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2014 DIGILAW 1619 (RAJ)

Vinayak Arts v. Indusind Bank Ltd.

2014-10-07

GOVIND MATHUR

body2014
JUDGMENT 1. - This application is preferred to have appointment of independent sole arbitrator as per Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act of 1996') to resolve the dispute between the parties. 2. Briefly stated, facts of the case are that the applicant, a partnership firm, entered into an agreement for foreign exchange transaction with respondent Indusind Bank Ltd. on 26.2.2013. On the same day an agreement was executed between the applicant and the respondent wherein foreign exchange upto Rs. 80 lacs was agreed to be booked by the respondent for transactions entered by the applicant. On basis of it the applicant entered into an agreement with regard to forward contract dealing in a tune of Euro 70,000/- and US $ 25,000/-. On 12.6.2013 another forward contract for a sum of Rs. Euro 16,000/- was signed. The agreement was executed at Jodhpur and transaction referred above also undertook at Jodhpur. 3. As per clause 14 of the agreement for foreign exchange transactions dated 26.2.2013, FX contract shall be governed by and construed in accordance with the laws of India. As per clause 15, any dispute, difference, controversy or claim arising out of or in connection with the agreement shall be resolved by arbitration. Clause 15 referred above reads as under:- "15. Dispute Resolution (a) Any dispute, difference, controversy or claim (a "Dispute") arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement or the consequences of its nullity and including any dispute as to the validity or enforceability of this Section 13) shall be referred to and finally resolved by arbitration under the Arbitration Rules (the "Rules") of the Indian Merchants Chambers, which Rules, as modified from time to time are deemed to be incorporated by reference into this Agreement (provided that, in the event of any conflict between the Rules and the provisions of this Agreement, the latter shall prevail); (b) The arbitral tribunal shall consist of one arbitrator. The seat of arbitration shall be Mumbai, the language of the arbitration shall be English; (c) The Tribunal shall state the reason for its decision in writing and shall not make such decisions on the basis of the principle of ex aequo et bono or as amiable composite; (d) Each party waives irrevocably, without limitation, generally an and all immunity it or its assets or revenues may otherwise have in any jurisdiction, including immunity from or in respect of: (A) the giving of any relief by way of injunction or order for specific performance or for the recovery of assets or revenues; (B) the issue of any process against its assets or revenues for the enforcement of a judgment or, in an action in rem, for the assets, attachment, detention or sale or any of its assets and revenues; and (C) any claims, suit, action, the jurisdiction of any court or arbitral tribunal, the execution of any judgment, attachment prior to the judgment and attachment in aid of execution of judgments." 4. As per clause 16 of the agreement for foreign exchange transactions with respect to any challenge to arbitration and for the purpose of enforcement of the arbitral award, the courts and tribunals of competent jurisdiction at Mumbai are having exclusive jurisdiction. 5. Certain disputes cropped up between the parties and the respondent bank on 13.9.2013 repudiated the agreement dated 26.2.2013. The applicant to get the dispute resolved sent a legal notice dated 31.12.2013 to the respondent bank to invoke arbitration clause. Shri Murlidhar Vaishnav, retired District Judge) was proposed as arbitrator of the applicant, however, by a communication dated 24.1.2014 the respondent refused to accept the arbitrator with assertion that in view of the provisions of clause 15 of the agreement, arbitration could be organised before the Indian Merchants Chambers at Mumbai. On being failed to get arbitrator nominated by the respondent bank, this application was filed on 10.3.2014. 6. While contesting the application Shri Dhanesh Saraswat, learned counsel for the respondent bank submits that as per clause 15 of the agreement the dispute between the parties through arbitral proceedings could have been resolved from the institutional arbitrator i.e. Indian Merchants Chambers. It is asserted that the parties with open eyes entered into an agreement and they are abide by the conditions of agreement. 7. It is asserted that the parties with open eyes entered into an agreement and they are abide by the conditions of agreement. 7. Per contra, as per Shri Sandeep Shah, learned counsel for the applicant, the entire cause of action of the dispute arose at Jodhpur, therefore, the applicant rightly proposed name of Shri Murlidhar Vaishnav as its arbitrator and further rightly preferred this application before Rajasthan High Court for getting sole arbitrator appointed. 8. Heard counsel for the parties. 9. Learned counsel for the applicant submits that in view of the law laid down by Hon'ble Supreme Court in Harshad Chimanlal Modi v. DLF Universal Ltd. & Anr, reported in 2005(7) SCC 791 , clause 15(2) of the agreement itself is illegal, thus, deserves to be ignored. 10. In my opinion, the judgment relied upon is having no application in present controversy. In the case of Harshad Chimanlal Modi (supra) Hon'ble Apex Court was dealing with a condition referred in a "plot buyer agreement" in the terms that "the Delhi High Court or court subordinate to it, alone shall have jurisdiction in all matters arising out of, touching and/or concerning this transaction". The issue before -6- the court was that whether the Delhi Civil Court had jurisdiction to try and entertain the suit concerned. The suit was found to be within the ambit of Section 15(d) of the Code of Civil Procedure without having any application of the proviso thereto, thus, the court held that a clause vesting jurisdiction of a court which otherwise does not have jurisdiction to decide the matter, would be void as being against public policy. If an agreement between the parties to the contract have any condition in this regard in contract agreement, then that have no effect and that cannot be enforced. In the case in hand the agreement contains arbitration clause and the condition is with regard to seat of arbitration clause and not with regard to jurisdiction of civil court. 11. Sub-section(1) of Section 20 of the Act of 1996 provides that the parties are free to agree on the place of arbitration. The freedom given under subsection (1) of Section 20 (ibid) was availed by the parties and as per clause 15(b) of the agreement the seat of arbitration was fixed at Mumbai. 11. Sub-section(1) of Section 20 of the Act of 1996 provides that the parties are free to agree on the place of arbitration. The freedom given under subsection (1) of Section 20 (ibid) was availed by the parties and as per clause 15(b) of the agreement the seat of arbitration was fixed at Mumbai. It was also agreed that the dispute, difference, controversy or claim arising out of or in connection with the agreement shall be referred to and finally resolved by arbitration under the arbitration rules of the Indian Merchants Chambers. Both the parties of the agreement are abide by the condition aforesaid. The parties to the agreement, thus, are abide by the conditions -7- mentioned in the agreement with regard to arbitral proceedings. In view of it, the objection raised on behalf of the respondents sustains and the same is affirmed.The application is dismissed accordingly.Application Dismissed. *******