Research › Search › Judgment

Andhra High Court · body

2013 DIGILAW 892 (AP)

Bharath Sanchar Nigam Limited v. S. Satya Durga Dass

2013-10-11

L.NARASIMHA REDDY, P.NAVEEN RAO

body2013
JUDGMENT (L. Narasimha Reddy, J.) An important question pertaining to the territorial jurisdiction of the Courts to entertain an application filed under Section 36 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) for setting aside the award arises for consideration, in this case. The genesis of the appeal and revision is : 2. The 1st respondent was entrusted with civil work of constructing a building at Cherla, in Khammam District, by the appellant herein. Since the office of the appellant, covering Khammam district also, is at Vijayawada, an agreement was entered into, at that place on 28.03.2002. The agreement contained a Clause that provides for resolution of disputes through arbitration. The 1st respondent addressed a letter on 30.09.2004 to the Chief Engineer of the appellant, with a request to appoint an arbitrator. The appellant appointed one Sri Gurbax Singh as an arbitrator. However, before the factum of appointment of arbitrator was communicated to him, the 1st respondent filed an Arbitration Application No. 7 of 2005 before the Chief Justice, High Court of Andhra Pradesh for appointment of an arbitrator. Justice Sri S.Dasaradharami Reddy, a retired Judge of this Court (the 2nd respondent herein) was appointed as an arbitrator. 3. The 1st respondent on the one hand, and appellant on the other hand submitted their respective claims and replies, before the 2nd respondent. An award was passed on 28.05.2007 and it was amended on 19.06.2007. 4. The appellant filed A.O.P. No.1 of 2008 before the Court of Principal District Judge, Krishna at Machilipatnam under Section 34 of the Act with a prayer to set-aside the award. The 1st respondent entered appearance and contested the A.O.P. One of the grounds raised by him was that the trial Court does not have territorial jurisdiction to entertain the A.O.P. According to him, the appointment of arbitrator has taken place at Hyderabad and it is only in a Court at Hyderabad that the petition under Section 34 of the Act could have been filed. Reliance was placed upon the Judgment of this Court in ParamitaConstructions Private Limited, Hyderabad v. UE Development India (P) Limited, Bangalore (2008(4) ALD page 106). The trial Court accepted the contention of the 1st respondent and returned the A.O.P. through its order dated 14.08.2012 with an observation that appellant can present the same, in a proper court, that has jurisdiction to entertain the petition. The trial Court accepted the contention of the 1st respondent and returned the A.O.P. through its order dated 14.08.2012 with an observation that appellant can present the same, in a proper court, that has jurisdiction to entertain the petition. C.M.A. No.604 of 2013 is filed against the said order of the trial Court. 5. After the A.O.P. was returned by the Court of Principal District Judge, Krishna, the 1st respondent filed E.P. No.83 of 2012 in the Court of III Additional Chief Judge, City Civil Court, Hyderabad for execution of the award. The executing Court issued a notice proposing to bring the property to sale on 01.07.2013. C.R.P. No.2824 of 2013 is filed against the said notice. 6. Dr.Pundla Bhaskara Mohan, learned counsel for the appellant submits that the view taken by the trial Court regarding the jurisdiction to entertain the application under Section 34 of the Act, cannot be sustained in law. He submits that the application filed before the Hon’ble Chief Justice of this Court is only the one for appointment of arbitrator under Section 11 of the Act and that event cannot decide the jurisdiction of a Court to entertain the application under Section 34 of the Act. He submits that if one goes by the text of Section 2 (e), it becomes clear that in determining the forum that can entertain the O.P., the proceedings must be equated to a suit and it is only the Principal Civil Court of the District, that would have jurisdiction to entertain the suit, which can entertain the O.P. He submits that in the instant case the 1st respondent is a resident of Vijayawada and the agreement was also executed at that place. The learned counsel further submits that the purport of the Judgment in ParamitaConstructions Private Limited is totally different and it was in the limited context of filing under the Act. 7. Sri Ravi Kumar Toleti, learned counsel for the 1st respondent on the other hand, submits that once the arbitrator has been appointed through an order passed by the High Court, the other consequential proceedings in respect of the arbitration must be in the Principal District Court i.e., Chief Judge, City Civil Court at Hyderabad and that the view taken by the trial Court is correct. He submits that even Section 42 of the Act, mandates that arbitration commences with the institution of proceedings in the particular Court and all the proceedings must be instituted in the same Court and since the High Court of A.P. does not have the original jurisdiction, the only alternative is to file the O.P. in the Court of the Chief Judge, City Civil Court, Hyderabad. 8. The facts, that gave raise to the filing of the O.P. under Section 34 of the Act before the trial Court, have already been stated within the permissible limits of brevity. After receiving notice in the suit, the 1st respondent entered appearance and raised an objection as to the jurisdiction of the trial Court. His contention was accepted and the O.P. was returned. 9. The trial Court took the view that the 2nd respondent i.e., arbitrator was appointed through an order of the High Court and it is only a Court at Hyderabad, that can have jurisdiction. 10. The points that arise for consideration are: as to a) which is the civil Court that can entertain an O.P. filed under Section 34 of the Act?, and b) whether the view taken by the trial Court can be countenance? 11. The Act brought about substantial improvement in the process of Arbitration in several respects. One of the objectives for enacting the 1996 Act was to minimize the interference of the Courts with the arbitration proceeding and to standardize the procedure in respect of arbitrations involving the companies of foreign origin. The procedure for execution of awards was also simplified. The necessity to file an independent suit for making the award, as rule of court, was done away with. Straightaway an E.P. can be filed for enforcement of an award. 12. Under the previous dispensation, suits for appointment of an arbitrator or for setting aside of an award, or for making the awards, as rule of the Court, were to be filed in the concerned civil Courts depending upon the territorial and pecuniary jurisdictions. In contrast, the Courts below the level of District Judge are rendered without jurisdiction under the new Act. 13. In contrast, the Courts below the level of District Judge are rendered without jurisdiction under the new Act. 13. The word ‘Court’ is defined in Section 2(e) as under :- “(e) "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;” 14. It is also necessary to take note of Section 42 of the Act in this behalf. It reads :- “42. Jurisdiction : Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.” 15. A combined reading of these provisions that leads to the conclusion that, a) the proceedings, to be instituted under the relevant provisions of the Act must be treated as a suit, b) the Court in which the proceedings are to be instituted must be chosen accordingly, and c) the same Court, which has entertained the proceedings at one stage shall continue to have jurisdiction in respect of the subsequent proceedings. The only difference would be that irrespective of the pecuniary value of the proceedings, the institution must be invariably in District Court or its equivalent. 16. Once the proceedings are to be treated as a suit, the principles underlying Sections 16 to 20 of C.P.C. become relevant in determining the proper Court, for institution of the proceedings. It is needless to mention that the place of residence of a defendant, or the place, where the cause of action has arisen, become relevant. Obviously guided by these factors, the appellant filed the suit in the Court of Principal District Judge, Krishna at Machilipatnam. 17. It is needless to mention that the place of residence of a defendant, or the place, where the cause of action has arisen, become relevant. Obviously guided by these factors, the appellant filed the suit in the Court of Principal District Judge, Krishna at Machilipatnam. 17. The basis for the contention of the 1st respondent as to the territorial jurisdiction was that the arbitrator i.e., 2nd respondent was appointed on the strength of an order passed by the Hon’ble the Chief Justice of this Court, in A.A. No.7 of 2005 and once the arbitrator has been appointed by the High Court at Hyderabad, it is only the Principal District Court at that place trial can entertain the suit. Obviously, the plea is referable to Section 42 of the Act. 18. There is a subtle difference, which needs to be noticed in this regard. While the proceedings for setting aside an award under Section 34, or for execution of the Award under Section 36, are to be filed in the Courts as defined under Section 2(e), an application for appointment of an arbitrator under Section 11 has to be filed before “the Chief Justice of the High Court or any person or institution, designated by him”. Section 11(4) of the Act makes this aspect very clear. It reads 11. Appointment of arbitrators : (1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties. (2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. (3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator. (4) If the appointment procedure in sub-section (3) applies and_ (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment; the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. 19. 19. The Parliament has chosen the expression “Chief Justice” and not the High Court, notwithstanding the fact that the Chief Justice is invariably of a High Court. It is also necessary to note that those who are to be authorized by Chief Justice are also mentioned as ‘person’ or ‘institution’ as distinguished from, ‘Court’. 20. In case the Parliament wanted to confer the power of appointment of an arbitrator on a Court, it could have certainly employed that word or expression. When it has omitted to use the expression “High Court” also, even while referring to the “Chief Justice”, the intention is clear to the effect that appointment of arbitrator is a separate activity, totally different from the adjudication of disputes, in relation to the awards. Further, the nature of consideration of an application under Section 11 is bereft of any examination of merits. It is limited to one of verification of existence of arbitration clause and compliance or otherwise of the request made by one party, to the other, for appointment of an arbitrator. The omission to employ the word “Court” in the length and breadth of Section 11 on the one hand and similar omission to refer to the word ‘Chief Justice’ in Section 2(e) and Section 42 is not without reason. Both operate in separate compartments and there is no overlapping with each other. Therefore, the activity of appointment of arbitrator under Section 11 can in no way, be treated as a step referred to, under Section 42 of the Act. 21. The matter can be viewed from another angle. If the appointment of an arbitrator by the Chief Justice or his nominee is to be treated as an act of the Court, the literal interpretation of Section 42 would lead to several complications and in some cases to absurdity. For an instance, the High Court of Andhra Pradesh does not have original jurisdiction to entertain suits or ordinary Original Petitions under Section 34 of the Act. If on account of the fact that the arbitrator, was appointed by the Chief Justice in exercise of power under Section 11, an O.P. for setting aside the award also. It must be entertained by the High Court, that too, by the Chief Justice, notwithstanding to the fact that the High Court is not conferred with the original jurisdiction. If on account of the fact that the arbitrator, was appointed by the Chief Justice in exercise of power under Section 11, an O.P. for setting aside the award also. It must be entertained by the High Court, that too, by the Chief Justice, notwithstanding to the fact that the High Court is not conferred with the original jurisdiction. Same would be the case with an application filed under Section 36 of the Act for enforcement of the award, where the procedure stipulated under the C.P.C. must be followed. Even the applications under Section 9 for interim measures must be entertained by the High Court. A logical extension of this could be that the definition under Section 2(e) would become redundant. It is a well settled principle of interpretation that it should not render a provision contained in an enactment, redundant, while construing another provision. Each provision must be permitted to operate in its own way; and no provision can be rendered otiose in the process of interpreting another. 22. The principle uniformly followed in this regard needs to be taken note of. Maxwell, in his treatise on Interpretation of Statutes, observed, “Where the language of a statute, in its ordinary construction leads to a manifest contradiction, of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modified the meanings of the words, and even the structure of the sentence”. In State of Punjab v. Ajaib Singh ( AIR 1953 SC 10 ), the Supreme Court held, If the language of the Article is plain and unambiguous and admits of only one meaning then the duty of the court is to adopt that meaning irrespective of the inconvenience that such a construction may produce. If, however, two constructions are possible, then the court must adopt that which will ensure smooth and harmonious working of the Constitution and eschew the other which will lead to absurdity or give rise to practical inconvenience or make well-established provisions of existing law nugatory”. 23. If, however, two constructions are possible, then the court must adopt that which will ensure smooth and harmonious working of the Constitution and eschew the other which will lead to absurdity or give rise to practical inconvenience or make well-established provisions of existing law nugatory”. 23. Further, sub-section 12 of Section 11 of the Act makes abundantly clear that the expression Chief Justice in sub-sections 4, 5, 6, 7, 8 and 10 of Section 11 of the Act shall be construed as reference to the Chief Justice of the High Court, within whose territorial jurisdiction limits the Principal Civil Court referred to in Clause (e) of subsection (1) of Section 2 of the Act is situated. The provision reads (12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in an international commercial arbitration, the reference to "Chief Justice" in those subsections shall be construed as a reference to the "Chief Justice of India". (b) 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 sub-sections 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. 24. This clarifies the doubt, if any, that the seat of High Court does not have any bearing upon the process of choosing the forum, under Section 2(1)(e) of the Act. 25. The trial Court placed heavy reliance upon the judgment of a learned single judge of the Court in Paramita Constructions Private Limited, Hyderabad v. UE Development India (P) Limited, Bangalore (2008(4) ALD page 106). That was a case, in which an application under Section 11 of the Act was filed before the High Court, with a prayer to appoint an arbitrator. On finding that the place of arbitration under the agreement was Bangalore, the learned judge refused to entertain the application. At one place it was mentioned that the place of arbitration would determine the Court, in which the application under Section 11 of the Act can be filed. 26. On finding that the place of arbitration under the agreement was Bangalore, the learned judge refused to entertain the application. At one place it was mentioned that the place of arbitration would determine the Court, in which the application under Section 11 of the Act can be filed. 26. The ratio of the said judgment does not apply to the facts of the case for more reasons than one. The first is that the learned judge, who was dealing with the application was acting in the capacity of “person”, designated by the Chief Justice under Section 11(4)(b) of the Act. As observed in the preceding paragraphs, it is a totally different exercise and he cannot be treated as a ‘Court’ under Section 2(e). The second is that applications under Section 11 are not guided by the principles contained in Section 2(e). The third is that the place of arbitration does not have any relevance whatever, in the context of choosing the forum in the context of Section 2(e). The last of the aspects mentioned above need some elaboration. 27. Arbitration may be conducted at any place and in a given case, it can be in more places than one. The convenience of the Arbitrator or the parties would decide this aspect. The expression “place of arbitration” is not defined under the Act. However, it assumes significance, if it takes place in foreign country, giving rise to a “foreign award” as defined under Section 44 of the Act; which reads : 44. Definition:-In this Chapter, unless the context otherwise requires, "foreign award" means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960 - (a) in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies; and (b) in one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies. 28. The arbitration, in respect of an indigenous dispute, as observed earlier, can be undertaken at any place, depending upon the convenience of the Arbitrator and the parties to the arbitration. 28. The arbitration, in respect of an indigenous dispute, as observed earlier, can be undertaken at any place, depending upon the convenience of the Arbitrator and the parties to the arbitration. In a given case, even where both the parties are at Hyderabad or Vijayawada, they may choose an arbitrator who is at Delhi, because of his specialized knowledge in the concerned sphere of activity. Such Arbitrator, who is basically stationed at Delhi may conduct the proceedings at any place of his choice including the place at which the work is in progress or was executed. Neither under the 1940 Act nor under the present Act, the place of arbitration is accorded any primacy. Once an award is passed, the proceedings that are to be instituted before a Court are to be guided by the principles contained in C.P.C. 29. Another important aspect, which needs to be noted is that the freedom of the parties to an agreement, to choose the place of arbitration is totally different from their freedom to choose the Court, in which the proceedings are to be initiated. While the former is not guided by any factor whatever, the later is circumscribed by the principles contained in the C.P.C. It is quite possible that more Courts than one can have territorial jurisdiction to decide a matter, depending on the relevant parameters. For instance, in a dispute between ‘A’ a resident of Hyderabad and ‘B’ a resident of Chennai, arising out of an agreement, executed at Delhi, in relation to the subject matter at Bangalore; a) the Court at Chennai can have jurisdiction because the defendant is residing within its jurisdiction, b) the Court at Bangalore may have jurisdiction because the subject matter is situated in its territorial jurisdiction and c) the Court at Delhi may have jurisdiction because the agreement between ‘A’ and ‘B’ is signed at that place. The parties have freedom to choose any one of those three courts for institution of the proceedings; in which case, proceedings cannot be instituted in the other two Courts. However, they do not have the liberty to choose a Forum other than the one of the three. This much, about the judgment in “Paramita’s case”. 30. The filing of application A.A. No. 7 of 2005 by the 1st respondent at Hyderabad was not because the 1st respondent has chosen any forum, as such. However, they do not have the liberty to choose a Forum other than the one of the three. This much, about the judgment in “Paramita’s case”. 30. The filing of application A.A. No. 7 of 2005 by the 1st respondent at Hyderabad was not because the 1st respondent has chosen any forum, as such. An application under Section 11(4) could have been filed only before the Chief Justice of this Court. As observed in the preceding paragraphs, the filing of the said application does not have any relevance or bearing for choosing the forum to institute an O.P. under Section 34. Even if it is assumed that the A.A. No.7 of 2005 was filed because the principal office of the appellant is situated at Hyderabad, the principle laid down by the Supreme Court M/s.Patel Roadways Limited, Bombay v. M/s. Prasad Trading Company (A.I.R. 1992 S.C. 1514) becomes relevant. Their lordships held that the proceedings can be initiated by a Corporation in a Court within whose jurisdiction its branch office is situated. 31. The learned counsel for the 1st respondent relied upon the judgment rendered by Division Bench of this Court in SalarjungMuseum, Hyderabad v. Design Team Consultants Private Limited ( 2010(1) ALT 435 (DB). That was a case in which the arbitration agreement was entered into between the appellant and the respondent at Delhi for executing the work at Salarjung Museum at Hyderabad. The arbitrator was appointed by the Chief Justice of Delhi High Court under Section 11 of the Act. The award was challenged in the Court of Chief Judge, City Civil Court, Hyderabad under Section 34 of the Act. The trial Court returned the O.P. taking the view that it does not have jurisdiction to entertain the O.P. In appeal, this court took the view that once the arbitrator was appointed by Delhi High Court and the arbitration has taken at Delhi, O.P. could not have been presented in the Court at Hyderabad. Reliance was placed upon the judgment in Paramita Constructions Private Limited, Hyderabad. A perusal of the judgment in both the cases disclose that the expression, “the Chief Justice” mentioned in Section 11 was treated as a “Court” and the principle underlying in Section 42 of the Act was applied. Reliance was placed upon the judgment in Paramita Constructions Private Limited, Hyderabad. A perusal of the judgment in both the cases disclose that the expression, “the Chief Justice” mentioned in Section 11 was treated as a “Court” and the principle underlying in Section 42 of the Act was applied. In the preceding paragraphs we have taken the view that the expression “Chief Justice” or person or agency designated by him” cannot be treated as a Court. At any rate since the arbitrator in the instant case was appointed by the Chief Justice, High Court of Andhra Pradesh, the ratio laid down in that case does not apply to the facts of this case. 32. Hence, the C.M.A. No.604 of 2013 is allowed and the order under appeal is set aside. The trial Court shall proceed to determine the A.O.P. No.1 of 2008 on merits after giving opportunity to both the parties. 33. C.R.P. No. 2824 of 2013 arises out of an order passed in E.P. No.83 of 2012. It is needless to mention that the execution of an award cannot take place as long as the proceedings for setting aside the same are pending. In view of the result in C.M.A. No. 604 of 2013, the C.R.P. No.2824 of 2013 is allowed and the execution proceedings instituted by the 1st respondent in the Court of III Additional Chief Judge, Hyderabad are set aside. 34. There shall be no order as to costs. The Miscellaneous Applications filed in this appeal shall stand disposed of.