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M/S. R.K Constructions v. National Thermal Power Corporation Ltd .
Summary of Opinion — Devinder Gupta, J.
Factual and Procedural Background
The petition was filed under Section 20 of the Arbitration Act by the petitioner (a firm) against National Thermal Power Corporation Ltd. (NTPC, respondent No. 1) and Canara Bank (respondent No. 2). The petition sought (a) filing of arbitration agreements relating to three different contracts and (b) directions to the Chairman of respondent No. 1 to appoint an arbitrator in terms of arbitration clause 56 (see para 14 of the petition). An application for interim relief sought to restrain respondent No. 1 from invoking various bank guarantees and to restrain Canara Bank from making payment under those bank guarantees.
After notice, respondent No. 1 filed a reply and raised a preliminary objection challenging the territorial jurisdiction of the court. The petition records that respondent No. 2 (Canara Bank) was ordered to be deleted from the array of parties.
Undisputed facts: the petitioner was awarded three separate contracts by NTPC; the contracts were executed at Bhubaneswar and the sites of performance were at the Talcher (Talchur/Talchar) Super Thermal Power Project in District Dhenkanal, Orissa. The petitioner relied on the fact that NTPC's head office is in Delhi to claim jurisdiction of this court.
Legal Issues Presented
- Whether the High Court of Delhi has territorial jurisdiction to entertain a petition under Section 20 of the Arbitration Act seeking filing of arbitration agreements and appointment of an arbitrator where (a) the contracts were executed at Bhubaneswar and to be performed at Talcher (Orissa), and (b) the respondent-corporation has its head/principal office in Delhi but a subordinate/regional office at Bhubaneswar.
- Whether an application under Section 20 of the Arbitration Act is governed by the territorial jurisdiction rules set out in Section 31 and Section 2(c) of the Arbitration Act and, by analogy, the explanation to Section 20 of the Code of Civil Procedure (as interpreted by relevant precedent) when the defendant is a corporation having principal and subordinate offices.
Arguments of the Parties
Petitioner's Arguments
- The petitioner contended that because respondent No. 1 (NTPC) has its head office in Delhi, this court has jurisdiction to entertain the petition under Section 20 of the Arbitration Act.
Respondent's Arguments
- Respondent No. 1 objected to the territorial jurisdiction of this court: the contracts were signed and executed at Bhubaneswar; the site of work and performance was at Talcher, District Dhenkanal, Orissa; the acts forming part of the cause of action (including invocation of bank guarantees) occurred in Orissa. Therefore, no part of the cause of action arose in Delhi and courts in Delhi have no territorial jurisdiction to entertain the petition.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Kumbha Mawji v. Union of India, AIR 1953 SC 313 | Explained scope of Section 31 of the Arbitration Act: sub‑section (1) determines the court in which an award can be filed; the remaining sub‑sections make that jurisdiction effective by (1) vesting authority in one court to deal with all questions regarding validity/effect/existence of an award or arbitration agreement; (2) casting on concerned persons the obligation to file all related applications in that one court; and (3) vesting exclusive jurisdiction in the court in which the first application relating to the matter is filed. | The court relied on this explanation to treat applications under Section 20 of the Arbitration Act as falling within the jurisdictional scheme of Section 31 and hence to require filing in the court having jurisdiction over the subject‑matter of the reference. |
| Patel Roadways Limited v. Prasad Trading Company, 1991 4 SCC 270 | Interpreted the explanation to Section 20 of the Code of Civil Procedure: where a defendant is a corporation, the explanation operates in two parts—(a) if the corporation has its sole or principal office at a place, courts there are deemed to have jurisdiction; (b) if the corporation has a principal office at one place and subordinate offices elsewhere, the court within whose jurisdiction the subordinate office is situate shall have jurisdiction in respect of causes of action arising where that subordinate office exists. | The court applied this principle to determine that a corporation's subordinate office location may confer jurisdiction where the cause of action arises there, and that the mere existence of a principal office at Delhi does not automatically confer jurisdiction on Delhi courts for causes of action arising at subordinate office locations. |
| Kamal Pushp Enterprises v. Chairman‑cum‑Managing Director, G.A.I.L., 56 1994 DLT 259 | Held that territorial jurisdiction depends on (a) what questions form the subject‑matter of reference to arbitration and (b) which court would be competent to decide a suit in respect of those questions; applied Patel Roadways to hold that a corporation having a subordinate office at the place where cause of action arises cannot deny jurisdiction there. | The court followed this ratio to emphasize that it would be unjust to compel a plaintiff to sue at the principal office location when a subordinate office exists where the cause of action arose; this precedent supports rejecting Delhi jurisdiction in the present facts. |
| Arun Khosla v. Union Bank of India, 1995 32 DRJ 94 | Held that under Section 2(c) of the Arbitration Act, territorial jurisdiction must be determined by the claims in the petition; the court at the place where the contract was performed alone will have jurisdiction, not the place where it was signed or where the appointing authority is situated; Section 20 CPC had no application. | The court cited this decision to support the proposition that the place of performance (Talcher/Orissa) governs jurisdiction rather than the place where the contract was signed or the principal office of the appointing authority (Delhi). |
| Haryana Breweries Ltd. v. Haryana Beer Agencies, 58 1995 DLT 682 | Followed the decision in Kamal Pushp Enterprises regarding territorial jurisdiction and subordinate office doctrine. | Cited as a later decision that followed Kamal Pushp and thereby reinforced the line of authority applied in the present case. |
| Aligarh Muslim University v. Vinay Engineering Enterprises (P) Ltd., 1994 4 SCC 710 | Settled that proceedings connected with an arbitration agreement, award and conduct of arbitration proceedings can be initiated only in a court within whose territorial jurisdiction the cause of action has arisen; High Court of Calcutta held not to have jurisdiction where contract was executed and performed at Aligarh despite contractor being Calcutta‑based. | The court relied on this authority to reject the petitioner's contention that Section 20 (or Section 120 of the Code as invoking special High Court jurisdiction) confers jurisdiction on Delhi: where no part of the cause of action arose in the place of the principal office, the forum of performance controls. |
Court's Reasoning and Analysis
The court's analysis focused on statutory jurisdiction rules in the Arbitration Act and precedent interpreting corresponding provisions of the Code of Civil Procedure when the respondent is a corporation with principal and subordinate offices.
Stepwise, the court:
- Identified Section 31 of the Arbitration Act as regulating the forum for matters connected with arbitration agreements and awards, and noted the Supreme Court's explanation in Kumbha Mawji that Section 31(1) determines the court in which an award may be filed while the other sub‑sections make that jurisdiction effective (vesting authority in one court, obliging filing of related applications in that court, and bestowing exclusive jurisdiction on the court of the first application).
- Concluded that applications under Section 20 of the Arbitration Act fall within the scope of Section 31(3) and therefore must be filed in the court having jurisdiction over the matter to which the reference relates.
- Referred to Section 2(c) of the Arbitration Act's definition of "court" (a civil court competent to decide the questions forming the subject‑matter of the reference) to determine which civil court is competent in the case of a corporation that has a principal office and subordinate offices.
- Applied the Apex Court's interpretation in Patel Roadways to distinguish two scenarios: (a) where a corporation has a sole or principal office, courts at that place may be deemed to have jurisdiction; and (b) where a corporation has subordinate offices, the court within whose jurisdiction the subordinate office is situate shall have jurisdiction in respect of causes of action arising there.
- Relied on local High Court decisions (Kamal Pushp and Haryana Breweries) and Arun Khosla to emphasize that territorial jurisdiction is determined by the place of performance or place where cause of action arises, not merely where a contract was signed or where a principal office is situated.
- Noted that in Aligarh Muslim University v. Vinay Engineering Enterprises the Supreme Court ruled that proceedings connected with arbitration can only be initiated in a court where the cause of action has arisen, rejecting the invocation of a defendant's home forum when no part of the cause of action had arisen there.
- Applied the foregoing to the present facts: the contracts were executed at Bhubaneswar and to be performed at Talcher (Orissa); invocation of the bank guarantees and related acts occurred in Orissa (bank guarantee furnished by Canara Bank, Chandni Chowk, Cuttack; amount payable at Bhubaneswar). Therefore, the cause of action arose in Orissa and not in Delhi.
- On that basis, the court concluded that the mere existence of NTPC's head office in Delhi does not confer jurisdiction on this court to entertain the petition under Section 20 of the Arbitration Act and that the petition is not maintainable in this court.
Holding and Implications
Core Holding: The petition is not entertainable in this court and is not maintainable for want of territorial jurisdiction.
Implications and direct consequences:
- The petition under Section 20 of the Arbitration Act filed in this court is dismissed / held not maintainable on territorial jurisdiction grounds.
- Because the petition is not maintainable in this court, no interim relief can be granted by this court in respect of the petition as filed. (The opinion states: "since petition is not maintainable, no interim relief can be granted. Interim relief which has been granted appropriate court having jurisdiction over the matter. Ordered accordingly.")
- The appropriate consequence is that proceedings related to the arbitration agreement, appointment of the arbitrator, and any interim relief should be pursued in the court having territorial jurisdiction where the cause of action arose (as determined by the court), i.e., where performance and acts giving rise to dispute took place.
- Respondent No. 2 had already been ordered deleted from the array of parties in the proceedings before this court (as recorded in the opinion).
The opinion does not assert that it is laying down a new legal precedent; it applies existing Supreme Court and High Court authority to the facts and decides territorial jurisdiction accordingly.
Devinder Gupta, J.:— Petition under Section 20 of the Arbitration Act was filed against National Thermal Power Commission and Canara Bank praying for filing of the arbitration agreements pertaining to three different contracts in court and directing Chairman of respondent No. 1 corporation to appoint an Arbitrator in terms of arbitration clause 56 as reproduced in para 14 of the petition. Along with the petition, an application for interim relief has also been preferred praying that respondent No. 1 be restrained from invoking various bank guarantees and restraining Canara Bank from making payment of the bank guarantees. After notice respondent No. 1 filed its reply and raised a preliminary objection as regards territorial jurisdiction of this court to entertain and try the petition. Be it stated that respondent No. 2 was ordered to be deleted from the array of parties.
2. The petitioner firm was awarded three different contracts by M/s. National Thermal Power Corporation Ltd. (for short ‘NTPC’) and it is not disputed that its head office of respondent No. 1 Corporation is located at Delhi Petition was filed in this court alleging that since respondent No. 1 Corporation has its Head Office in Delhi, therefore, this court has jurisdiction to entertain this petition. After the parties exchanged their respective affidavits, the facts which have emerged and which are not in dispute are that for the award of the works, three contracts were executed at Bhubneshwar. Under the first contract the petitioner was required to carry out construction of 58 Type I, II AND III Quarters in the Construction Township at Talchar Super Thermal Power Project in District Dhenkanal in Orissa. Second contract was for Construction Township of 34 units of Type I and 10 units of Type III Quarters in the township of Talchur Thermal Power Project, Orissa and the third contract was for constrution of 2H Block Officer for Talchur Thermal Power Project, Orissa. The objection is as regards territorial jurisdiction that the contracts were signed and executed at Bhubneshwar. The site of work was Township of Talchur Thermal Power Project at Talchur in Distt. Dhenkanal, Orissa. No part of cause of action arose at Delhi. As such courts in Delhi have no territorial jurisdiction to entertain and try this petition. Learned counsel for the parties were heard at length.
3. The objection raised on behalf of the respondent and arguments addressed in reply by the learned counsel for the petitioner do not require much discussion since the point raised stands decided by various decisions of this courtand of the Supreme Court. Section 31 of the Arbitration Act regulates the forum for entertainment of all matters connected with an arbitration agreement anc award and to make applications regarding conduct of arbitration proceedings, Scope of Section 31 of the Act was explained by the Supreme Court in Kumbha Mawji v. Union of India . AIR 1953 SC 313, saying that while sub-section (1) determines the jurisdiction of the court in which an award can be filed the remaining three sub-sections are intended to make that jurisdiction effective in three ways:
(1) by vesting in one court the authority to deal with all questions regarding the validity, effect or existence of an award or arbitration agreement;
(2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one court; and
(3) by vesting exclusive jurisdiction in the court in which the first application relating to the matter is filed.
4. Applications covered by sub-section (3) of Section 31 of the Act would also include an application under Section 20 of the Act and the same will have to be filed in the court having jurisdiction in the matter to which the reference relates and no other court. The court has been defined in Section 2(c) of the Act to mean:
“a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under Section 21, include Small Cause Court.”
5. In the matter of a Corporation like the defendant in this case court will mean that Civil Court whuch would be competent to decide a suit in respect of the matter which is the subject-matter of reference. The defendant is a Corporationwhich does not have a sole office. It has a principal office at Delhi and has various subordinate offices at other places. One of the subordinate office being at Bhubneshwar (Orissa).
6. In Patel Roadways Limited, Bombay v. Prasad Trading Company. . 1991 4 SCC 270, the Apex Court interpreted the explanation to Section 20 of the Code of Civil Procedure saying that the explanation clarifies the scope of clause (a) of Section 20, and is in two parts. One before the word “or” occurring between the words “office in India” and the words “in respect of” and the other thereafter. The explanation applies to the defendant, which is a Corporation. The first part of the explanation applies to such Corporation which has its sole or principal office at a particular place. In that event the courts within whose jurisdiction the sole or principal office of defendant is situate will also have jurisdiction in as much as even if the defendant may not be actually carrying on business at that place, it will “be deemed to carry on business” at that place ofthe fiction created by the explanation. The later part of the explanation refers to the defendant which does not have a sole office but has a principal office al one place and has also a subordinate office at another place. If the case falls within the later part of the explanation, it is not the court within whose jurisdiction the principal office of the defendant is situate but the court within whose jurisdiction it has a subordinate office which alone shall have jurisdiction in respect of any cause of action arising at any place where it has also a subordinate office.
7. This court in Kamal Pushp Enterprises v. Chairman-cum-Managlng Director G.A.I.L . 56 1994 DLT 259 held that determination of the territorial jurisdiction of a court depends upon the determination of the questions, namely, what are the questions which form the subject-matter of reference to arbitration and secondly which would be the competent court to decide a suit in respect of the questions which would be the subject-matter of reference’ Relying upon the decision in Patel Roadways' case (supra) it was held that where the Corporation has a subordinate office at the place where the cause of action arises, it cannot be heard to say that it cannot be sued there because it does not carry on buiness at that place. It would be a great hardship if, inspite of Corporation having a subordinate office at the place where cause of action arises such plaintiff is to be compelled to travel to the place where the Corporation has its principal office.
8. In Arun Khosla v. Union Bank of India . 1995 32 DRJ 94, also it was held that under Section 2(c) of the Arbitration Act territorial jurisdiction of the court has to be determined on the basis of the claims made in a petition seeking revocation of the authority of the Arbitrator. Court at a place where contract was performed alone will have jurisdiction and not where it was signed or revoked nor where the appointing authority is situate. It was also held that Section 20 of the Code of Civil Procedure had no application.
9. Kamal Pushp's case (supra) was followed in a later decisibn in Haryana Breweries Limited v. Haryana Beer Agencies . 58 1995 DLT 682.
10. In Aligarh Muslim University v. Vi nay Engineering Enterprises (P) Ltd. . 1994 4 SCC 710, the controversy stands settled that proceedings pertaining to all matters connectedwith an arbitration agreement, award and regarding conduct of arbitration proceedings can be initiated only in a court within whose territorial jurisdiction cause of action has arisen. In that case the contract was executed at Aligarh. Construction work was also to be carried out at Aligarh and even the contract provided that in the event of disputes Aligarh alone will have jurisdiction. The Arbitrator was also from Aligarh and was to function from that place. The mere fact that the contractor was a Calcutta based firm, where no part of cause of action had arisen, it was held that High Court of Calcutta had no jurisdiction in the matter. This decision would also answer the submission of learned counsel for the plaintiff that by virtue of Section 120 of the Code of Civil Procedure. Section 20 therof is not applicable to the Delhi High Court while exercising original civil jurisdiction. In Aligarh Muslim University's case also same was the position. Calcutta High Court being a Charted High Court, by virtue of Section 120 of the Code, Section 20 of Indian Panel Code is not applicable to that court.
11. In the instant case the questions on which a reference is sought to Arbitrator are enumerated in para 19 of the petition, namely, non payment of the claims of the petitioner, the legality or validity of the action rescinding of the contract, the act of invoking of the bank guarantee and other ancilliary disputes arising out of the execution of the contract. Since the contract was executed at Bhubneshwar and the same was to be performed at Talchar Thermal Power Project. Talcher. Distt. Dhenkanal, Orissa, the mere fact that the respondent Corporation has its head office at Delhi will not confer jurisdiction on this court to entertain the petition under Section 20 of the Arbitration Act, for filing of the arbitration agreement and for making directions for the appointment of the arbitrator. Contract was awarded by the respondent to the petitioner at Bhubaneshwar by the respondents’ Regional Office. The entire performance of the contract was to be at Orissa. The act of invocation of the bank guarantee was also at Orissa. Bank guarantee was also furnished by Canara Bank, Chandni Chhak, Cuttack. On invocation of the bank guarantee, the amount was also payable at Bhubneshwar. In the circumstances aforementioned, the petition is not at all entertainable in this court and since petition is not maintainable, no interim relief can be granted. Interim relief which has been granted appropriate court having jurisdiction over the matter. Ordered accordingly.
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