Ramkripal Sharma v. Union Of India And Another

The petitioner carries on business under the name and style of Standard Steel Suppliers at No. 5/1, Clive Row, Calcutta as the sole proprietor thereof. The petitioner entered into a contract with the respondent to supply M.S rounds at agreed rate and the respondent issued a purchase order dated 19-10-81. One of the terms of the contract was that before supply the petitioner would give inspection of the goods to the respondent. Pursuant to the said agreement the respondent's representative inspected the goods and three inspection certificates were issued by the respondent's Assistant Director of Inspection (MET) from his office at Guha Building at No. 7, Ganesh Chandra Avenue within the jurisdiction aforesaid. The said goods were alleged to be wrongfully rejected by the respondent. By a letter dated 28-4-82, addressed to the petitioner the respondent's controller of stores alleged that the delivery period had expired but the extension of time would be I granted if the petitioner would agree to accept Rs. 4,380/- per M.T instead of Rs. 4,885/- per M.T as agreed the petitioner's case is that the said letter was written in breach of the agreement and the petitioner accepted the said breach within the jurisdiction. Disputes arose and the same were referred to the arbitration in terms of the arbitration agreement contained in the contract. The Arbitrator made the award. On 23-3-83, the petitioner made the present application under Section 14(2) of the Arbitration Act in this Court for direction on the Arbitrator to file the award in this Court. On 30-3-83, the respondent made a similar application in Gauhati Court for filing the said award in that Court. The question is which Court will have jurisdiction in the matter?

2. The respondent's counsel submits that no part of the cause of action arose within the jurisdiction of this Court and as such this Court cannot entertain this application. I am unable to accept this submission. Under the terms of the contract, the respondent was to take inspection of the goods. The certificates of inspection were issued by the respondent from within the jurisdiction of this Court. This was done in performance of the contract. Hence part of the cause of action arose within the jurisdiction of this Court. The petitioner prayed for leave under Clause 12 of the Letters Patent which was granted. The respondent did not make any application for revocation of the said leave. In that view of the matter, I reject this submission of the respondent. It is, therefore, clear that both this Court and the Gauhati Court have jurisdiction to entertain the application for filing the award.

3. The respondent's counsel submit that the contract contained a forum selection clause as follows:

2703: “Jurisdiction of Court:— The Court of the place from where the acceptance of tender has been issued shall alone have jurisdiction to decide any dispute arising out of or in respect of the contract.”

It is an admitted case that the acceptance of tender was issued for Gauhati. The respondent's counsel, relying on the above clause submits, that although this agreement will not divest this Court of its jurisdiction in the matter but this Court being the excluded Court, should not exercise its jurisdiction in view of this lawful agreement between the parties. In support of his contention, he relies on AIR 1971 SC 740, Hakam Singh v. Gammon (India) Ltd.† . and AIR 1985 Cal 89, Sm. Kumud Agarwalla v. Fertiliser Corporation of India Ltd. In both these cases the excluded Court declined to exercise jurisdiction to give effect to the agreement between the parties.

4. The petitioner's counsel however points out that in none of the aforesaid two cases, the effect of the provisions of Section 31(4) of the Arbitration Act was considered. The petitioner's counsel invites my attention to Section 31 of the Arbitration Act which is set out below:—

31. “Jurisdiction. — Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.

(3) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been, or may be filed, and by no other Court.

(4) Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force, where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court.”

5. This section clearly provides that if an application in the matter of a reference is made in a Court of competent jurisdiction, and that application is the first application, then that Court will have exclusive jurisdiction to entertain all subsequent applications relating to that reference and all other Courts which are otherwise competent to entertain such applications will lose their jurisdiction in the matter due to the operation of Section 31(4) of the Arbitration Act. If the first application is made in the Court excluded by a forum selection agreement between the parties, still that excluded Court will be fixed with the exclusive jurisdiction by ousting the jurisdiction of all other Courts. In support of his contention, he cites AIR 1953 SC 313, Kumbha Mawji v. Dominion of India. In this case, after the award is made on a private reference, the Dominion of India on 10-8-49 made an application before the Gauhati Court under Section 14(2) of the Arbitration Act for filing the award in that Court. Thereafter on 17-8-49, a week-after the application was filed in Gauhati Court, the appellant Mawji's solicitor sent the award to the Registrar, O.S, of this Court for filing the award in this Court. The question was in which Court, Gauhati or Calcutta, the award should be filed? The Supreme Court considered the provision of Section 31(4) of the Act and held in paragraph 15 thereof:

“The phrase ‘in a reference’ would mean “in the matter of a reference to arbitration”. The phrase “in a reference”, is therefore, comprehensive enough to cover also an application first made after the arbitration is completed and a final award is made and in our opinion that is the correct construction thereof in the context. We are, therefore, of the opinion that Section 31(4) would vest exclusive jurisdiction in the Court in which an application for the filing of an award has been first made under Section 14 of the Act.”

6. It was held in that case that Gauhati Court had exclusive jurisdiction in the matter. The petitioner's counsel submits that in the present case also the application has been made under Section 14(2) of the Arbitration Act and has been made in this Court first. Therefore this Court is fixed with the exclusive jurisdiction in the matter due to the operation of Section 31(4) of the Act. He further submits, that Section 31(4) clearly provides:—

“Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force.”

7. Therefore the forum selection clause which is governed by the Indian Contract Act cannot prevail over sub-section (4) of Section 31.

8. The respondent's counsel on the other hand submits that in AIR 1953 SC 313 there was no forum selection clause and its effect on Section 31(4) was not considered in that case. According to him Section 31(4) contemplates that the first application must be entertained and disposed of by the Court of competent jurisdiction. If so, then and then only that Court will have exclusive jurisdiction. Mere making of or filing of an application will not attract the provisions of Section 31(4) of the Act. Moreover this statutory bar under Section 31(4) will be applicable to the subsequent application only but not to the first application. In case of the first application, the Court always has the discretion either to exercise its jurisdiction or to decline to do so. If there is a forum selection clause in the agreement, then the Court will not exercise the jurisdiction with a view to give effect to this agreement between the parties. In support of his contention that in case of first application, Section 31(4) is not attracted, he cites AIR 1981 SC 2075. Guru Nanak Foundation v. Rattan Singh & Sons. He strongly relies on paragraphs 18 and 20 of this report which records the facts of that case as well as the decision of the Supreme Court on this point. The Bench consisted of D.A Desai. J. and A.P Sen, J. and the judgment was delivered by Desai, J.:

“In this case an application was made to Delhi High Court under S. 20 of the Arbitration Act for a direction to file the arbitration agreement in the Court. As provided in sub-section (2) of S. 20, the proceeding was numbered as a suit. The suit ended in an order of reference to the arbitrator, the 2nd respondent. A subsequent application was made to Delhi High Court under S. 5 read with S. 11 of the Act for removal of the 2nd respondent as arbitrator. On this application being dismissed, the matter was brought to this Court in appeal being Civil Appeal No. 17 of 1977. By the decision of this Court in the appeal the 2nd respondent was removed as arbitrator and the 3rd respondent was appointed as sole arbitrator. Indisputably, therefore, the arbitrator was appointed by this Court. The order appointing the 3rd respondent as arbitrator, gave a further direction that the arbitrator shall enter upon the reference within 15 days from the date of the order of the Court and he should try to dispose of the same as expeditiously as possible. The final order was that the appeal was disposed of in terms hereinabove indicated. A contention that thereafter this Court was not in seisin of the matter was urged relying upon the fact that the appeal was disposed of by the order of the Court and that there was no further proceeding before this Court. This contention has merely to be stated to be rejected, as will be presently pointed out. After disposal of the appeal C.M.P No. 896/77 was presented to this Court for clarification and/or modification of the order of the Court dated January 5, 1977. This Court by order dated February 10, 1977, gave further directions and a specific time limit was fixed by this Court directing the 3rd respondent as arbitrator to conclude the proceedings within four months from the date of order of this Court. Even with regard to the conduct of proceedings this court directed that the 3rd respondent should proceed with the reference from the stage where it was left by the 2nd respondent and that not only that he may permit additional evidence to be led but he must consider the pleadings and evidence already placed before the previous arbitrator. This will indisputably show that this Court had complete control over the proceedings before the arbitrator.”

9. In AIR 1981 SC 2075, the award made by the 3rd respondent arbitrator was tried to be filed in the Delhi High Court but objection was taken on the ground that the award should be filed in the Supreme Court due to the provisions of S. 31(4) of the Act. The Supreme Court held:

Para 20: “In view of the fact that reference was made by this Court to the 3rd respondent and that this Court gave further direction about the manner and method of conducting the arbitration proceedings and fixed the time for completion of arbitration proceedings, this Court alone would have jurisdiction to entertain the award.”

10. The respondents counsel submits that merely because the initial application under Section 20 of the Act was made in Delhi High Court for filing the arbitration agreement that Court did not have exclusive jurisdiction u/s. 31(4) of the Act. A proceeding anterior to starting of a reference in a Court would not clothe that Court with exclusive jurisdiction. He submits that according to the Supreme Court, the Court gets exclusive jurisdiction, if it starts the reference and retains complete control over the matter.

11. It should be noted that in AIR 1981 SC 2075, Delhi High Court not only entertained the application under Section 20 of the Act and started the reference but it entertained the second application also under Sections 5 and 11 of the Act in connection with the reference started by it earlier under Section 20 of the Act. Both these applications were entertained and disposed of by the Delhi High Court. The Supreme Court as the appellate Court heard the appeal preferred from the order of dismissal of Sections 5 and 11 application. While appointing the sole arbitrator, in the said appeal, the Supreme Court gave the new arbitrator directions to start the reference from the stage left by the previous arbitrator and to consider the pleadings and the evidence adduced before the previous arbitrator. Therefore the Supreme Court proceeded on the basis that it appointed the new arbitrator in a pending reference started by the Delhi High Court and directed the arbitrator appointed by it to complete the proceeding. Otherwise the question of taking up the proceeding from the stage left by the previous arbitrator would not have arisen at all. Still the Supreme Court held that Delhi High Court was not vested with the exclusive jurisdiction u/s. 31(4) of the Act. This decision does not support the contention of the respondent's counsel that if the 1st application is entertained and disposed of by the Court then the provisions of Section 31(4) applies. Then the Supreme Court, in that case, could not have assumed exclusive jurisdiction in spite of the fact that Delhi High Court had entertained and disposed of both Sec. 20 and Ss. 5 and 11 applications. It is also to be noted that in AIR 1981 SC 2075, another earlier decision of the Supreme Court, reported in AIR 1970 SC 189. Union Of India v. Surjeet Singh Atwal was considered. The question in that case was whether the Court where application under Section 34 of the Act would be made would have exclusive jurisdiction under S. 31(4) of the Act. It was held in paragraph 5 of this report as follows:—

“There are different sections in the Arbitration Act whereby an application is to be made even before any reference has been made. S. 8 for instance provides for an application to invoke the power of Court, when the parties fail to concur in the appointment of an arbitrator to whom the reference can be made. So also S. 20 provides for an application to file the arbitration agreement in Court so that an order of reference to an arbitrator can be made. These are clearly applications anterior to the reference but they lead to a reference. Such applications are undoubtedly applications in the matter of a reference and may fall within the purview of S. 31(4) of the Act even though these applications are made before any reference has taken place.”

12. It was held in that case that S. 34 application does not attract S. 31(4) of the Act. This decision in AIR 1970 SC 189, is by a larger Bench consisting of S.M Sikri, R.S Bachawat and V. Ramaswami JJ. It may, however, be said that the aforesaid findings regarding S. 8 and S. 20 in this case were in the nature of obiter as the main question before the Court was to find out the effect of S. 34 application on S. 31(4) of the Act. But AIR 1981 SC 2075 is a clear decision that S. 20 application is not an application which will attract the provisions of S. 31(4) of the Act.

13. This Court, however, in the present case, is not concerned with S. 20 application. The present application is under S. 14(2) of the Act and is clearly covered by Kumbha Mawji's case (AIR 1953 SC 313). On the authority of this case I hold that this Court is vested with the exclusive jurisdiction under Section 31(4) of the Act in the present case. Now the question is, having vested with the exclusive jurisdiction in the matter, can this Court decline to exercise jurisdiction on account of the existence of forum selection clause in this case? The provisions of Section 31(4) of the Arbitration Act and its effect were considered in AIR 1981 SC 2075 in paragraph 15 at page 2080:

“Thus sub-section (4) not only confers exclusive jurisdiction on me Court to which an application is made in any reference but simultaneously ousts the jurisdiction of any other Court, which may as well have jurisdiction in this behalf.”

14. If this was the intention of the statute, then as soon as the present application was made in this Court, Gauhati Court lost its jurisdiction over the matter. Under the circumstances, if this Court declines to exercise jurisdiction, the Gauhati Court will not be competent to entertain this application. The award cannot be filed at all.

15. Mr. Bhabra, the petitioners counsel submits that the section contemplates only the making of an application as will be clear from the language of Section 31(4) “Where in any reference, any application under this Act has been made in a Court competent to entertain it” which means Court of competent jurisdiction. He submits that under S. 3(2)(c) of the Limitation Act, 1963. an application is made as follows:

“An application by notice of motion in a High Court is made when the application is presented to the proper officer of that Court.”

16. Under the Original Side Rules of our Court an application is made on motion after notice to the parties affected thereby, as provided in Chap. XX, Rule 3 and Rule 2 of Appendix 14, Vol. 2 of our O.S Rules. He submits that these provisions did not support respondent's contention that an application is only made when the same is entertained and disposed of. On the contrary, these provisions make clear distinction between making of an application and its disposal. I accept Mr. Bhabra's contention.

17. The respondent's counsel invites my attention to my unreported judgment delivered on 27-6-83 in Ganpatrai Agarwalla v. Fertiliser Corporation of India (reported in AIR 1984 Cal 35) where I had declined to entertain the application under Sections 20 and 41 of the Arbitration Act on account of existence of a forum selection clause in favour of Dhanbad Court by excluding the jurisdiction of this Court. After the dispute arose, applications were made in this Court under Section 20 and Section 41 of the Act. It was argued in that case that in view of the forum selection clause, this Court should not exercise its jurisdiction in the matter. Mr. R.C Deb appearing on behalf of the petitioner in that case, submitted that this Court was vested with the exclusive jurisdiction under the provisions of Section 31(4) of the Act and as such this Court should not refuse to exercise jurisdiction. I, however, declined to entertain those applications and returned the same for filing at Dhanbad Court. On the basis of this decision the respondent's counsel urges me to release this application also. In Ganpatrai's case it was an application under Sections 20 and 41 of the Act and in accordance with the decision reported in AIR 1981 SC 2075, such an application does not attract S. 31(4) of the Act. In Ganpatrai's case, this Court therefore, rightly declined to exercise jurisdiction and released the matter. I have already held that this present application being an application u/s. 14(2) of the Arbitration Act, is covered by Kumbha Mawji's case (AIR 1953 SC 313) and this Court is now vested with the exclusive jurisdiction. This Court, therefore, cannot return the application or refuse to entertain it as the jurisdiction of all other Courts have been ousted by virtue of the provisions of Section 31(4) of the Act. The award holder would be without any remedy, if this Court declines to entertain this application.

18. In that view of the matter, I direct the arbitrator to file the award dated 4-3-83 together with the records of the proceedings in this Court. Parties to pay and bear their respective costs of this application.

Application allowed.