ORDER P.K. Jaiswal, J. Heard on I.A. No. 1484/06, an application for dismissal of revision petition. With the consent of the parties the case is finally disposed of. The defendant No. 2/petitioner is partly aggrieved by order dated 12-12-2005 passed by III Additional District Judge, Gwalior in Civil Suit No. 101-A/05, whereby the learned Additional District Judge dismissed the applications filed u/s 5 read with section 8 of Arbitration and Conciliation Act, 1996 and under Order 7, Rule 11 of Civil Procedure Code. Brief facts of the case are that the petitioner Fittjee Limited is doing the business of coaching of IIT-JEE and State Level Engineering Entrance Test by offering education to aspiring students for success in the said examination/test conducted all over India. In order to expand their business the petitioner invited interested parties by way of advertisements to make investment in the business and promised handsome and lucrative returns on the investments. As per their scheme they were to authorize franchise's to use the trade mark, trade name, design, copyright material and technical know how for the purpose of setting up franchise centers at different places for providing coaching for IIT-JEE and State Level Engineering Entrance Test. The plaintiff-respondent No. 1 entered into an agreement with the petitioner on 4-6-2001 (Annexure A/8) for setting up franchise centre at Gwalior. Clause 2 of Article 1 of the agreement reads as under: 2. This agreement shall come into effect, except for Clause 26 of Article 5 w.e.f. 4-6-2001. This agreement came into effect, except clause 26 of Article 5, w.e.f. 4-6-2001. As per clause 26 of the franchise agreement, the respondent No. 1 shall promote and incorporate a private limited company within two months of execution of agreement. On 3-7-2001 respondent No. 1 formed respondent No. 3/Company. The respondent No. 1 is Director of the said company which is evident from letter dated 31-10-2004 (Annexure A/7). The franchise agreement dated 4-6-2001 was executed between the petitioner and respondent No. 1 at New Delhi. As per the terms of the agreement the centre started operating at Gwalior. There arose a dispute between petitioner and the respondent No. 1. The respondent No. 1 had stopped depositing the fee collected from the student in the designated Bank Account constituted as per the agreement. The petitioner intimated the same by letter dated 21-9-2005.
As per the terms of the agreement the centre started operating at Gwalior. There arose a dispute between petitioner and the respondent No. 1. The respondent No. 1 had stopped depositing the fee collected from the student in the designated Bank Account constituted as per the agreement. The petitioner intimated the same by letter dated 21-9-2005. As per Article 23 of the agreement if any dispute and differences arise between the parties the matter shall be referred to the named arbitrators. The relevant clause of clause 23.1 reads as under: 1. "Arbitration". All disputes and differences of any nature arising out of this agreement, whether during its term or after expiry thereof or prior termination shall be referred to the sole arbitration of any of the following persons. a. Mr. A. K. Behera, Advocate. b. Mr. C. S. Aggarwal, Advocate. c. Mr. Rajesh Gupta, Chartered Accountant. Whose decision shall be final on every matter arising hereunder. In spite of the fact that the above-mentioned Arbitrators are known to the company, the franchisee hereby agrees to their appointment as the Arbitrator without any reservation. It is further agreed that the fact that the above mentioned person may have had occasion to deal with any matter related to this agreement either before or after its execution, shall not disqualify him from acting as Arbitrator. The venue of arbitration shall be Delhi/New Delhi only. The petitioner invoked the arbitration clause by letter dated 5-10-2005 and respondent No. 4 has been appointed as sole arbitrator to adjudicate the dispute and claims. The Arbitration Tribunal entered into reference and commenced the arbitration proceedings and issued notice to the parties by letter dated 7-10-2005 to appear before him on 26-11-2005. The respondent No. 1 after receipt of notice from the arbitrator filed a suit for declaration and permanent injunction to declare that the franchise agreement dated 4-6-2001 and letters dated 5-10-2005 and 7-10-2005 were in effective and void and to restrain them from initiating proceedings as per agreement dated 4-6-2001 and letters dated 5-10-2005 and 7-10-2005. In the suit the respondent No. 1 claimed the following reliefs which reads as under: The petitioner filed an application before the trial Court under sections 8(1) and 5 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to refer the parties to arbitration and refer the dispute to an arbitrator.
In the suit the respondent No. 1 claimed the following reliefs which reads as under: The petitioner filed an application before the trial Court under sections 8(1) and 5 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") to refer the parties to arbitration and refer the dispute to an arbitrator. He also raised the preliminary objection regarding territorial jurisdiction of the trial Court on the ground that agreement was signed and executed at Delhi and as per Article 23(3) of the agreement the parties to the agreement i.e. parties to the suit have agreed that only the Courts at Delhi/New Delhi will have jurisdiction to entertain any case arising out of and/or connected with this agreement whether during the currency of the agreement or before that or after the termination of this agreement. No other Court shall have jurisdiction in such matters. As per the terms of the agreement the Delhi/New Delhi Court alone should have jurisdiction to try the proceedings and Gwalior Court would have no jurisdiction to try the suit. Clause 23.3 reads as under: 3. 'Jurisdiction' Subject to provision contained in Article 23 the parties agree that only the Courts in Delhi/New Delhi in the Republic of India will have jurisdiction to entertain any case arising out of and/or connected with this agreement whether during the currency of the agreement or before that or after the termination of this Agreement. No other Court shall have jurisdiction in such matters. The trial Court by the impugned order rejected the application by holding that the Gwalior Court shall also have jurisdiction to try the suit on the ground that respondent No. 1/plaintiff is residing at Gwalior and the Company formed by the plaintiff as per Clause 26 of Article 5 of the agreement is registered at Gwalior and having its registered office at Gwalior, and therefore, Gwalior Court have also jurisdiction to try the suit. In respect of an application under sections 5 and 8 of the Act the trial Court held that respondent No. 1/plaintiff is assailing the notice issued by the arbitrator and the agreement dated 4-6-2001 entered between the parties, and therefore, dispute cannot be referred to arbitrator and rejected the application of the petitioner. The trial Court also rejected the injunction application of the respondent No. 1.
The trial Court also rejected the injunction application of the respondent No. 1. The petitioner partly aggrieved by the impugned order, whereby his application under Order 7, Rule 11 of CPC and sections 5 and 8 of the Act has been rejected. Learned Counsel for the petitioner submits that as per clause 23(3) of the agreement between the parties that the Delhi/New Delhi Court shall alone have the exclusive jurisdiction to adjudicate upon the dispute and trial Court has no jurisdiction to entertain the suit. In the case of Hakam Sing Vs. Gammon (India) Ltd., the Apex Court has held that where two Courts have under the CPC jurisdiction to try a suit or proceeding, an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy. Such an agreement does not contravene section 28 of the Contract Act. In the case of A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, it was held as under: 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 on or arising out of the contract. It would not, however, ipso facto take away jurisdiction of other Courts. Where an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other Courts should avoid exercising jurisdiction. As regards construction of ouster clause when 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 exclusio 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.
Even without such words in appropriate cases the maxim "expression unius est exclusio 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. This view has been reiterated in M/s. Angile Insulations Vs. M/s. Davy Ashmore India Ltd. and another, . In the case of AIR 2002 2402 (SC) held that it is open for a party for his convenience to fix the jurisdiction of any competent Courts to have their dispute adjudicated by that Court alone. In other words if one or more Courts have the jurisdiction to try any suit, it is open for the parties to choose any one of the two competent Court to decide their disputes. In case parties under their own agreement expressly agree that their dispute shall be tried by only one of them then the parties can only file the suit in that Court alone to which they have so agreed. In the instant case as per clause 23.3 of the agreement, the parties have bound themselves that in any matter arising between them under the said agreement, it is the Courts in Delhi/New Delhi alone which will have jurisdiction. Once parties bound themselves as such it is not open for them to choose a different jurisdiction as in the present case by filing the suit at Gwalior. Such a suit would be in violation of the agreement and it is the Courts at Delhi/New Delhi alone shall have jurisdiction to try and adjudicate the dispute between the parties. Learned Counsel for respondent No. 1 submits that franchise agreement dated 4-6-2001 was never executed at New Delhi and provisions of sections 5 and 8 of the Act are applicable only when valid agreement containing arbitration clause is accepted between the parties. He submitted that there was no compliance of clause 26 of Article 5 of the agreement and plaintiff is not bound by such agreement.
He submitted that there was no compliance of clause 26 of Article 5 of the agreement and plaintiff is not bound by such agreement. It is also averred by the respondent No. 1 that respondent No. 4 is not authorised by the petitioner/company to sign and execute the agreement on behalf of the petitioner. He lastly submitted that plaintiff/respondent No. 1 residing at Gwalior and respondent No. 2 is having registered office at Gwalior, and therefore, Gwalior Court is also having jurisdiction to try the suit and trial Court has not committed any error in rejecting both the applications. In respect of arbitration clause he submitted that respondent No. 2 was not party to the agreement dated 4-6-2001 and as such arbitration clause will not be applicable between the parties. It is not disputed that plaintiff/respondent No. 1 is Director of respondent No. 2 and the said company was incorporated on 3-7-2001. As per clause 26 of Article 5 of the agreement it is also not disputed that franchise centre at Gwalior is running by respondent No. 2/Company and respondent No. 1 being a Director of the said company is running the centre which is evident from letter dated 31-10-2004 (Annexure A/7) which is signed by the plaintiff Sandeep Gupta as Director of respondent No. 2. This shows that as per clause 26 of Article 5 the condition was incorporated by the plaintiff in terms and condition of the agreement and it is the plaintiff who is running the company as Director of the Company and plaintiff very specifically agreed that the terms of the franchise agreement shall also include the Company which is formed by the plaintiff under clause 26 of Article 5 of the franchise agreement. From the perusal of the relevant clause of the plaint it is clear that the plaintiff is claiming relief only against the petitioner which is reproduced hereinabove. Before the trial Court except the petitioner all the parties were proceeded ex parte. Learned Counsel for the petitioner placed reliance on the decision of the Apex Court in the case of Sukanya Holdings Pvt. Ltd. Vs.
Before the trial Court except the petitioner all the parties were proceeded ex parte. Learned Counsel for the petitioner placed reliance on the decision of the Apex Court in the case of Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya and Another, , held that where a suit is commenced in respect of a matter which falls partly within the arbitration agreement and partly outside and which involves parties some of whom are parties to the arbitration agreement while some are not so and held that there is no provision in the Arbitration and Conciliation Act, 1996 for bifurcating the suit into two parts, one to be referred to arbitration for adjudicator, and the other to be decided by the Civil Court and held that section 8 of the Act is not attracted. In the instant case the suit is filed by the respondent No. 1 in respect of the matter which falls within the arbitration agreement and therefore the entire subject-matter will be subject to arbitration agreement. In the case of Dharma Prathishthanam Vs. Madhok Construction Pvt. Ltd., the question that arose before the Supreme Court was whether, in the light of a general arbitration provision as in clause 35 of the agreement the respondent could have unilaterally appointed an arbitrator without the consent of the appellant and could have made a reference to such arbitrator again without the reference of disputes having been consented to by the appellant. The arbitrator or arbitral Tribunal under the scheme of 1940 Act is not statutory. In the instant case the respondent No. 1 executed an agreement on 4-6-2001 and as per the provisions of 1996 Act agreed for the named arbitrators as stated in clause 23.3 of the agreement, and therefore, the case of Dharma Prathishthanam (supra) will not in any way help the respondent No. 1. In the case of K.K. Modi Vs. K.N. Modi and Others, , memorandum of understanding was signed on 24-1-1989. In the said MOU the experts appointed for valuation and preparing scheme for division of companies owned by the family between the two groups. Clause 9 of MOU providing that disputes, clarifications etc. in respect of implementation of the agreement shall be referred to the Chairman, Industrial Finance Corporation of India (IFCI) whose decision shall be final.
In the said MOU the experts appointed for valuation and preparing scheme for division of companies owned by the family between the two groups. Clause 9 of MOU providing that disputes, clarifications etc. in respect of implementation of the agreement shall be referred to the Chairman, Industrial Finance Corporation of India (IFCI) whose decision shall be final. Hon'ble Apex Court held that the said clause does not constitute an arbitration agreement but amounts to reference of issues to an expert for decision. The MOU was signed in the year of 1991 and at that time Arbitration Act, 1940 was in force, and therefore, it is rightly held by the Apex Court that clause 9 of MOU does not constitute an arbitration agreement. Here in the instant case the agreement was signed by the parties in the year of 2001 i.e. after coming into force of Arbitration and Conciliation Act, 1996, and therefore, the above decision will also not be applicable in the present facts and circumstances of the case. Learned Counsel for the respondent No. 1 further relied on a decision of the Apex Court in the case of U.P. Rajkiya Nirman Nigam Ltd. Vs. Indure Pvt. Ltd. and others, . The facts of the above case are different and as such the ratio decided by the Hon'ble Apex Court will not be applicable in the present facts and circumstances of the case. Learned Counsel for the respondent No. 1 placed reliance on the decision of the Apex Court in the case of M/s. Angile Insulations Vs. M/s. Davy Ashmore India Ltd. and another, . It was held by the Apex Court where two Courts having jurisdiction consequent upon a part of the cause of action arising therewith, if parties stipulate in the contract to vest jurisdiction in one such Court to try the disputes arising between themselves and if the contract is unambiguous, explicit and clear and is not pleaded to be void and opposed to section 23 of the Contract Act, then suit would lie in the Court agreed to by the parties and the other Court will have no jurisdiction even though cause of action arose partly within the territorial jurisdiction of that Court.
The Apex Court in the case of M/s S.B.P. and Company vs. M/s Patel Engineering Ltd. and another, 2006(1) MPJR 1 has held that the power exercised by the Chief Justice of the High Court or the Chief Justice of India is not administrative power. It is judicial exercise of power. The Apex Court further held that once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of section 37 of the Act or in terms of section 34 of the Act. In the above judgment the decision in M/s. Konkan Railway Corpn. Ltd. and Another Vs. M/s. Rani Construction Pvt. Ltd., was overruled. Section 5 of the Act reads as under: 5. Extent of judicial intervention. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. From the perusal of above it is clear that mandate of section 5 does not permit any judicial authority to intervene in the matter specified under provisions of Arbitration Act except where so provided in the Act. In the instant case the dispute is already referred to the respondent No. 4 and arbitral tribunal initiated proceedings and issued letter to the parties to appear before him and thus the suit for declaration and injunction filed by the respondent No. 1 is not maintainable by reasons of the provisions of section 5 and 8 of the Act and trial Court cannot have jurisdiction to go into question that there does not exit any arbitration clause or the arbitral proceedings before the arbitral tribunal is without jurisdiction. For the reasons stated above, the impugned order dated 12-12-2005 is set aside and applications under Order 7, Rule 11 of CPC and u/s 5 read with section 8 of Arbitration and Conciliation Act are allowed. In the result, the revision is allowed. Final Result : Allowed