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Case Number
Attorney(S)
  • S.Rama Chandra Murthy
  • Nuty Ram Mohan Rao
  • Dipak Bhattacharji
Judges
  • B. Sudershan Reddy, J.
Acts
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Cites
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Citation Codes
Equivalent Citations
citation codes
Case Number
Attorney(S)
  • S.Rama Chandra Murthy
  • Nuty Ram Mohan Rao
  • Dipak Bhattacharji
Judges
  • B. Sudershan Reddy, J.
Acts
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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The Civil Revision Petition under Article 227 challenges an order dated 05.08.2003 of the VI-Additional District Judge, Visakhapatnam, which allowed LA. No. 445 of 2003 in O.P. No. 52 of 2003. The respondent (a partnership firm engaged in computer education) and the petitioner (a company engaged in software education) entered into an agreement dated 16.10.2000 to establish "Techno Campus--The Software Finishing School" at Visakhapatnam. Disputes arose and the respondent filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, seeking attachment before judgment of specified properties and bank accounts, alleging that the petitioner had transferred student fees out of Visakhapatnam and was secreting funds and assets.

The petitioner resisted the Section 9 application, raising objections including lack of territorial jurisdiction of the VI-Additional District Judge (relying on Clause 24 of the agreement which provided the seat of arbitration at New Delhi) and non-compliance with statutory procedural requirements for attachment under the CPC. The learned VI-Additional District Judge overruled the objections and ordered ex parte attachment before judgment of the petition-schedule properties. The petitioner approached this Court under Article 227 challenging that interlocutory order.

Legal Issues Presented

  1. Whether the Court of the VI-Additional District Judge, Visakhapatnam, is a "Civil Court of a grade inferior" to the Principal Civil Court of original jurisdiction (i.e., whether it lacks jurisdiction under Section 2(e) and related provisions of the Arbitration and Conciliation Act, 1996).
  2. Whether Clause 24 of the parties' agreement (providing that the seat of arbitration shall be New Delhi and arbitration proceedings shall be conducted at New Delhi) excludes jurisdiction of the Visakhapatnam courts to entertain an application under Section 9 of the Act.
  3. Whether the interlocutory attachments ordered by the learned VI-Additional District Judge (immovable property in Calcutta and multiple bank accounts) were maintainable, and if so, what relief or modification should be made pending disposal of the main O.P.

Arguments of the Parties

Petitioner (represented by the Additional Advocate General)

  • The disputes were required to be resolved by arbitration in New Delhi under Clause 24 of the agreement; therefore, only the Principal District Judge (Principal Civil Court of original jurisdiction) has territorial jurisdiction to entertain applications under Section 9 of the Act.
  • The VI-Additional District Judge is an inferior Court and thus lacked jurisdiction to entertain the Section 9 application; the petition had been originally filed before the Principal District Judge and then transferred to an inferior Court, contrary to Sections 9, 5 and 2(e) of the Act.
  • The attachments ordered by the VI-Additional District Judge affect properties situated in Calcutta (outside Visakhapatnam territorial jurisdiction) and could not have been passed without compliance with the statutory procedure under Section 136 of the Code of Civil Procedure.
  • Relied upon the decision in I.T.I. Ltd., Allahabad v. District Judge, Allahabad (AIR 1998 All. 313... etc.) to support the contention that the term "Court" in Section 2(e) means the Principal Civil Court of original jurisdiction and excludes inferior Civil Courts.

Respondent

  • The cause of action arose at Visakhapatnam; accordingly, the Section 9 application was rightly filed there and the Visakhapatnam Court has jurisdiction.
  • The VI-Additional District Judge is not an inferior Court vis-à-vis the Principal District Judge; Additional District Courts are established for division of workload and occupy essentially the same status as other District Courts (save for inter se seniority and pay).
  • The bank accounts (though operable at branches in Calcutta) were transacted through the petitioner's branches in Visakhapatnam and the banks operated "on-line"; therefore the accounts and related properties cannot be said to be outside the territorial jurisdiction of the Visakhapatnam Courts.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
I.T.I. Ltd., Allahabad v. District Judge, Allahabad, AIR 1998 All. 313-1998(2) Arb. LR 670 (as cited by petitioner) That the term "Court" in Section 2(e) of the Arbitration and Conciliation Act was intended to mean only the Principal Civil Court of original jurisdiction in a district and to exclude Civil Courts of a grade inferior to such Principal Civil Court. The Court considered the decision but explicitly rejected the reasoning and ratio of that decision for the facts of this case, holding that the VI-Additional District Judge is not a Court of a grade inferior to the Principal District Judge and therefore the precedent's application to deny jurisdiction to the VI-Additional District Judge was not accepted.

Court's Reasoning and Analysis

The Court addressed the matters in stages.

  1. On whether the VI-Additional District Judge is a Court of a grade inferior: The Court examined the meaning of "inferior" (dictionary and Black's Law Dictionary) and concluded that the VI-Additional District Judge's Court is not a Court of a grade inferior to the Principal District Judge's Court. The court found the petitioner’s reliance on the Allahabad decision (I.T.I. Ltd.) unpersuasive and rejected its ratio for the present facts (paras 12–20).
  2. On Clause 24 (seat of arbitration at New Delhi) and territorial jurisdiction: The Court observed that Clause 24 prescribes the seat and place of arbitration proceedings (New Delhi) but does not expressly confer exclusive jurisdiction on the Courts at New Delhi to entertain Section 9 applications. The Court treated the question of whether Visakhapatnam courts were excluded as a mixed question of law and fact, requiring evidence and adjudication in the main O.P.; the Court therefore declined to express a final view on that issue at this interlocutory stage to avoid rendering the main O.P. infructuous (paras 15–17, 21–23).
  3. On the appropriateness of continuing the interlocutory attachments: The Court considered the nature and value of the attached properties. It noted that the immovable property (Factory Shed and Building at Salt Lake, Kolkata) is valuable and remains under attachment since 05.08.2003, and observed that the interim attachment protects the respondent's interest and there was no indication the petitioner would immediately alienate it. Consequently, the Court held the interim attachment of the immovable property should continue, but the bank accounts need not remain attached. The bank accounts were ordered to be released so the petitioner may operate them without impediment (paras 25–28).
  4. On case management and disposal: The Court expressed that, in the interest of justice, the main O.P. should be disposed of promptly (both parties agreed to lead evidence without unreasonable adjournments). The trial Judge was directed to dispose of the main O.P. before the expiry of the attachment period (end of January 2004), to consider the issues afresh and not be influenced by observations in this revisional order or by previous interlocutory observations. All substantive contentions were left open for determination in the main O.P. (paras 18, 23, 29).

Holding and Implications

DISPOSED OF

Direct consequences and practical implications arising from the Court's decision (as stated in the opinion):

  • The Civil Revision Petition was disposed of and there shall be no order as to costs (para 24).
  • The Court held that the VI-Additional District Judge at Visakhapatnam is not a Court of a grade inferior to the Principal District Judge and therefore the objection to its jurisdiction on that ground was rejected (paras 12–20).
  • The Court declined to finally decide whether Clause 24 excluding the seat of arbitration at New Delhi ousts jurisdiction of Visakhapatnam Courts; that is a mixed question of fact and law reserved for the main O.P. (paras 15–17, 21–23).
  • The interim attachment of the immovable property (Salt Lake, Calcutta factory/building and plant & machinery) was continued until the end of January 2004 to protect respondent's interest, with directions to the trial Judge to dispose of the main O.P. by that time (paras 25, 28–29).
  • The attachment of the bank accounts was lifted and the petitioner was permitted to operate those accounts without impediment (para 28).
  • The trial Judge was directed to dispose of the main O.P. afresh and not to be influenced by the observations in this revisional order or by his own interlocutory order; all substantive contentions were left open for determination (para 29).

The opinion does not state that it establishes a binding new precedent; it confines its determinations to the facts and interlocutory relief in the present matter and leaves substantive issues to be finally determined in the main O.P.

Show full summary ...

    Globsyn Technologies Limited, Calcutta v. Eskaaycee Infosys, Viskashapatnam

    1. This Civil Revision Petition filed under Article 227 of the Constitution of India arises out of an order passed by the learned VI-Additional District Judge, Visakhapatnam dated 05.08.2003, whereunder the learned Judge allowed LA. No. 445 of 2003 in O.P. No. 52 of 2003 filed by the respondent herein purporting it to be under Sections 9(b) and (e) of the Arbitration and Conciliation Act 1996 (for short 'the Act') read with Order 38, Rule 5 of the Code of Civil Procedure seeking an order of attachment before Judgment of the petition schedule property.

    2. The petitioner herein is a Company incorporated under the provisions of the companies act with its Registered Office at New Delhi and Corporate Office at Calcutta, engaged in the business of Software education. The respondent herein is a partnership firm also engaged in the field of Computer education. Both of them have entered into an agreement on 16.10.2000 for setting up "Techno Campus--The Software Finishing School" in Visakhapatnam. It is not necessary to refer in detail as to the nature of the business and the contents of the agreement entered by and between the parties except to notice that certain disputes or differences had arisen between them leading to filing of the application under Section 9 of the Arbitration and Conciliation Act, 1996.

    3. The respondent herein who invoked the jurisdiction of the Court at Visakhapatnam alleged that it had invested approximately Rs. 52 lakhs in the business. In terms of the said agreement, the fee collected from the students enrolled in the Techno Campus was deposited into the account of the petitioner herein with the Hongkong and Shanghai Bank Corporation at Visakhapatnam. The petitioner without any justification whatsoever, had transferred all the said amounts to Calcutta. The amounts that are liable to be paid to the respondent herein in terms of the agreement was thus, not paid and was in fact, secreted. The thrust of the contention of the respondent herein was that the petitioner had sliced down its staff at Hyderabad, Delhi and Calcutta. The respondent has sensed that the petitioner was intending to wind up their operations at the Techno Campus at Visakhapatnam while at the same time appropriating the association fee collected from the respondent as a business partner. It is alleged that the petitioner herein failed to discharge its contractual obligation towards the respondent who is admittedly a business partner at Visakhapatnam.

    4. It is the case of the respondent that steps have already been initiated in that regard by the respondent by nominating an Arbitrator. But the petitioner herein has declined to co-operate and started stonewalling by adopting various dilatory tactics and in the process started transferring the funds and properties. Apprehending that the action on the part of the petitioner herein was likely to result in serious prejudice the respondent invoked the jurisdiction of the District Court at Visakhapatnam under Section 9 of the Act.

    5. The petitioner herein resisted the application filed by the respondent herein in the District Court, inter alia, contending that the disputes and differences arose between the petitioner and the respondent during the year 2001-2002. The disputes and differences were required to be resolved by Arbitration. According to Clause 24 of the said agreement, which reads as follows ;

    "The seat of Arbitrator was at New Delhi and an Arbitration proceeding shall have to be conducted at New Delhi only.

    All disputes or the differences whatsoever arising between the parties hereto out of or relating to the construction, meaning and operation or effect of this agreement or the breach thereof which cannot be settled by mutual discussion the same shall be referred to the decision of an Arbitrator to be appointed in writing by the parties to the agreement or if they cannot agree upon a single Arbitrator, to the decision of three Arbitrator, one each to be appointed by the Parties herein and the third to he mutually agreed upon by the two Arbitrators will be appointed as the Chairman, The Arbitration proceedings shall be conducted at New Delhi and the Arbitration proceedings shall be in accordance with the provisions of the Arbitration and Conciliation Act, 1996."

    6. In such view of the matter, only the Principal District Judge at Delhi alone has the territorial jurisdiction to entertain any petition under Section 9 of the Act. The learned VI-Additional District Judge has no territorial jurisdiction to entertain the O.P. itself. It was also contended by the petitioner before the learned Judge that the learned VI-Additional District Judge has no jurisdiction to entertain the application and even if the cause of action had arisen at Visakhapatnam, the application could have been entertained only by the Principal District Judge as is provided for under the Act. It was also contended that the learned Judge has no jurisdiction to order the attachment without ordering compliance of the statutory procedure laid down under section 136 of the cpc.

    7. The learned Judge over-ruled all the objections raised by the petitioner herein and allowed the application and accordingly passed an ex parte order of attachment before judgment of the petition schedule properties.

    8. It is just and necessary to notice the petition schedule properties, since the same has acquired some significance in view of the submissions made during the course of hearing of this Civil Revision Petition.

    Land and Building on Plot No. XI 11-12, Blocks EP, Sector V, Salt Lake, Calcutta.

    (1) Bank A/c bearing No. A/c No. 023-299993 001 through Hong-kong and Shanghai Bank Corporation, Visakhapatnam.

    (2) Bank A/c with HDFC Bank, 2/6, Sarat Bose Road Branch, Calcutta through HDFC Bank, Visakhapatnam.

    (3) Bank A/c Central Bank of India, Netaji Subash Bose Road Branch, Calcutta, through Central Bank of India, Visakhapatnam.

    9. Sri D. Prakash Reddy, learned Additional Advocate General appearing on behalf of the petitioner contended that the learned VI-Additional District Judge at Visakhapatnam had no jurisdiction to deal with the matter in any manner whatsoever and if at all the petition could have been entertained only by the learned Principal District Judge at Visakhapatnam. In fact, the petition was filed before the Learned Principal District Judge, Visakhapatnam, but the same was later on transferred to the Court of the learned VI-Additional District Judge which is an inferior Court. It was contended that the same is contrary to Sections 9, 5 and 2(e) of the Act. Learned Additional Advocate General further contended that in view of Clause 24 of the said agreement, the Arbitration proceedings shall have to be conducted at New Delhi in accordance with the provisions of the Act and the Courts at New Delhi alone have the jurisdiction, notwithstanding the fact that even if any cause of action had arisen at Visakhapatnam. It was further contended that the properties which are attached by virtue of the order are situated at Calcutta i.e. outside the territorial jurisdiction of the Court at Visakhapatnam and the impugned order could not have been passed without ordering compliance of the statutory procedure laid down under section 136 of the cpc.

    10. Sri Noothi Ram Mohan Rao, learned counsel appearing on behalf of the respondent herein contended that the cause of action had arisen at Visakhapatnam and the application under Section 9 of the Act has been rightly filed at Visakhapatnam. Learned counsel further contended that the Court of the learned VI-Additional District Judge at Visakhapatnam is not an inferior Court to that of the Principal District Court at Visakhapatnam. It is only for the purpose of division of the workload Additional District Courts arc established. All the District Courts occupy the same status and all the District Judges are equal in rank except in the matter of inter se seniority and pay structure which is exclusive to them. Learned counsel contended that MSBC Bank, HDFC Bank and the Central Bank of India where the petitioner has the Bank accounts are all banks now trading and carrying on business "on-line". The bank transactions are carried out by the petitioner through the branches of HSBC, HDFC and Central Bank situated at Visakhapatnam though the account may have been available for operation at Calcutta as well. It is under those circumstances, the properties cannot be said to be situated outside the territorial jurisdiction and limits of Visakhapatnam Courts.

    11. Learned Additional Advocate General relied upon the decision reported in I.T.I. Ltd., Allahabad v. District Judge, Allahabad, AIR 1998 All. 313-1998(2) Arb. LR 670 (AIL), rendered by a single Judge of the Allahabad High Court in support of the submission that the Parliament intended to make only one Court - the Principal Civil Court of original jurisdiction and any application with respect to the Arbitration agreement will have to be filed in the Principal Civil Court of original jurisdiction in the District. Unless the context otherwise requires the term "Court" as defined in Section 2(e) of the Act 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.

    12. The short question that falls for consideration is as to whether the Court of the learned VI-Additional District Judge is a Civil Court of a grade inferior to the Principal Civil Court. The Court of the Principal District Judge and the Court of VI-Additional District Judge are of equal grade. The Court of the learned VI-Additional District Judge is not a Court of a grade inferior to the Court of the Principal District Judge. The expression "Court of a grade inferior" is required to be understood in its proper context.

    13. The dictionary meaning of inferior is "lower in any respect, subordinate, a person who is lower in rank or station". According to Black's Law Dictionary, inferior means "One who, in relation to another, has less power and is below him ; one who is bound to obey another. The term may denote any Court subordinate to the chief appellate Tribunal in the particular judicial system (e.g. Trial Court) ; but it is also commonly used as the designation of a Court of special, limited, or statutory jurisdiction",

    14. I find it difficult to accept the submission of the learned Additional Advocate General that the Court of the learned VI-Additional District Judge at Visakhapatnam is a Court of a grade inferior to the Principal District Judge's Court. I am unable to persuade myself to accept the reasoning given and the ratio of the decision in M/s. I.T.I. Ltd., Allahabad (supra). The contention is accordingly rejected.

    15. The next question that falls for consideration is as to whether the Courts at Visakhapatnam have no jurisdiction at all in view of Clause 24 of the agreement noticed hereinabove ?

    16. The Arbitration proceedings in terms of the said agreement are required to be conducted at New Delhi in accordance with the provisions of the clause. That Clause 24 of the agreement does not speak anything about the jurisdiction of the Courts. It is not as if the parties have agreed that the Courts at New Delhi alone shall have the jurisdiction in the matter.

    17. The question as to whether the Courts at Visakhapatnam have no jurisdiction at all is not a pure question of law. It is a mixed question of law and facts and the resolution thereof depends upon the appreciation of evidence that may be let in by the parties. The main O.P. filed by the responded herein is still pending and under consideration of the learned Judge at Visakhapatnam. That any observation from this Court, at this sage, may render the very O.P. infructuous. In the circumstances this Court is of the opinion that it would not be necessary to express any opinion on the same at this stage.

    18. In spite of some suggestion from this Court, the parties were unable to arrive at some consensus for the disposal of the interlocutory application. Having regard to all the facts and circumstances of the case, this Court is of the opinion that interest of justice requires disposal of the main O.P. itself, in which the very same questions that are canvassed before me arise for consideration.

    19. I have already noticed the details of movable and immovable properties that were attached pursuant to the directions of the learned trial Judge.

    20. In the memo filed on behalf of the petitioner herein, it is stated that the total value of the petition schedule (Item No. 1) property i.e., the Factory Shed and Building including Plant and Machineries, with plot area admeasuring about Acres 2.5 with plot No. XI 11-12, situated at Blocks EP, Sector V, Salt Lake City Kolkata is worth about Rs. 24.00 crores. The total balance in all the attached bank accounts is Rs. 6.00 lakhs.

    21. Learned counsel for the respondent, however, seriously disputed about the estimation of the value of the immovable property at Rs. 24.00 crores and according to him, the property is not worth of Rs. 24.00 crores.

    22. But the fact remains that it is a valuable property which continues to be under attachment ever since the order dated 05.08.2003. The interim attachment of the said property ordered by the learned Judge, for all purposes protects the interest of the respondent herein. It is not as if the said property is likely to be alienated or parted away by the petitioner herein immediately and the interim attachment order granted by the Court is coming in its way for alienating the same. In the circumstances, there is no need or necessity to keep the bank accounts under attachment. The attachment of the Bank accounts is accordingly raised and the petitioner herein shall be entitled to operate the bank accounts without any impediment whatsoever.

    23. The attachment of the immovable property shall continue till the end of January 2004. Before expiry of the same, the learned trial Judge is directed to dispose of the main O.P. itself, for which purpose, both the parties have agreed to lead their evidence without asking for any unreasonable adjournments. The learned trial Judge is accordingly directed to dispose of the main O.P. itself without being influenced by any of the observations made in this order and as well as the observations made by himself in the interlocutory order. The entire issue is required to be considered afresh in accordance with law. All the contentions raised by the parties are left open.

    24. The Civil Revision Petition is accordingly disposed of. There shall be no order as to costs.

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    Comments

    Globsyn Technologies Limited, Calcutta v. Eskaaycee Infosys, Viskashapatnam
    (Nov 11, 2003)