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Hindustan Petroleum Corporation Ltd. v. Barun Sankar Chatterjee & Anr.
Factual and Procedural Background
An agreement dated March 31, 2004 was executed between the Corporation (petitioner) and opposite parties 1 and 2, partners of M/s. Maa Durga Service Station, granting dealership for petrol/diesel retail at Jessore Road, Barasat. The agreement included clauses conferring exclusive jurisdiction to Kolkata courts and providing for arbitration of disputes by the Managing Director or a nominee of the Corporation.
Inspection by the Corporation's vigilance wing revealed tampering with petrol/diesel units, leading to a show cause notice and subsequent termination of the dealership on February 11, 2006. The termination was unsuccessfully challenged in writ jurisdiction and on appeal.
Following the arbitration clause, the Corporation appointed an arbitrator who issued an award dated August 28, 2009. Opposite parties filed separate applications under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the award before different courts.
Prior to these, two applications under Section 9 of the Act were filed: one by opposite party no. 2 before this Court on October 4, 2006, and another by opposite party no. 1 before the District Judge, Barasat on October 10, 2006. The former was dismissed for default in 2010, while the latter resulted in an ex-parte injunction and was subject to appeal and directions for expeditious hearing.
The Corporation objected to the jurisdiction of the Barasat Court based on the agreement's clause conferring jurisdiction to Kolkata courts, but the District Judge held the application maintainable. This objection was not pursued in earlier appeals.
After the Section 34 applications were filed, the Corporation raised the issue of jurisdiction relying on Section 42 of the Act, contending that the Court where the first application under the Act was filed (this Court) had exclusive jurisdiction. The Additional District Judge rejected this contention, holding the Barasat Court had jurisdiction due to territorial factors and absence of prior adjudication by this Court.
The Corporation challenged the Additional District Judge's order in this revisional application.
Legal Issues Presented
- Whether, under Section 42 of the Arbitration and Conciliation Act, 1996, the Court where the first application under the Act is filed has exclusive jurisdiction over all subsequent applications arising out of the same arbitration agreement.
- Whether the Corporation waived its right to object to the jurisdiction of the Barasat Court by not raising the objection earlier in the proceedings.
- Whether parallel proceedings challenging the same arbitral award before two different courts should be consolidated to avoid conflicting decisions and wastage of judicial resources.
Arguments of the Parties
Petitioner's Arguments
- The learned Additional District Judge erred in rejecting the Corporation's objection to the jurisdiction of the Barasat Court under Section 42 of the Act.
- The relevant date for determining jurisdiction is when the first valid application under the Act is filed, which was October 4, 2006 before this Court by opposite party no. 2.
- The Corporation was justified in raising the jurisdictional objection at the stage of challenge to the arbitral award, despite not having raised it earlier, as estoppel does not apply against statutory provisions.
- Two parallel proceedings challenging the same award are pending, and to avoid conflict and duplication, the proceedings before the Barasat Court should be consolidated with those before this Court.
Opposite Party No. 1's Arguments
- The impugned order of the Additional District Judge is correct and does not warrant interference.
- The Corporation was aware of the prior application by opposite party no. 2 before this Court but did not raise jurisdictional objections at earlier stages, including appeals against interim orders.
- By failing to raise the jurisdictional objection earlier, the Corporation waived its right to challenge the jurisdiction of the Barasat Court.
- Prayed for dismissal of the revisional application.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Inder Sain Mittal v. Housing Board, (2002) 3 SCC 175 | Support for the principle that jurisdictional objections under statutory provisions can be raised at any stage and are not waived by non-raising earlier. | Relied upon to support the Corporation's contention that jurisdictional objection under Section 42 of the Act can be raised at the stage of challenge to the award. |
| Shiva Carriers v. Royal Projects Ltd., AIR 2000 Cal 138 | Similar principle regarding jurisdiction and statutory estoppel. | Used to reinforce the argument that the Corporation was entitled to raise jurisdictional objections notwithstanding earlier omissions. |
| Mahesh Kumar Gupta v. Suresh Chander Gupta, 2009 (1) Arb. LR. 37 (Delhi) | Support for jurisdictional principles under the Arbitration and Conciliation Act. | Referenced as part of the legal framework for jurisdiction under the Act. |
| Kiran Singh v. Chaman Paswan, AIR 1954 SC 340 | Jurisdictional objections relating to subject matter cannot be waived and orders passed without jurisdiction are nullities. | Applied to hold that the Barasat Court lacked jurisdiction and the objection could be raised at any stage. |
| Prem Lal Nahata v. Chandi Prasad Sikaria, (2007) 2 SCC 551 | Principles relating to consolidation of proceedings to avoid conflicting decisions and wastage of judicial resources. | Applied to justify consolidation of parallel proceedings challenging the same arbitral award. |
| Chitivalasa Jute Mills v. Jaypee Rewa Cement, (2004) 3 SCC 85 | Same as above - consolidation of proceedings. | Used to support the direction for consolidation of the two pending applications. |
Court's Reasoning and Analysis
The Court began by examining Section 42 of the Arbitration and Conciliation Act, 1996, which mandates that once an application relating to an arbitration agreement is made in a Court, that Court alone has jurisdiction over all subsequent applications arising from that arbitration agreement.
The Court acknowledged that opposite party no. 2 had validly invoked the jurisdiction of this Court first by filing an application under Section 9 on October 4, 2006. The Court emphasized that the relevant factor for jurisdiction is the date on which the first valid application is made, not whether the Court rendered a decision on that application.
The Additional District Judge erred in interpreting Section 42 to require adjudication of the first application before conferring exclusive jurisdiction, which the Court rejected.
Regarding waiver, the Court distinguished between objections to territorial or pecuniary jurisdiction, which can be waived, and objections to subject matter jurisdiction, which cannot be waived and render any order passed without jurisdiction a nullity. The Court held that failure to raise a subject matter jurisdiction objection earlier does not empower the Court to assume jurisdiction.
Finally, the Court considered the existence of parallel proceedings challenging the same arbitral award before two different courts. Citing Supreme Court precedents, the Court found it just and proper to consolidate the proceedings to avoid conflicting decisions and unnecessary judicial expenditure.
Holding and Implications
The Court quashed the impugned order of the Additional District Judge that had rejected the Corporation's jurisdictional objection.
The Court directed that the records of Misc. Case No. 124 of 2009 pending before the Additional District Judge be transmitted to this Court for consolidation and joint trial with A.P No. 629 of 2009.
The revisional application was allowed without any order as to costs.
The direct effect of this decision is to vest exclusive jurisdiction in this Court over all applications arising from the arbitration agreement, consistent with Section 42 of the Act. No new precedent was created beyond the application of settled principles regarding jurisdiction under the Arbitration and Conciliation Act and consolidation of proceedings.
Dipankar Datta, J.:— An agreement dated March 31, 2004 was executed by and between the Corporation, the petitioner herein, and the opposite parties 1 and 2. In terms thereof, M/s. Maa Durga Service Station (of which the opposite parties 1 and 2 are partners) was granted dealership for dealing in petrol/diesel from a retail outlet situate on Jessore Road, Barasat, 24 Parganas (N). The dealership agreement contained various clauses. While clause no. 65 provided that “the court in the city of Kolkata alone shall have jurisdiction to entertain any suit, application or other proceeding in respect of any claim or dispute arising under this agreement”, clause no. 66, inter alia, laid down that “(a)ny dispute or difference of any nature whatsoever or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this agreement shall be referred to the sole arbitration of the Managing Director of the Corporation or of some officer of the corporation who may be nominated by the Managing Director”.
2. An inspection of the retail outlet conducted by the vigilance wing of the Corporation revealed irregularities committed by the dealer/firm. The petrol and diesel dispensing units were found to have been tampered. Show cause notice was issued by the Corporation, which was challenged before this Court in its writ jurisdiction. The Court refused to interfere. The partners of the firm responded to the show cause notice and were heard. The Corporation, thereafter, by an order dated February 11, 2006 terminated the dealership agreement and directed the partners of the firm to settle the accounts and to hand over the belongings of the Corporation to its sales officer. The order of termination was again subjected to an unsuccessful challenge before the writ Court. The order of the writ Court was carried in appeal, which was also dismissed.
3. In terms of the arbitration agreement recorded in clause no. 66 of the dealership agreement, the Corporation referred the dispute to arbitration by appointing an arbitrator. The arbitrator made and published his award dated August 28, 2009.
4. The opposite party no. 1 filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the Act) before the learned District Judge, 24 Parganas (N) at Barasat, giving rise to Misc. Case No. 124 of 2009. Simultaneously, the opposite party no. 2 filed a separate application under Section 34 of the Act before this Court. The said application has been registered as A.P No. 629 of 2009.
5. The applications under Section 34 of the Act, referred to above, were preceded by two sets of application under Section 9 of the Act, one before this Court at the instance of the opposite party no. 2 (presented on October 4, 2006 being A.P No. 432 of 2006) and the other at the instance of the opposite party no. 1 before the learned District Judge, 24 Parganas (N) (on October 10, 2006 being Misc. Case No. 332 of 2006).
6. In so far as the application filed by the opposite party no. 2 is concerned, a learned Judge of this Court on October 5, 2006 had granted leave to move it before the vacation Bench. The application was moved before the vacation Bench on October 11, 2006 but the learned Judge relegated the same to the regular Bench. Ultimately, it was dismissed for default on March 11, 2010.
7. Misc. Case No. 332 of 2006 was entertained on October 10, 2006 by the learned District Judge and an ex-parte order of injunction was obtained by the opposite party no. 1.
8. The order was carried in appeal by the Corporation before this Court giving rise to FMAT No. 4395 of 2006. An application for stay filed in connection therewith on November 21, 2006 came up for consideration before the Hon'ble Division Bench on December 18, 2006. It was reported that December 20, 2006 had been fixed as the next date for hearing the application under Section 9 of the Act. Considering the fact that only a day intervened between the date of hearing of the stay application by the Hon'ble Division Bench and the application under Section 9 of the Act by the learned District Judge, the Hon'ble Division Bench considered it unfair to interfere with the impugned order. Upon hearing learned advocates for the parties, the Hon'ble Division Bench was of the view that the stay application ought to be treated as the objection of the Corporation to the Section 9 application filed by the opposite party no. 1 and the learned Judge was directed to conclude the hearing on December 20, 2006 and if that was not possible, to continue hearing on day to day basis and to conclude it at an early date.
9. The application under Section 9 of the Act was thereafter heard on contest. While finally disposing it of by an order dated February 21, 2007, the learned District Judge directed the parties to maintain status quo.
10. It appears from the order dated February 21, 2007 that the petitioner had objected to maintainability of the Section 9 application before the learned District Judge by referring to clause no. 65 of the dealership agreement, providing that only the Court in the city of Calcutta would have jurisdiction to entertain a suit, application or other proceeding in respect of any claim or dispute arising thereunder. It was argued that the Court at Barasat had no jurisdiction. The learned Judge was of the view that since the place of business is situated at Jessore Road under his jurisdiction, the application was maintainable before him. It further appears that no point was raised before the learned Judge that having regard to initiation of a previous proceeding under Section 9 of the Act by the opposite party no. 2, the application before him was not maintainable.
11. The order dated February 21, 2007 was again challenged by the Corporation before this Court in an appeal, registered as FMAT No. 1043 of 2007. An application for stay was also filed in connection therewith. By an order of the Hon'ble Division Bench dated April 9, 2007, the appeal, after admission, was disposed of with a variation of the order under challenge. The extent of variation is not too significant for the purpose of disposal of the present revisional application under Article 227 of the Constitution and, therefore, is not adverted to. However, it is noted that no submission was advanced on behalf of the Corporation before the Hon'ble Division Bench to the effect that the Section 9 application was not maintainable before the Court of the learned District Judge at Barasat in view of Section 42 of the Act.
12. It is after filing of the application under Section 34 of the Act by the opposite party no. 1 that a point regarding maintainability of Misc. Case No. 124 of 2009 was raised by the petitioner referring to Section 42 of the Act. It was contended that the application for setting aside the award ought to have been filed before this Hon'ble Court since A.P No. 432 of 2006 was filed first, on October 4, 2006.
13. The application, together with the objection thereto filed by the opposite party no. 1, was considered by the Additional District Judge to whom the records stood transferred. By order dated September 21, 2011, the learned Judge rejected the application filed by the Corporation. The learned Judge was of the view that although the opposite party no. 2 might have tried to invoke the jurisdiction of this Hon'ble Court by presenting an application under Section 9 of the Act on October 4, 2006, the same was not heard and no order had been passed by this Court upon adjudication thereof. Additionally, it was ruled that the point sought to be urged by the Corporation was never raised earlier when the parties appeared before the learned District Judge at the time of disposal of the Section 9 application and that having regard to the definition of ‘Court’ in Section 2(e) of the Act, together with the fact that the firm is situated within the territorial jurisdiction of the Barasat Court, that Court alone had jurisdiction to adjudicate the dispute.
14. The Corporation challenges the order dated September 21, 2011 in this revisional application.
15. Mr. Dutta, learned advocate appearing for the Corporation contended that the learned Additional District Judge misdirected herself in passing the impugned order. According to him, in terms of the provisions contained in Section 42 of the Act, a decision on a previous application is not relevant for determining the forum to which all subsequent applications should be made but it is the date on which the application is validly made, that is relevant. Having regard to the facts and circumstances of the present case, it is clear that the jurisdiction of this Court was first invoked in relation to the disputes between the parties on October 4, 2006 by the opposite party no. 2 rightly, when he presented his application under Section 9 of the Act, whereupon leave was granted on October 5, 2006 to move the vacation Bench. He further contended that notwithstanding the fact that the point of jurisdiction based on Section 42 of the Act was not raised before the learned District Judge or even before this Hon'ble Court in the previous rounds of litigation, that would not debar the Corporation from urging the point of jurisdiction at the stage of a challenge to the award under Section 34. Since the objection flows from a statutory interdict and having regard to settled principles of law that there cannot be an estoppel against statute, the Corporation was justified in raising its objection which, unfortunately, was not dealt with by the learned Judge in the manner law required her to deal with the same.
16. In support of his submissions, Mr. Dutta relied on the decisions reported in (2002) 3 SCC 175 (Inder Sain Mittal v. Housing Board, Haryana, AIR 2000 Cal 138 (Shiva Carriers v. Royal Projects Ltd.) and 2009 (1) Arb. LR. 37 (Delhi) (Mahesh Kumar Gupta v. Suresh Chander Gupta).
17. He further submitted that A.P 629 of 2009 came up for consideration before a learned Judge of this Court on December 15, 2012, when direction for exchange of affidavits was made. In view thereof, two parallel proceedings against the self-same award are pending, one before this Court and the other before the Barasat Court and that to avoid conflict of decisions, it is only just and fair that Misc. Case No. 124 of 2009 ought to be heard along with A.P 629 of 2009.
18. Mr. Basu, learned senior advocate for the opposite party no. 1 opposed the revisional application. According to him, the impugned order of the learned Judge does not suffer from any infirmity warranting interference. Referring to the order passed by the Hon'ble Division Bench dated December 18, 2006, he argued that the fact of presentation of an application under Section 9 of the Act by the opposite party no. 2 before this Court on October 4, 2006 was well within the knowledge of the Corporation, yet, that was not urged as a ground for challenging the ex-parte interim order dated October 10, 2006. Not only that, in the appeal against the order dated February 21, 2007, that point was again not raised. In the circumstances, the Corporation must be held to have waived its right to object to the jurisdiction of the Barasat Court to entertain the application under Section 34 of the Act. He, accordingly, prayed for dismissal of the revisional application.
19. I have heard learned advocates for the parties and considered the materials on record.
20. Since the argument of Mr. Dutta is based on Section 42 of the Act, the same requires to be noted first. For facility of reference, Section 42 is quoted below:
“42. Jurisdiction. — Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.”
21. The mandate of Section 42 of the Act is that all future applications must be filed only in the Court where the first application in respect of the arbitral dispute was filed. However, it would be a fraud on statute if an application, in relation to an arbitral dispute between the parties, could be filed either in Court A or B but is filed in Court Z, which is not the Court having jurisdiction to entertain the application, thereby paving the way for all future applications to be filed in Court Z. In such an event, there would arise no requirement to file the subsequent applications in Court Z and if either Court A or B is approached, it would be perfectly legitimate for it to entertain such subsequent application. What follows is that the jurisdiction of a Court has to be duly invoked by a party and if the jurisdiction of a Court is found to have been invoked erroneously, future applications in respect of the arbitration agreement in question would not lie in that Court where the first application was filed.
22. It has not been disputed that the opposite party no. 2 had approached this Court first with his application under Section 9 of the Act (A.P No. 432 of 2006) on October 4, 2006. That application was duly made before this Court since this Court had the jurisdiction to entertain it. Once the jurisdiction of this Court was duly invoked, the mandate of Section 42 would require all subsequent applications under Part I of the Act to be filed before this Court. It is not necessary for the Court to render a decision on such application one way or the other so as to guide the parties to file further applications arising out of the same arbitration agreement. Decision on the first application is irrelevant; what is relevant is the date on which the application is duly made to the Court competent to assume jurisdiction. I am of the firm view that the learned Additional District Judge misdirected herself by reading in Section 42 of the Act the requirement of adjudication of the application that is first made.
23. Now, the point of waiver is taken up for consideration. An objection that the Court, which has been approached by a party, does not have the jurisdiction to deal with the subject matter of the dispute is not akin to an objection regarding territorial or pecuniary jurisdiction of the Court. Objections on the ground of territorial or pecuniary jurisdiction may not be entertained after issues have been settled, unless a consequent failure of justice would ensue. The objection can, therefore, be waived. However, law appears to be well settled that even if a party may not have raised the point that the Court does not have the jurisdiction to decide the subject matter of dispute and ultimately suffers an order or a decree, such order/decree is a nullity and that its invalidity may be raised wherever and whenever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. Merely because the point was available to be raised but was not actually raised is no ground to hold that the Court is empowered to assume jurisdiction over a subject matter of dispute, which it inherently lacks. Reference in this connection may be made to the decision reported in Kiran Singh v. Chaman Paswan: AIR 1954 SC 340.
24. I am, therefore, of the view that the learned Judge was wholly in error in rejecting the application of the Corporation seeking to question the maintainability of the Section 34 application before the Barasat Court.
25. There is one other weighty reason for which this Court feels inclined to interfere. This Court has entertained A.P No. 629 of 2009. Such entertainment has necessarily resulted in parallel proceedings running against one award made by the arbitrator. Principles relating to consolidation of two proceedings for avoiding conflict of decisions have been laid down by the Hon'ble Supreme Court in its decisions reported in (2007) 2 SCC 551 (Prem Lal Nahata v. Chandi Prasad Sikaria) and (2004) 3 SCC 85 (Chitivalasa Jute Mills v. Jaypee Rewa Cement.). To prevent wastage of precious judicial hours as well as costs that the parties might have to incur while prosecuting/contesting cases on the self-same points before two Courts, it would be fair and proper to consolidate the two proceedings and I propose to order accordingly.
26. The impugned order stands quashed. I direct that records of Misc. Case No. 124 of 2009, which the learned Additional District Judge is in seisin of, shall be transmitted to this Hon'ble Court for being tried together with A.P No. 629 of 2009.
27. The revisional application stands allowed, without any order as to costs.
28. Office is directed to communicate this order to the learned Additional District Judge without any delay.
29. Urgent photostat certified copy of this order, if applied for, shall be furnished to the applicant at an early date.
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