitration and Conciliation Act, 1996 ). (2) The phrase "in relation to arbitral proceedings" can not be given a narrow meaning to mean only pendency of the arbitration proceedings before the Arbitrator. It would cover not only proceedings pending before the Arbitrator but would also cover the proceedings before the Court and any proceedings which are required to be taken under the old Act for award becoming decree under Section 17 thereof and also appeal arising thereunder. (3) In cases where arbitral proceedings have commenced before coming into force of the new Act and are pending before the Arbitrator. It is open to the parties to agree that new Act be applicable to such arbitral proceedings and they can so agree even before the coming into force of the new Act. (4) The new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act comes into force. (5) Once the arbitral proceedings have commenced, it can not be stated that right to be governed by the old Act for enforcement of the award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the award enforced under the old Act that some legal proceedings for its enforcement must be pending under that Act at the time new Act came into force. (6) If narrow meaning of the phrase "in relation to arbitral proceedings" is to be accepted, it is likely to create great deal of confusion with regard to the matters award is made under the old Act. Provisions for the conduct of arbitral proceedings are vastly different in both the old and the new Act. Challenge of award can be with reference to the conduct of arbitral proceedings. An interpretation which leads to unjust and inconvenient results can not be accepted. " ( 9. ) THE learned Counsel for the applicant has cited the decision of the Supreme Court in Kalpana Kothari v. Sudha Yadav, (2002) 1 SCC 203 : 2002 Arb. W. L. J. 170 (SC ). An interpretation which leads to unjust and inconvenient results can not be accepted. " ( 9. ) THE learned Counsel for the applicant has cited the decision of the Supreme Court in Kalpana Kothari v. Sudha Yadav, (2002) 1 SCC 203 : 2002 Arb. W. L. J. 170 (SC ). In that case Section 34 of the old Act and Section 8 of the new Act were under consideration. It was held that the fact that the earlier application under Section 34 of the old Act was got dismissed as not pressed could not constitute any legal impediment for having recourse to the provisions of the new Act for reference of the dispute in a pending suit to the Arbitrator. ( 10. ) IN the present case the proceeding under Section 20 of the old Act for appointment of Arbitrator was pending on the date the new Act came into force. A copy of the application under Section 20 of the Act was served on the non-applicant. The Court passed the order dated 7-4-1997 rejecting the application under Section 20 of the old Act on the ground that it has no territorial jurisdiction to entertain the application under Section 20 of the old Act. An appeal was filed against this order by the applicant but it was withdrawn. Therefore, the order of the District Court that it had no jurisdiction to entertain the application under Section 20 of the old Act became final. That question can not be reopened by making an application under Section 11 of the new Act. ( 11. ) ASSUMING that the earlier order of the District Court regarding the territorial jurisdiction is not final and also assuming that the new Arbitration Act is applicable, the application under Section 11 of the new Act is not maintainable at Jabalpur. Section 11 (12) (b) of the new Act provides that where the matters referred to in Sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to "chief Justice" in those subsections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the Principal Civil Court referred to in Clause (e) of Sub-section (1) of Section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court. Section 2 (1) (e) lays down that "court" means 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. Thus "chief Justice" in any arbitration other than international commercial arbitration means the Chief Justice of the High Court within whose local limits the Principal Civil Court referred to in Section 2 (1) (e) is situate. The Principal Civil Court of that place would have the jurisdiction where the question forming the subject-matter of the arbitration could be decided if the same had been the subject-matter of a suit. In short the District Court having the jurisdiction to decide the civil suit under the provisions of the Civil Procedure Code would also have the territorial jurisdiction to decide the questions arising in the arbitration and the Chief Justice of the High Court of the State in which such a District Court is situate would have the territorial jurisdiction to entertain the application under Section 11 of the Act. ( 12. ) IN the present case the agreement specifically provides that the Court at Delhi would have jurisdiction to decide the suit. The words used in the agreement are: "all disputes and claims, if any, out of or in respect of this agreement are to be settled at Delhi or be triable only in any Competent Court situated at Delhi". The non-applicant company is carrying on business at Delhi and the performance of the contract was to be completed in District Shahdol in the State of M. P. Therefore, the Courts at both the places would have the jurisdiction if the civil suits were to be filed for damages for breach of contract. It is well settled that where two Courts or more have the jurisdiction then Section 20 of the Code of Civil Procedure permits choice of the Court in the contract. In such a case an agreement between the parties that the dispute between them shall be tried in one of such Courts is valid and is not contrary to public policy. In such a case an agreement between the parties that the dispute between them shall be tried in one of such Courts is valid and is not contrary to public policy. [hakam Singh v. Gammon (India) Ltd. , AIR 1971 SC 740 ]. In A. B. C Laminart Pvt. Ltd. v. A. P. Agencies, Salem, AIR 1989 SC 1239 , the Supreme Court has held : "if under the law several Courts would have jurisdiction and the parties have agreed to submit to one of these jurisdictions and not to other or others of them it can not be said that there is total ouster of jurisdiction. In other words, where the parties to a contract agreed to submit the disputes arising from it to a particular jurisdiction which would otherwise also be a proper jurisdiction under the law their agreement to the extent they agreed not to submit to other jurisdictions can not be said to be void as against public policy". The same view has been reiterated in Angile Insulations v. Davy Ashmore India Ltd. , AIR 1995 SC 1766 . In this view of the matter in the present case the application under Section 11 of the new Act is not maintainable before the Chief Justice or his designate in Madhya Pradesh. ( 13. ) THE application is rejected.