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2019 DIGILAW 242 (TS)

Indian Oil Corporation Ltd. v. M. Kishore

2019-06-28

P.V.SANJAY KUMAR

body2019
ORDER : P.V. Sanjay Kumar, J. 1. This arbitration application, filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for brevity, 'the Act of 1996'), was placed before this Court upon the objection raised by the Registry as to whether this Court would have jurisdiction to entertain it. 2. Indian Oil Corporation Limited, Mumbai, having its Branch Office at Vijayawada Terminal, Kadimipothavaram, Pinapaka Post Office via Kondapalli, Krishna District, Andhra Pradesh, filed this application seeking appointment of a Sole Arbitrator under the Act of 1996 to resolve its claim for a sum of Rs. 11,61,326/- raised against M/s. M. Kishore, a Proprietorship/Partnership/Private Limited Company, having its Registered Office at Vijayawada, Krishna District, Andhra Pradesh. 3. The applicant company entered into a 'Bulk Petroleum Products Road Transport Agreement' with the respondent on 18.4.2014, whereby the respondent undertook to provide the applicant company with 13 tank trucks. One such tank truck carrying 20 KL HSD was seized by the Civil Supplies authorities of the State, resulting in the subject claim for a sum of Rs. 11,61,326/-, being the value of the petroleum product transported in the said tank truck. The applicant company issued notice dated 10.9.2018 to the respondent invoking the arbitration agreement contained in Clause 16 of the contract dated 18.4.2014 and asking for the consent of the respondent to appointment of an in-house Arbitrator. The said notice however could not be served upon the respondent due to non-availability. Hence, this application. 4. Perusal of the agreement dated 18.4.2014 reflects that it was executed on a non-judicial stamp paper of Rs. 100/- sold by a licensed Stamp Vendor at Nunna in Andhra Pradesh to the respondent at Undavalli in Andhra Pradesh. The contract does not specifically record the place at which it was executed but one of the witnesses thereto is a transport contractor of the applicant Company at Vijayawada. It can therefore be presumed that the agreement was executed at Vijayawada or thereabouts in the present State of Andhra Pradesh. The arbitration agreement is in Clause 16 thereof and it reads thus: '16. All questions, disputes and differences arising under or in relation to this Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Company. The arbitration agreement is in Clause 16 thereof and it reads thus: '16. All questions, disputes and differences arising under or in relation to this Agreement shall be referred to the sole arbitration of the Director (Marketing) of the Company. If such Director (Marketing) is unable or unshalling to act as the Sole Arbitrator, the matter shall be referred to the sole arbitration of some other officer of the Company by such Director (Marketing) in his place, who is shalling to act as such Sole Arbitrator. It is known to the parties herein that the Arbitrator appointed hereunder is an employee of the Company and may be Shareholder of the Company. The Arbitrator to whom the matter is originally referred, whether the Director (Marketing) or Officer, as the case may be, on his being transferred or vacating his office or being unable to act, for any reason, the Director (Marketing) shall designate any other person to act as Arbitrator in accordance with the terms of the Agreement and such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also the term of this Agreement that no person other than the Director (Marketing) or the person designated by the Director (Marketing) as aforesaid shall act as Arbitrator. The award of the Arbitrator so appointed shall be final/conclusive and binding on all the parties to the Agreement and provisions of the Arbitration and Conciliation Act 1996 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause. The venue of the arbitration shall be Patna.' 5. Clause 17 of the agreement is also of relevance in the context of the present controversy and it is extracted hereunder: '17. The parties hereby agree that the Court in City of Hyderabad alone shall have jurisdiction to entertain any application or any award’s made by the Sole Arbitrator or other proceedings in respect of anything arising under this Agreement.' 6. It is clear that the 'seat' of the arbitration was to be at Patna, State of Bihar. The parties hereby agree that the Court in City of Hyderabad alone shall have jurisdiction to entertain any application or any award’s made by the Sole Arbitrator or other proceedings in respect of anything arising under this Agreement.' 6. It is clear that the 'seat' of the arbitration was to be at Patna, State of Bihar. However, in terms of Clause 17, the parties agreed that the Courts in the city of Hyderabad alone should have jurisdiction to entertain any application or any award(s) made by the Sole Arbitrator or other proceedings in respect of anything arising under the agreement. It is on the strength of Clause 17 that Sri B. Mayur Reddy, learned Counsel for the applicant company, would contend that this Court has jurisdiction to entertain this application and appoint an Arbitrator under the Act of 1996. 7. In terms of Section 11(12)(b) of the Act of 1996, the High Court which is empowered to exercise jurisdiction in relation to appointment of an Arbitrator is the High Court within whose local limits the principal civil Court referred to in Section 2(1)(e) is situated. The definition of 'Court' in Section 2(1)(e), to the extent relevant, reads as under: '2(1)(e) "Court" means-- (i) in the case of an arbitration other than international commercial arbitration, 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 clauses; (ii)............' 8. Thus, only the High Court having jurisdiction over the principal civil Court of original jurisdiction which is competent to decide the questions forming the subject-matter of the arbitration would be entitled to exercise power under Section 11 of the Act of 1996 to appoint an Arbitrator. 9. The present controversy would therefore boil down to whether any principal civil Court within the jurisdiction of this High Court would have the competence to deal with the subject-matter of the arbitration sought by the applicant company. 10. In this regard, it may first be noted that the subject agreement was not executed within the State of Telangana. 9. The present controversy would therefore boil down to whether any principal civil Court within the jurisdiction of this High Court would have the competence to deal with the subject-matter of the arbitration sought by the applicant company. 10. In this regard, it may first be noted that the subject agreement was not executed within the State of Telangana. Further, the dispute which is sought to be referred to an Arbitrator relates to seizure of a tank truck at Ibrahimpatnam in Krishna District in Andhra Pradesh. The respondent also is shown to be at Undavalli in Guntur District in Andhra Pradesh. Therefore, in terms of Sections 16 and 20 CPC, no suit could have been instituted by the applicant company in relation to the subject dispute in any principal civil Court in the State of Telangana. 11. Sri B. Mayur Reddy, learned Counsel, would however contend that as the parties categorically agreed to confer exclusive jurisdiction upon the Courts in the city of Hyderabad in relation to any issue arising under the agreement, this Court would have power to exercise jurisdiction under Section 11 of the Act of 1996. He would rely upon the judgment of the Supreme Court in Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited, 2017 (4) ALD 120 (SC) : (2017) 7 SCC 678 . Learned Counsel would further state that the Division Bench judgment of the erstwhile common High Court in Sushee Ventures Private Limited, Hyderabad v. Rahul Agarwal, 2017 (2) ALD 360 (DB), may no longer be good law in the light of the later judgment in Indus Mobile Distribution Private Limited's case (supra). 12. Reference may first be made to the earlier judgment of a three Judge Bench of the Supreme Court in Swastik Gases Private Limited v. Indian Oil Corporation Limited, (2013) 9 SCC 32 . This was a case where the arbitration agreement in Clause 18 of a consignment agency contract conferred exclusive jurisdiction upon the Calcutta High Court in respect of any application under Section 11 of the Act of 1996. An application under Section 11 of the Act of 1996 was however made by Swastik Gases Private Limited, the appellant, before the Rajasthan High Court for appointment of an Arbitrator. An application under Section 11 of the Act of 1996 was however made by Swastik Gases Private Limited, the appellant, before the Rajasthan High Court for appointment of an Arbitrator. The Indian Oil Corporation Limited, the respondent, contested the application on the ground that the Rajasthan High Court lacked territorial jurisdiction as exclusive jurisdiction had been conferred upon the Calcutta High Court. The designated Judge of the Rajasthan High Court held that he did not have the territorial jurisdiction to entertain the application and dismissed the same. Aggrieved thereby, the appellant approached the Supreme Court. Having considered the legal and factual issues, the Supreme Court observed that the appellant before it did not dispute that part of the cause of action had arisen in Calcutta but despite the same, its contention was that as part of the cause of action had also arisen in Jaipur, the Rajasthan High Court would have jurisdiction to consider the application made by it for appointment of an Arbitrator. The Supreme Court observed that, having regard to Section 11(12)(b) and Section 2(1)(e) of the Act of 1996 read with Section 20(c) CPC, there remained no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court had jurisdiction in the matter but the question was whether the parties, by virtue of Clause 18 of the agreement, had agreed to exclude the jurisdiction of the Court at Jaipur or, in other words, whether in view of Clause 18 of the agreement, the jurisdiction of the Chief Justice of the Rajasthan High Court had been excluded. The answer to this question was set out in Para 32 of the majority judgment, which reads as under: '32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the Courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like "alone", "only", "exclusive" or "exclusive jurisdiction" have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties - by having Clause 18 in the agreement - is clear and unambiguous that the Courts at Kolkata shall have jurisdiction which means that the Courts at Kolkata alone shall have jurisdiction. The intention of the parties - by having Clause 18 in the agreement - is clear and unambiguous that the Courts at Kolkata shall have jurisdiction which means that the Courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the Courts at Kolkata, the parties have impliedly excluded the jurisdiction of other Courts. Where the contract specifies the jurisdiction of the Courts at a particular place and such Courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other Courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner.' (Emphasis added) 13. In his concurring opinion, Justice Madan B. Lokur opined that the very existence of an 'exclusion of jurisdiction' clause in the agreement would be rendered meaningless were it not given its natural and plain meaning and the use of words like "only", "exclusively", "alone" and so on are not necessary to convey the intention of the parties in an 'exclusion of jurisdiction' clause of an agreement. The learned Judge therefore agreed with the conclusion that jurisdiction in the subject-matter of the proceedings vested, by agreement, only in the Courts in Kolkata. 14. Relying upon the aforestated judgment in Swastik Gases Private Limited's case (supra), the Division Bench in Sushee Ventures Private Limited's case (supra), held as follows: '24. It may also be noticed that Section 2(1)(e), which defines 'Court' for the purposes of the Act of 1996, specifically speaks of jurisdiction to decide the questions forming the 'subject-matter of the arbitration'. The subject-matter of the arbitration would invariably take within its fold the arbitration proceedings also. It may also be noticed that Section 2(1)(e), which defines 'Court' for the purposes of the Act of 1996, specifically speaks of jurisdiction to decide the questions forming the 'subject-matter of the arbitration'. The subject-matter of the arbitration would invariably take within its fold the arbitration proceedings also. It is in this context that Bharat Aluminium Company's case (2012) 9 SCC 552 , applying Section 20 of the Act of 1996, justified jurisdiction being conferred upon Courts at two places - the place where the cause of action actually arose and the 'place/seat' of the arbitration, if it was not the same as the place where the cause of action arose. However, that situation, as pointed out supra, does not arise at all in the present case as neither the 'place/seat' nor the 'venue' of the arbitration proceedings contemplated under Clause XXV of the Development Agreement-cum-GPA dated 22.1.2016 fall in Ranga Reddy District. As pointed out in Swastik Gases Private Limited's case (supra), it is only when the Court inherently has jurisdiction to deal with the matter and if the contract confers exclusive jurisdiction upon such Court, that an inference may be drawn that the parties intended to exclude all other Courts. The requirement, first and foremost, is that the Court upon which such exclusive jurisdiction is sought to be conferred must have inherent jurisdiction. Section 20 of the Act of 1996 merely adds a facet in this regard. Therefore, if the Court does not have jurisdiction inherently to deal with the matter, the parties cannot confer jurisdiction upon it by agreement. In the present case, that is exactly what was done under Clause XXVI of the Development Agreement-cum-GPA, Ranga Reddy District had nothing whatsoever to do with either the land which was covered by the Development Agreement-cum-GPA or the arbitration contemplated thereunder. 25. Though Sri B. Vijaysen Reddy, learned Counsel, would also contend that convenience of the parties can be looked into and if the parties found it convenient to have their matters tried by a particular Court, there would be no illegality in conferring exclusive jurisdiction upon such a Court. This argument loses sight of the fundamental legal principles on jurisdiction. Convenience of the parties cannot be determinative of the jurisdiction of a Court. This argument loses sight of the fundamental legal principles on jurisdiction. Convenience of the parties cannot be determinative of the jurisdiction of a Court. If such an argument is accepted, it would be open to a litigant to confer exclusive jurisdiction upon a Court without reference or regard to territorial and pecuniary jurisdiction also. This argument is mentioned only to be rejected.' 15. The question is whether the later judgment of the two Judge Bench of the Supreme Court in Indus Mobile Distribution Private Limited's case (supra), made any inroads into the principle laid down in Swastik Gases Private Limited's case (supra). The question before the Supreme Court in this later case was whether, when the seat of arbitration was at Mumbai, an exclusive jurisdiction clause stating that the Courts at Mumbai alone would have jurisdiction in respect of the disputes arising under the agreement would oust other High-Courts, including the High Court of Delhi whose judgment was appealed against. The respondent in that case had its Registered Office at Amritsar in Punjab and supplied goods to the appellant at Chennai from New Delhi. The agreement entered into by them contained clauses positing that the seat of arbitration would be Mumbai and that all disputes arising out of the said agreement would be subject of the exclusive jurisdiction of the High Court of Mumbai only. Having referred to earlier case law, the Supreme Court observed that once the seat of arbitration was fixed, it was akin to an exclusive jurisdiction clause. On facts, the Supreme Court observed that it was clear that the seat of arbitration was Mumbai and the later clause only made it clear that jurisdiction exclusively vested in the Mumbai Courts. The Supreme Court further observed as under in Para 19 of the judgment: '19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai Courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in Courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in Courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of the CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai Courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.' 16. Reference to the earlier judgment in Swastik Gases Private Limited's case (supra), is found in Para 20 of the judgment and for the purpose of clarity, this paragraph is also set out in its entirety: '20. It is well settled that where more than one Court has jurisdiction, it is open for the parties to exclude all other Courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (supra). This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd., (2015) 12 SCC 225 . Having regard to the above, it is clear that Mumbai Courts alone have jurisdiction to the exclusion of all other Courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is set aside.....' (Emphasis added) 17. Having given earnest and careful consideration to the observations made in Indus Mobile Distribution Private Limited's case (supra), this Court finds that it did not in any manner dilute the principles laid down by the Larger Bench in Swastik Gases Private Limited's case (supra). On the other hand, the said principle was re-affirmed, as is clear from the aforestated emphasized observation. 18. On the other hand, the said principle was re-affirmed, as is clear from the aforestated emphasized observation. 18. Though Sri B. Mayur Reddy, learned Counsel, would point out that in his concurring opinion Justice Madan B. Lokur did not state anything about the Court which is vested with exclusive jurisdiction being one having competent jurisdiction otherwise, it may be noted that this was specifically spelt out in the majority opinion, penned by Justice R.M. Lodha, wherein it was stated : 'Where the contract specifies the jurisdiction of the Courts at a particular place and such Courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other Courts.' 19. As Justice Madan B. Lokur merely concurred with this opinion and did not take a different view, one cannot draw an inference to the contrary from his concurring opinion. Judgments are not to be interpreted in this nit-picking manner or subjected to such minute scrutiny under a magnifying glass. Further, as pointed out in Sushee Ventures Private Limited's case (supra), allowing parties to confer jurisdiction upon a particular Court as per their convenience without such a Court having the competence to deal with the matter would violate the fundamental legal principles of jurisdiction. The contention of Sri B. Mayur Reddy, learned Counsel, that the observations made by the Supreme Court in Indus Mobile Distribution Private Limited's case (supra), would come to his aid and that this arbitration application is maintainable before this Court on the strength thereof therefore cannot be countenanced. 20. The facts make it clear that no part of the cause of action, be it in terms of the situs of the agreement or the actual dispute that is sought to be referred to arbitration, arose within the territories of the State of Telangana. Further, the 'seat' of the arbitration is at Patna in the State of Bihar. Therefore, by no stretch of imagination can any part of the cause of action or the seat of arbitration be treated as having anything to do with the territories of the State of Telangana, bringing into play Section 2(1)(e) of the Act of 1996 and in consequence, Section 11(12)(b) thereof. The exclusive jurisdiction sought to be conferred by Clause 17 is therefore null and void and cannot be acted upon. 21. The exclusive jurisdiction sought to be conferred by Clause 17 is therefore null and void and cannot be acted upon. 21. The objection raised by the Registry as to the jurisdiction of this Court to entertain this application is accordingly upheld. The arbitration application shall stand rejected on this ground. This order shall however not preclude the applicant company from filing an application afresh before the competent forum. No order as to costs.