Satluj Jal Vidyut Nigam Ltd. vs Continental Foundation Joint Venture

Deepak Gupta, J.—This Appeal is directed against the judgment dated 13th April, 2005 passed by a the learned Single Judge of this Court whereby he has held that this Court has no jurisdiction to entertain and adjudicate the objections filed by the present appellant to the award of the Arbitrator.

The brief facts necessary for decision of the case are that the Nathpa Jhakri Power Corporation which has now been re-named as Satluj Jal Vidyut Nigam Limited (hereinafter referred to as the appellant-objector) entered into a contract with M/s. Continental Foundation Joint Venture which is an unincorporated joint venture between M/s. Continental Construction Limited duly registered under the Indian Companies Act and the Foundation Company of Canada Limited being a Company registered under the laws of Canada. This contract was entered into between the parties for the purposes of the construction of the Nathpa Jhakri Hydro Electric Project. The contract was entered into between the parties at New Delhi but the entire works which were the subject-matter of the contract were to be executed in District Shimla in the State of Himachal Pradesh.

Clause XII of the Contract reads as follows:

(XII) Venue, Applicable Law, and Personal Jurisdiction

In the event that any party deems it necessary to initiate legal action or proceedings to enforce any rights or obligations under this Agreement, the parties hereto agree that any such action shall be initiated as per law for the time being in force in India and within the jurisdiction of the Courts at New Delhi. The Board Members, hereby, consent to be bound by the personal jurisdiction of the Courts at New Delhi.

Disputes arose between the parties and the same were referred to arbitration. The Arbitral Tribunal passed an award in favour of the respondent-Claimant. The appellant being aggrieved by the said award filed objections in this Court. The present appellant initially filed objections to the award in 2002. The appellant averred that it had only received an uncertified copy of the award dated 16.1.2002 on 30.1.2002. Since the objections were not filed within a period of three months from the date of receipt of the Arbitral award the appellant filed an application u/s 34(3) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) praying that the delay in filing the objections may be condoned. This petition was registered as CMP(M) No. 248 of 2002. The respondent filed reply to the application u/s 34(3) of the Act. No objection was raised in this reply that this Court had no jurisdiction to entertain the objections. A learned Single Judge of this Court came to the conclusion that the objections were in fact pre-mature since the signed copy of the award had not been supplied to the appellant-objector as provided u/s 31(5) of the Act. The Court also directed the Arbitrator to supply a signed copy of the award if approached by any of the parties. This order was not challenged by any party and has attained finality. Thereafter, a signed copy of the award was supplied to the appellant-objector on 29th April, 2003 and the Objector filed objections on 22nd May, 2003. These objections were registered as Arbitration Case No. 58 of 2003. Notice of this award was issued to the respondent-claimant. In response to the notice, reply was filed and in this reply an objection was taken that this Court had no jurisdiction to decide the matter since the parties had by mutual consent agreed to oust the jurisdiction of the Courts at Himachal Pradesh and had farther mutually agreed that only the Courts at Delhi would deal with any disputes arising between the parties. In response the appellant filed rejoinder and in this rejoinder the stand of the appellant-objector was that the jurisdiction of the Courts at Himachal had not been ousted and it was also pleaded that even if there is any such ouster clause, the claimant had waived this right by not objecting to the jurisdiction of this Court in the earlier proceedings and therefore in terms of Section 42 of the Act this Court alone can deal with all subsequent proceedings arising out of the said arbitral award A learned single Judge upheld the objections of the respondent -claimant and held that this Court had no jurisdiction to entertain or adjudicate upon the objections.

Aggrieved by the said judgment, the appellant-objector has filed the present appeal.

Following three questions arise for adjudication in the present appeal:

(i) Whether the parties in terms of the contract entered between them had agreed to oust the jurisdiction of the Courts in Shimla and had further agreed that the disputes between them shall be tried only in the Courts at Delhi?

(ii) In case question No. 1 is decided in favour of the respondent, whether the respondent had waived it''s rights under the ouster Clause by not taking the objection of jurisdiction in the earlier proceedings in CMP(M) No. 248 of 2003?

(iii) Whether the provisions of Section 42 of the Act are applicable in the present case and therefore all proceedings arising out of the aforesaid arbitration agreement and arbitral award have to be dealt with only by this Court?

We have heard Sh. R.L. Sood, learned senior Counsel for the appellant objector and Sh. J.S. Bhogal, learned senior Counsel for the respondent.

Ouster of Jurisdiction:

In the present case there can be no manner of doubt that both the Courts at Delhi and in Himachal especially the ones in Shimla District had inherent jurisdiction to entertain and decide any dispute arising out of the contract. Admittedly, the contract was entered into between the parties at New Delhi and therefore the Courts at New Delhi had jurisdiction since part of the cause of action arose there. It is also not disputed that as per the contract, the works which were the subject-matter of the contract, were to be carried out in Shimla District in the State of Himachal Pradesh. Therefore, the Courts in Shimla District also had jurisdiction to entertain and decide the matter since part of the cause of action arose within the territorial jurisdiction of the Courts at Shimla. The High Court of Himachal Pradesh exercising original civil jurisdiction in respect of the claims exceeding Rs. 20 lakhs and since the value of the claims in the present case was more than Rs. 20 lakhs this High Court had inherent jurisdiction to entertain and decide the matter.

The law is well settled that when two or more competent Courts have jurisdiction to entertain the matter, the parties by mutual consent can agree to fix jurisdiction in only one of them. Such a contract is legal and binding. Reference in this behalf may be made to a judgment of the Apex Court in Hakam Sing Vs. Gammon (India) Ltd., , wherein the Apex Court held that though it was not open to the parties to confer by their agreement jurisdiction on a Court, which it did not possess, but where two Courts or more have jurisdiction to try a suit or proceedings, the parties by an agreement could agree that all disputes between them would be tried in one of such Courts only. Such an agreement was held not to be against the public policy or in contravention of Section 28 of the Contract Act.

The question that arises is whether the jurisdiction of the Courts at Shimla/Himachal was ousted by the agreement in question. Clause 12 of the agreement quoted hereinabove does not use the words ''alone'', ''only'', ''exclusive'' or such like words. Sh. Sood, learned senior Counsel for the appellant contends that in view of the fact that such words have not been used it appears that intention of the parties was not that only the Courts at Delhi would have jurisdiction. It is contended that the ouster of the jurisdiction of the Courts at Himachal/Shimla cannot be inferred on a reading of Clause 12 quoted hereinabove.

On the other hand Sh. J.S. Bhogal, learned senior Counsel for the respondent-claimant submits that this Court cannot loose sight of the fact that the contract was entered into between the parties at Delhi. The parties agreed that they would be governed by the law for the time being in force in India. He submits that by specifically stating that the Courts at Delhi would have jurisdiction, the jurisdiction of the Courts in Himachal was ousted by applying the maxim ''expressio unius est exclusio alterius'' expression of one is the exclusion of the another. He also submits that it is not only Clause 12 which indicates the intention of the parties. Clause 5-B of the contract document reads as follows:

Clause-5 : Language and Law:

(a) xxxxxxxxxx

(b) The law to which the contract is to be subject and according to which the contract is to be construed shall be the law for the time being in force in India and within the jurisdiction of New Delhi Courts.

He has also made reference to modified Clause 67 of the terms of the contract. Sub-clause-8 of modified Clause 67 provides that all arbitration proceedings shall be held at New Delhi, India. According to Sh. Bhogal on a combined reading of all the Clauses it is clear that the intention of the parties was to oust the jurisdiction of all other competent Courts except the Courts at Delhi.

A similar question arose for consideration in A.B.C. Laminart Pvt. Ltd. and Another Vs. A.P. Agencies, Salem, . In this case the Supreme Court was dealing with a matter in which the Clause which was to be interpreted read as follows:

Any dispute arising out of this sale shall be subject to Kaira jurisdiction.

The Apex Court after discussing a number of judgments held as follows:

From the foregoing decisions it can be reasonably deduced that where such an ouster Clause occurs, it is pertinent to see whether there is ouster of jurisdiction of other Courts. When the Clause is clear, unambiguous and specific accepted notions of contract would bind the parties and unless the absence of ad idem can be shown, the other Courts should avoid exercising jurisdiction. As regards construction of the ouster Clause when words like ''alone'', ''only'', ''exclusive'' and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim ''expressio nnius est exclusio alterius''- expression of one is the exclusion of anothermay be applied. What is an appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed.

However, having held so, the Apex Court went on to observe that the Clause in question did not contain any exclusionary words like ''exclusive'', ''alone'', ''only'' and therefore the other general terms and conditions of the contract had to be taken into consideration. On the facts of the case the Court held that the jurisdiction of the Court at Salem which Court otherwise had jurisdiction under law had not been expressly excluded.

Similar view was taken by the Apex Court in M/s. Angile Insulations Vs. M/s. Davy Ashmore India Ltd. and another, .

In Hanil Era Textiles Ltd. Vs. Puromatic Filters (P) Ltd., , the Apex Court dealt with a matter in which the Clause in question read as follows:

Jurisdiction.- Any legal proceeding arising out of the order shall be subject to the jurisdiction of the Courts in Mumbai.

The Apex Court following the law laid down in A.B.C. Laminart''s case (supra) held that though the exclusionary words had not been used since major part of the cause of action had arisen in Bombay, only the Courts at Bombay had jurisdiction to decide the cases to the exclusion of all other Courts.

Sh. R.L. Sood, learned senior Counsel for the appellant has relied upon the judgment of the Madras High Court in Neyveli Lignite Corporation, Neyveli Vs. M/s. Vinay Engineering, Sole Proprietors, New Delhi and another, . In that case both the Courts at Madras and Neyveli had jurisdiction. Clause 18.2 of the contract provides that Civil Court having ordinary civil jurisdiction over Neyveli shall have the jurisdiction all concerned in this contract. The Madras High Court held as follows:

I have given my anxious consideration to the arguments advanced by respective Counsel. I have already extracted Clause 18.2 of the agreement between the parties. That Clause merely provides that the Civil Court having ordinary original civil jurisdiction over Neyveli shall have the jurisdiction over all the matters concerning the contract. It is pertinent to notice that this Clause does not oust the jurisdiction of other Courts. Words like ''alone'', ''only'', ''exclusive'' are not found in Clause 18.2 of the contract between parties. Hence it cannot be contended that Clause 18.2 excludes the jurisdiction of other Courts. Admittedly, the contract was entered into within the jurisdiction of this Court and therefore part of the cause of action had arisen in Madras. Hence, there is no force in the contention of NLC that the Court at Neyveli alone has jurisdiction to the exclusion of all others.

Relying upon the aforesaid averments it is urged that even in the present case there is no ouster of the jurisdiction of the Courts at Delhi. We are unable to accept this argument. In the present case it is not only one Clause but a number of other factors which indicate that the parties had mutually agreed to restrict the jurisdiction to the Delhi Courts only.

On a careful analysis of the aforesaid judgments it is apparent that when two or more Courts have inherent jurisdiction to hear a matter and the parties by agreement oust the jurisdiction of other Courts and restrict the jurisdiction to one Court only this can be done even without the use of exclusionary words. However, in such cases where the exclusionary words are not used the Apex Court has laid down that each case must be decided on its own facts and the intention of the parties should be culled out from the terms of the agreement.

In the present case, as noted above, at three places in the contract, namely, Clause XII, modified Clause 67 as well as Clause 5 the parties have clearly indicated that the arbitration proceedings shall be held at New Delhi and have also clearly agreed that the Courts at Delhi would have jurisdiction to decide their disputes. The parties were aware that the other Courts which could have jurisdiction were the Courts in Shimla District. When they specifically limited the jurisdiction to the Delhi Courts a presumption can reasonably be raised at that their intention was to oust the jurisdiction of the Courts at Shimla. The parties by such an agreement have not conferred jurisdiction upon a Court not having jurisdiction but have elected that the disputes between them should be decided by the Courts at Delhi.

That takes us to the second question as to whether the respondent has waived its right to raise such an objection in view of the fact that it raised no objection in reply to CMP(M) No. 248 of 2003 and other attending circumstances.

Questions two and three can be taken up together. To appreciate the rival contentions of the parties it would be apposite to refer to certain provisions of the Arbitration Act, 1940 as well as the Arbitration and Conciliation Act, 1996. Section 31(4) of the Arbitration Act, 1940 reads as follows:

Jurisdiction:

(1) to (3) xxxxxxxx

(4) Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force, where in 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.

The Corresponding provision in the Act of 1996 is Section 42 which reads thus:

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.

On a bare perusal of the two provisions it is apparent that though both the provisions relate to the continuation of the proceedings in which the first application has been filed there are some subtle but clear differences between the two provisions. Section 31(4) of the 1940 Act provides that wherein in any reference any application under the 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 the reference. This Section contemplates that a reference to arbitration has been made and the application has been filed after such reference has been made. Section 42 of the 1996 Act however comes into operation immediately on any application being filed under Part-I of the Act in a Court. It is, therefore, not necessary that reference to Arbitration should already have been made. A bare reading of this Section shows that when any application under Part-I of the Arbitration and Conciliation Act, 1996 is filed in a Court then that Court alone shall have the jurisdiction over the arbitral proceedings. All applications subsequent to this have to be filed in this Court.

The word ''Court'' has been defined in Section 2(e) of the 1996 Act which reads as follows:

2(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.

It is, therefore, obvious that the Court must be a Court of competent jurisdiction within the meaning of Section 2(e) of the Act. Therefore, if the first application is filed in a Court not being the Court of competent jurisdiction then Section 42 will not come into play.

As already held by us above, where more than one Court have jurisdiction to decide a matter the parties by mutual consent can agree to oust the jurisdiction of some of the Courts and limit the jurisdiction to one of the Courts alone. The Apex Court has held that such an agreement is not against the public policy or against Section 28 of the Contract Act. Once it is held that the parties by consent can agree to restrict jurisdiction to one of the two or more Courts having jurisdiction, the converse situation will also have to hold true. The parties may even after agreeing to an ouster Clause decide to file the proceedings in the Court jurisdiction of which was ousted. They are not by this agreement conferring jurisdiction on a Court not having jurisdiction. They are only waiving the terms of the contract. It is but natural that if parties can agree to contract out of the jurisdiction of one of the competent Courts they can waive this right at a later stage. We are clearly of the view that the parties can waive their right of ouster of jurisdiction so long as the Court has the inherent jurisdiction to entertain the matter.

Section 31(4) of the Arbitration Act, 1940 came up for consideration before the Apex Court in Guru Nanak Foundation Vs. Rattan Singh and Sons, , wherein the Apex Court held as follows:

Merely because the initial application for filing arbitration agreement was made to the Delhi High Court, it could not be said that all subsequent applications will have to be made to that Court alone. A proceeding earlier to the reference in a Court would not clothe that Court with such jurisdiction as to render the provision contained in Section 31(4) otiose.

This authority is not applicable to the facts of the present case. Section 42 of the 1996 Act which is attracted in the present case is of much wider amplitude. Unlike Section 31(4) of the 1940 Act, to make Section 42 of the 1996 Act applicable it is not necessary that a reference should be pending. The only requirement is that an arbitration agreement should be in existence. Section 42 is so widely worded that any application moved under Part-I of the 1996 Act is covered under this provision of law. u/s 9 even before arbitral proceedings commence interim directions can be issued by the Court, obviously the Court of competent jurisdiction. In case such an application is filed then all subsequent applications arising out of the same agreement shall have to be filed in the same Court.

Sh. Bhogal has placed reliance upon the judgment of the Apex Court in P. Anand Gajapathi Raju and Others Vs. P.V.G. Raju (Died) and Others, , wherein the Court held as follows:

...The Court to which the party shall have recourse to challenge the award would be the Court as defined in Clause (e) of Section 2 of the new Act and not the Court to which an application u/s 8 of the new Act is made. An application before a Court u/s 8 merely brings to the Court''s notice that the subject-matter of the action before it is the subject-matter of an arbitration agreement. This would not be such an application as contemplated u/s 42 of the Act as the Court trying the action may or may not have had jurisdiction to try the suit to start with or be the competent Court within the meaning of Section 2(e) of the new Act.

Sh. Bhogal, learned senior Counsel for the respondent has strenuously urged on the basis of the aforesaid observations that an application u/s 34(3) is akin to an application u/s 5 of the Limitation Act. He therefore urges that merely because the respondent had not raised the objection of jurisdiction in such application the respondent cannot be debarred from raising this objection when the main case was being contested.

A perusal of the aforesaid judgment of the Apex Court makes it clear that the Apex Court was contemplating a situation where the application u/s 8 of the Act was made to a Court not being the Court of competent jurisdiction within Clause (e) of the Act. In such a case obviously Section 42 would not apply. But supposing the application u/s 8 is made before the Court of competent jurisdiction; in that case the provisions of Section 42 would come into operation. This is obvious from the latter part of the above quoted judgment wherein the Apex Court has observed that the Court trying the action may or may not had jurisdiction to try the suit to start with or be the competent Court within the meaning of Section 2(e) of the Act.

Both the parties have also relied upon the following observations made by the Apex Court in Union of India Vs. M/s Popular Construction Co.,

Furthermore, Section 34(1) itself provides that recourse to a Court against an arbitral award may be made only by an application for setting aside such award "in accordance with" Sub-section (2) and Sub-section (3). Sub-section (2) relates to grounds for setting aside an award and is not relevant for our purposes. But an application filed beyond the period mentioned in Section 34, Sub-section (3) would not be an application "in accordance with" that sub-section. Consequently by virtue of Section 34(1), recourse to the Court against an arbitral award cannot be made beyond, the period prescribed. The importance of the period fixed u/s 34 is emphasized by the provisions of Section 36 which provide that

where the time for making an application to set aside the arbitral award u/s 34 has expired...the award shall be enforced and the Code of Civil Procedure, 1908 in the same manner as if it were a decree of a Court.

This is a significant departure from the provisions of the Arbitration Act, 1940. Under the 1940 Act, after the time to set aside the award expired, the Court was required to "proceed to pronounce judgment according to the award and upon the judgment so pronounced a decree shall follow". Now the consequence of the time expiring u/s 34 of the 1996 Act is that the award becomes immediately enforceable without any further act of the Court. If there were any residual doubt on the interpretation of the language used in Section 34 the scheme of the 1996 Act would resolve the issue in favour of curtailment of the Court''s powers by the exclusion of the operation of Section 5 of the Limitation Act.

Though these observations are not directly applicable to the facts of the present case it is apparent that the Apex Court held that an application filed beyond the period prescribed in Section 34(3) would not be an application in accordance with that sub-section. This case does not deal with the scope of Section 42. An application to set-aside an award in terms of Section 34 has to be filed in a Court, obviously being the Court of competent jurisdiction. After the award was passed such an application was filed by the appellant-objector in this Court. This objection petition had not been filed within three months from the date of receipt of the award. Therefore, an application u/s 34(3) was filed. Admittedly notice to the respondent had been issued only on this application. There was no notice in the main petition filed u/s 34. The respondent in its reply to the application did not raise any objection as to the jurisdiction of this Court. This Court in fact came to the conclusion that the application u/s 34(3) was mis-conceived and pre-mature as according to the learned Single Judge the time would start running only from the date when a signed copy of the award was supplied to the party in terms of Section 31(5) of the Act.

We are unable to accept the contention of Sh. Bhogal that in terms of the CPC he was entitled to raise the objection of jurisdiction at any stage before the framing of issues in the main petition. Section 42 does not make any distinction between the various types of applications which can be made under Part-I of the 1996 Act. If any application under this part is made, and no objection of jurisdiction is raised, then in terms of Section 42 only that Court where the first application is filed would have the jurisdiction in respect of the arbitral proceedings and all subsequent applications and arbitral proceedings have to be made in that Court and no other Court.

Section 42 of the 1996 Act starts with a non-obstante clause. It is comprehensive in character and has very wide amplitude. It covers all applications filed under Part-I of the Act before a Court of competent jurisdiction. This Court did not lack inherent jurisdiction to decide the case and as such was not a Court not having jurisdiction to hear and decide the dispute. However, as we have held above the parties had elected to restrict the jurisdiction to the Courts at Delhi. But, when this application u/s 34(3) was filed it was the duty of the respondent to have raised this objection at that very stage itself. If it had raised the objection then the Court may not have passed any orders and may have directed the appellant-objector to approach the Courts at Delhi. The respondent chose not to raise this objection and therefore in our considered opinion the respondent waived its right to raise the objection of jurisdiction at a later stage. In terms of Section 42 all subsequent proceedings had to be filed before the High Court at Shimla only.

While taking this view we are also fortified by the fact that the respondent-claimant itself had filed a writ petition being CWP No. 875 of 2004 in which it had prayed that a writ of mandamus be issued against the objector-appellant herein directing it to release the dues of the respondent without withholding the amount due and admissible to the respondent under law. This writ petition arose out of the same arbitration agreement and the respondent had pleaded that this Court had the jurisdiction to entertain, try and adjudicate the writ petition. No doubt this writ petition was later withdrawn on the ground that the respondent would take recourse to arbitration proceedings in view of the arbitration Clause but this clearly shows that the respondent was invoking the jurisdiction of this Court.

Shri Bhogal has placed reliance on the observations made by a learned Single Judge of the Delhi High Court in proceedings initiated u/s 9 of the Arbitration and Conciliation Act, 1996 filed by the respondent wherein it had prayed for certain interim reliefs u/s 9 of the Act. These applications were filed after the objections had been filed out of which the present appeal arises. The order was passed on January 12, 2006 after the order of the learned Single Judge in this case was passed. Objection of jurisdiction was raised by the present appellant-objector and the Delhi High Court held that the parties had agreed to elect the jurisdiction of the Delhi Courts only and further was of the opinion that nobody could argue that the Courts at Delhi had no jurisdiction. However, the Delhi High Court did not at all consider the provisions of Section 42 of the Act. Therefore, the said judgment cannot be applied to the facts of the present case.

Keeping in view the entire discussion, we answer the questions framed above as follows:

Q. No. 1: The parties had elected to retain the jurisdiction only of the Courts at Delhi and therefore had impliedly ousted the jurisdiction of the Courts at Shimla.

Q. No. 2: The respondent has waived the right available to it under the ouster Clause by not taking the objection of jurisdiction in the earlier proceedings in CMP (M) No. 248/2003.

Q. No. 3: The provisions of Section 42 of the Act are applicable in the present case and since the first proceedings i.e. CMP(M) No. 248 of 2003 arising out of the arbitration agreement were filed in this Court it is this Court alone which will have jurisdiction to entertain, adjudicate and decide all subsequent applications arising out of the arbitration agreement or the arbitral proceedings.

Consequently, we allow the appeal of the appellant, set-aside the order of the learned single Judge and direct the learned single Judge, to hear and decide the objections filed by the present appellant-objector on merits.

There shall be no order as to costs.