Arvind Kanhaiyaial Pashine and Another vs Tata Finance Limited, Bombay

D.D. Sinha, J.—Rule returnable forthwith. Heard finally by consent of Shri Anand Parchure, learned counsel for the applicants, and Shri Talmale, learned Counsel for the respondent.

Since common question of law is involved in all these civil revision applications, they are disposed of by this common order.

In the instant revisions, the applicants are challenging the legality and propriety of the order dated 6.8.1999 passed by the Civil Judge, Senior Division, Bhandara in Special Darkhast No. 55/1996 whereby the objection raised by the applicants to the execution of the decree dated 1.9.1995 passed by the City Civil Court, Bombay in Award No.25/1999 came to be rejected. The facts in all the civil revision applications are more or less similar nature. They are stated, in nutshell, as follows:

The applicants in civil revision application bearing No. 1043/1999, are the employees of Nagar Parishad Gandhi Vidyalaya and Junior College, Bhandara. Sometime in the month of February 19.91, Agent for respondent Company approached the applicants with a proposal, a hire purchase agreement was singed by the applicants and respondent Company on 22.2.1991. In terms of the said proposal, the applicant No. I was to get LML Vespa bearing Chasis No.701312 from M/s Auto Wheels at Nagpur and same was to be transferred in the name of applicant No. I and deposit of amount as per the proposed agreement. The applicant No. 1 agreed to stand as guarantor for the applicant No. t in the said proposed agreement. On 6.5.1991, a representative of the respondent Company had-again visited the said College where applicants where working and the first installment was paid to him. The representative of the respondent Company asked the applicants to sign on some printed documents since it was necessary to fulfil the said formality. Hence, same were signed by the applicant as per directions of the representative of the respondent No. I.

The applicants did not receive LML Vespa nor the said vehicle was delivered to the applicant No, I. However, M/s. Auto Wheels forwarded the Xerox Copy of the bill of the respondent company and thereafter respondent Company released the finance in favour of M/s. Auto Wheels without confirming from the applicant No. I about delivery -of-the vehicle.

It is the case of the applicants that M/s. Auto Wheels instead of giving delivery of the Vespa to the applicant No. I, delivered VCR to the applicant No. I, regarding which no order was placed at all by the applicants. The said fact was brought to be notice of the respondent Company by the applicants. The respondent Company assured the applicants that goods would be changed and as per specifications, applicant No.1 would get the vehicle, which was ordered by him.

Since dispute arose between the parties, the matter was referred to the Arbitrator and the award was passed by the Arbitrator and decree arising therefrom has been obtained by the respondent Company. The respondent (decree holder) filed execution proceedings in the Court of Civil Judge, Senior Division, Bhandara vide Special Darkhast No.555/1996 to get the decree passed by the City Civil Court, Bombay executed. The applicant/judgment debtors moved an objection u/s 47 of the CPC for terminating execution proceedings on the ground that the decree obtained. by the respondent from the City Civil Court, Bombay is OR the basis of fraud. Similarly, another ground which was raised in the objection by the applicants is that the decree passed by the City Civil Courts at Bombay is without jurisdiction the hence, same is nullity in the eye of law and is not executable against the judgment debtors.

Shri Parchure, learned counsel for the applicants, contended that entire cause of action, if any, had arisen at Bhandara. The proposal was made by the respondent Company to the applicants at Bhandara. The goods, which were though not as per the order placed by the applicants, were delivered at Bhandara. The bills were also passed at Bhandara. The first installment was also paid by the applicants to the respondent Company at Bhandara. The oral agreement as well as written agreement, if any, were also executed between the parties at Bhandara. However, the Arbitrator wrongly filed the award in the City Civil Court, Bombay. It is contended that u/s 31 of the Arbitration Act, 1940, award has to be filed in the Court, which has territorial jurisdiction over the subject matter of the arbitration proceedings. The City Civil Court at Bombay had no territorial jurisdiction over the subject matter of the arbitration proceedings and as such, decree dated 1.9.1995 passed by the City Civil Court, Bombay in Award No.25/ 1995 is a nullity and is not executable. Shri Parchure further canvassed, that clause 16of the alleged Bombay alone would have jurisdiction to entertain all suit arising under the said agreement is contrary to section 20 of the CPC and, therefore, the said Clause is void.

It is further contended by the learned counsel for the applicants that jurisdiction cannot be conferred on a particular Court by consent of parties. It is contended that the impugned order in the facts and circumstances of the present case and as per relevant provisions of the CPC cannot be sustained. In order, to substantiate the contentions, reliance is placed on the judgments of the Apex Court in Urban Improvement Trust, Jodhpur Vs. Gokul Narain and another, . Kumbha Mawji vs. Dominion of India (Now the Union of India), AIR 1953 SC 3I3.A.B.C. Laminari Pvt. Ltd. and another vs. A.P. Agencies, Salem, AIR 1999 SC 1239 and M/s. Angile Insulations Vs. M/s. Davy Ashmore India Ltd. and another, .

The learned Counsel for the respondents contended that as per Clause 16 of the Hire Purchase Agreement, it was agreed between the parties and the award of the Arbitrator shall be final and binding on all the parties. The venue of such arbitration shall be in a Bombay and the Courts at Bombay alone and no other Court elsewhere would have jurisdiction to try and suit in respect of any claim or dispute arising out of or under the agreement or in any way relating to or touching the agreement. The learned Counsel, therefore, supported the impugned order and contended that the decree passed by the City Civil Court, Bombay is just and proper and does not suffer from lack of jurisdiction and hence, the impugned order is sustainable in law.

Before I adjudicate upon the issue in question, it is necessary to consider the basic clause, i.e. Clause 16 of the agreement dated 6.5.1991, which is singed by both the parties, i.e. applicants and respondent Company. The said Clause 16 reads thus :-

It is agreed between the parties that in case of any dispute arising under this agreement, the same shall be referred to an Arbitrator to be nominated by the owners and the award of the Arbitrator shall be final and binding on all the parties concerned including the guarantor. The venue of such "arbitration shall be in Bombay. Save as aforesaid, the Court at Bombay alone and no other Courts whatsoever will have the jurisdiction to try any suit in respect of any claim or dispute arising out of or under the agreement or in any way relating to or touching the agreement.

The arbitration clause undoubtedly provides that in case any dispute arises under this agreement, it shall be referred to the Arbitrator to be nominated the respondent Company and his award shall be final and binding. Such arbitration proceedings shall take place in Bombay and Courts at Bombay alone will have jurisdiction to try and suit in respect of any claim or dispute arising out of or under the agreement. The jurisdiction of the Courts other than at Bombay for trying the dispute arising out of or under the agreement has been specifically barred under this clause.

It is essential to keep in mind that arbitration is a mechanism for resolution of the dispute, which takes place, usually in private, pursuant to an agreement in written between two or more parties under which parties agree to be bound by the decision to be given by the Arbitrator(s) according to law after a fair hearing, such decision being enforceable at law. The essence of the concept of arbitration is that dispute is referred by parties for settlement to a Tribunal of their own choice instead of instituting the proceedings before regular Civil Courts. Though there is no clear and specific definition of concept of arbitration, however, there are certain attributes, existence of which is essential in the process of arbitration. Those are :-

-The decision of the Tribunal which carries on the process of arbitration between the parties is binding on the parties to the procedural agreement.

- The jurisdiction of the Tribunal to carry on the process and to decide the rights of the parties must be derived either from the consent of the parties of from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration.

- The Tribunal must be chosen, either by the parties or by the method to which they have consented.

- The agreement of the parties to refer their dispute to the decision of the Tribunal must be intended to be enforceable in law.

Before I consider the issue in question, regard must be had to section 31 of the Arbitration Act, 1940 which deals with the aspect of jurisdiction. Section 31 reads thus :-

(i) Subject to the provisions of the Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

(ii) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding validity, effect or existence of an award or arbitration agreement between the parties to the agreement or persons claiming under then shall be decided by the Court in which award under the agreement has been, or may be filed, and by no other Court.

(iii) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where award has been or may be filed and to no other Court.

(iv) Notwithstanding anything contained elsewhere in this Act of in any other law for the time being in force, where is 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 subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court.

In this case, there is a specific clause 16 of the hire purchase agreement, which is no uncertain terms contemplates that it was agreed between the parties that the disputes arising under the agreement shall be referred to the Arbitrator and award to Arbitrator shall be final and binding on all the parties. The said Clause makes it clear that venue of such arbitration shall be in Bombay and Courts at Bombay alone and no other Court elsewhere will have jurisdiction to try and suit in respect of any claim or dispute arising out or under the agreement of any way relating or touching the agreement.

The aspect of jurisdiction needs to be understood and required to be considered in view of scheme of the Act and section 31 is required to be understood in the back drop of these vital factors while deciding the aspect of jurisdiction of the Court provided therein. It must be noted that except some of the Mandatory provisions, almost all the provisions of the Act are subject to agreement of the parties. The parties may determine number of Arbitrators, procedure of appointing Arbitrators, rules of procedure, rule governing subsistence of dispute, the place of arbitration and language of Arbitrator. It is, therefore, aptly clear that wishes of the parties are of paramount importance in the entire process of arbitration agreement and due regard must be given to them. In the instant case, section 31 of the Arbitration Act, 1940 needs to be understood in the backdrop of Clause 16 of the hire purchase agreement and as per clause 16, the applicants and respondent Company have agreed that venue of such arbitration shall be in Bombay and Courts at Bombay alone and no other Court elsewhere would have jurisdiction to try the suit in respect of any claim or dispute arising out of or under the agreement or in any way relating or touching the agreement. In the context of the factors prevalent in the instant case, it can safely be inferred that venue of arbitration shall be in Bombay and the competent Court at Bombay shall have jurisdiction in this regard.

Where more than one Court has concurrent jurisdiction to entertain the matter, the parties to the contract may exclude anyone of them and confine jurisdiction to one available Court, which is agreed between the parties. However, such agreement should not be contrary to the public policy and does not contravene provisions of sections 20 and 28 of the Contract Act. Where two Courts had concurrent jurisdiction, if application u/s 14(2) of the Arbitration Act, 1940 requesting the Court to direct the Arbitrator to file an award was filed in one of them, award could be filed in that Court alone. Sub-Section (4) of section 30 of the Arbitration Act, 1940 contemplates that where with respect to arbitration agreement, any application has been made in a Court, that Court alone shall have jurisdiction over the proceedings and subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in not other Court.

In the instant case, the award was passed in Bombay. The award was filed in the City Civil Court at Bombay. The City Civil Court passed a decree in terms of the award. The applicants did not even bother to appear in the said proceedings. Therefore, it can be concluded that the decree passed by the Bombay City Civil Court does not suffer from lack of jurisdiction.

It is well settled that parties by agreement can neither confer nor oust the jurisdiction of the Courts. However, under the 3cheme of the Act, the parties to the arbitration proceedings can be mutual consent/agreement provide that in respect of arbitration proceedings, a single Court shall have jurisdiction. However, only legal requirement is that the said Court must have jurisdiction to entertain the suit between the parties in which controversies are the same as are the subject matter of the arbitration.

The ratio laid down by the Apex Court in the judgment reported in Urban Improvement Trust, Jodhpur Vs. Gokul Narain and another, , which is relied by the applicants, in the facts and circumstances of this case, is of no help to them. The proposition laid down by the Apex Court is that :-

if the decree strikes at the jurisdiction of the Court or the Court lacks jurisdiction, it strikes at the very root of the authority to pass the order or the decree. As seen, the Amendment Act 68 of 1984 has no application to the lands acquired under the Act. It was amended only w.e.f. August 1, 1987 and it was made applicable to the pending proceedings. It would, therefore, be clear that the order awarding additional benefits is clearly without jurisdiction and thereby it is a nullity. Its nullity can be assailed at any stage including at the execution or in a collateral proceedings since it strikes at the very jurisdiction and authority of the Court.

In the-instant case, I have already observed that the decree passed by the City Civil Court, Bombay does not suffer from lack of jurisdiction and, therefore, objection raised by the applicants in this regard must fail.

The judgment of the Apex Court in Kumbha Mawji Vs. Union of India (UOI), also in my opinion does not support the contention of the applicants, In para 13 of the judgment, the Apex Court has observed that :-

Thus, it will be seen on a comprehensive view of section 31 that while the first sub-section determines the jurisdiction of the Court in which an award can be filed, subsections (2), (3) and (4) are intended to make that jurisdiction effective in three different ways, (1) by vesting in one Court the authority to deal with all questions regarding the validity, effect or existence of an award or an arbitration agreement, (2) by casting on the persons concerned, the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one Court, and (3) by vesting exclusive jurisdiction in the Court in which the first application relating to the matter is filed. The context, therefore, of sub-section (4) would seem to indicate that the sub-section was not meant to be confined to applications made during the pendency of an arbitration. The necessity for clothing a single Court with effective and exclusive jurisdiction and to bring about by the combined operation of these three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced."

In the instant case, the parties to the agreement agreed to vest jurisdiction in the Court at Bombay in which award is filed. Hence, under the scheme of section 31, the City Civil Court alone will have exclusive jurisdiction in regard to questions arising out of arbitration proceedings, I am afraid, the ratio laid down by the Apex Court in the above referred judgment does not support the contention of the applicants.

It is also relevant to consider sections 23 and 28 of the Contract Act. Section 23 contemplates that consideration or object of an agreement shall be lawful-unless is forbidden by law or is of such a nature, that if permitted, it would defeat the provisions of any-law or is fraudulent, or involves or implies injury to the person or property of another or the Court regards, it as immortal or opposed to public policy. Similarly, section 28 contemplates that agreements in restraint of legal proceedings are void. The Apex Court in A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, has held 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 sections 23 and 28 of the Contract Act. This cannot be. understood as parties contracting against the Statute. Mercantile Law and practice permit such agreements.

The ratio laid down by the Apex Court provides that the agreement between the parties giving jurisdiction to one of the two competent Court''s to try the suit by mutual consent and if the part of cause of action arises within the local jurisdiction of such Court, is not hit by sections 23 and 28 of the. Contract Act is valid and sustainable in law. In the instant case, vide clause 16 of the agreement, the parties have agreed in no uncertain terms, that the venue of arbitration would be at Bombay and Courts at Bombay alone will have jurisdiction in this regard. The terms of clause 16 of the agreement are definite and unambiguous. The principal office of the respondent company is at Bombay and, therefore, cause of action or part thereof has arisen at Bombay and agreement is also not hit by sections 23 and 28 of the Contract Act. Therefore, same is valid and has been rightly acted upon by respondent. The contention raised by the learned counsel for the applicants in this regard is misconceived and devoid of substance.

Section 20 of the CPC provides that where cause of action had arisen partly within territorial jurisdiction of one Court and partly in another Court, it would be open to the parties to avail of the remedy at the Court where part of the cause of action has arisen. The contention of the learned Counsel for the applicants that clause 16 of the arbitration agreement, which totally ousts the jurisdiction of the other Courts except Court at Bombay is unlawful and void being against the public policy u/s 23 of the Contract Act is misconceived and cannot be sustained in view of the ratio and down by the Apex Court in the above referred judgment:-

A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, and the said view is also fortified by the judgment of the Apex Court in M/s. Angile Insulations Vs. M/s. Davy Ashmore India Ltd. and another, .

For the reasons stated hereinabove, the revisions are misconceived and devoid or substance and hence, the same are dismissed. No order as to costs.

Rev. applications dismissed.