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Hindustan Steel Works Construction Ltd. v. N.V Chowdhury And Others
Factual and Procedural Background
The petitioner and respondent entered into a contract in late November 1982 by the petitioner accepting the respondent's tender. The contract contained an arbitration clause. Disputes arose and a reference was made to joint arbitrators in accordance with the agreement. By letter dated 13-4-84 the joint arbitrators informed the petitioner they had received the respondent's statement of claim and directed the petitioner to submit a counter-statement by 2-5-84.
The petitioner alleges that the joint arbitrators entered upon the reference without appointing an umpire, contrary to the arbitration agreement which required the umpire to be appointed before proceeding on the reference. The petitioner wrote on 23-4-84 requesting appointment of the umpire but asserts the arbitrators failed to do so. The petitioner therefore filed the present application under S.8 of the Arbitration Act on 30-5-85 seeking appointment of an umpire.
As to forum, the petitioner invoked the jurisdiction of this High Court on the ground that the tender was accepted at its office in Calcutta (No. 1, Shakespeare Sarani), so part of the cause of action arose within the Court's local limits. The respondent raised a preliminary objection contesting jurisdiction, arguing that because part of the cause of action arose outside this court the petitioner needed leave under Clause 12 of the Letters Patent to bring the application here, and that the application is therefore not maintainable in limine.
Legal Issues Presented
- Whether the High Court could entertain the petitioner's application under S.8 of the Arbitration Act for appointment of an umpire without first obtaining leave under Clause 12 of the Letters Patent where only part of the cause of action arose within its local limits.
- Whether the Division Bench decision in AIR 1984 Cal 24 (Tobu Enterprises Pvt. Ltd. v. Cameo Industries Ltd.) requiring leave under Clause 12 (in certain circumstances) controls the present application or can be distinguished in light of S.31(4) of the Arbitration Act and Clause 44 of the Letters Patent.
- Whether the petitioner's application under S.8 was premature because, under Rule 2 of the First Schedule to the Arbitration Act, the joint arbitrators had one month (from last date of appointment) to appoint an umpire and the petitioner's notice was given before that one month expired.
- Whether an express arbitration agreement clause requiring the umpire to be appointed in writing before proceeding on the reference displaces the default provision in the First Schedule (via S.3 of the Arbitration Act), and thus whether the joint arbitrators' failure to appoint the umpire before entering upon the reference constituted a default warranting the court's intervention.
Arguments of the Parties
Petitioner's Arguments
- The arbitration agreement required the umpire to be appointed by the arbitrators in writing before proceeding on the reference; the arbitrators proceeded without doing so and thereby committed a default.
- The petitioner gave a written notice on 23-4-84 pointing out the absence of an umpire and requesting appointment; the arbitrators nonetheless failed to appoint one.
- The petitioner invoked this High Court's jurisdiction because the respondent's tender was accepted at the petitioner's office in Calcutta (No. 1, Shakespeare Sarani), meaning part of the cause of action arose within the local limits of this Court.
- Because the arbitration agreement expressed a different intention about appointment of the umpire, the First Schedule's Rule 2 one-month default period is displaced by S.3 of the Arbitration Act; accordingly the petitioner's notice dated 23-4-84 was timely and the application under S.8 was maintainable.
Respondent's Arguments
- Preliminary objection to jurisdiction: since part of the cause of action arose outside this Court, the petitioner should have obtained leave under Clause 12 of the Letters Patent before making the application here; without such leave the application is not maintainable in this Court.
- The respondent relied strongly on the Division Bench decision in AIR 1984 Cal 24 (Tobu Enterprises Pvt. Ltd. v. Cameo Industries Ltd.) to support the contention that leave under Clause 12 is necessary when only part of the cause of action arises within the High Court's local limits.
- On the merits of timing, the respondent argued the joint arbitrators had one month from the last date of appointment (last date of appointment being 6-4-84) under Rule 2 of the First Schedule, so a notice under S.8 should only have been given after 5-5-84; the petitioner's notice of 23-4-84 was therefore premature.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court in this Opinion |
|---|---|---|
| AIR 1984 Cal 24 (Tobu Enterprises Pvt. Ltd. v. Cameo Industries Ltd.) | Held by Division Bench that leave under Clause 12 of the Letters Patent is necessary before filing an application under S.20 of the Arbitration Act when only part of the cause of action arises within the High Court's local limits; interpreted S.2(c) and S.31 to require that the court have jurisdiction over the entire cause of action. | The Court critically reviews and disagrees with this Division Bench decision, distinguishing it on the basis that the Division Bench did not consider S.31(4) and Clause 44 of the Letters Patent; the present Court treats Tobu as not determinative for the present S.8 application and seeks to qualify its scope. |
| AIR 1963 Cal 642 (Rebati Ranjan Chakraborty v. Suranjan Chakravarti) | Dutta J.'s view that S.2(c) read with S.31 determines jurisdiction and that Clause 12 of the Letters Patent is indirectly attracted by S.2(c); suggested leave under Clause 12 may not be decisive because S.2(c) and S.31 govern jurisdiction. | The Court records Dutta J.'s position and notes that the Division Bench in Tobu rejected this view; the present Court aligns more with Dutta J.'s reasoning that S.2(c) and S.31 condition jurisdiction under the Arbitration Act. |
| (1948) R. Wright & Partner, Ltd. v. Governor General In Council (reported reference in text) | Illustrated that the Arbitration Act, as a special Act, can control or limit rights of appeal under the Letters Patent; the Act's provisions can prevail over Letters Patent provisions where Parliament so provides. | The Court states this authority was not considered by the Division Bench in Tobu and uses it to support the proposition that provisions of the Arbitration Act (notably S.31(4)) prevail over conflicting provisions of the Letters Patent (Clause 12) by virtue of Clause 44. |
| AIR 1966 Cal 259 (S.P. Consolidated Engineering Co. Pvt. Ltd. v. Union of India) | Held that leave under Clause 12 was not imperative for filing an application under S.20 of the Arbitration Act even where the proceeding may be characterized as a suit. | The Court cites this decision as supporting the proposition that applications under the Arbitration Act are not suits and that leave under Clause 12 may not be necessary; the Division Bench in Tobu was said to have overruled this view, but the present Court prefers the earlier position. |
| AIR 1981 Cal 202 (Das Consultants Pvt. Ltd. v. N.M.D. Corpn. Ltd.) | Held that if part of the cause of action arose within the jurisdiction of the court, proceedings under the Arbitration Act could be instituted in that court without leave under Clause 12 of the Letters Patent. | The Court notes this authority and records that the Division Bench in Tobu overruled it; the present Court treats Das Consultants as supportive of the proposition that applications under the Arbitration Act are not suits and leave is not required where part of the cause of action is within jurisdiction. |
| AIR 1970 SC 189 (Union of India v. Surjeet Singh Atwal) | Supreme Court decision (three-judge Bench) holding that S.8 and S.20 applications would come within the scope of S.31(4) of the Arbitration Act. | The Court cites this decision to show there is Supreme Court authority holding S.8/S.20 fall within S.31(4); used to support the argument that S.31(4) has overarching effect and can confer jurisdiction even where only part of the cause of action arose within the court's limits. |
| AIR 1981 SC 2075 (Guru Nanak Foundation v. Raltan Singh & Sons) | Supreme Court (two-judge Bench) held that a S.20 application did not come under S.31(4) — presenting a conflicting view at the Supreme Court level. | The Court acknowledges the conflict in Supreme Court precedents on whether S.20 applications fall within S.31(4) and notes that the law on this point remains unsettled; uses the conflict to justify caution in construing Tobu's general applicability. |
| AIR 1985 SC 218 (Amarnath Om Prakash v. State of Punjab) | Guidance on how to read and apply principles laid down in judgments: judicial observations should be interpreted as explanations, not as substitutes for statutes; not to be read as inflexible rules. | The Court invokes this authority to argue that the Division Bench's observations in Tobu should not be read as absolute statutory definitions and may require qualification in new circumstances (notably where S.31(4) and Clause 44 are in play). |
| AIR 1971 SC 740 (Hakam Singh's case) | Referenced in the context that it did not consider the effect of S.31(4) on forum selection clauses. | The Court notes that the effect of S.31(4) on forum selection clauses was not considered in Hakam Singh's case and therefore that decision does not resolve the present conflict regarding Cl.12 and S.31(4). |
| AIR 1986 Cal 80 (Ramkripal Sharma v. Union of India) — Matter No. 369 of 1983 (mentioned as reported) | The Court's own earlier treatment of related jurisdictional aspects in arbitration proceedings (referenced by the present Judge). | The Judge refers to his prior disposition of similar issues in this reported matter as additional background and previous consideration of the point. |
Court's Reasoning and Analysis
The Court addresses two principal strands of legal analysis: (A) whether the High Court had jurisdiction to entertain the application without leave under Clause 12 of the Letters Patent when only part of the cause of action arose within its limits, and (B) whether the petition was premature under the First Schedule's Rule 2 or whether the arbitration agreement's express term and S.3 displace the Rule.
A. Jurisdictional Analysis
- The Court summarizes the Division Bench decision in AIR 1984 Cal 24 (Tobu) which held that S.2(c) and S.31 of the Arbitration Act refer to a court having jurisdiction over the entire subject matter (i.e., the whole cause of action) and therefore concluded that Clause 12 leave was necessary for this High Court when only part of the cause of action arose here.
- The Court then examines the text and effect of S.31(4) of the Arbitration Act, which states that where an application under the 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 — an overriding provision “notwithstanding anything contained elsewhere” in the Act or in any other law.
- The Court reasons that the phrase “no other court” in S.31(4) contemplates situations where two or more courts may be competent to entertain an application (for example, by virtue of part of the cause of action arising within different courts' limits). Under S.31(4), the court in which the first application is made acquires exclusive jurisdiction and divests other courts of power over subsequent applications in that reference. This exclusive effect is described as having overriding operation over other laws, including provisions of the Letters Patent.
- Relying on Clause 44 of the Letters Patent (which makes the Letters Patent subject to legislative power), the Court concludes that S.31(4) will prevail over Clause 12 of the Letters Patent where there is a conflict. Therefore, in the Court's view, the Arbitration Act itself provides the jurisdictional basis for entertaining arbitration applications even when the court has jurisdiction over only part of the cause of action.
- The Court also analyzes the practical and doctrinal consequences of treating Clause 12 leave as the “foundation of jurisdiction.” It finds that viewing leave as conferring inherent jurisdiction is untenable because once a court accepts an arbitration application under S.31(4), it becomes exclusively vested with jurisdiction and cannot thereafter conveniently divest other courts; the Court considers such an outcome to be inconsistent with the operation and consequences of Clause 12 (which, if applied, would still leave other courts with jurisdiction and permit cross-suits, stays and transfers under the C.P.C. and Letters Patent).
- The Court observes that earlier Calcutta High Court decisions (AIR 1966 Cal 259 and AIR 1981 Cal 202) held that leave under Clause 12 was not necessary for applications under the Arbitration Act where part of the cause of action arose in the High Court; the Division Bench in Tobu overruled these earlier decisions, but the present Court prefers to distinguish Tobu on the ground that it did not consider S.31(4) and Clause 44 and therefore requires qualification.
- The Court also notes conflicting Supreme Court authorities on whether S.20 applications fall within S.31(4) (a three-judge Bench said yes in Union of India v. Surjeet Singh Atwal — AIR 1970 SC 189 — while a two-judge Bench later said no in Guru Nanak Foundation — AIR 1981 SC 2075). The Court uses this conflict to underline that the law on scope of S.31(4) is unsettled and that Tobu's broad reading should be qualified.
B. Analysis of Prematurity and Agreement-Specific Provision
- The respondent argued the petition was premature because Rule 2 of the First Schedule gives joint arbitrators one month from the last date of appointment to appoint an umpire; in this case the last date was 6-4-84 so one month would expire on 5-5-84 and the petitioner's S.8 notice dated 23-4-84 preceded that date.
- The petitioner countered that the arbitration agreement expressly stated the umpire was to be appointed "by the Arbitrators in writing before proceeding on the reference." The petitioner relied on S.3 of the Arbitration Act, which deems the First Schedule included in an arbitration agreement "unless a different intention is expressed therein."
- The Court accepted the petitioner's submission: where the parties' agreement expresses a different intention (requiring appointment before proceeding), the default provision in the First Schedule (R.2) is displaced by S.3. Since the joint arbitrators had already entered upon the reference (having received the statement of claim and called the petitioner to file its counter-statement) without appointing the umpire, they committed a default and the petitioner's notice of 23-4-84 was valid under S.8.
Holding and Implications
Holding: The Court concluded the application was maintainable and issued relief. The core ruling is: APPLICATION ALLOWED; the petitioner’s application under S.8 of the Arbitration Act is maintainable and the Court appoints an umpire.
The direct operational consequences ordered by the Court in this opinion (as the relief granted) are:
- The Court appointed Mr. Justice Salil Kumar Roy Chowdhury (a retired Judge of the High Court) as the sole Umpire to enter upon the reference in case of disagreement between the joint arbitrators.
- Remuneration: fixed at 60 Gms. per each effective sitting irrespective of hours.
- The Umpire may engage/retain a stenographer, an interpreter and a clerk; their remuneration is to be fixed at the meeting of the parties. The Umpire may retain those already appointed by the joint arbitrators if he thinks fit.
- The Umpire is to make his award within six months from the date of his entering upon the reference.
- The cost of the application is to be costs in the arbitration proceeding.
- All parties, the joint arbitrators and the Umpire are to act on a signed copy of the minutes of this order; the signed copy must be served on the arbitrators and the umpire within three weeks from the date. If service is not effected within three weeks, the order stands vacated.
Broader implications noted in the opinion (as expressed by the Court, not asserted as binding new precedent):
- The Court expresses a reasoned disagreement with the Division Bench decision in AIR 1984 Cal 24 to the extent that it did not consider S.31(4) and Clause 44 of the Letters Patent; the Judge considers that S.31(4) has an overriding effect and can permit a court having jurisdiction over part of the cause of action to entertain arbitration applications without leave under Clause 12.
- The Court highlights that Supreme Court decisions on whether certain arbitration applications fall within S.31(4) are conflicting, and that these matters require authoritative settlement. The opinion cautions against reading appellate decisions as absolute statutory definitions without qualification.
- The opinion does not purport to lay down a binding change of law beyond the facts of this case; it records disagreement with the Division Bench and offers an alternative interpretation favoring the primacy of S.31(4) in appropriate circumstances.
Application allowed.
Note: This summary strictly reflects the content and reasoning contained in the provided opinion and does not add or infer information beyond what is explicitly stated therein.
This is an application under S. 8 of the Arbitration Act for appointment of an umpire. The petitioner entered into a contract on 22nd/23rd Nov. 1982 by accepting the tender submitted by the respondent. The contract contained an arbitration clause that disputes arising out of the contract would be decided by arbitration. Disputes arose and reference was made to the joint arbitrators in accordance with the agreement. By a letter dt. 13-4-84 the arbitrators intimated the petitioner that they had received the statement of claim from the respondent and called upon the petitioner to submit its counter-statement on or before 2-5-84. The petitioner alleges that the joint arbitrators entered upon the reference without appointing an umpire. The petitioner by letter dt. 23-4-84 pointed out to the joint arbitrators that they did not appoint an umpire before entering upon the reference and requested them to appoint the umpire. It is alleged that in spite of such notice, the joint arbitrators did not appoint any umpire. Hence the present application was taken out on 30-5-85. The petitioner has invoked the jurisdiction of this Court on the ground that the tender submitted by the respondent was accepted by the petitioner at its office at No. 1, Shakespeare Sarani, Calcutta-700071, situate within the jurisdiction of this Court. In short the petitioner alleges that the contract was concluded within the jurisdiction and as such part of the cause of action arose within the local limits of this court. The respondent in the present case, has taken a preliminary objection that the jurisdiction of this Court has been invoked on the ground that part of the Cause of action has arisen within the jurisdiction but the rest has arisen outside. Therefore this application could not have been made in this court without first obtaining leave under Cl. 12 of the Letters Patent and as such this application must be rejected in limine. In support of his contention, the respondent's counsel Mr. Bhabra, strongly relies on our Division Bench judgment reported in AIR 1984 Cal 24 (Tobu Enterprises Pvt Ltd. v. Cameo Industries Ltd.). This case requires a careful consideration. The facts of this case were that on 25-1-84 this Court granted leave under Cl. 12 of the Letters Patent to the respondent to make an application under S. 20 of the Arbitration Act 1940. The said application was registered as Special Suit No. 3A of 1983. The respondent Tobu Engineering preferred an appeal against the order dt. 25-1-83 granting leave under Cl. 12 of the Letters Patent. The respondent in this appeal raised an objection that the appeal was not maintainable under S. 39(1) of the Arbitration Act as the order granting leave under Cl. 12 of the Letters Patent must be treated as an order passed under the Arbitration Act on account of the provisions of Ss. 2(c) and 31(2) of the Act. The question, therefore, arose whether the order dt. 25-1-83 was passed under the Arbitration Act or only under Cl. 12 of the Letters Patent. If that order was under Cl. 12 only then S. 39(1) of Arbitration Act will have no application and the order will be appealable. The Appeal Court rejected the contention of the respondent that the order dt. 25-1-83 was passed under the Arbitration Act and held in para 9 at page 27:—
“It is difficult for us to accept the contention of the respondent that an order under Cl. 12 of the Letters Patent is an order under the Arbitration Act. Neither Sec. 31 nor S. 2(c) refers to Cl. 12 of the Letters Patent. The question of passing any order under the Arbitration Act will arise after leave under Cl. 12 is granted enabling a party to file an application under S. 20 of the Arbitration Act. So long as the leave is not granted there is no proceeding before the court under the Arbitration Act and as such there can be no order under the Arbitration Act.”
2. It was further argued in that case on behalf of the respondent, that the jurisdiction of this High Court to entertain an application under the Arbitration Act depended wholly on the provisions of S. 2(c)and S. 31(1) and (2) of the Arbitration Act and not on Cl. 12 of the Letters Patent and as such no leave under Cl. 12 of the Letters Patent would be necessary to make an application under the Arbitration Act on the ground that only a part of the cause of action arose within the jurisdiction. The respondent's counsel, in support of his contention had cited AIR 1963 Cal 642 (Rebati Ranjan Chakraborty v. Suranjan Chakravarti). It was an appeal before Sinha and Dutta JJ. In this case Sinha J. held that the appeal was not maintainable and as such he did not decide the question of jurisdiction and/or whether leave under Cl. 12 of the Letters Patent would be necessary to make an application under S. 20 of the Act on the ground that a part of the cause of action had arisen within the jurisdiction of that court. But Dutta J. held:—
“Clause 12 of the Letters Patent does not determine the jurisdiction of the Court but S. 2(c) read with Sec. 31 does it, and in so doing S. 2(c) indirectly incorporates the provisions of the Letters Patent. To put it differently, Cl. 12 of the Letters Patent cannot determine the jurisdiction but for Sec. 2(c) read with S. 31. Hence jurisdiction of the court to entertain an application for appointment of Receiver and/or Award does not flow from the Letters Patent but springs from Sec. 31 read with S. 2(c) which by reference attracts Cl. 12 of the Letters Patent …………….. In this view of the matter it is immaterial to consider whether it is necessary in order to find jurisdiction in the High Court that a part of the cause of action should arise within the local limits of jurisdiction and further in such a case leave should be taken before filing the plaint or it is sufficient if a part of cause of action only arises within the local limits of the jurisdiction.”
(emphasis supplied).
3. Dealing with Dutta J.'s observation in AIR 1963 Cal 642, the Division Bench in AIR 1984 Cal 24 observed in para 12 as follows:—
“While it is true that S. 2(c) read with S. 31 of Arbitration Act determines the jurisdiction of the Court, most respectfully we beg to differ with the observation of the learned Judge that S. 2(c) indirectly incorporates the provisions of the Letters Patent or that it attracts Cl. 12 of the Letters Patent. Consequently, we are unable to subscribe to the view of the learned Judge that it is immaterial whether part of the cause of action should arise within the jurisdiction of this court or leave under Cl. 12 should be taken or not.”
4. The Division Bench also gave their reasons for differing with the view taken by Dutta J. by analysing the scope and effect of Ss. 2(c) and 31(1) and (2) of the Arbitration Act in manner stated in para 13 of the report. The reasonings are as follows:—
“The word ‘questions’ in S. 2(c) is significant to be noticed, S. 2(c) enjoins that the civil court should have jurisdiction to decide the ‘questions’ that is to say all the questions forming the subject matter of a reference. It, therefore, follows that if, in a given case, the civil court has not the jurisdiction to decide all the questions, but only one or some of the questions forming the subject matter of a reference that particular civil court will not have jurisdiction in terms of S. 2(c). Similarly, under sub-secs. (1) and (2) of S. 31 of the Arbitration Act, a court not having jurisdiction in the matter to which the reference relates in a particular case, will have no jurisdiction to decide the questions referred to in sub-sec. (2). Here also the word ‘matter’ in sub-sec. (1) refers to, the entire matter and not part of it. In view of, however, of the provision of Secs. 17, 19 and 20 of the Civil P.C, such a situation create no difficulty in filing a suit in a Civil Court.”
(emphasis supplied).
5. It is, therefore, clear that according to this Division Bench, the word ‘Court’ under S. 2(c) and S. 31(1)(2) of the Arbitration Act must be a civil court having jurisdiction to deal with the “entire subject matter of the reference” and not part thereof. It should be a court, within whose jurisdiction, the entire cause of action has arisen. Therefore, this Division Bench further held that Ss. 2(c) and 31(1)(2) of the Arbitration Act attract civil courts u/Ss. 17, 19 and 20 of the Civil P.C because such courts can entertain and try the entire suit even though they have jurisdiction over only part of the cause of action thereof. No other formality will have to be observed for filing such suits in these courts but so far as this High Court is concerned, the position is different. Cl. 12 of the Letters Patent requires leave for filing a suit in this court Under Cl. 12, unless leave is obtained first no suit can be filed in this court on the basis that part of the cause of action has arisen within its local limits. Only after granting the leave under Cl. 12, this High Court gets jurisdiction to try the entire suit and not otherwise. Therefore Ss. 2(c) and 31(1) and (2) of Arbitration Act do not attract a chartered. High Court like ours Ss. 2(c) and 31(1) and (2) do not bring within their purview a court which has jurisdiction only over part of the cause of action in respect of an application under the Arbitration Act.
6. Unfortunately the attention of the Division Bench was not invited to the provisions of S. 31(4) of the Arbitration Act which is set out below for convenience:
“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 other subsequent applications arising out of that reference and the arbitration proceeding shall be made in that Court and in no other court.”
(emphasis supplied).
7. The reference of ‘no other court’ in sub-sec. 31(4) will clearly establish that this sub-Section contemplates a situation where two or more courts have jurisdiction in respect of an application and when the application is made in any of such courts first in order of time, then that court will be fixed with the exclusive jurisdiction and all other courts which otherwise are entitled to entertain the application, will be divested of their jurisdiction in the matter. This subjection has overriding effect over other provisions of the Arbitration Act and over all other laws for the time being in force. This sub-section also provides that an application can be made in a court which has jurisdiction over part of the cause of action in the matter and such court is described in the sub-section as “competent Court”. Therefore S. 2(c) and S. 31(1), (2), (3) and (4) also include a Court which has jurisdiction over part of the cause of action. The Division Bench's finding that S. 2(c) and S. 31(1) and (2) only refer to the Court which has jurisdiction over the whole of the cause of action as laid down in AIR 1984 Cal 24 para 13 is contrary to the provisions of S. 31(4) of the Act. It is true that S. 2(c) or S. 31 does not expressly refer to Cl. 12 of the Letters Patent, but in my opinion, when the Arbitration Act 1940, itself has made provisions regarding jurisdiction of civil courts for trying applications under the Arbitration Act, with overriding effect over all other laws in force; then there is no occasion for taking recourse to the provisions of the Civil P.C or Cl. 12 of the Letters Patent. In (1948) 52 R. Wright & Partner, Ltd.… v. Governor General In Council…* in Council) one party had made an application u/S. 33 of the Arbitration Act for staying an arbitration proceeding on the ground that there was no dispute in existence and as such the Arbitrator had no jurisdiction to proceed in the matter. This application was allowed and an appeal was preferred. Before the Appeal Court it was contended that no appeal would lie under S. 39 of the Arbitration Act from an order allowing an application u/S 33 of the Act. The appellant contended that if the appeal was incompetent under S. 39 of the Arbitration Act, the appeal could still be entertained by this chartered High Court under Cl. 15 of the Letters Patent. It was however, held, that the provisions of the Letters Patent being subject to the legislative powers of the Governor General in Council, under Cl. 44 of the Letters Patent, the provisions of S. 39 of the Arbitration Act would prevail over the provisions of Cl. 15 of the Letters Patent and the appeal would be incompetent under S. 39 of the Act. It would be significant to note that in AIR 1984 Cal 24, R. Wright's case was not considered although the Division Bench thoroughly considered AIR 1963 Cal 642 where Sinha J. had elaborately dealt with R. Wright's case for coming to his finding that order passed under S. 41 of the Arbitration Act was not appealable under S. 39 of the Act. In para 10 of AIR 1963 Cal 642, Sinha J. held:—
“The Arbitration Act 1940 was a Special Act and therefore controlled the general right of appeal given by Cl. 15 of the Letters Patent.”
Clause 44 of Letters Patent is set out below:—
“And we do further ordain and declare that all the provisions of these our Letters Patent are subject to the legislative powers of the Governor General in legislature………. and may be in all respect be amended and altered thereby.”
8. The provisions of S. 31(4) and Cl. 44 of the Letters Patent, when read together, will leave no doubt, that S. 31(4) will prevail over Cl. 12 of the Letters Patent and this Court as a Civil Court having jurisdiction over part of cause of action in an application under the Arbitration Act will be entitled to entertain such an application under the provisions of the Arbitration Act itself without taking recourse to Cl. 12 of the Letters Patent because Cl. 12 is subject to the provisions of S. 31(4) of the Act.
9. The Division Bench having already decided that a ‘Court’ under Ss. 2(c) and 31(1) and (2) must be a court having jurisdiction over the entire cause of action, in the matter, a court which has jurisdiction over part of it must derive its jurisdiction either from the Civil P.C u/S. 17, 19 or 20 or from Cl. 12 of the Letters Patent. Arbitration Act does not make any provision to meet this situation. The Division Bench, therefore, came to the conclusion:—
“So long as such leave is not obtained this court will not have jurisdiction to entertain or try the suit and consequently in terms of S. 2(c) read with S. 31 of the Arbitration Act also an application under Sec. 20 of the Arbitration Act Neither S. 2(c) nor S. 31 dispense with the obtaining of leave under Cl. 12 of the Letters Patent. In the circumstances, it is not possible to say that S. 2(c) indirectly incorporates or attracts the provisions of Cl. 12 of the Letters Patent as observed by Dutta J.”
10. If the attention of the Appeal Court was invited to the words “Court competent to entertain” contained in sec. 31(4) of the Act as well as its overriding effect and cl. 44 of the Letters patent, there was every possibility that the Division Bench would have come to a different conclusion altogether. In my opinion, this High Court, in its ordinary original civil jurisdiction, in Arbitration matters, derives its entire jurisdiction only from the Arbitration Act itself, irrespective of the fact whether this court has jurisdiction over the whole of the cause of action or the part thereof. That is why Dutta J. held in AIR 1963 Cal 642 at para 22:—
“Hence the determination of the existence or non-existence of jurisdiction of a court to entertain an application under the Arbitration Act is conditioned by S. 2(c) and S. 31 of the Act and is consequently under this Act.”
11. But while saying so, Dutta J. did not deal with the provisions of S. 31(4) or Cl. 44 of the Letters Patent specifically in the judgment. As a result, the attention of the Appeal Court, while considering AIR 1963 Cal 642, was not drawn to the provisions of sub-sec. 31(4) of Cl. 44. The counsel for the parties to the appeal in Tobu Enterprises (AIR 1984 Cal 24) also did not invite the Appeal Court's attention, to these provisions. As a matter of fact, the Division Bench did not have any opportunity or occasion to deal with this sub-sec. 31(4) of the Arbitration Act or Cl. 44 of the Letters Patent in this appeal. Moreover, the Division, Bench was very much concerned and swayed by the words “if the same had been the subject matter of a suit” contained in S. 2(c) of the Act. It came to the conclusion that leave would be necessary in case the court has jurisdiction over the part of the cause of action only and as no suit could be filed without the leave, no application under the Arbitration Act under the similar circumstances could be entertained without leave under Cl. 12 of (the Letters Patent. The analogy of “suit” given in S. 2(c) of the Arbitration Act, only gives us a guideline to find out the right court. The word “suit” acts as an indicator and points out which court will be competent court to entertain the application under the Act. S. 2(c) cannot treat an ‘application’ under the Act as a ‘suit’ because a ‘suit’ is barred under S. 32 of the Arbitration Act Hence an application under the Arbitration Act remains an ‘application’. As a matter of fact if a civil suit is filed covering the subject matter of an arbitration agreement, the Act provides that the said suit can be stayed under S. 34 of the Arbitration Act. The Arbitration Act with all emphasis, prohibits a suit. Therefore, it cannot be contended that the Arbitration Act intended that an application under this Act and a civil suit should be treated on the same footing. In AIR 1966 Cal 259 (S.P Consolidated. Engineering Co. Pvt. Ltd. v. Union of India) it was contended that for filing a Special Suit under Sec. 20 of the Arbitration Act in this High Court on the basis of the part of the cause of action arising within the local limits of this court, leave under Cl. 12 of the Letters Patent would be necessary. This Court rejected the contention and held at page 266:—
“…….I am unable to accept Mr. Sen's contention that leave under Cl. 12 is imperative under S. 20 of the Act even though such a proceeding may well be characterised as a suit”
12. This view of AIR 1966 Cal 259 was accepted in AIR 1981 Cal 202 (Das Consultants Pvt. Ltd. v. N.M.D Corpn. Ltd.) and in para 7 of this case it was held that for filing an application under Arbitration Act:
“If part of the cause of action had arisen within the jurisdiction of the court, then proceeding can be instituted in this court and in that event leave under Cl. 12 of the Letters Patent was not necessary.”
The aforesaid observations were made on the ground that the applications under the Arbitration Act were not suits.
13. The learned Judges of the Division Bench while agreeing with the aforesaid two cases that applications under the Arbitration Act are not suits, however, held at page 39:—
“……It is true that the application under Sec. 20 of the Arbitration Act is not a but but the jurisdiction of the court will have to be decided on the basis that if it had been a suit, whether the court would have jurisdiction to entertain and try the suit. This is manifestly clear from the provisions of Ss. 2(c) and 31 of the Arbitration Act.”
The Division Bench has overruled AIR 1981 Cal 202 and AIR 1966 Cal 259 and reversed the decision of Dutta J. in AIR 1963 Cal 642.
14. I am quite aware of the fact that this decision of the Hon'ble Appeal Court is binding on me. But with greatest respect, I beg to differ with the view taken by the learned Judges of the Division Bench on the ground, that in arriving at the decision reported in AIR 1984 Cal 24, the learned Judges did not have any opportunity or the occasion to consider the provisions of S. 31(4) of the Arbitration Act as well as Cl. 44 of the Letters Patent and that was why the Division Bench came to the finding that unless leave under Cl. 12 of the Letters Patent would be obtained first as is done in case of a suit where the court had jurisdiction over part of cause of action only, an application under the Arbitration Act would not be maintainable without leave if the same would be filed in this court on the basis that a part of the cause of action arose within its local limits. This principle was laid down by the Division Bench on this point without consideration of S. 31(4) and Cl. 44 of the Letters Patent and therefore is distinguishable. It has been observed in some cases that where leave under Cl. 12 is necessary, leave is the “foundation of the jurisdiction” of the court to try the matter, what does it mean? Does it mean that without leave, this court lacks inherent jurisdiction? In my opinion, leave cannot be the “foundation of jurisdiction”. Such expressions are loosely made. Unless this court has inherent jurisdiction over, part of the cause of action in the suit this court cannot grant leave under Cl. 12. Therefore, the existence of inherent jurisdiction of the court over the suit must be admitted before leave is obtained. Hence leave cannot be the foundation of jurisdiction. Testing from another angle, the theory that “leave is the foundation of jurisdiction” seems baseless and absurd. Certainly, it cannot be contended that this court by granting leave confers upon itself the jurisdiction to try the suit and can again divest itself of this jurisdiction by revoking the leave. It is an absurd proposition to suggest that a civil court has discretion of conferring jurisdiction upon itself and also divesting itself of it. In my opinion, by granting, leave, the court only exercises its discretion to take up the whole suit. The leave is also a condition precedent which must be fulfilled before the suit is filed. This discretion is to be exercised by this court judicially after considering many factors. Generally ‘leave’ is granted ex parte but if the other side prays for revocation of the leave, the court has to consider the question or balance of convenience of the parties, whether the suit would be oppressive or would cause hardship or injustice to the defendant and so on and so forth. Upon consideration of the above aspects of the matter, this court then decides either to retain the order of leave or to revoke the same. In case of revocation, the parties will thereafter be free to follow any other legal recourse open to them and to seek redress from any other court having jurisdiction in the matter. But that cannot be done, if the provisions of S. 31(4) come into operation. Assuming for the sake of argument that leave under Cl. 12 is necessary in Arbitration applications then what would be the result? Then once this court grants leave to apply, and the application is made, this court will automatically be fixed with the exclusive jurisdiction u/S. 31(4) of the Act and all other courts, which have jurisdiction in the matter will lose the same. In such a case, even if the ex parte leave given to the applicant causes oppression, hardship or injustice to the respondent or the balance of convenience is against retaining the matter in this court, still this court will have to retain it. This court will have no jurisdiction to revoke the leave as S. 31(4) does not provide that on revocation of the leave, the jurisdiction of the other courts will be revived. Once a court is vested with the exclusive jurisdiction the other courts would be completely divested of their jurisdiction for good. Under the circumstances if this court refuses to take up the matter, the parties will be without any remedy. Take another instance. If the parties agree to a forum selection clause but in breach of such agreement one party files a suit in the “excluded” court, then the excluded court can return the suit for filing the same in the agreed court. In case of this High Court, if the leave has been given, then the court will revoke the leave to give effect to the agreement which is binding on the parties. But consider what will happen in case of the arbitration application, filed in this High Court. Due to operation of S. 31(4), this court having vested with the exclusive jurisdiction in respect of the matter cannot revoke the leave. The jurisdiction of the agreed court will be totally lost as has been held in AIR 1981 SC 2075 page 2080, para 15. There will be no court where the party can go to seek redress. The effect of S. 31(4) on forum selection clause was not considered in Hakam Singh's case in AIR 1971 SC 740 or in AIR 1984 Cal 24. There is also glaring difference between the scope and effect of the provisions of cl. 12 and S. 31(4). If leave under Cl. 12 is obtained for filing a suit all other courts having jurisdiction over the suit retain their jurisdiction. A defendant in such a case can file a cross-suit in any other court having jurisdiction on the basis of the same cause of action. Both these suits will be good suits but the subsequent suit can be stayed u/S. 10 of C.P.C or can be transferred under Cl. 13 of the Letters Patent, if the first suit is filed in this High Court. No such thing is possible when S. 31(4) of Arbitration Act operates. All subsequent applications made in other courts would be without jurisdiction. The legal incidents and consequences, of leave under Cl. 12 of the Letters Patent and the provisions of S. 31(4) are so conflicting and contradictory to each other that both cannot be made applicable to the same case. Under the circumstances, it is not possible to hold Cl. 12 of the Letters Patent as well as S. 31(1), (2), (3) and (4) govern the arbitration application. It is therefore, evident that provisions of ‘leave’ under Cl. 12 and S. 31(4) were enacted for entirely different purposes. The whole object or legal consequences of Cl. 12 of the Letters Patent will be rendered useless and inoperative if the provisions of S. 31(4) of the Arbitration Act are sought to be made applicable to the same case. The High Court's discretion to revoke the leave will be completely lost. Moreover the provisions of S. 31(4) due to its overriding effect, cannot be bye-passed or ignored in any manner whatsoever and, must prevail over Cl. 12 of the Letters Patent. These are the factors which will sufficiently indicate that the jurisdiction of this High Court in Arbitration matters is quite independent of Cl. 12 of the Letters Patent. In humble disagreement with the decision of the Hon'ble Appeal Court, I hold that Cl. 12 of the Letters Patent does not govern the applications under the Arbitration Act S. 31(4) overrides Cl. 12 by virtue of the provisions of Cl. 44 of the Letters Patent. In any event, this decision of the Appeal Court must remain confined to the application under S. 20 of the Act only. This I say, on the ground that the Supreme Court itself has conflicting views regarding the nature of S. 20 application. In AIR 1970 SC 189 (Union Of India v. Surjeet Singh Atwal ) the Supreme Court Bench consisting of three Judges held that S. 8 and S. 20 applications would come within the scope of S. 31(4) of the Act whereas in AIR 1981 SC 2075 (Guru Nanak Foundation v. Raltan Singh & Sons) the Supreme Court Bench consisting of two Judges held that S. 20 application did not come under S. 31(4) of the Act. It is desirable that the law on this point should be settled. I have already dealt with this aspect in my judgment delivered on 3-5-85 in Matter No. 369 of 1983 (reported in AIR 1986 Cal 80) (Ramkripal Sharma v. Union of India).
15. It may be contended that in AIR 1984 Cal 24, the Appeal Court while interpreting S. 2(c) and S. 31(1) and (2) of Arbitration Act, did not consider the same only from the point of view of S. 20 application but considered their general effect and its findings are applicable to the whole of the Arbitration Act. As the single Bench, this court is bound to follow the view taken by the Appeal Court I have already pointed out that in my opinion, the decision of the Appeal Court can be distinguished on the ground that it did not consider at all the provisions and the overriding effect of S. 31(4) of the Act as well as Cl. 44 of the Letters Patent. Moreover, the Supreme Court in AIR 1985 SC 218 (Amarnath Om Prakash v. State of Punjab) pointed out how to read and apply the principles laid down in a judgment as will appear from para 11 of the report:—
“………observations of the learned Judge are not to be read as Enclid's theorems, nor as provisions of the Statute ……… We consider it proper to say, as we have already said in other cases, that judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for Judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words or a statute, their words are not to be interpreted as statutes.”
16. In that case the Supreme Court also quoted with approval the observation of Lord Ried in (1970) 2 All ER 294 (In Home Office v. Dorset Yacht Co.):
“Lord Athin's speech ………. is not to be treated as if it was a statutory definition. It will require qualification in new circumstances.”
17. These observations of the Supreme Court will apply in full force on the facts and circumstances of this case. The observations of the Appeal Court regarding S. 2(c) and S. 31(1) and (2) as well as Cl. 12 of Letters Patent in AIR 1984 Cal 24 will require qualification and fresh interpretation under the new circumstances when considered in the light of the provisions of S. 31(4) of the Arbitration Act read with Cl. 44 of the Letters Patent.
18. The second point taken by the respondent is that the present application is premature. According to the respondent the joint arbitrators were to appoint the umpire within one month from the last date of appointment of the Arbitrator under R. 2 of the 1st schedule of the Arbitration Act. In the present case last date of appointment of Arbitrator was 6-4-84. One month would expire on 5-5-84. Therefore notice u/S. 8 of the Act for appointment of Umpire should have been given after 5-5-84 but notice was given on 23-4-84, before expiry of one month. Hence this application must be rejected. On the other hand, the petitioner's counsel submits that the arbitration agreement between the parties provides “Umpire to be appointed by the Arbitrators in writing before proceeding on the reference”. In view of this express agreement that Umpire should be appointed before the Arbitrators would enter upon the reference, the provisions of R. 2 of the 1st, schedule of the Act would not be applicable by virtue of the operation of S. 3 of the Arbitration Act which is as follows:—
“An arbitration agreement unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference.”
19. It is contended that in this case, appointment of Umpire ought to have been made prior to 13-4-84 when the Joint Arbitrators informed the petitioner that they had already received the statement of fact and directed the petitioner to file its counter statement The Joint Arbitrators proceeded with the reference without appointing an umpire in violation of the express provision of the agreement and committed the default. The notice dt. 23rd April 1984 was a valid notice perfectly in accordance with the provision of Sec. 8 of the Act. I accept this submission of the petitioner's counsel.
20. In that view of the matter, I hold that this application is maintainable. I, appoint Mr. Justice Salil Kumar Roy Chowdhury, a retired Judge of this High Court as the sole Umpire. In case of disagreement, between the Joint Arbitrators, he will enter upon the reference. His remuneration is fixed at 60 Gms. per each effective sitting irrespective of hours. He will be entitled to engage a stenographer, an interpreter and a clerk and their remunerations are to be fixed at the meeting of the parties. The Umpire, however, will be entitled to retain the stenographer, interpreter and clerk, already appointed by the Joint Arbitrators, if he thinks fit. He will make his award within 6 months from the date of his entering upon the reference. The cost of this application will be cost in the Arbitration proceeding. All parties, the Joint Arbitrators and the Umpire to act on a signed copy of the minutes of this order. This signed copy of the order to be served on the arbitrators and the umpire within three weeks from date. In default the order will stand vacated.
Application allowed.
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