Research › Search › Judgment

Kerala High Court · body

2018 DIGILAW 239 (KER)

Britannia Industries Limited v. R. Easwaran S/o. Ramaswamy, Proprietor, Adithya Enterprises

2018-03-13

C.K.ABDUL REHIM, SHIRCY V.

body2018
JUDGMENT : C.K. Abdul Rehim, J. Since the appellant is common in all these cases and since the orders impugned are passed by the same District Court and since the nature of the orders impugned in all these appeals are identical, we have considered these appeals together and disposed of through this common judgment. 2. The appellant company is challenging the orders passed by the District Court, Manjeri in OP (Arb) Nos.141/2017, 150/2017, 151/2017 & 149/2017, respectively in the above appeals. The original petitions were instituted before the District Court by various petitioners, who are 'authorised wholesalers' of the appellant company, by invoking Section 9 (1) of the Arbitration and Conciliation Act (herein after referred to as 'the Act' for short). The relief sought for in the original petitions were to issue mandatory injunction commanding the appellant to continue with 'distributorship' of the petitioners in accordance with the terms of the agreement entered between the parties and to supply the products of the company to them on the basis of the orders placed; and also to restrain the appellants from appointing any new 'distributors' in the place of the petitioners in any part of operational area allotted to each of them, until the dispute is settled through arbitration. The court below through the orders impugned had allowed the above said prayer sought for and restrained the appellants from discontinuing the 'distributorship' of the respondents/petitioners and from discontinuing supply of the products to them and also from appointing any new distributors in the place of the petitioners. It is aggrieved by the said order the above appeals are filed. 3. Heard; Senior counsel Adv. P.K. Suresh Kumar who appeared for the appellant and Sri. V. Venugopalan Nair, counsel appearing for the respondents/petitioners. 4. On behalf of the appellant, a preliminary question of jurisdiction of the District Court was raised. It is contended that the parties to the agreement had limited the jurisdiction to the courts at Bangalore, with respect to all matters arising out of the agreement. Hence it is contended that the courts at Bangalore alone has got jurisdiction to entertain any petition under Section 9 (1) of the Act. In support of the above contention, learned Senior Counsel had placed reliance on the decision of the hon'ble Supreme Court in Swastik Gases (P) Ltd. V. Indian Oil Corporation Ltd. ( (2013) 9 SCC 32 ). Hence it is contended that the courts at Bangalore alone has got jurisdiction to entertain any petition under Section 9 (1) of the Act. In support of the above contention, learned Senior Counsel had placed reliance on the decision of the hon'ble Supreme Court in Swastik Gases (P) Ltd. V. Indian Oil Corporation Ltd. ( (2013) 9 SCC 32 ). It is held by the apex court that, by making a provision that the agreement is subject to jurisdiction of courts at Kolkata, the parties have impliedly excluded jurisdiction of other courts. Where the contract specifies jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an interference may be drawn that the parties intended to exclude all other courts. A clause like this is not hit by Section 32 of the Contract Act at all. Such clause is neither forbidden by law nor is it against the public policy. It does not offend Section 28 of the Contract Act in any manner, was the findings. 5. In a more recent decision of the hon'ble Supreme Court in State of West Bengal V. Associated Contractors ( (2015) 1 SCC 32 ), after referring to various earlier decisions, it is held that, where the agreement between the parties restricted jurisdiction to only one particular court, that court alone would have jurisdiction as neither Section 31 (4) nor Section 42 of the Act contains a non obstante clause wiping out a contrary agreement between the parties. On the basis of the above decision, it is further held that, an application preferred to courts outside the exclusive court agreed to by the parties, would also be without jurisdiction. 6. The dictum contained in Swastik Gases case (supra) and Associated Contractors case (supra) were taken into consideration by the hon'ble Supreme Court while deciding an issue relating to jurisdiction under Section 9 of the Act, in B.E. Simoese Von Staraburg Niedenthal and another V. Chhattisgarh Investment Limited ((2015) 12 SCC 225). After referring to Section 2 (e) and Section 9, it is held that, where the contract specifies jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, the parties intended to exclude all other courts and therefore it had ousted jurisdiction of the District Court in any other place. After referring to Section 2 (e) and Section 9, it is held that, where the contract specifies jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, the parties intended to exclude all other courts and therefore it had ousted jurisdiction of the District Court in any other place. Section 2 (e) of the Act defines the court as the civil court of original jurisdiction in a district and the High Court in exercise of its ordinary civil jurisdiction on the subject matter of the dispute. Section 9 (1) enables any party to the contract to approach the court seeking for an interim measure of protection with respect to preservation of the subject matter of the arbitration. But in the above decision of the hon'ble Supreme Court in B.E. Simoese's case (supra) it is held that, in the light of the legal position exposited in Swastik Gases case and Associated Contractors case (supra) and having regard to the clause in the agreement, jurisdiction of District Courts in any other place stands ousted, other than jurisdiction of the court at a particular place as specified in the contract. The hon'ble Supreme Court in that matter held that, on the basis of the finding that the court where the proceedings initiated was not the court specified in the contract, it is not necessary to sent back the matter to the District Court for determination of jurisdiction and had set aside the impugned order passed by the District Court. 7. Learned Senior counsel appearing for the appellant had drawn our attention to the specific clause contained in the agreement, which is Clause No.16, which is extracted hereunder; “It is hereby expressly agreed that this Agreement shall be deemed to have been made in Bangalore and that subject to Clause 15 above, the courts in Bangalore alone will have jurisdiction on all matters arising out of this Agreement.” 8. We are of the considered opinion that the above clause would indicate that the parties to the agreement had intended to exclude all other courts, other than the court at Bangalore specified in the contract. Therefore we are of the opinion that the dictum contained in B.E Simoese's case (supra) would squarely apply in the matter. We are of the considered opinion that the above clause would indicate that the parties to the agreement had intended to exclude all other courts, other than the court at Bangalore specified in the contract. Therefore we are of the opinion that the dictum contained in B.E Simoese's case (supra) would squarely apply in the matter. But learned counsel appearing for the respondent contended that, the exclusive jurisdiction conferred on the courts at Bangalore will depend upon the seat of the arbitration. In the case at hand the arbitration proceedings has not yet commenced and once the seat of arbitration is designated then only the court having jurisdiction over the seat of arbitration will get jurisdiction to entertain any applications under Section 9. The contentions seems to be that, as long as the seat of arbitration is not designated, it will be left open to the parties to invoke Section 9 before any court having jurisdiction at the place where the transaction under the agreement takes place. In support of the above contention learned counsel had cited a decision of the Hon'ble Supreme Court in Indus Mobile Distribution Private Limited Vs. Datawind Innovations Private Limited (2017 (2) KLT 665 (SC)). It is held in the said decision that, the moment the seat is designated it is akin to an exclusive jurisdiction clause, unlike the Code of Civil Procedure. Under the Law of Arbitration, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties. The neutral venue may not be having jurisdiction on the subject matter or no part of the cause of action might have arisen at the neutral venue. Therefore, de hors provisions under Section 16 to 21 of C.P.C, under the arbitration law, the moment the seat is determined, the courts at that place will have exclusive jurisdiction for the purpose of regulating arbitral proceedings arising out of the agreement. 9. In the case at hand, the seat of arbitration has not yet been designated. As long as the seat of arbitration remaining not designated, in the matter of approaching courts for any remedy, including remedy provided under Section 9 of the Act, the clause in the agreement will operate, as held in the decisions of the hon'ble Supreme Court mentioned above. As long as the seat of arbitration remaining not designated, in the matter of approaching courts for any remedy, including remedy provided under Section 9 of the Act, the clause in the agreement will operate, as held in the decisions of the hon'ble Supreme Court mentioned above. When the parties have chosen the courts at a particular place having jurisdiction to deal with the matters involved in the contract and had specified such jurisdiction in the contract, it has to be inferred that the parties have intended to exclude all other courts. Therefore we are of the opinion that the facts stands distinguished from the legal position enumerated in Indus Mobile Distribution Private Limited's case (supra). 10. Yet another contention raised by Adv. Venugopalan Nair appearing for the respondents is that, Clause 16 contained in the agreement is an unfair and unreasonable clause entered into between the parties, who are not equal in the bargaining power. According to him, the respondents were compelled to sign such an agreement only at the command of the appellant and the terms were dictated only by the appellant while executing the contract. The respondents were in the role of passive acceptors and therefore it cannot be considered as a clause introduced on the basis of free consent of both the parties to the contract, is the contention. Referring to a decision of the hon'ble Supreme Court in Central Inland Water Transport Corporation Limited Vs. Brojo Nath Ganguly and another ( AIR 1986 SC 1571 ) it is contended that, in such occasions the court has to exercise its jurisdiction to nullify such unreasonable clause in a contract. The observations of the apex court in that judgment is, “We have a Constitution for our country. Our judges are bound by their oath to uphold the Constitution and the Laws. The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. Article 14 of the constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Article 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between the parties who are not equal in bargaining power.” 11. But in the said judgment itself the apex court had observed that, this principle however will not apply where the bargaining power of the contracting parties are equal or almost equal. It is further observed that, this principle may not apply where both the parties are business men and contract is a commercial transaction. 12. This court is of the considered opinion that, going by the observations in the judgment in Central Inland Water Transport Corporation's case (supra) itself, the principle enunciated therein will not apply in the case of commercial contract. Moreover, whether Clause 16 is an unreasonable clause entered into between parties who are not equal in bargaining power, is a question which needs to be decided based on evidence. We feel that such an exercise cannot be ventured while deciding this appeal that too in an arbitration proceedings under Section 37 of the Act. 13. Based on the above discussions, we have no hesitation to hold that, the specification of courts at Bangalore contained in Clause 16 of the agreement will exclude the jurisdiction of courts at any other places, with respect to any matters arising out of the contract, including an original petition filed under Section 9 of the Act. But the question of jurisdiction is basically a question which need to be decided, at the first instance, by the court where the petition is instituted. Therefore, under normal circumstances, the question need to be relegated for adjudication by the District Court itself. But we take note of the procedure adopted by the hon'ble Supreme Court in B.E. Simoese's case (supra) and also take note of the findings on the factual aspects enumerated in the foregoing paragraphs. Therefore, under normal circumstances, the question need to be relegated for adjudication by the District Court itself. But we take note of the procedure adopted by the hon'ble Supreme Court in B.E. Simoese's case (supra) and also take note of the findings on the factual aspects enumerated in the foregoing paragraphs. Hence we are of the opinion that the appeals need to be allowed and the original petitions filed before the court below need to be declared as not maintainable before the court below. 14. In the result, the above appeals are hereby allowed. The impugned orders are hereby set aside. The respective Arbitration Original Petitions pending before the District Court, Manjeri were held as not maintainable, because the said lacking jurisdiction, based on the clause contained in the agreement entered into between the parties. The court below shall pass appropriate consequential orders in all the original petitions.