Aksh Optifibre Limited vs B.S.N.L. and Another

Manmohan Sarin, J.—Petitioner-Aksh Optifibre Limited has filed this petition u/s 9 of the Arbitration and Conciliation Act, 1996, seeking an ad-interim order, staying the invocation of bank guarantees, listed in Schedule A to the petition, Annexure P-12 and Annexure P-13 (page 88-89 of the paper book). Petitioner had contended that the encashment of six out of nine bank guarantees was unwarranted, as they were not the subject matter of the contracts, where the respondents were claiming excess payment. For the remaining, it was contended that the encashment was not in terms of the bank guarantees. The Court, vide order dated 21.2.2003, had granted an interim injunction against the encashment of bank guarantees. Reply has been filed by the respondents. A preliminary objection as to the lack of territorial jurisdiction has been raised. By this order/judgment, the preliminary objection as to the lack of jurisdiction to try and entertain this petition u/s 9 is being decided.

Learned Counsel for the respondent, Mr. Dinesh Agnani, submitted that invitation to tender had been issued from the respondents'' office at Chandigarh. The bids were received at Chandigarh. The acceptance of tender was also issued from Chandigarh. The purchase order had been issued by the Respondents from Chandigarh to the petitioner at Gurgaon, Haryana. The entire correspondence and the performance bank guarantee was also submitted by the petitioner to the respondents at their Punjab Circle office at Chandigarh. The cause of action it was urged had arisen within the jurisdiction of the High Court of Punjab and Haryana at Chandigarh. This Court, accordingly, did not have the jurisdiction to try and entertain this petition.

Reference may be made to the provision 9.0 of the terms and conditions of the bid document, which is in the following terms:-

Legal Jurisdiction

9.0 It is also a condition of this contract that the Court which has territorial jurisdiction upon the place from which the acceptance of tender is issued shall have absolute jurisdiction for adjudicating any difference or dispute arising of this contract.

Reference may also be usefully made to Clause 20.1 and 20.3, which are in the following terms:-

20.1 In the event of any question, dispute or difference arising under this agreement or in connection there with except as to matter the decision of which is specifically provided under this agreement, the same shall be referred to sole arbitration of the Chief General Manager, Punjab Telecom Circle, Chandigarh or in case his designation of his office is abolished then is such case to the sole arbitration of the officer for the time being entrusted whether in addition to the functions of the Chief General Manager, Punjab Telecom Circle, Chandigarh or by whatever designation such officers may be called (hereinafter refer to as the said officer) and if the Chief General Manager or the said officer is unable or unwilling to act as such the sole arbitration or some other person appointed by the Chief General Manager or the said officer. The agreement to appoint an arbitrator will be in accordance with the Arbitration and Conciliation Act, 1996. There will be no objection to any such appointment that the arbitrator is Government Servant or that he has to deal with the matter to which the agreement relates or that in the course of his duties as Government Servant he has expressed views in all or any of the matter under dispute. The award of the arbitrator shall be final and binding on the parties. In the event of such arbitrator to whom the matter is originally referred, being transferred or vacating his office are being unable to act for any reason whatsoever such Chief General Manager or the said officer shall appoint another person to act as arbitrator in accordance with terms of the agreement and the person so appointed shall be entitled to proceed from the stage at which it was left out by this predecessors.

20.3 The venue of the arbitration proceeding shall be office of Chief General Manager, Punjab Telecommunication Circle at Chandigarh or such other places as the arbitrator may decide.

Under the above clause, the disputes/difference were to be referred to the sole arbitration of the Chief General Manager, Punjab Telecom Circle at Chandigarh or his designatee. The venue of arbitration was also stipulated as being office of the Chief General Manager, Punjab Telecommunication Circle at Chandigarh or such other place as the arbitrator may decide.

In view of the foregoing, Mr. Dinesh Agnani urged that no material part of cause of action had arisen within the jurisdiction of this Court. Hence the petition was liable to be dismissed for lack of territorial jurisdiction.

Mr. Rajiv Nayyar, learned senior counsel for the petitioner, in reply submitted that Clause 9.0 under the heading, "Legal Jurisdiction" did not use the usual and normal expression, to exclude the jurisdiction of other Courts. He submitted that the use of the term, "Absolute Jurisdiction" is not synonymous with complete exclusion or ouster of jurisdiction. He next contended that part of cause of action had arisen within the limits of jurisdiction of Delhi Courts, as the performance bank guarantee, furnished by the respondent was drawn on a Delhi Bank and its invocation had to be affected within the jurisdiction of this Court. He further contended that the registered office of the respondents was in Delhi, from where they were controlling operations. Petitioner could, therefore, sue where the respondents were having their place of business. Reliance was placed by Mr. Rajiv Nayyar on Hindustan Vidyut Products Ltd. Vs. Shri B.M. Patel, . The Court following the ratio in A.B.C. Laminart''s case noted in para 24 as under:-

Applying the ratio in A.B. Laminart''s case (supra), a part of cause of action within the meaning of Section 20(c), CPC had arisen in Delhi because of the execution of aforesaid letter of guarantee, Ex. PW 8/N and this Court has thus the territorial jurisdiction to try the suit. Issue is decided accordingly.

Replying on the above observations, Mr. Rajiv Nayyar wishes to draw a parallel by urging that in the present case, performance bank had been drawn on a bank in Delhi and thus its invocation would be in Delhi. Hence part of cause of action can be said to have arisen within the territorial jurisdiction of this Court. Coupled with the factum of the registered office of the respondents being in Delhi, in terms of Section 20 CPC, he urges that the suit in Delhi, would also be maintainable. While there cannot be a quarrel with the proposition that a suit can be instituted at a place, where the respondent carries on business and part of cause of action has arisen. The situation in the present case is different. The material part of cause of action has not arisen within the jurisdiction of this Court but has arisen within the jurisdiction of Punjab and Haryana High Court, as noted earlier. The tender was issued from Chandigarh, bids were received at Chandigarh, purchase order was placed at the petitioner at Gurgaon, within the jurisdiction of Punjab and Haryana High Court and was issued from Chandigarh. Simply because the performance bank guarantee has been drawn on a bank in New Delhi, it would not constitute material part of cause of action. The performance bank guarantee itself was submitted by the petitioner from Gurgaon and received and accepted at Chandigarh. Not only this, the parties have specifically agreed for confining the jurisdiction to the Court, which has territorial jurisdiction upon the place from which acceptance of tender is issued. The place from which acceptance of tender was issued, was Chandigarh. Not only this, the venture of arbitration is also fixed as Chandigarh.

Considering that material parts of cause of action have arisen within the jurisdiction of Punjab and Haryana High Court, parties themselves have fixed the exclusive jurisdiction at Chandigarh and the venue of arbitration is also fixed as Chandigarh, it is clear that the intention of the parties was to have exclusive jurisdiction at Chandigarh. Reference in this connection may be made to A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, In which the legal position has been very succinctly set out in the following paras:-

So long as the parties to a contract do not oust the jurisdiction of all the Courts which would otherwise have jurisdiction to decide the cause of action under the law it cannot be said that the parties have by their contract ousted the jurisdiction of the Court. It under the law several Courts would have jurisdiction and the parties have agreed to submit to one of these jurisdictions and not to other or others of them it cannot be said that there is total ouster of jurisdiction. In other words, where the parties to a contract agreed to submit the disputes arising from it to a particular jurisdiction which would otherwise also be a proper jurisdiction under the law their agreement to the extent they agreed not to submit to other jurisdiction cannot be said to be void as against public policy. If on the other hand the jurisdiction they agreed to submit to would not otherwise be proper jurisdiction to decide disputes arising out of the contract it must be declared void being against public policy. Would this be the position in the instant case?

18.....................The jurisdiction of the Court under the Arbitration Act to entertain a proceeding for filing an award was accordingly governed by the provisions of the Code of Civil Procedure. By the terms of Section 20(a) of the CPC read with explanation II thereto the respondent company which had its principal place of business at Bombay was liable to be sued at Bombay. It was held that it was not open to the parties to agreement to confer by their agreement jurisdiction on a Court which it did not possess under the Code. But where two Courts or more have under the CPC jurisdiction to try suit or proceeding an agreement between the parties that the dispute between them shall be tried in one of such Courts was not contrary to public policy and such an agreement did not contravene Section 28 of the Contract Act. Though this case arose out of an arbitration agreement there is no reason why the same rule should not apply to other agreements in so far as jurisdiction is concerned ........................Thus it is now a settled principle that where there may be two or more competent Courts which can entertain a suit consequent upon a part of the cause of action having arisen there within, if the parties to the contract agreed to vest jurisdiction in one such court to try the dispute which might arise as between themselves the agreement would be valid. If such a contract is clear, unambiguous and explicit and not vague it is not hit by Ss. 23 and 28 of the Contract Act. This cannot be understood as parties contracting against the Statue. Mercantile Law and practice permit such agreements.

When the Court has decided the question of jurisdiction pursuant to an outster clause it is necessary to construe the ousting expression or clause properly. Often the stipulation is that the contract shall be deemed to have been made at a particular place. This would provide the connecting factor for jurisdiction to the Courts of that place in the matter of any dispute on or arising out of that contract. It would not, however, ipso facto take away jurisdiction of other Courts.

From the legal principles enunciated, it would be seen that the parties cannot agree to submit to jurisdiction, which otherwise would not be proper jurisdiction to decide the disputes arising under the contract and the said agreement can be declared as void and against public policy. Further, if two or more Courts under the CPC have jurisdiction to try the suit or proceedings, then an agreement between the parties that the disputes could be tried in one of the Courts does not contravene Section 28 of the Indian Contract Act. Further, that a clause for jurisdiction has to be properly construed and simply providing, "any dispute arising shall be subject to a particular jurisdiction, need not ipso facto constitute ouster of jurisdiction. Applying the aforesaid principles, it would be seen that although, no material part of cause of action has arisen within the jurisdiction of this Court, assuming but not admitting that issuance of bank guarantee drawn on Delhi Bank could constitute a part of cause of action, parties have specifically agreed to confine the jurisdiction to Courts at Chandigarh, by Clause 11 of Legal Jurisdiction. The provision for the venue for arbitration is again Chandigarh. Not only this, the use of the expression, "absolute jurisdiction" in the facts admits of no other meaning except that exclusive jurisdiction was intended and so conferred to Chandigarh. It also meets the requirement of an ouster clause, as set out in A.B.C. Laminart Pvt. Ltd. and another Vs. A.P. Agencies, Salem (supra) In view of the foregoing discussion, the objections of the respondents to lack of territorial jurisdiction is upheld.

Petition is dismissed for want of territorial jurisdiction. Interim order stands vacated.