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Shree Baidyanath Ayurved Bhawan Private Limited v. Praveen Bhatia And Others
Factual and Procedural Background
Shree Baidyanath Ayurved Bhawan (P) Ltd. (“the Company”) manufactures Ayurvedic medicines and distributes them through carrying and forwarding agents. Under an agreement dated 1-10-1999, the Company appointed M/s S. Bhatia Enterprises, Ludhiana (“the Firm”) as such an agent; the agreement contained an arbitration clause and fixed court jurisdiction at Jhansi.
Alleging large-scale misappropriation and forged credits by the Firm (revealed in audit reports for 2000 and 2001), the Company invoked arbitration and appointed Shri M.P. Dixit, who ultimately passed an award in its favour for Rs 3,56,54,487.37 at Jhansi. The Firm disputed the authenticity of the 1-10-1999 agreement, claimed the operative agreement was dated 1-4-1999, and appointed its own arbitrator, Mr Sudesh Kukreja, who passed an award in favour of the Firm for Rs 4,70,000.
Both parties filed objections and ancillary proceedings in multiple fora: the Firm initiated five Section 9 applications and several civil suits in Punjab; the Company filed objections, Section 34 petitions, execution petitions, and approximately fourteen civil suits, largely in Jhansi. Three revisions were filed in the Punjab & Haryana High Court and later withdrawn.
Faced with parallel litigation, the Company filed a writ petition under Article 32 of the Constitution seeking transfer of all pending proceedings to Jhansi. The writ petition was converted into the present transfer petition before the Supreme Court.
Legal Issues Presented
- Whether, in the presence of a contractual clause conferring exclusive jurisdiction on the courts at Jhansi, the Supreme Court should transfer all related suits, petitions, and applications pending in various courts in Punjab to Jhansi.
- Whether Respondent 6 (Kay Pee Agencies), though not a signatory to the arbitration agreement, should also be subjected to the transfer order because its claim arises through the Firm.
Arguments of the Parties
Respondents’ Arguments
- The Company maintains offices in Punjab and Haryana and would suffer no prejudice if the suits remain where originally filed.
- Evidentiary stages have commenced in some Punjab proceedings; transferring them now would be inconvenient.
- The 1-10-1999 agreement containing the Jhansi jurisdiction clause is allegedly forged; therefore, the parties are not bound by it.
Petitioner Company’s Position (as reflected in the judgment)
- The parties are governed by the contractual clause that vests exclusive jurisdiction in Jhansi, which should be respected.
- Parallel proceedings in multiple courts create unnecessary complexity and risk of conflicting decisions.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| A.B.C. Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163 | Courts should honour contractual clauses that confer jurisdiction on a particular forum; other courts ought to refrain from exercising jurisdiction. | Cited to underline that where parties choose a competent court, that choice “should ordinarily be given effect to.” |
| Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd., (2004) 4 SCC 671 | Reiterated the principle that an agreed forum clause ousts the jurisdiction of other competent courts. | Reinforces the need to respect the Jhansi forum selection clause in the parties’ contract. |
| Rajasthan SEB v. Universal Petrol Chemicals Ltd., (2009) 3 SCC 107 | When parties expressly restrict jurisdiction to one court, that court alone is competent for arbitration matters and related proceedings. | Quoted in extenso to illustrate that, by analogy, only Jhansi courts should entertain disputes arising from the agreement. |
Court's Reasoning and Analysis
The Supreme Court observed that the parties are bound by their contract. When a contract validly confers exclusive jurisdiction on one of several competent courts, that choice must generally be respected. The Court relied on A.B.C. Laminart, Hanil Era Textiles, and Rajasthan SEB to emphasise that other courts should ordinarily decline jurisdiction once an ouster clause is established.
It further noted the peculiar situation of “competing awards” issued by two separately appointed arbitrators—an issue that ultimately turns on the validity of each appointment and on compliance with the arbitration agreement. Consolidating all related proceedings before the courts at Jhansi would best enable coherent adjudication of that underlying jurisdictional and arbitral validity question.
Although Respondent 6 was not a direct party to the arbitration agreement, its claim derived from the Firm’s distributorship rights conferred by the Company. The Court therefore considered it expedient to include Respondent 6’s suit in the transfer to avoid fragmentation of closely connected disputes.
Balancing convenience, the contractual forum clause, and the need to avoid conflicting decisions, the Supreme Court concluded that the interests of justice favoured transferring every listed proceeding to Jhansi.
Holding and Implications
TRANSFER PETITION ALLOWED.
All cases enumerated in Annexure I are ordered to be transferred to the District Judge, Jhansi. The originating courts must transmit their records to Jhansi, and the District Judge will assign them to competent courts, which shall issue fresh notices and fix hearing dates.
Implications are confined to the parties: all ongoing litigation between them will proceed exclusively in Jhansi, ensuring consistency and adherence to the contractual jurisdiction clause. The judgment does not purport to set new precedent beyond applying existing principles on forum-selection clauses.
S.B Sinha, J.— Shree Baidyanath Ayurved Bhawan (P) Ltd. (hereinafter referred to as “the Company”, for the sake of brevity) is a company registered and incorporated under the Companies Act, 1956. It manufactures ayurvedic medicines. For the purpose of distribution of its products, it engages carrying and forwarding agents to receive goods from it, store them and sell them to stockists.
2. The Company appointed M/s S. Bhatia Enterprises, Ludhiana (Respondent 5 herein) (for short “the Firm”) of which Praveen Bhatia, Ramkishan Bhatia, Ashwani Bhatia and Promila Bhatia are partners. The agreement between the parties incorporating the terms and conditions of the said contract of carrying and forwarding agency contained an arbitration clause. Allegedly, the jurisdiction of the court to determine the dispute between the parties was fixed at Jhansi.
3. The respondents are said to have committed misappropriation of a huge amount which was pointed out in the audit reports of 2000 and 2001. Furthermore, they are said to have created several other forged and fraudulent credits in favour of some entities in which they had substantial interest which was allegedly detected by the Company's Accounts Manager.
4. The parties hereto invoked the arbitration clause contained in the said agreement. The Company appointed one Shri M.P Dixit as an arbitrator. The respondents are said to have appeared before the said arbitrator and filed copies of the pleadings, applications, etc. and also collected a copy of the note-sheet but absented themselves from other and further proceedings before the arbitrator. The respondents, however, alleged that the purported agreement dated 1-10-1999 is a forged one and in fact, an agreement had been entered into by and between the Company and the Firm on 1-4-1999. The Firm, however, appointed one Mr Sudesh Kukreja who is said to have made an award against the appellant for a sum of Rs 4,70,000 on or about 23-1-2004. The said award has been received by the Company at Jhansi on 31-3-2004 whereafter an objection under Section 34 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) is said to have been filed in the Court of District Judge, Jhansi.
5. The Firm filed five applications under Section 9 of the Act which were marked as Applications Nos. 68, 69, 72, 73 and 74 of 2004 through its partners against the Company in the Court of District Judge, Ludhiana.
6. Mr Dixit is said to have made an award in favour of the Company awarding a sum of Rs 3,56,54,487.37 at Jhansi upon adjusting the amount of security amounting to Rs 20 lakhs as well as the amount of commission, etc.
7. One Atul Saggar on behalf of Kay Pee Agencies, Ludhiana, who is said to have been appointed as a distributor at Ludhiana on or about 30-8-2004 filed a civil suit praying for a declaration that the cheque given by him for supply of goods to the Company by M/s Bhatia as null and void.
8. The respondents filed an application for setting aside the award pronounced by Shri Dixit in the Court of District Judge, Ludhiana on or about 23-12-2004. The Firm also filed three civil suits in the Court of Civil Judge, Ludhiana alleging defamation against them.
9. The appellant filed objections to the execution petition filed by the respondents and during the period 2006-2008 appeared to have filed fourteen civil suits in different courts, the details whereof are as under:
Sl. Nos. Case No. Filed on Court Authority Subject-matter 1. Arbitration Suit No. 12 2004 District Judge, Jhansi Petition under Section 34 of the Arbitration Act for setting aside arbitration award pronounced by Sudesh Kukreja in favour of Praveen Bhatia. 2. Civil Suit No. 227 2005 District Judge, Jhansi Petition under Section 9 of the Arbitration Act for securing award of M.P Dixit by restraining Bhatias from selling his property, etc.
3. Civil Suit No. 390 2005 -do- Suit for declaration/recovery of damages against opposite parties due to making of forged agreement dated 1-4-1999 by Bhatias. 4. Civil Suit No. 28 2005 -do- Declaration and recovery suit of Rs 23,86,374 from Praveen Bhatia and Nandi Jain. 5. Civil Suit No. 388 2005 -do- Declaration and recovery suit of Rs 23,41,870. 6. Civil Suit No. 386 2005 -do- Declaration and recovery suit of Rs 9,30,222 from Karanveer and Praveen Bhatia. 7. Civil Suit No. not known 2005 -do- Declaration and recovery suit of Rs 13,25,748 from Ravinder Singh. 8. Civil Suit No. 387 2005 -do- Declaration and recovery suit of Rs 91,410 against credit note from Praveen Bhatia. 9. Civil Suit No. 389 2005 Civil Judge (Junior Division), Jhansi Suit for damages for defamation caused by false and defamatory notice by opposite party in Punjab Kesri. 10. Civil Suit No. 27 2006 -do- Declaration and recovery suit of Rs 11,16,847 from Tarvinder and Praveen Bhatia. 11. Civil Suit No. 26 2006 -do- Declaration and recovery suit of Rs 14,68,864 from Sanjeev Tara and Praveen Bhatia. 12. Civil Suit No. 25 2006 -do- Suit for declaration/recovery of rupees 1 lakh 20 thousand as outstanding dues from Praveen Bhatia and Sukhraj Singh Gill Kharad. 13. Civil Suit No. 116 2006 -do- Defamation suit for damages for lodging false FIR No. 139 by opposite parties. 14. Arbitration Suit No. 03 2006 District Judge Petition under Section 36 of the Arbitration Act for execution of award given by Mr M.P Dixit.
10. The Company filed objections for release of goods wherein an order of attachment has been passed. Three revision applications were also filed before the High Court of Punjab and Haryana which were said to have been withdrawn.
11. The Company filed a writ petition under Article 32 of the Constitution of India before this Court praying, inter alia, for the following reliefs:
“Grant a writ of mandamus or any other appropriate writ, a writ for transferring the cases mentioned in Annexure I be transferred to the court of Jhansi.”
However, the said writ petition was permitted to be converted into a transfer petition.
12. Mr Sodhi, learned counsel appearing for some of the respondents, would contend that having regard to the fact that the Company would not suffer any prejudice in the event the civil suits filed by the firm and/or its partners are permitted to be determined at different courts in the State of Punjab, particularly when the Company has an office in Punjab and Haryana and, thus, the balance of convenience lies in allowing the civil proceedings to be tried at their original courts of filing. It was urged that in some of the matters, evidences were being led. Mr Bhatt, learned counsel appearing on behalf of the respondents, urged that the purported agreement being a forged one, the question of the parties being bound thereby does not arise.
13. The parties hereto are governed by the terms of the contract. If, in terms of the provisions of the contract, they by agreement conferred jurisdiction on one of the courts which would have otherwise jurisdiction to deal with the matter, the same should ordinarily be given effect to. In A.B.C Laminart (P) Ltd. v. A.P Agencies (1989) 2 SCC 163, this Court held that when the court has to decide the question of jurisdiction pursuant to an ouster clause, it is necessary to construe the same properly. In such an event, it was opined that other courts should avoid exercise of jurisdiction. [See also Hanil Era Textiles Ltd. v. Puromatic Filters (P) Ltd. (2004) 4 SCC 671]
14. Yet again, in Rajasthan SEB v. Universal Petrol Chemicals Ltd. (2009) 3 SCC 107 this Court held:
“27. The aforesaid legal proposition settled by this Court in respect of territorial jurisdiction and applicability of Section 20 of the Code to the Arbitration Act is clear, unambiguous and explicit. The said position is binding on both the parties who were contesting the present proceeding. Both the parties with their open eyes entered into the aforesaid purchase order and agreements thereon which categorically provide that all disputes arising between the parties out of the agreements would be adjudicated upon and decided through the process of arbitration and that no court other than the court at Jaipur shall have jurisdiction to entertain or try the same. In both the agreements in Clause 30 of the general conditions of the contract it was specifically mentioned that the contract shall for all purposes be construed according to the laws of India and subject to jurisdiction only at Jaipur in Rajasthan courts only and in addition in one of the purchase orders the expression used was that the court at Jaipur only would have jurisdiction to entertain or try the same.”
It was opined: (Rajasthan SEB case (2009) 3 SCC 107)
“35. The parties have clearly stipulated and agreed that no other court, but only the court at Jaipur will have jurisdiction to try and decide the proceedings arising out of the said agreements, and therefore, it is the Civil Court at Jaipur which would alone have jurisdiction to try and decide such issue and that is the court which is competent to entertain such proceedings. The said court being competent to entertain such proceedings, the said court at Jaipur alone would have jurisdiction over the arbitration proceedings and all subsequent applications arising out of the reference. The arbitration proceedings have to be made at Jaipur Court and in no other court.”
15. It is not in dispute that two awards have been made by two different arbitrators. Objections to the said awards have been filed by both the parties. One of the questions which, thus, is required to be taken into consideration is as to whether the appointment of respective arbitrators by the parties was valid and, thus, whether the arbitrators had acted within the four corners of the arbitration agreement.
16. It is true that Respondent 6 is not a party to the arbitration agreement but he is claiming interest under the Firm who had appointed him as its distributor pursuant to such an authority having been conferred upon the Firm by the Company. We, therefore, are of the opinion that although stricto sensu Respondent 6 is not a party to the contract, his case also should be transferred. The transfer petition, therefore, is allowed.
17. The cases mentioned in Annexure I thereto are directed to be transferred to Jhansi. The court concerned should send the records of the respective cases to the District Judge, Jhansi who shall in turn transfer them to the courts having appropriate jurisdiction in this behalf. The transferee court therefore should issue notices to the parties after fixing date(s) of hearing in the matters transferred to their courts.
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