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Progressive Career Academy Pvt. Ltd., Jabalpur v. Fiitjee Ltd., New Delhi
Factual and Procedural Background
The applicants entered into a franchise agreement dated 26-7-2001 with respondent No. 1, FIITJEE Ltd., to set up a coaching center at Jabalpur for IIT-JEE and SLEET examinations. The respondents promised to provide copyrighted material, technical knowhow, and training as per the agreement but allegedly failed to fulfill these obligations, leading to a breach of contract. The applicants issued notices on 5-4-2005 and 11-5-2005 seeking reference of the dispute to arbitration as per the arbitration clause of the agreement, but the respondents did not accede. Consequently, the applicants filed an application under section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator. The respondents raised preliminary objections, primarily contesting the territorial jurisdiction of the Madhya Pradesh High Court to entertain the application, asserting exclusive jurisdiction of courts in Delhi/New Delhi as per the agreement.
Legal Issues Presented
- Whether the Chief Justice of the High Court of Madhya Pradesh or any person designated by him has jurisdiction to entertain the application under section 11(6) of the Arbitration and Conciliation Act, 1996, for appointment of an arbitrator, given the jurisdiction clause in the agreement specifying courts in Delhi/New Delhi.
- Whether the appointment of an arbitrator by the respondents after the applicants’ notice renders the application under section 11(6) infructuous.
- Whether the exclusion clause in the agreement regarding jurisdiction applies to the administrative powers exercised under section 11(6) of the Act.
Arguments of the Parties
Respondents' Arguments
- Article 23 of the agreement grants exclusive jurisdiction to courts in Delhi/New Delhi, excluding the jurisdiction of the Madhya Pradesh High Court.
- The parties validly chose the jurisdiction of Delhi/New Delhi courts, and no other court has jurisdiction over disputes arising from the agreement.
- The Chief Justice of the Madhya Pradesh High Court or his designate has no jurisdiction to entertain the application.
- The respondents appointed an arbitrator on 28-9-2005, making the applicants' application for appointment of arbitrator infructuous.
- Relied on Supreme Court precedents including Hakam Singh v. Gammon (India) Ltd. and A.B.C Laminart Pvt. Ltd. v. A.P Agencies to support the jurisdiction argument.
Applicants' Arguments
- The powers of the Chief Justice under section 11(6) are administrative and do not constitute a court proceeding; hence, the exclusion clause on jurisdiction does not apply.
- The agreement was signed at Jabalpur, not New Delhi, and the work was to be performed at Jabalpur, thus Madhya Pradesh High Court has jurisdiction.
- The appointment of arbitrator by respondents after 30 days of notice and after filing of the application is invalid, relying on the Supreme Court judgment in Datar Switchgears Ltd. v. Tata Finance Ltd.
- Relied on the Allahabad High Court judgment in Rail India Technical and Economic Services Ltd. v. Vidyawati Construction Company to support the jurisdiction of the local High Court.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286 | Parties can validly agree to exclusive jurisdiction of one court among multiple competent courts; such choice is not against public policy. | The court held that since both Delhi and Jabalpur courts had jurisdiction, the parties’ agreement conferring exclusive jurisdiction to Delhi courts was valid and binding. |
| A.B.C Laminart Pvt. Ltd. v. A.P Agencies, (1989) 2 SCC 163 | Supports the principle that parties may choose jurisdiction of a particular court. | Reinforced the validity of the jurisdiction clause conferring exclusive jurisdiction to Delhi courts. |
| New Moga Transport Co. v. United India Insurance Co. Ltd., (2004) 4 SCC 677 | Reiterates that parties can limit jurisdiction to one court if multiple courts have jurisdiction. | Supported the court’s conclusion on the validity of the jurisdiction clause. |
| Shree Subhlaxmi Fabrics (P) Ltd. v. Chand Mal Baradia, (2005) 10 SCC 704 | Confirms the principle that parties’ jurisdictional agreement is binding if courts otherwise have jurisdiction. | Used to uphold the exclusive jurisdiction of Delhi courts as per the agreement. |
| Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151 | Appointment of arbitrator after delay and after filing application under section 11(6) may not be valid. | The court rejected respondents’ objection that appointment of arbitrator rendered the application infructuous, but ultimately did not decide on this point due to jurisdiction issue. |
| Rail India Technical and Economic Services Ltd. v. Vidyawati Construction Company, AIR 2001 Allahabad 259 | Administrative powers under section 11(6) and jurisdiction of local High Court. | The court distinguished this case as not applicable here because the agreement predated the Arbitration Act, 1996, and the jurisdiction clause was different. |
Court's Reasoning and Analysis
The court analyzed the jurisdiction clause (Article 23) of the agreement, which provides for exclusive jurisdiction of courts in Delhi/New Delhi and venue of arbitration in Delhi/New Delhi. It examined definitions under section 2(e) and section 11(12)(b) of the Arbitration and Conciliation Act, 1996, clarifying that the Chief Justice for appointment of arbitrator under section 11(6) is the Chief Justice of the High Court within whose territorial limits the principal Civil Court with jurisdiction over the subject matter is situated.
The court found that both Delhi and Jabalpur courts had jurisdiction as per the facts, but the parties validly excluded Jabalpur and conferred exclusive jurisdiction on Delhi courts. The applicants’ contention that the Madhya Pradesh High Court had jurisdiction because the agreement was signed and work performed in Jabalpur was rejected, as the agreement was signed at New Delhi and the jurisdiction clause was valid.
The court distinguished the applicants’ reliance on the Allahabad High Court judgment, noting it was based on a pre-1996 Act agreement and different facts. It held that the application under section 11(6) must be filed before the Chief Justice of the Delhi High Court, as per the jurisdiction clause and statutory provisions.
Since the Madhya Pradesh High Court lacked territorial jurisdiction, the application was not maintainable there. The court did not decide on the merits of the objection regarding the appointment of arbitrator by respondents after the notice.
Holding and Implications
The application under section 11(6) of the Arbitration and Conciliation Act, 1996, filed before the Chief Justice of the Madhya Pradesh High Court for appointment of arbitrator is rejected for want of territorial jurisdiction.
The applicants are required to approach the Chief Justice of the Delhi High Court for appointment of arbitrator in accordance with the jurisdiction clause of the agreement. The decision directly affects the parties by denying jurisdiction to the Madhya Pradesh High Court but does not set any new legal precedent beyond reaffirming established principles on jurisdiction clauses in arbitration agreements.
1. This is an application filed under section 11(6) of the Arbitration and Conciliation Act, 1996 (‘Act’ for short).
2. As per the applicants, the respondent No. 1 FIITJEE Ltd. is doing business of coaching for IIT-JEE and State Level Engineering Entrance Test (for short ‘SLEET’) by offering education to aspiring students for success in the said examination/test conducted all over India.
3. In order to expand their business the respondents invited interested parties by way of advertisements to make investment in the business and promised handsome and lucrative returns on the investments. As per their scheme they were to authorize franchisee's to use the trademark, trade name, design, copyright material and technical knowhow for the purposes of setting up franchise centers at different places for providing coaching for IIT-JEE and SLEET. The applicants entered into an agreement with the respondents on 26-7-2001 (Annexure A-1) for setting up franchise center at Jabalpur. It is stated that the respondents having taken all the considerations payable by the applicants as per the said agreement were obliged to provide the copy-righted material, technical knowhow, training etc. for both the courses, however, they failed in their promise and thereby breached the terms of the agreement. In view of the aforesaid the applicants issued a notice on 5-4-2005 (Annexure A-38) to the respondents seeking reference of the dispute to the arbitration as per the arbitration clause of the agreement. A reminder dated 11-5-2005 (Annexure A-39) was also sent to the respondents but the applicants' request was not acceded to by them. Under the circumstances the applicants have filed this application.
4. The respondents filed preliminary objections and reply. Shri H.C Kohli, learned counsel for the respondents contented that in view of Article 23 of agreement entered into between the parties, the Chief Justice of High Court of Madhya Pradesh or any person authorised by him would have no jurisdiction to entertain the application because the parties with their wilful conduct and clear understanding have specifically agreed that only the Courts in Delhi/New Delhi will have jurisdiction to entertain any case arising out of and/or connected with the agreement whether during the currency of the agreement or before that or after the termination of the agreement, and that no other Court shall have jurisdiction in such matters. He contended that the parties were competent to choose one jurisdiction out of many and they having selected jurisdiction of Delhi/New Delhi Court, the Chief Justice of High Court of Madhya Pradesh would have no jurisdiction to entertain this application. In support Shri H.C Kohli, learned counsel for the respondents placed reliance on Hakam Singh v. Gammon (India) Ltd.† ., (1971) 1 SCC 286 : AIR 1971 SC 740, A.B.C Laminart Pvt. Ltd. v. A.P Agencies, Salem, (1989) 2 SCC 163 : AIR 1989 SC 1239. In addition he also contended that pursuant to the request made by the applicants, the respondents have appointed arbitrator on 28-9-2005 in the circumstances this application seeking appointment of Arbitrator has rendered infructuous.
5. Shri Rajesh Pancholi, in reply to the preliminary objection contended that the powers of the Chief Justice conferred under section 11(6) of the Act being administrative in nature and while exercising such powers neither he nor any person designated by him act as a Court, therefore, exclusion clause 23 of the agreement have no application. He also disputed the fact that the agreement was signed by the applicants at New Delhi. He contended that it was actually sent to Jabalpur within the territorial jurisdiction of this Court where the applicants signed it. He also contended that as the work was to be accepted and performed at Jabalpur, the Chief Justice of High Court of Madhya Pradesh or his designate has got jurisdiction to decide this application. In support he placed strong reliance on the judgment passed in the case of Rail India Technical and Economic Services Ltd. v. Vidyawati Construction Company, AIR 2001 Allahabad 259. As regards the other contention that the respondents having appointed arbitrator this application has rendered infructuous, he contended that the said appointment being made after 30 days of the receipt of the notice and after filing of this application by the applicants, this objection has no merit in view of the judgment passed by the Supreme Court in case of Datar Switchgears Ltd. v. Tata Finance Ltd., (2000) 8 SCC 151 : 2000 AIR SCW 3925.
6. The contention of the applicants that the agreement entered into between the parties was not signed by the applicants at New Delhi and was sent to Jabalpur where it was signed cannot be accepted for the reason that the said plea was not taken by the applicants in this application seeking appointment of arbitrator. In the notices (Annexures A-38 and A-39) also no such plea was taken by the applicants. The agreement entered into between the parties clearly demonstrates that the same was signed by the parties and the witnesses at New Delhi. However, there can be no dispute that the work was to be performed by the applicants at Jabalpur. Thus, the Courts at New Delhi and Jabalpur both had jurisdiction.
7. Now in order to decide the objection about territorial jurisdiction to entertain this application, it would be appropriate to extract the relevant case of the agreement.
“ARTICLE 23: ARBITRATION AND JURISDICTION
1. “Arbitration”
All disputes and differences of any nature arising out of this agreement, whether during its term or after expiry thereof or prior termination shall be referred to the sole arbitration of any of the following persons
(a) Mr. A.K Behera, Advocate
(b) Mr. C.S Aggarwal, Advocate
(c) Mr. Rajesh Gupta, Chartered Accountant
whose decision shall be final on every matter arising hereunder. In spite of the fact that the above-mentioned Arbitrators are known to the company, the franchisee hereby agrees to their appointment as the Arbitrator without any reservation. It is further agreed that the fact that the abovementioned person may have had occasion to deal with any matter related to this agreement either before or after its execution, shall not disqualify him from acting as Arbitrator. The venue of arbitration shall be Delhi/New Delhi only.
2. ‘Incapacity of Arbitrator’
In case any or all of the above persons are incapacitated and/or are unwilling or are not available for appointment as arbitrators then parties to this Agreement shall approach the ‘Indian Council of Arbitrators’ for appointment of an Arbitrator. In such events also the venue of arbitration shall be Delhi/New Delhi only.
3. ‘Jurisdiction’
Subject to provision contained in Article 23 the parties agree that only the Courts in Delhi/New Delhi in the Republic of India will have jurisdiction to entertain any case arising out of and/or connected with this agreement whether during the currency of the agreement or before that or after the termination of this Agreement. No other Court shall have jurisdiction in such matters.”
It would also be appropriate to extract definition of Court as provided in section 2, the Act and the relevant provisions of section 11 of the Act.
“2. Definitions. (1) In this Part, unless the context otherwise requires—
…..…..…..…..…..…..…..…..…..
…..…..…..…..…..…..…..…..…..
(e) “Court” means the principal Civil Court of original jurisdiction in a district, and includes the High Court, in exercise of its Ordinary Original Civil Jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of small causes;
…..…..…..…..…..…..…..…..…..
11. Appointment of arbitrators.
…..…..…..…..…..…..…..…..…..
…..…..…..…..…..…..…..…..…..
(6) Where, under an appointment procedure agreed upon by the parties—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, failed to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justice or the person or institution designated by him, is final.
…..…..…..…..…..…..…..…..…..
…..…..…..…..…..…..…..…..…..
(12)(a) …..…..…..…..…..…..…..…..
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and (10) arise in any other arbitration, the reference to “Chief Justice” in those sub-sections shall be construed as a reference to the Chief Justice of the High Court within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate and, where the High Court itself is the Court referred to in that clause, to the Chief Justice of that High Court.
8. A conjoint reading of section 2(e) and section 11(12)(b) of the Act makes it clear that ‘Chief Justice’ for the purposes of sub-sections (4), (5), (6), (7), (8) and (10) of the Act shall be Chief Justice of the High Court within whose limit the principal Civil Court is situated. Thus, an application for appointment of arbitrator under section 11(6) of the Act may be filed before the Chief Justice of the High Court within whose limit the principal Civil Court having jurisdiction to decide the questions forming subject-matter of arbitration is situated.
9. In Hakam Singh v. Gammon (India) Ltd.† . (supra) it has been held by the Supreme Court that where two Courts or more have jurisdiction under Civil Procedure Code to try a suit or proceeding, an agreement between the parties that the dispute between them shall be tried in any one of such Courts is not contrary to public policy and in no way contravenes section 28 of the Contract Act, 1872. If on the facts of a given case more than one Court has jurisdiction, parties by their consent may limit the jurisdiction to one of the two Courts. The parties, however, cannot confer jurisdiction on a Court which otherwise does not have jurisdiction to deal with the matter. The same view was taken by the Supreme Court in cases of New Moga Transport Co. v. United India Insurance Co. Ltd., (2004) 4 SCC 677 and Shree Subhlaxmi Fabrics (P) Ltd. v. Chand Mal Baradia, (2005) 10 SCC 704. In view of this legal position the parties were entitled to exclude the jurisdiction of one of the Courts. They entered into an agreement that the Courts at Delhi/New Delhi would only have jurisdiction. In the circumstances, having regard to section 2(e) and section 11(12)(b) of the Act, the applicants would be obliged to approach the Chief Justice of the Delhi High Court within whose limits the principal Civil Court is situated to which the parties by agreement conferred jurisdiction excluding the jurisdiction of other Courts.
10. The judgment of Allahabad High Court passed in the case of Rail India Technical and Economic Services Ltd. v. Vidyawati Construction Company (supra) relied by the applicants is not applicable to the facts of the present case. In the said case the agreement was entered into between the parties prior to the commencement of the Arbitration Act of 1996. As per the said agreement there was a condition that any suit or application for enforcement of the arbitration clause shall be filed in competent Court at New Delhi and no other Courts or any other district of the country. The application was filed praying the Chief Justice of Allahabad High Court to appoint arbitrator under section 11(6) of the Act. The said application was allowed by the Allahabad High Court. When the order of appointment was assailed in the writ petition, the writ petition was dismissed on the ground that the petitioner did not raise the plea in reply to the application filed before the Chief Justice of Allahabad High Court seeking appointment of arbitrator that the application under section 11(6) could only be filed before the Chief Justice of Delhi High Court. It was also observed that in view of section 41 of the Arbitration Act of 1940 (old Act) clause 47 of the agreement become void and inoperative after coming into force of Arbitration Act of 1996. In this judgment also it was observed that in order to ascertain the jurisdiction of the Chief Justice it has to be seen which principal Court of original jurisdiction or the High Court exercising its ordinary civil jurisdiction has the jurisdiction to decide the question forming subject-matter of the arbitration, if the same had been the subject-matter of the suit. As observed in the present case the Courts at Jabalpur and New Delhi were having jurisdiction to decide question forming the subject-matter of the arbitration, but as per clause 23, the parties have agreed that the dispute between them shall be tried in the Courts at Delhi/New Delhi only. As per the law laid down by the Supreme Court in case of Hakam Singh v. Gammon (India) Ltd.† . (supra). New Moga Transport Co. v. United India Insurance Co. Ltd (supra) and Shree Subhlaxmi Fabrics (P) Ltd. v. Chand Mal Baradia (supra) clause 23 of the agreement is valid and shall govern the field.
11. Thus, the parties having agreed that the Courts in Delhi/New Delhi will have jurisdiction and no other Courts shall have jurisdiction then the application must be filed before the Chief Justice of High Court of Delhi. In the circumstances the applicants are required to approach the Chief Justice of High Court of Delhi for appointment of arbitrator. The application for want of jurisdiction is not maintainable before the Chief Justice of this High Court and consequently before any person or institution designated by him.
12. The application is accordingly rejected. Since the application is rejected for want of territorial jurisdiction the other objection raised by the respondents is left open. No orders as to costs.
Application dismissed.
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