M/s Engipress Industries Ltd. vs Kontey Securities and Others

Shri Gangele, J

This Miscellaneous Appeal has been preferred by the appellant u/s 37 of the Arbitration and Conciliation Act, 1996 against the order dated 31st August, 2001, passed by the VIth Additional District Judge, Gwalior in Case No. 6/2001, whereby the learned court below rejected the application of the appellant on the ground of want of jurisdiction. The respondent No. 2 was appointed as a Sub Broker of respondent No. 1. The respondent No. 1 is a broker of Stock Exchange, Mumbai, which is a Stock Exchange duly recognized by the Central Government under the provisions of Securities Contracts (Regulations) Act, 1956.

The appellant entered into a contract with the respondent No. 1 in regard to purchase of 7300 shares of M/s Tata Tea Company Limited at the rate of Rs. 439 per share. Three hundred (300) shares were delivered to the appellant by the respondent No. 1, however, 7000 shares were not delivered. The appellant filed a complaint on 14-11-1998 to the Stock Exchange Mumbai. Thereafter in accordance with the provisions of the Stock Exchange Bye-laws, the matter was referred to the Arbitrators. The Arbitrators vide an award dated 14-2-2000 absolved the respondent No. 2 from its liability and passed an award against the respondent No. 1.

Aggrieved by the aforesaid award, the appellant preferred an appeal before the Appellate Board constituted under the bye-laws of Mumbai Stock Exchange, the appeal was rejected vide order dated 27-9-2000. Thereafter an application u/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ''the Act of 1996'') was filed by the appellant at Gwalior, that has been rejected by the trial judge on the ground that the Court of Gwalior has no jurisdiction to entertain the application and it has to be filed in the appropriate Court having jurisdiction in Mumbai.

Learned Senior Counsel appearing on behalf of the appellant has contended that the trial court committed an error of law in rejecting the application of the appellant because in accordance with Section 2 (e) of the Act of 1996, the appellant can file an application u/s 34 of the Act of 1996 at Gwalior. Learned Senior Counsel further submitted that the provisions of Act of 1996 would prevail over Bye-laws of Mumbai Stock Exchange. In support of his contentions, learned Senior Counsel relied on the following judgments :

i) Bombay Stock Exchange Vs. Jaya I. Shah and Another,

ii) Hanil Era Textiles Ltd. Vs. Puromatic Filters (P) Ltd.,

iii) New Moga Transport Company, through its Proprietor Krishanlal Jhanwar Vs. United India Insurance Co. Ltd. and Others,

iv) Municipal Council Palai Vs. T.J. Joseph and Others,

v) Cholamandalam Investments and Finance Co. Pvt. Ltd. Vs. Radhika Synthetics and another,

vi) M/s. Patel Roadways Limited, Bombay Vs. M/s. Prasad Trading Company, and

vii) Rajasthan State Electricity Board Vs. Universal Petro Chemicals Ltd.,

Contrary to this, learned counsel appearing on behalf of the respondent No. 2 has contended that in accordance with the Bye-laws, parties have to raise dispute within the jurisdiction of Mumbai Court only. The appellant agreed the terms and conditions of the Bye-laws of Mumbai Stock Exchange and he himself initiated arbitration proceedings in accordance with the Bye-laws, hence, the Court at Gwalior has no jurisdiction to entertain an application u/s 34 of the Act of 1996 and the trial court has rightly rejected the application of the appellant. In support of his contentions, learned counsel relied on the following judgment :

i) Balaji Coke Industry Pvt. Ltd. Vs. Maa Bhagwati Coke (Guj) Pvt. Ltd.,

The Mumbai Stock Exchange is a Stock Exchange duly recognized by the Central Government under the provisions of Securities Contracts (Regulations) Act, 1956. The Stock Exchange made regulations named as Regulations of 1957 in pursuance to the provisions of Securities Contracts (Regulations) Act, 1956 with prior approval of the Central Government. The Bye-laws No. 274 of Mumbai Stock Exchange prescribes that all dealings transactions and contracts are subject to the jurisdiction of the courts in Mumbai. The relevant Bye-law No. 274 is as under :-

Operation of Contracts

All dealings, transactions and contracts which are subject to the Rules, Bye-laws and Regulations of the Exchange and every arbitration agreement to which the Rules, Bye-laws and Regulations of the Exchange apply shall be deemed in all respects to be subject to the Rules, Bye-laws and Regulations of the Exchange and shall be deemed to be and shall take effect as wholly made, entered into and to be performed in the city of Bomaby and the parties to such dealings, transactions, contracts and agreements shall be deemed to have submitted to the jurisdiction of the Courts in Bombay for the purpose of giving effect to the provisions of the Rules, Bye-laws and Regulations of the Exchange.

The appellant submitted its application for arbitration in accordance with the Bye-laws of the Mumbai Stock Exchange and thereafter the arbitration proceedings were initiated and the award was pronounced. Thereafter an appeal was filed by the appellant before the appellate Bench of Arbitration Department, Stock Exchange, Mumbai, that appeal was dismissed vide order dated 27-9-2000.

From the aforesaid fact, it is clear that the appellant itself initiated proceedings under the Bye-laws of the Rules and Regulations framed by the Mumbai Stock Exchange and the Bye-law No. 274 clearly prescribes that in the event of dispute the competent court of Mumbai would have a jurisdiction. Section 2(e) of the Act of 1996 defines the "Court" which is as under :

Definitions.-(1) x x x

(a) xxx

(b) xxx

(c) xxx

(d) xxx

(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;

The Hon''ble Supreme Court in the case of Balaji Coke Industry Pvt. Ltd. Vs. Maa Bhagwati Coke (Guj) Pvt. Ltd., , after considering its previous judgments has held as under in regard to the fact that where two more competent Courts have jurisdiction to entertain the suit, parties to contract can agree to vest jurisdiction in one such court to try the dispute and such agreement is valid :

The aforesaid question has often troubled the courts with one view being that since the parties to the agreement had agreed to a particular forum, they could no longer resile from the said position and claim that other courts, where a part of the cause of action may have arisen, would also have jurisdiction to entertain a suit or other proceeding. The other view has been that if by the said agreement the rightful jurisdiction of a court was sought to be ousted and a court was vested with the jurisdiction to entertain a suit, which it did not have, the same would be contrary to the provisions of Section 28 of the Indian Contract Act, 1872, being contrary to public policy. One of the earlier judgments on this dichotomy of views is that of this Court in Hakam Sing Vs. Gammon (India) Ltd.,

Faced with the question as to whether an agreement arrived at between two parties that one of two courts having jurisdiction, would decide all disputes relating to such agreement, was hit by the provisions of Section 28 of the Indian Contract Act, 1872, this Court in Hakam Singh case held that where two courts or more have jurisdiction to try a suit or proceeding under the provisions of the Code of Civil Procedure, an agreement between the parties that one of such courts would have jurisdiction to decide the disputes arising between the parties from such agreement would not be contrary to public policy and would not, therefore, be contrary to the provisions of Section 28 of the Indian Contract Act, 1872.

The said question once again arose in the case of A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, wherein following the decision in Hakam Sing Vs. Gammon (India) Ltd., but relying on the maxim ex dolo malo non oritur actio, this Court held that by an agreement which absolutely ousted the jurisdiction of a court having jurisdiction to decide the matter, would be unlawful and void, being contrary to public policy u/s 28 of the Contract Act. But 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 could not be said that the parties had by their contract ousted the jurisdiction of the court.

This Court in A.B.C. Laminart case, went on to observe 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 with in, if the parties to the contract agree to vest jurisdiction in one such court to try the dispute which might arise between them, the agreement would be valid.

The question also arose in R.S.D.V. Finance Co. Pvt. Ltd. Vs. Shree Valllabh Glass Works Ltd., , where an endorsement "Subject to Anand (Gujarat) jurisdiction", was relied upon to contend that only Courts in Anand would have jurisdiction to entertain any dispute relating to such jurisdiction and the suit filed in Bombay on the ground that the cause of action arose in Bombay was not maintainable. In the said case, this Court held that since apart from the endorsement on the deposit receipt, there was no formal agreement between the parties, the said endorsement would not divest the courts in Bombay of their jurisdiction to entertain the suit. As will be evident from the facts of the suit, the same stood on a different footing and does not advance the case of the respondent in any way.

In the instant case, the parties had knowingly and voluntarily agreed that the contract arising out of the High Seas Sale Agreement would be subject to Kolkata jurisdiction and even if the courts in Gujarat also had jurisdiction to entertain any action arising out of the agreement, it has to be held that the agreement to have the disputes decided in Kolkata by an Arbitrator in Kolkata, West Bengal, was valid and the Respondent-Company had wrongly chosen to file its application u/s 9 of the Arbitration and Conciliation Act before the Bhavnagar Court (Gujarat) in violation of such agreement. The decisions of this Court in A.B.C. Laminart (P) Ltd. as also Hakam Singh are very clear on the point.

Same view has been taken by the Hon''ble Supreme Court in the case of New Moga Transport Company, through its Proprietor Krishanlal Jhanwar Vs. United India Insurance Co. Ltd. and Others, and Rajasthan State Electricity Board Vs. Universal Petro Chemicals Ltd., The judgments passed by the Hon''ble Supreme Court in the case of Rajasthan State Electricity Board (supra), is in regard to Section 2-c of the Act of 1996 and the Civil Procedure Code.

In the present case, the appellant himself subjected to the Bye-laws of the Mumbai Stock Exchange, it initiated the proceedings in accordance with the Bye-laws and an award was pronounced in accordance with the Bye-laws. In such circumstances, the appellant is bound by the Bye-laws and as per Bye-law No. 274, the competent Court of Mumbai has the jurisdiction to entertain the application filed by the appellant u/s 34 of the Act of 1996. Hence, in our opinion, there is no merit in this appeal. It is hereby dismissed. No order as to costs.