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Home > SC > Business Law > Arbitration and Conciliation Act > Jindal Vijayanagar Steel (JSW Steel Ltd.) Vs. Jindal Praxair Oxygen Company Ltd.



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Jindal Vijayanagar Steel (JSW Steel Ltd.) Vs. Jindal Praxair Oxygen Company Ltd.

Posted on 21 May 2009 by jyoti

Title

Jindal Vijayanagar Steel (JSW Steel Ltd.) Vs. Jindal Praxair Oxygen Company Ltd.



Coram

DR. AR. LAKSHMANAN, LOKESHWAR SINGH PANTA



Act

Arbitration and Conciliation Act



Subject

Arbitration and Conciliation Act, 1996, Sections 9, 2(e)-Arbitration petition-Jurisdiction of Bombay High Court to entertain-Held: Bombay High Court has Original Jurisdiction to entertain Arbitration petition even if no cause of action arose within its jurisdiction, provided the party has its principal office at Bombay-On this question, Rules in Section 20, CPC are not applicable-Letters Patent (Bombay)-Clause 12-Code of Civil Procedure, 1908-Sections 16, 17, 20, 120- Arbitration Act, 1940-Section 2(c).

Letters Patent and CPC-Scope of-Distinction between.

Principle of incurium-Judgment of Supreme Court-Held: Cannot be referred for reconsideration by a subsequent coordinate Bench merely because the subsequent Bench may have arrived at a different conclusion had there not been an earlier judgment.

The appellant was in the process of setting up a steel plant in Bellary Distt., Karnataka. It entered into agreements with the respondent company, which was incorporated in Karnataka. Respondent-company was to set up an Air Separation Plant in the same complex in Bellary, Karnataka for the purpose of supplying the appellant with the required quantities of industrial gases. It entered into a Pipeline Supply Agreement with appellant for supply of industrial gases. This agreement contained arbitration clause. The agreement clearly stated that arbitration was to be conducted in Bombay. Dispute arose between the parties. A meeting was held at Bombay between the representatives of the parties. However, respondent filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 in Bombay High Court. Respondent issued notice of arbitration in Bellary, Karnataka which was served upon appellant in Bellary and Bangalore in Karnataka. The appellant wrote a letter to respondent resenting the action taken by respondent.

Appellant filed arbitration petition before Principal District Judge, Bellary seeking orders to restrain the respondent from breach of Pipeline Supply Agreement. Respondent filed an application to dismiss the arbitration petition filed by appellant at Bellary. Principal District Judge dismissed the application and held that as the entire action had arisen at Bellary, the Bellary Court had jurisdiction to decide the matter. Respondent preferred an appeal which was allowed and the Court directed that the issue of jurisdiction would have to be decided by Bombay High Court in respondent's arbitration petition. By the impugned order, Bombay High Court held that it had the jurisdiction to entertain arbitration petition. Hence the present appeal.

The appellant contended that High Court erred in holding that by virtue of clause 12 of the Letters Patent Act, Bombay High Court has jurisdiction to entertain the petition filed by respondent in Bombay High Court; that the High Court failed to appreciate that as per Section 2(1)(e), only a Court having jurisdiction to decide the questions forming the subject matter of the arbitration, if the same had been the subject matter of the suit, would have jurisdiction under the Act; that the High Court failed to appreciate that being a special enactment for arbitration, the provisions of the Act would prevail over the provisions of the Letters Patent when determining question under the Act including questions as to jurisdiction; that the High Court erred in ignoring the settled law that it is the situs of cause of action and not the place of business which is deciding factor in determining the jurisdiction. Appellant further contended that the Division Bench decision of this Court in Food Corporation of India* has, without reference to the binding precedent in the Patel Roadways Limited** wrongly held that despite the disjunctive term `or' used in the explanation to Section 20 CPC, a Corporation would be deemed to be carrying on business at its principal office and also at the subordinate office situated at the place in which the cause of action arose. He submitted that the said Division Bench decision is per incuriam the decision of this Court in Patel Roadways Limited case** hence requires reconsideration and should be referred to a larger bench of this court. Appellant further contended that a "Uniformity Rule" on jurisdiction should be applied to all courts in the country since the 1996 Act is a central statute.



Citation

, 2006(5 )Suppl.SCR579 , 2006(11 )SCC521 , 2006(8 )SCALE668 , 2006(8 )JT230



Head Notes

Dismissing the appeal, the Court

HELD: 1. The Bombay High Court has jurisdiction to entertain petition filed under Section 9 of the Arbitration and Conciliation Act, 1996. [588-c]

2.1. An arbitration petition is required to be filed in a Court having jurisdiction. On a plain reading of the definition of "Court" under section 2(e) of the 1996 Act, it is evident that the Arbitration Petition can be filed before (i) a principal Civil Court of original jurisdiction in district, (ii) a High Court in exercise of its 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. [593-h; 594-e, f]

2.2. There are only three Chartered High Courts in India which exercise jurisdiction under their respective Letters Patent which continue to apply in full force and effect which Letters Patent are inter alia protected by Article 225 of the Constitution. [594-g]

2.3. The Bombay High Court is a Chartered High Court under the Letters Patent exercising Original Civil Jurisdiction. For the purpose of determining the Original Civil Jurisdiction of the Bombay High Court, Section 20 of the CPC 1908 has been specifically excluded and has no application. Only the provisions of clause 12 of the Letters Patent are required to be considered to determine the jurisdiction of the Bombay High Court. Under Clause 12 of the Letters Patent, the Bombay High Court would have jurisdiction to entertain and try an Arbitration Petition even if no cause of action has arisen within its jurisdiction, provided the Respondent has an office at Bombay. [594-f; 596-b, c]

3.1. It is ex facie clear from Section 20 CPC that a suit can be filed where a part of the cause of action arises or where the principal office is located. The principles of Section 20 cannot be made applicable to clause 12 of the Letters Patent since the CPC itself by section 120 specifically excludes the applicability of Section 20 of the CPC to Chartered High Courts.
[597-f; 599-c]

3.2. In Food Corporation's case, this Court pointed out that as per Section 20, a suit can be filed where cause of action arises or where the principal office is situate. The statement of the Food Corporation case was purely obiter qua the issue to be decided and the reason behind it therein and can never be the basis for a subsequent Bench to refer the same for reconsideration. [597-g; 598-d]

4.1. The Letters Patent, is a special charter conferring jurisdiction on Chartered High Courts. When there is a special enactment such as the Letters Patent, which expressly lays down the criteria on the jurisdiction of the Chartered High Court, it is totally unnecessary and in fact futile to refer to another legislation such as the CPC (which is not applicable) to determine the jurisdiction of the Chartered High Court. [599-f]

Sarguja Transport Service v. State Transport Appellalte Tribunal, M.P. Gwalior and Ors., [1987] 1 SCC 5, held inapplicable.

4.2. Neither the CPC nor its principles can be made applicable to the Letters Patent qua sections 16, 17 and 20 of CPC. It is therefore not only impermissible but also unnecessary to apply the CPC or import the principles of section 20 of the CPC into the Letters Patent. [600-d]

4.3. The Letters Patent and CPC operate in separate fields i.e. the Letters Patent specifically conferring jurisdiction on Chartered High Courts and the CPC conferring jurisdiction on all other courts. There is clearly a difference between the scope of the Letters Patent and the CPC, the difference being evident upon a plain reading of section 120 of the CPC. [600-f-g]

P.S. Sathappan (dead) by LRs. v. Andhra Bank Ltd. and Ors., [2004] 11 SCC 672, referred to.

5. This Court in Food Corporation of India case* followed the provision of law i.e. Clause 12 of Letters Patent and Section 120 CPC which itself made the provisions - Sections 16, 17 and 20 CPC inapplicable. The judgment of this Court will not be referred for reconsideration by a subsequent coordinate Bench merely because the subsequent Bench may have arrived at a different conclusion had there not been an earlier judgment. That law is the principle of stare decisis adopted and followed in the Indian Courts. None of the conditions necessary for reconsidering an earlier direct precedent has arisen in the instant case. [593-c-d]

Food Corporation of India v. Evdomen Corporation,* [1999] 2 SCC 446 and Patel Roadways Limited, Bombay v. Prasad Trading Corporation** [1991] 4 SCC 270, referred to.

6. There is no question of uniformity rules applying since section 2(e) of the 1996 Act expressly recognizes that not only district courts but also High Courts exercising original civil jurisdiction would have jurisdiction under the 1996 Act. The Act thus recognizes that Chartered High Courts exercising Original Civil Jurisdiction would exercise jurisdiction. It is submitted that apart from the 3 Chartered High Courts who are governed by the Letters Patent only two other High Courts in the country (Delhi and Jammu & Kashmir under their respective High Courts Acts) exercise original civil jurisdiction. This issue is therefore not question of all India application as it does not affect jurisdiction of most High Courts. There is therefore no question of a "uniformity rule" being required to be applied. There cannot be a rule of uniformity applied between unlikes. The appellant seeks to apply such uniformity rule between the subordinate Courts (governed by the CPC) and the High Courts (governed by the Letters Patent). [601-c-e]

Globe Cogeneration Power Ltd v. Sri. Hiranyakeshi, AIR (2005) Kar 94 and Kamal Pushp Enterprises v. Chairman Cum Managing Director, Gas Authority of India Ltd., (Vol. 31 DRJ 651), held inapplicable.

Rameshwar and Ors. v. Jot Ram and Anr., [1976] 1 SCC 194 and Shri Kishan v. Manojkumar, [1998] 2 SCC 710, distinguished.

Dayanand Prasad Sinha v. Hindustan Steel Works Construction Ltd., AIR (2001) CAL 71; Khaleel Ahnmed v. Hatti Gold Mines Co. Ltd., [2000] 3 SCC 755; Mayur (H.K.) Ltd. & Ors. v. Owners & Parties, Vessel M.V. Fortune Express & Ors., [2006] 3 SCC 100; Sudhir G. Angur & Ors v. M. Sanjeev & Ors., [2006] 1 SCC 141 and Fazlehussein v. Yusufully, AIR (1955) Bom 55, referred to.

R.F. Nariman, T.K. Cooper, Mannu Nair, Margaret D Souza and Mark D Souza (for M/s. Suresh A. Shroff & Co.) for the Appellant.

C.A. Sundaram, R.K. Krishnamurthi, Rahul Narichania, C. Muralidhara, Syed Naqvi, Smieetaa Inna, Asha Gopalan Nair and Rohini Musa for the Respondent.



Judgment Made On

29/08/2006

CASE NO.:
Appeal (civil) 3773 of 2006

JUDGMENT:
J U D G M E N T
(Arising out of SLP (C) No. 7078/2006)


Dr. AR. Lakshmanan, J.


Leave granted.

The above appeal was filed by the appellant seeking
special leave to appeal against the final order dated
02.03.2006 passed by the High Court of Bombay in Arbitration
Petition No. 459 of 2004. By the said order, the High Court,
according to the appellant, has wrongly assumed jurisdiction
to entertain petitions under Section 9 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as 'the Act')
despite holding that the entire cause of action has arisen
outside its territorial jurisdiction.
In other words, the appellant seek to impugn the
judgment dated 02.03.2006 whereby the High Court has held
that jurisdiction of the Court under the provisions of the
Arbitration Act may be assumed by a Court exercising
jurisdiction in a place where no part of the cause of action has
arisen, if the respondent being a Company has a Corporate
Office at the place where the Court is moved.
The facts leading to the filing of the above appeal are as
follows:
The appellant was in the process of setting up an
integrated steel plant having the capacity of 1.25 million
tonnes of the manufacture of iron and steel in Bellary District,
Karnataka. For its manufacturing operations, the appellant
required large quantities of industrial gases, namely, oxygen,
nitrogen and argon for such production. To this end, the
appellant, in conjunction with M/s Praxair Pacific Limited
decided to enter into agreements to incorporate the
respondent-Company in Karnataka. The respondent-
Company was to set up an Air Separation Plant (ASP) in the
same complex in Bellary, Karnataka for the purpose of
supplying the appellant with the required quantities of
industrial gases.
The respondent-Company was incorporated in Bangalore
with a 50:50% share holding between the appellant and the
Praxair Pacific Limited, which was subsequently changed to
26:74%. On 19.02.1996, Pipeline Supply Agreement (PSA)
was entered into between the appellant and the respondent at
Bangalore wherein the respondent would supply to the
appellant its requirement of industrial gases, namely, gaseous
oxygen, gaseous nitrogen and the gaseous argon. Product
Supply Agreement was entered into between the respondent
and Praxair India Private Limited (PIPL), a wholly-owned
subsidiary of Praxair Pacific Limited at Bangalore for supply of
liquid oxygen, nitrogen and argon to PIPL. This agreement
was entered into on 01.06.1996. As several disputes/issues of
technical and commercial nature in relation to the
implementation of the PSA and the performance of the ASPs
had arisen between the parties, the representatives of the
appellant, respondent, Praxair Pacific Limited, Praxair Inc. and
PIPL made in Singapore to resolve the issues.
On 23.06.2002, an agreement was arrived at between the
parties (Settlement Agreement). The Settlement Agreement
was approved by the Board of Directors of both the parties in
Bangalore. The interpretation of the obligations of parties
under various provisions of the Settlement Agreement
including the above provisions and the PSA is presently in
dispute in arbitration invoked by the respondent against the
appellant.
Accordingly, the respondent implemented those
provisions of the Settlement Agreement which were favourable
to it, whilst delaying the implementation of terms favourable to
the appellant. As a result thereof in various issues/disputes
including all power norms, reimbursement of excise duty and
income-tax claims, maintenance of adequate quantities of
suppliable liquids in the storage tanks of the respondent etc.
arose between the parties.
To settle the disputes, the respondent invoked dispute
resolution process pursuant to Article 17 of the PSA by issuing
a notice from Bellary, Karnataka to the appellant in Bellary
Karnataka.
Article 17 of the Dispute Resolution reads as follows:
"17.1. In the event that a party to this Agreement has
reasonable grounds to believe that the other Party
hereto has failed to fulfill any obligations hereunder or,
that its expectation of receiving due performance under
this Agreement may be impaired, such Party will
promptly notify the other party in writing of the
substance of its belief. The party receiving such notice
must respond in writing within thirty (30) days of
receipt of such notice and either provide evidence of
cure of the condition specified, or provide an
explanation of why is that its performance is in
accordance with the terms and conditions of this
Agreement, and also specify three (3) dates, all of which
must be within thirty (30) days from the date of its
response, for a meeting to resolve the dispute. The
claiming party will then select one (1) of the three (3)
dates, and a dispute resolution meeting will be held at
the place specified by the responding party. Each party
shall have the right to require that individuals
representing Buyer and Seller who have the authority to
execute this Agreement or amendments thereto, be in
attendance at the dispute resolution meeting. If the
parties cannot, in good faith discussions, resolve their
dispute, they shall submit the dispute to arbitration in
the manner set forth below in Article 17.2

17.2 Any dispute, controversy, or claim arising out of or
relating to this Agreement, or the breach, termination,
non-performance, interpretation of the respective rights
and liabilities of the parties under the Agreement; or
invalidity thereof which cannot be fully and
satisfactorily resolved or settled by the parties hereto
pursuant to Section 17.1 shall, at the request of either
party, be submitted to, and be settled by arbitration,
which shall, except to the extent provided herein, be
held in accordance with the Rules of the U.N.
Commission of International Trade Law (UNCITRAL)
("Rules") in effect on the date of this Agreement except
as modified by this Article 17.2. This Article 17.2 shall
supercede any Conflicting provision of the Rules.

(i) The number of arbitrators shall be two (2), one (1)
each appointed by the respective parties. The two
arbitrators shall within 30 days of the appointment of
the second arbitrator appoint an Umpire. If the two
arbitrators are unable to agree upon the appointment of
the Umpire within the aforesaid period, then either
party may ask the Secretary General of the Permanent
Court of Arbitration at the Hague to appoint the Umpire.
The arbitrators and the Umpire shall have expertise in
the area of corporate law and shall be disinterested
persons of either Indian, English or United States
nationality except that the Umpire shall be of British or
Swiss nationality and shall have had no previous
dealing or relationship, direct or indirect, with either of
the parties. The arbitration shall be conducted in
Bombay, India. Any decision or resolution of the
dispute shall be based on Indian law (except that British
law shall apply to procedural matters such as appeals),
shall be a unanimous decision of the arbitrators or the
Umpire if the arbitrators cannot agree, and shall be set
forth in a reasoned written opinion, based on applicable
law, stating the reasons with legal basis for the decision.
The proceedings shall be conducted in English in
facilities, arranged for by the arbitrators and Umpire
held at such time, as the arbitrators and Umpire shall
direct.

(ii) The arbitration proceeding shall be initiated by a
Party lending an arbitration demand to the other party.
The demand shall be sent in accordance with Article
17.2 of this Agreement. The demand shall be sent to
the Party at the address and to the individual specified
in Article 17.2.

(iii) .
(iv)
(v)."
A meeting was held at Mumbai between the
representatives of the parties on 04.10.2004. However, the
respondent filed a petition under Section 9 of the Act in the
Bombay High Court being Arbitration Petition No. 459 of 2004.
The respondent, on 14.10.2004, issued notice of arbitration
pursuant to Article 17.2 of the PSA. The notice of arbitration
was issued by the respondent in Bellary, Karnataka and
served upon the appellant in Bellary and Bangalore,
Karnataka. The appellant wrote a letter pointing out that
unilateral action threatened by the respondent was contrary to
the letter and spirit of the PSA read with the Settlement
Agreement, as the respondent was under the obligation to first
meet the product requirements of the appellant. The
appellant, in view of the urgent need to protect its interests,
filed Arbitration Petition No. 9 of 2005 before the Principal
District Judge, Bellary on 06.02.2005 seeking appropriate
orders to restrain the respondent from breaching the PSA read
with the Settlement Agreement. On 07.02.2005, an interim
order was passed by the Principal District Judge, Bellary
restraining the respondent from insisting upon an artificial
ceiling of 40 TPD of LAR. The respondent filed an I.A. No.4 in
the said arbitration petition under Section 151 of the CPC read
with Section 42 of the Arbitration Act to dismiss the
arbitration petition filed by the appellant at Bellary. On
05.03.2005, the Principal District Judge, Bellary dismissed
I.A. No. 4 in arbitration petition and held that as the entire
cause of action had arisen in Bellary, the Bellary Court had
jurisdiction to decide the matter. An appeal was preferred by
the respondent against the order passed by the Principal
District Judge, High Court of Karnataka which allowed the
appeal filed by the respondent and directed that the issue of
jurisdiction would have to be decided by the Bombay High
Court in respondent's Arbitration Petition No. 459 of 2004. By
the impugned order dated 02.03.2006, the Bombay High
Court held that it had the jurisdiction to entertain Arbitration
Petition No. 459 of 2004. Hence the present appeal.
The High Court, in para 16 of its order, has held as
under:-
"16. Under the circumstances, by virtue of clause 12 of
the Letters Patent, this Court has jurisdiction to
entertain this Petition as the respondent is having
corporate office in Mumbai from where it was carrying
on its business. Moreover, since during the pendency of
this petition the registered office of the respondent has
also been shifted to Mumbai, it is needless to say that
the respondent is carrying on business in Mumbai.
Therefore, this Court has jurisdiction to entertain the
petition. I, therefore, reject the contention raised on
behalf of the respondent that this Court has no
jurisdiction to entertain the petition filed under Section
9 of the Arbitration & Conciliation Act, 1996."

We heard Mr. R.F. Nariman, learned senior counsel for
the appellant and Mr. C.A. Sundaram, learned senior counsel
for the respondent. Mr. R.F. Nariman submitted that:
a) the High Court erred in rejecting the contention
of the appellant that the Bombay High Court had
no jurisdiction to entertain the petition filed by
the respondent in the Bombay High Court under
Section 9 of the Act;
b) the High Court erred in holding that by virtue of
Clause 12 of the Letters Patent Act, the Bombay
High Court has jurisdiction to entertain the
petition filed by the respondent in the Bombay
High Court;
c) the High Court failed to appreciate that as per
Section 2(1)(e) of the Act, only a court having
jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had
been the subject-matter of a suit, would have
jurisdiction under the act;
d) the High Court failed to appreciate that being a
special enactment for arbitration, the provisions
of the Act would prevail over the provisions of the
Letters Patent when determining questions under
the Act, including questions as to jurisdiction;
e) the High Court ought to have appreciated that for
a court to exercise jurisdiction under section 9 of
the Act, the court must be a "Court" as defined
under Section 2(1)(e) of the Act and where the
cause of action has arisen;
f) the High Court, after observing in paragraph 7 of
the Impugned Order that no part of the cause of
action had arisen at Mumbai failed to appreciate
that it was only the Bellary Courts, which had
the jurisdiction to entertain disputes arising from
the PSA and the Settlement Agreement since the
entire cause of action had arisen in Mumbai;
g) the High Court erred in ignoring the settled law
that it is the situs of cause of action and not the
place of business, which is the deciding factor in
determining jurisdiction under Section 2(1)(e) of
the Act;
h) the High Court failed to appreciate that the mere
venue of arbitration, and situs of the corporate
office of the respondent does not vest jurisdiction
in a court under Section 2(1)(e) of the Act.
It is also contended that the judgment of this Court in
Food Corporation of India vs. Evdomen Corporation,
(1999) 2 SCC 446 is per incuriam.
It is the contention of Mr. Nariman that the High Court
has failed to notice and appreciate that the cause of action as
set out hereunder arose in Bellary:
a) the disputes raised by both the parties emanate
from the maintenance of product levels
stored/supplied from the plants of both the
parties, which are situated in Bellary, Karnataka;
b) at the relevant time, the registered office of the
appellant was situated in Bellary, Karnataka;
c) the registered office of the respondent is situated
in Bellary, Karnataka;
d) the action threatened by the respondent to limit
the supply of Liquid Argon ("LAR") up to 40
Tonnes per day ("TPD") was proposed to be made
in Bellary, Karnataka;
e) the consequences of such actions would also
have an effect on the plant of the appellant and
the ancillary units in the same situated in
Bellary;
f) the entire chain of events leading to the
unilateral threat issued by the respondent to
restrict the supply of Liquid Argon occurred in
Bellary.
The High Court also is not correct in holding that since
during the pendency of the petition filed by the respondent
before it, the Registered Office of the appellant had shifted to
Mumbai, the appellant was carrying on business in Mumbai,
and that this would vest jurisdiction in the Bombay High
Court under Section 9 of the Act, in relation to disputes which
had arisen prior to the shifting of the Registered Office.
According to learned senior counsel, the subsequent
events do not retrospectively confer jurisdiction upon Courts
to entertain pending cases, where there was no jurisdiction to
entertain them at inception and that the sole intention of the
respondent in filing a petition under Section 9 of the Act before
the Bombay High Court was to oust the jurisdiction of the
competent Court under Section 2(1)(e) of the Act and that the
High Court by claiming jurisdiction rendered the petition filed
in the Bellary Court by the appellant nugatory and ineffective.
Mr. Nariman also submitted that the test under Section
2(e) of the Act applies uniformly across India and that the
principle in the explanation to Section 20 CPC should be
applied to Clause 20 of the Bombay Letters Patent.
Concluding his argument, Mr. Nariman submitted that the
High Court in passing the impugned order has mis-interpreted
the provisions of the Act and Clause 12 of the Letters Patent
and the net effect of the impugned order is that it renders
nugatory the competency of the Courts having jurisdiction
where admittedly the entire cause of action has arisen.
Further it affords jurisdiction to courts on the basis of an
enactment, namely, the Letters Patent which would not apply
since in arbitration matters, jurisdiction must be solely
determined by Section 2(1)(e) of the Act.
Mr. C.A. Sundaram, learned senior counsel appearing for
the respondent submitted that an order holding that the Court
has no jurisdiction to entertain, try and dispose off an
arbitration petition under Section 9 of the Act would
necessarily imply or entail a refusal to grant relief under
Section 9 of the Act and that such an order would, therefore,
be an order under Section 9 of the Act and would, therefore,
be appealable. In other words, where a Court holds that it has
jurisdiction to entertain, try and dispose off a petition under
Section 9 of the Act, such determination of an issue would be
one in aid of determination of an issue under Section 9 and
would, therefore, also be a decision under Section 9 of the Act.
It is, therefore, submitted that an order on the issue of
jurisdiction to entertain, try and dispose off an arbitration
petition under Section 9 of the Act is clearly an appealable
order under Section 37(1)(a) of the Act.
Since the matter was argued on merits, we do not
propose to consider the submission on the maintainability of
the appeal in this Court and we proceed to consider the rival
claims on merits as advanced by the respective senior counsel
appearing on either side.
According to Mr. Sundaram, the Bombay High Court has
jurisdiction to entertain, try and dispose off the said
arbitration petition for the following reasons:
a) The High Court of Bombay is a Chartered Court
under the Letters Patent;
b) Clause XII of Letters Patent prescribes the
jurisdiction of a Chartered Court;
Clause XII of the Letters Patent reads as under:-
"Original jurisdictions as to suits.- And We do further
ordain that the said High Court of Judicature at
Bombay, in the exercise of its ordinary original civil
jurisdiction, shall be empowered to receive, try, and
determine suits of every description, if, in the case of
suits for land or other immovable property such land or
property shall be situated, or in all other cases if the
cause of action shall have arisen, either wholly, or, in
case the leave of the Court shall have been first
obtained, in part, within the local limits of the ordinary
original jurisdiction of the said High Court or if the
defendant at the time of the commencement of the suit
shall dwell or carry on business, or personally work for
gain, within such limits; except that the said High Court
shall not have such original jurisdiction in cases falling
within the jurisdiction of the Small Cause Court at
Bombay, or the Bombay City Civil Court."

According to learned senior counsel, the Bombay High
Court would have jurisdiction under Clause XII of the Letters
Patent; if a defendant dwells or carries on business or works
for gain within the limits of Mumbai. Where the cause of
action has accrued wholly or in part within or without the
limits of the said jurisdiction is wholly irrelevant in the
circumstances. Explaining further, Mr. Sundaram submitted
that, in the present case, at the time of filing of Section 9
petition, the appellant had its Corporate Office at Mumbai and
was, therefore, carrying on business within the local limits of
the Oridinary Original Jurisdiction of the Bombay High Court.
During the pendency of the said Section 9 petition, the
Registered Office of the appellant was transferred to Mumbai.
At the time when the issue of jurisdiction was argued before
the learned Single Judge, the Registered Office of the appellant
had already been transferred to and was situated in Mumbai
within the local limits of the Ordinary Original Jurisdiction of
the Bombay High Court.
It is submitted that by Section 120 of the CPC, various
sections of the Code including Section 20 thereof, are made
inapplicable to Chartered High Courts like the Bombay High
Court. Therefore, it is submitted that for determining the
question of jurisdiction of the Bombay High Court as a
Chartered Court, the provisions of Section 20 of the CPC are
inapplicable and that only the provisions of Clause XII of the
Letters Patent are applicable. Mr. Sundaram submitted
further that the jurisdiction of a Court under Section 2(1)(e) of
the 1996 Act is not in any manner restricted to the situs of the
cause of action and that it is inconceivable that the legislature
could have intended to restrict or circumscribe the scope and
ambit of the jurisdiction of the Court under Section 2 (i) (e) of
the 1996 Act and make it inferior to the jurisdiction of the
Court prescribed under the Code of CPC or Letters Patent.
We have given our careful consideration to the rival
submissions made by the learned senior counsel appearing for
the parties. We shall now consider the arguments advanced
by both the learned senior counsel.
This case deals with the original civil jurisdiction of the
Bombay High Court which is governed by its Letters Patent.
Clause XII whereof founds its jurisdiction. By virtue of Section
120 CPC Sections 16, 17 and 20 CPC are expressly made
inapplicable to the Bombay High Court. Mr. Nariman
submitted that the Division Bench decision of this Court in
Food Corporation of India vs. Evdomen Corporation,
(supra) has, without reference to the squarely applicable and
binding precedent in the Patel Roadways Limited, Bombay
vs. Prasad Trading Company, (1991) 4 SCC 270, wrongly
held that despite the disjunctive term 'or' used in the
explanation to Section 20 CPC, a Corporation would be
deemed to be carrying on business at its principal office and
also at the subordinate office situated at the place in which
the cause of action arose. He submitted that the said Division
Bench decision is per incuriam the decision of this Court in
Patel Roadways Limited case (supra) and, therefore, cannot
be said to have laid down the correct law in this regard. He
would further submit that the Division Bench of this Court in
Food Corporation of India case (supra) also erred in failing to
consider the crucial question of whether the provisions of
Letters Patent should be interpreted in the light of the
principles enshrined in the pari materia provisions of the CPC.
He would further submit that a three-Judge Bench of this
Court in the case of Patel Roadways Limited case (supra)
held that the explanation to Section 20 is purely clarificatory
and does not extend the principle enunciated in Section 20.
Further, it has held that in view of the term 'or' used in the
explanation to Section 20 CPC a Corporation would be deemed
to be carrying on business only at the place at which the
cause of action arose, provided that it had a subordinate office
at that place, failing which, it would be deemed to be carrying
on business only at the place at which it maintained its
principal office. It is, therefore, submitted that the same
principle in Section 20 including the clarification made by the
explanation, should be read in Clause 12 of the Letters Patent.
In our opinion, no good reason has been made out in
reconsideration of the judgment in Food Corporation of India
case (supra). The reasons are as under:
In our view, a judgment of this Court will not be
reconsidered unless a subsequent Bench believes it has laid
down wrong principles of law by ignoring a provision of law or
otherwise not following a direct binding precedent. In the
instant case, this Court in Food Corporation of India case
(supra) followed the provision of law i.e. Clause 12 of Letters
Patent and Section 120 CPC which itself made the provisions 
Section 16, 17 and 20 CPC inapplicable. The judgment of this
Court will not be referred for reconsideration by a subsequent
coordinate Bench merely because the subsequent Bench may
have arrived at a different conclusion had there not been an
earlier judgment. That law is the principle of stare decisis
adopted and followed in the Indian Courts. None of the
conditions necessary for reconsidering an earlier direct
precedent has arisen in the instant case. Hence, the
submission made by Mr. Nariman in this context has no force.

JURISDICTION OF THE COURT:
Mr. Nariman submitted that the test under Section 2(e) of
the Act applies uniformly across India. The Arbitration and
Conciliation Act, 1996 is the Central Act and lays down a
single, uniform law in respect of arbitration and conciliation
for the whole of India and, therefore, submitted that it must be
read to lay down principles that apply uniformly across the
country.
It is submitted that Section 2(e) of the 1996 Act defines
the term 'court' and in doing so, it lays down the test to
determine which the court has the jurisdiction to supplement
and complement arbitration proceedings. It is submitted that
Section 2(e) must be read to lay down one uniform test to
determine the 'court' of competent jurisdiction for application
across the country, regardless of whether the principal Civil
Court of ordinary jurisdiction referred to in the said test is a
High Court or a District Court.
In our view, an arbitration petition is required to be filed
in a Court having jurisdiction. The definition of the "Court"
under the 1996 Act is as follows:-
"Sec.2(e): "Court" means the principal Civil Court of
original jurisdiction in a district, and includes the High
Court in exercise of its 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;"
(emphasis supplied)

"Court" has been defined in the Arbitration Act, 1940 as
follows:-
"Sec. 2(c): "Court" means a Civil Court having jurisdiction
to decide the questions forming the subject-matter of the
reference if the same had been the subject-matter of a
suit, but does not except for the purpose of arbitration
proceedings under section 21 includes a Small Cause
Court;"

The definition of "Court" in the two sections are,
therefore, pari materia except that under the 1996 Act, the
definition restricts Subordinate Courts competent to hear such
matters to the Principal Civil Court and expressly includes
High Courts in exercise of their original civil jurisdiction.
On a plain reading of the definition of "Court" under
section 2(e) of the 1996 Act, it is evident that the Arbitration
Petition can be filed before:-
(i) a principal Civil Court of original jurisdiction in
district.
(ii) a High Court in exercise of its original civil
jurisdictionhaving jurisdiction to decide the
questions forming the subject matter of the
arbitration if the same had been the subject
matter of a suit.
For the purpose of the present Petition under Section 9 of
the 1996 Act, we are concerned with the jurisdiction of the
Bombay High Court which is a Chartered High Court under
the Letters Patent exercising Original Civil Jurisdiction. It is
relevant that there are only three Chartered High Courts in
India which exercise jurisdiction under their respective Letters
Patent which continue to apply in full force and effect which
Letters Patent are inter alia protected by Article 225 of the
Constitution.
Mr. Nariman submitted that the principle in the
explanation to Section 20 CPC should be applied to Clause 12
of the Bombay Letters Patent. It is submitted that although
admittedly, Section 20 of the CPC does not, in terms, apply to
the High Court in exercise of its original civil jurisdiction, it is
settled law that the principles of the CPC should nevertheless
be applied, as far as possible, to proceedings of a civil nature,
even where the application of the CPC has been barred. This
Court has, in the case of Sarguja Transport Service vs.
State Transport Appellate Tribunal, M.P. Gwalior & Ors.,
(1987) 1 SCC 5, held that principles from the CPC can and
should be applied even to writ proceedings, despite the fact
that the explanation to Section 141 of the CPC, expressly
states that the stipulation in Section 141 that the procedure
provided in the CPC shall be followed, as far as it can be made
applicable, in all proceedings in any Court of civil jurisdiction,
does not apply to proceedings under Article 226 of the
Constitution.
It is submitted that Clause 12 of the Bombay Letters
Patent is in pari materia with Section 20 of the CPC. Both
provisions deal with the jurisdiction of a court of ordinary
original civil jurisdiction, and they set out similar tests for the
determination of where a suit may be filed.
Clause 12 of the Letters Patent states that a suit may be
filed in either the Madras, Calcutta or Bombay High Court in
the following circumstances:
" if the cause of action shall have arisen, either wholly,
or, in case the leave of the Court shall have been first
obtained, in part, within the local limits of the ordinary
original jurisdiction of the said High Court, or if the
defendant at the time of the commencement of the suit
shall dwell or carry on business or personally work for
gain, within such limits".
It may thus be noted that Section 20 of the CPC and
Clause 12 of the Letters Patent lay down the same test for
determining the court of appropriate jurisdiction in which to
proceed against a non-corporate defendant. It is submitted
that in the absence of any reason to believe that there was any
intention to apply different tests in the CPC and the Letters
Patent to determine the appropriate forum to sue a corporate
defendant, it cannot be said that the two statutes provide
different tests, and that the principles in one cannot be used
to interpret the principle in the other.
The above argument was countered by Mr. C.A.
Sundaram under Section 120 of CPC, 1908. The provisions of
Sections 16, 17 and 20 of the Code of CPC are inapplicable to
Chartered High Courts exercising Original Civil Jurisdiction
under the Letters Patent. Section 120 reads as follows:
"Section 120"- Provisions not applicable to High Court
in original civil jurisdiction- (1) The following provisions
shall not apply to the high Court in the exercise of its
original civil jurisdiction, namely, section 16, 17 and
20."

Thus for the purpose of determining the Original Civil
Jurisdiction of the Bombay High Court, Section 20 of the CPC
1908 has been specifically excluded and has no application.
Only the provisions of clause 12 of the Letters Patent are
required to be considered to determine the jurisdiction of the
Hon'ble Bombay High Court.
Under Clause 12 of the Letters Patent, the Bombay High
Court would have jurisdiction to entertain and try an
Arbitration Petition even if no cause of action has arisen
within its jurisdiction, provided the Respondent has an office
at Mumbai.
This Court in Food Corporation case while considering
the definition of "Court" under section 2(c) of the 1940 Act has
held that:
(i) jurisdiction of a Chartered High court is to be
determined by clause 12 of the Letters Patent.
(ii) by virtue of the section 120 of the CPC, 1908, the
provisions of section 20 of the CPC do not apply to
Chartered High Courts (such as Bombay) exercising
original civil jurisdiction.
(iii) that under clause 12 of the Letters Patent, the
Bombay High Court would have jurisdiction over
the subject matter of arbitration if the Respondent
has an office in Mumbai, regardless of the fact that
no cause of action may have arisen at Mumbai.
By such judgment this Hon'ble Court merely expressed
the law as it stands and as is ex facie clear from the applicable
Statutes/provisions of law.
The appellant, in the present case, concedes that by
virtue of the judgment of Food Corporation of India case
(supra), the Bombay High Court would have jurisdiction to
entertain and try the Section 9 petition. However, the
appellant contends the judgment in the Food Corporation of
India case is per incuriam requiring reconsideration and
should be referred to a larger Bench of this Court since it
failed to consider the judgment of this Court in the case of
Patel Roadways Limited (supra).
This Court in Patel Roadways Limited case held:
(i) an action can be filed in a Court where a
subordinate office of the Defendant is situated if a
part of the cause of action has arisen thereat.
(ii) no action would lie in a court within whose
jurisdiction the principal office of the Defendant is
situated if no cause of action has arisen thereat.
Section 20 CPC reads as under:
"20. Other suits to be instituted where defendants
reside or cause of action arises- Subject to the
limitations aforesaid, every suit shall be instituted
in a court within the local limits of whose
jurisdiction-

(a) the defendant, or each of the defendants where
there are more than one, at the time of the
commencement of the suit, actually and voluntarily
resides, or carries on business, or personally works
for gain; or

(b) any of the defendants, where there are more
than one, at the time of the commencement of the
suit, actually and voluntarily resides, or carries on
business or personally works for gain, provided
that in such case either the leave of the Court is
given, or the defendants who do not reside, or
carry on business, or personally work for gain, as
aforesaid, acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises

Explanation- A corporation shall be deemed to
carry on business at its sole or principal office in
India or, in respect of any place where it has also a
subordinate office, at such place."

It is ex facie clear from the section that a suit can be filed
where a part of the cause of action arises or where the
principal office is located meaning thereby that what their
Lordships in the Patel Roadways case held that was that a suit
can be filed where a subordinate office is situate if a part of
the cause of action arises or otherwise only where the
principal office is situate.
In Food Corporation case, this court pointed out that as
per section 20 (and a mere perusal of such section would show
this is so) a suit can be filed where the cause of action arises
or where the principal office is situate. In any event, it is
submitted that such observation was merely obiter in seeing
out what section 20 CPC stated and formed no part of the
judgment and ratio decidendi, since this court then proceeded
to hold that section 20 had no application to the Bombay High
Court by virtue of section 120 CPC (which was never a matter
in issue in the Patel Roadways case) but was the only matter
in issue in the Food Corporation case and proceeded to
consider the jurisdiction of the Bombay High Court under
clause 12 of its Letters Patent. While doing so, an
interpretation of section 20 CPC became totally unnecessary
for arriving at its decision in the Food Corporation case and in
fact was not applied at all. There is therefore, no question of
this court in the Food Corporation of India case failing to
consider whether the provisions of the Letter Patent should be
interpreted in light of the principles of the CPC.
The only ground on which the appellant seeks
reconsideration of the Food Corporation case is that as per the
appellant the interpretation of Section 20 of CPC in the Food
Corporation case (supra) is erroneous and contrary to the
judgment of the Supreme Court in the Patel Roadways case
(supra) in that it erroneously interprets the explanation to
section 20of the CPC, 1908. As stated above, even assuming
without admitting that the appellant is correct, the said
statement of the Food Corporation case was purely obiter qua
the issue to be decided and the reason behind it therein and
can never be the basis for a subsequent Bench to refer the
same for reconsideration.
Furthermore, the appellant loses sight of the fact that the
judgment in the Patel Roadways case is clearly distinguishable
on facts since in that case this Court was dealing with the
jurisdiction of the 3rd Assistant City Civil Judge, Chennai who
was governed by the CPC and the section 20 therefore and not
by the Letters Patent. It is for this reason that in the Patel
Roadways case the Court was only concerned with section 20
CPC and was in no way concerned with the Letters Patent
jurisdiction. In fact, nowhere in the Patel Roadways judgment
is there a whisper on the scope of either the Letters Patent
jurisdiction of the High Court or section 120 CPC which will
clearly distinguish the Patel Roadways case both on facts and
law from the instant case or the Food Corporation case
decided by this Court.
The appellant has also urged that:
(i) even if section 20 of the CPC, 1908 is not applicable to
the Bombay High Court, the principles of the section and
in particular explanation to section 20 would be attracted
when corporations are being sued and relies on the
judgment of this Court in Sarguja Transport case
(supra) where the Supreme Court held that even though
section 141 of the CPC, 1908 did not apply to writ
petitions, the principles would be applicable.
(ii) that a "Uniformity Rule" on jurisdiction should be
applied to all courts in the country since the 1996 Act is
a central Statute.
In our opinion, the argument of Mr. Nariman that the
principles of Section 20 of the Code can be applied to Letters
Patent has no substance and merit.
The principles of Section 20 cannot be made applicable to
clause 12 of the Letters Patent since the CPC itself by section
120 specifically excludes the applicability of Section 20 of the
CPC to Chartered High Courts. It is submitted that when the
CPC itself provides that Section 20 is specifically excluded, the
principles of Section 20 cannot be made applicable or be
attracted when a corporation is being sued under the Letters
Patent. The judgment of this Court in Sarguja Transport case
(1987) 1 SCC 5 cannot apply for the following reasons:-
(i) the principles of CPC were made applicable to Writ
Petitions on the premise that these would not be
contrary to the provisions of Article 226.
(ii) If the appellant's argument is accepted it would
render section 120 of the CPC nugatory and otiose
since section 120 expressly refers to three sections
(i.e. sections 16, 17 and 20) and makes them
inapplicable.
(iii) The Letters Patent, is a special charter conferring
jurisdiction on Chartered High Courts. When there
is a special enactment such as the Letters Patent,
which expressly lays down the criteria on the
jurisdiction of the Chartered High Court, it is totally
unnecessary and in fact futile to refer to another
legislation such as the CPC (which is not applicable)
to determine the jurisdiction of the Chartered High
Court.
(iv) The facts in the Sarguja Transport Case (supra)
were entirely different since there was no
corresponding legislation which laid down the
territorial of the Court exercising Writ Jurisdiction.
Thus the judgment of this Court in Sarguja transport
case cannot be applied in the facts of the present case.
Our attention was drawn to the decision of a Constitution
Bench of this Court in the case of P.S. Sathappan (dead) by
LRs. Vs. Andhra Bank Ltd. and Others, (2004) 11 SCC 672
in para 32 this Court has held has follows:-
". To submit that a Letters Patent is a subordinate piece of
legislation is to not understand the true nature of a Letters
Patent. As has been held in Vinita Khanolkar case and
Sharda Devi case a Letters Patent is the Charter of the High
Court. As held in Shah Babulal Khimji case a Letters Patent
is the specific law under which a High Court derives its
powers. It is not any subordinate piece of legislation. As set
out in the aforementioned two cases a Letters Patent cannot
be excluded by implication. Further it is settled law that
between a special law and a general law the special all will
always prevail. A Letters Patent is a special law for the
High Court concerned. The Civil Procedure code is a general
law applicable to all courts. It is well settled law, that in the
event of a conflict between a special law and a general law,
the special law must always prevail."

Thus neither of the CPC nor its principles can be made
applicable to the Letters Patent qua sections 16,17 and 20 of
CPC. It is therefore not only impermissible but also
unnecessary to apply the CPC or import the principles of
section 20 of the CPC into the Letters Patent more so when the
court has already held in the FCI case that the jurisdiction of
the Civil Court under section 20 of CPC is different from the
jurisdiction of the High Court under clause 12 of Letters
Patent.
The appellant has urged that P.S. Satthappan's case will
apply only in case there is a conflict between the Letters
Patent and the CPC and that there is no conflict. Such a
submission, in our view, is clearly fallacious for the following
reasons:
(i) the Letters Patent and CPC operate in separate
fields i.e. The Letters Patent specifically conferring
jurisdiction on Chartered High Courts and the CPC
conferring jurisdiction on all other courts.
(ii) There is clearly a difference between the scope of
the Letters Patent and the CPC. The difference being
evident upon a plain reading of section 120 of the
CPC.
Mr. Nariman, in reply to the above submission of Mr.
Sundaram, contended that the above decision supports the
appellant's stand, since there is no conflict whatsoever
between relevant provisions of the Letters Patent and the CPC
in the instant case. It is submitted that clause 12 of Letters
Patent and Section 20 of CPC are in pari materia and sets out
similar test for the determination of where a suit may be filed
and that the appellant is merely seeking to apply the
additional clarificatory principle relating to corporate
defendants stated in Section 20 of CPC to Clause 12 of the
Letters Patent. It is, therefore, submitted that the decision of
this Court in P.S. Sathappan case (supra) does not detract
from the appellant's contention but in fact supports its
contention.
UNIFORMITY RULE:
There is no question of uniformity rules applying since
section 2(e) of the 1996 Act expressly recognizes that not only
district courts but also High Courts exercising original civil
jurisdiction would have jurisdiction under the 1996 Act. The
Act thus recognizes that Chartered High Courts exercising
Original Civil Jurisdiction would exercise jurisdiction. It is
submitted that apart from the 3 Chartered High Courts who
are governed by the Letters Patent only two other High Courts
in the country (Delhi and Jammu & Kashmir under their
respective High Courts Acts) exercise original civil jurisdiction.
This issue is therefore not question of all India application as
it does not affect jurisdiction of most High Courts. There is
therefore no question of a "uniformity rule" being required to
be applied. There cannot be a rule of uniformity applied
between unlikes. The appellant seeks to apply such uniformity
rule between the subordinate Courts (governed by the CPC)
and the High Courts (governed by the Letters Patent).
The appellant further cited:
(i) Globe Cogeneration Power Ltd vs. Sri. Hiranyakeshi
(AIR 2005 Karn 94 (Karnataka High Court)
(ii) Kamal Pushp Enterprises vs. Chairman Cum
Managing Director, Gas Authority of India Ltd.,
(Vol.31 DRJ 651) (Delhi High Court).
for the proposition that the jurisdiction of the Court is
not to be determined on the basis of the residence of the
respondent but only on the basis of where the subject
matter of arbitration is situated.
In our view, neither of the two judgments above are
applicable and in any event can be distinguished for the
following reasons:-
(a) (i) The judgment of the Karnataka High Court in the
Globe Congeneration case(supra) was one where the
litigant had initiated the proceedings in the City Civil
Court (exercising jurisdiction under section 16(d) of the
CPC, 1908) which is admittedly not a Chartered High
Court Exercising jurisdiction under the Letters Patent.
The city Civil Court was following 16(d) of CPC.
(ii) Further the Karnataka High Court was dealing with
a case under section 16(d) of the CPC dealing with
disputes relating to immovable property. It is well settled
that an action can be instituted only in a Court where the
immovable property is situated. Thus clause 12 of the
Letters Patent never arose for consideration.
(b) (i) The judgment of the Delhi High Court in the Kamal
Pushp Enterprise case (supra) was one where the Delhi
High Court was interpreting section 20 of the CPC and
not clause 12 of the Letters Patent. That this was clearly
the case is made evident from the fact that the learned
judge (Hon'ble Justice Lahoti as he then was) who
rendered this judgment was a party to the Bench of this
Court in the FCI case which was concerned with clause
12 of the Letters Patent and applies with full force in this
case.
(c) the interpretation of the key words "the questions
forming" the subject matter have been completely
overlooked and/or not given effect to by the Karnataka
High Court and the Delhi High Court. The respondent
submits that the subject matter of arbitration may be
situated anywhere but a Chartered High Court would
nonetheless have jurisdiction to decide "the questions"
forming subject matter of arbitration if the requirements
of clause 12 of the Letters Patent are satisfied.
(d) This Court in the FCI case which arose while interpreting
section 2(c) of the Arbitration Act (which is in pari
materia with section 2(e) of the 1996 Act) qua clause 12
of the Letters Patent has held that Bombay High Court
would have jurisdiction under clause 12 of the Letters
Patent if the respondent has an office in Mumbai even if
no part of the cause of action has arisen thereat.
The appellant also relied upon the judgment of the High
Court in Dayanand Prasad Sinha vs. Hindustan Steel
works Construction Ltd. (AIR 2001 CAL 71) to contend that
where there is a conflict between the place of residence and of
carrying business and the place where the cause of action has
arisen, the Court must apply the test of forum conveniens and
accept the place in respect of the cause of action as having
overriding value over the place of residence and business.
It is submitted that under domestic law i.e. CPC or
Letters Patent as the case may be, a plaintiff has the option of
instituting proceedings in any of the courts which would have
jurisdiction, the test of forum non convenience cannot be
applied under Domestic Law and if applied would wrongfully
restrict or negate the amplitude of the provisions of CPC and
of the Letters Patent. The view of the Calcutta High Court is
clearly erroneous in the light of the observation of this Court
in the case of "Khaleel Ahnmed vs. Hatti Gold Mines Co.
Ltd. (2000) 3 SCC 755 where this court has observed that " It
cannot always be said in view of section 20 of the Code, that
only one Court will have jurisdiction to try the suit". The said
judgment of the Calcutta High Court is therefore erroneous
and cannot and ought not to be relied upon. In any event the
rule of Forum Conveniens is expressly excluded by section 42
of the Arbitration Act, 1996 which mandates that all future
actions be filed only in the court where the first application
with regard to a arbitration was filed.
CAUSE OF ACTION:
Mr. Nariman, learned senior counsel submitted that the
Bombay High Court has correctly come to the conclusion that
no cause of action in relation to the present dispute has arisen
in Bombay and that this finding has been recorded at 3
separate places in the impugned judgment and has not been
challenged by the respondent. It is submitted that the
Registered Offices of both the appellant and the respondent
were situated in Bellary District at all relevant times. Further,
the plants of both the appellant and the respondent are
situated in Bellary, the concerned products are supplied and
payment in respect of them is made at Bellary, the alleged
actions of the respondent took place at Bellary and the
consequences allegedly emanating from these actions would
be borne in Bellary. Finally, the correspondence in relation to
the threatened action also took place at Bellary.
Mr. Nariman further submitted that as per the decision
of this Court in Patel Roadways Limited, under Section 20, the
place of business of a Corporation, for the purposes of the
institution of a suit against it, would be the place at which the
cause of action arose, if a subordinate office of the Corporation
was located at that place, or failing which, the place of the
principal office of the Corporation. Therefore, he submitted
that in the Patel Roadways judgment, it was held that the
words 'place of business' used in Section 20(a) of the CPC
would, in relation to a Corporation, refer exclusively to the
place at which the cause of action arose, if a subordinate office
of the Corporation was also situated there. In such
circumstance, no suit can be initiated in the court with
jurisdiction over the principal office of the corporation under
Section 20(a). It is only in cases where there is no subordinate
office at the place at which the cause of action arose, that a
suit may be instituted under Section 20(a) in the court with
jurisdiction over the principal office of the corporation.
Conversely, no suit may be instituted under Section 20(a) in
the court with jurisdiction over the subordinate office unless
the cause of action has also arisen within the same
jurisdiction.
It is further urged that the contrary dicta of the Division
Bench of this Court in the case of Food Corporation of India
(supra) is per incurium the dicta in the Patel Roadways (supra)
and further, it is erroneous in that it fails to consider the
crucial question of whether the provisions of the Letters Patent
should be interpreted in light of the principles enshrined in
the pari materia provisions of the CPC. Therefore, it is
submitted that the Food Corporation of India case (supra)
ought not to be relied upon as a precedent.
It is submitted that the principles governing Section 20 of
the CPC as well as Clause 12 of the Letters Patent clearly
direct that a suit may not be instituted at the situs of the
subordinate office unless the cause of action also arose at
such place.
It is, therefore, submitted that the Bombay High Court
would not have had the jurisdiction to entertain the
respondent's petition under Section 9 of the Act, 1996 had
Section 20 of the CPC applied to it. Since Clause 12 of the
Letters Patent incorporates and is based upon principles
identical to those enshrined in Section 20 of the CPC, it is
submitted that the Bombay High Court erred in holding that it
had jurisdiction to entertain the said petition under Clause 12
of the Letters Patent. It is submitted that, since admittedly the
entire cause of action in relation to the disputes between the
parties had arisen in Bellary District, Karnataka, and since
admittedly at the time of the institution of the Section 9
Petition filed by both parties, the registered and principal
offices of the parties were at Bellary, the only court with
jurisdiction to entertain the said petitions was the appropriate
court with jurisdiction at Bellary.
We considered the above argument of Mr. Nariman. Our
answer to the above argument is as under:-
Though the Bombay High Court has in the impugned
order dated 2.3.2006 observed that no part of the cause of
action has arisen at Mumbai, it is submitted that the cause of
action against the respondents has in fact arisen within the
Ordinary Original Jurisdiction of the Bombay High Court for
the following reasons: It may be noted that the following sub
paragraphs below have been noted by the Bombay High Court
in impugned order dated 2.3.2006.
(a) The parties themselves have chosen Mumbai to be the
situs for the Arbitration proceedings (clause 17.2 (i) of the
Agreement)
(b) The arbitration clause specifically provides for a dispute
resolution meeting to be held to resolve the dispute
between the parties as a pre-condition for invocation of
the arbitration clause which meeting was held at Bombay
at the request of the appellant.
(c) The Pipeline Supply Agreement (under which the
disputes have arisen) was approved by the Board of
Directors of the appellant Company in Bombay.
(d) The pipeline Supply Agreement as amended was reviewed
and discussed by the Board of Directors of the appellant
Company in Bombay.
(e) The Settlement Agreement dated 23.6.2003 was adopted
at the meeting of the respondent Board of Directors
where the appellant's nominees on the respondents
Board were also present.
(f) That the entire Senior Management of the appellant is
located at Mumbai. It may be noted that in Mayur (H.K)
Ltd. & Ors vs. Owners & Parties, Vessel M. V. Fortune
Express & Ors. (2006) 3 SCC 100 this Court (in para 27)
observed that the principal place of business would be
where the governing power of the Corporation is
exercised or the place of a Corporation's Chief Executive
Offices which is typically viewed as the verve centre or
the place designated as the principal place of business of
the Corporation in its incorporation under various
statutes.
(g) when the section 9 petition was filed the appellant had
its office at Mumbai and was carrying on business at
Mumbai and its Directors were stationed in Mumbai.
(h) The appellant had in fact shifted its registered office to
Mumbai during the pendency of the section 9 petition in
the Bombay High Court as it was more convenient to
operate its registered office from Mumbai. It is submitted
that where a Court has jurisdiction to try the suit when it
comes up for disposal, it then cannot refuse to assume
jurisdiction by reason of the fact that it had no
jurisdiction to entertain it at the date of institution as
held in Sudhir G. Angur & Ors. vs. M. Sanjeev & Ors.
(2006) 1 SCC 141 para 11)
(i) That at the time the question of jurisdiction was heard
and gone into and decided by the Bombay High Court,
the Registered Office of the appellant had been shifted to
and was in fact situated in Mumbai. The Bombay High
Court in the case of Fazlehussein vs. Yusufully AIR
1955 Bom 55, para 2 has held that:
"Even if the Court had jurisdiction to entertain the suit
as filed, if by reason of subsequent events the Court has
lost jurisdiction to entertain or try the suit, the Court
will not be justified in dealing with the suit with
reference to circumstances as they existed at the date of
the institution of the suit but must proceed to decide
the dispute on the footing that if the suit had been filed
at the later date, the Court would have been
incompetent to grant the reliefs in respect of the
properties and of the persons who are not within the
limits of the jurisdiction of the Court. Normally, a Court
must have regard to circumstances existing as at the
date when the issue of jurisdiction is tried and must
decide it in the light of circumstances existing as at that
date." (emphasis supplied)

It may be noted that when the section 9 Petition was
tried in Bombay on the issue of jurisdiction, the Respondent
had transferred its registered office to Mumbai.
It is submitted that the ratio for this would be that
territorial jurisdiction does not go to the competence of the
Court as in the case of a court having jurisdiction on the
subject matter of the dispute.
That is why if a court has no territorial jurisdiction (but
is otherwise competent to hear a matter) should the matter be
heard and decided by such Court without demur, the
judgment will be valid and not void or non est. It is for this
reason that insofar as territorial jurisdiction is concerned, the
relevant time to determine the existence of the jurisdiction
would be when the matter is heard.
SUBSEQUENT SHIFT OF REGISTERED OFFICE CANNOT
GIVE RISE TO JURISDICTION:

Mr. Nariman contended that the subsequent shift of
Registered Office cannot give rise to jurisdiction
He submitted that the Letters Patent specifically and
expressly refers to the time of commencement of the suit as
the relevant time to determine jurisdiction of the Court. It
states that:
" if the cause of action shall have arisen, either
wholly, or, in case the leave of the Court shall have been
first obtained, in part, within the local limits of the
ordinary original jurisdiction of the said High Court, or
if the defendant at the time of the commencement of the
suit shall dwell or carry on business or personally work
for gain, within such limits".

He further submitted that the very same principle is also
reflected in Section 20 of the CPC, which also states that the
court of the appropriate jurisdiction to decide a suit would be
the court within whose jurisdiction the defendant or each of
the defendants resided or carried out business "at the time of
the commencement of the suit".
He further submitted that this Court has in a plethora of
cases, including Rameshwar and Ors. Vs. Jot Ram and
Anr., (1976) 1 SCC 194 and Shri Kishan vs. Manoj Kumar,
(1998) 2 SCC 710 held that the rights of parties are
crystallized on the date of the institution of the suit, and
subsequent events cannot alter these rights. It is submitted
that on the date of the institution of proceedings before the
Bombay High Court, it did not have jurisdiction, and therefore
the subsequent shifting of the appellant's registered office
cannot operate to vest the Bombay High Court with the
requisite jurisdiction. It is therefore submitted that the
Bombay High Court erred in assuming jurisdiction based on
the subsequent change in the appellant's registered office.
FORUM CONVENIENS:
Mr. Nariman's contention that the situs of arbitration is
determined by the parties keeping in mind various
considerations including convenience of the prospective
arbitrators. These same considerations do not apply in
deciding which Court would be convenient to supplement or
compelement the arbitral proceedings. It is submitted that the
latter question is to be determined based on the convenience
of only the parties i.e. the appellant and the respondent by
reference to the cause of action the assets under dispute and
the Registered/Principal offices of the parties. Concluding his
submission, he submitted that in view of the fact that the
cause of action as well as the plant and machinery being the
subject-matter of the dispute, is situated in Bellary, that is
also where the Registered Offices of both the parties at the
commencement of arbitral proceedings, the Court with
jurisdiction to entertain a petition under Section 9 of the Act
would undoubtedly be the Court at Bellary.
Mr. Sundaram submitted that the appellant's contention
that Bombay High Court was not a convenient forum is totally
fallacious for the following reasons apart from being taken for
the first time in the oral submissions before this Court.
(a) The arbitration hearings are being conducted at Bombay
as per the Agreement. (Clause 17.2)
(b) 8 full days of hearings had already been held before this
appeal was heard. Further hearings of 4 days have also
taken place on the 7th, 9th, 10th and 11th of August, 2006
and further 5 days hearing for final and submissions are
scheduled for 16th to 20th October, 2006.
(c) The record comprises of several thousand pages of
documents complied in over 12 voluminous box files all
available in Mumbai.
(d) The appellants Directors and Senior Officers are in
Mumbai and have been attending the hearings to instruct
their lawyers in Mumbai.
(e) Evidence has been recorded and closed by both parties in
the arbitration.
(f) The parties had agreed on Mumbai as a convenient
location for the conduct of the arbitration.
It is contended that the appellant is indulging in forum
shopping to vest jurisdiction at Bellary, Karnataka with an
ultimate objective of challenging the Award before the Civil
Court at Bellary rather than the Bombay High Court.
The appellant has relied upon two judgments, namely,
(i) Rameshwar & Ors. Vs. Jot Ram & Anr. (1976) 1 SCC
194
(i) Shri Kishan vs. Manojkumar (1998) 2 SCC 710 to
urge that the Courts ought to consider the rights of
parties which crystallized on the date of the institution
of the suit and subsequent events cannot alter these
rights.
It is submitted that both the above two cases cited do not
apply to the facts of the case and are clearly distinguishable.
In the Rameshwar & Ors vs. Jot Ram & Anr (supra),
this Court was called upon to consider whether subsequent
event of the land owners death at the appellate stage unsettled
the right acquired by the tenants or whether the Tribunal
must uphold the rights which have crystallized on the date the
applications were made. This was a mater under the Punjab
Security of Land Tenures Act, 1953. The said judgment did not
consider the subsequent events vis-`-vis territorial jurisdiction
of the court. In fact, the said judgment can be only relied upon
for the proposition that higher Courts pronounce rights of
parties as the facts stood when the first Court was
approached.
In Shri Kishan vs. Manojkumar (supra) this Court was
called upon to consider whether legal rights accrued to the
plaintiff and stood crystallized under the law applicable to
buildings at that time. This was a case under the Haryana
Urban Control of Rent and Eviction Act.
This Court had the occasion to consider whether the suit
filed before the expiry of ten years was in any matter, affected
due to the fact that during the pendency of the suit the 10
years exemption period ended. This court held that the legal
rights had accrued and stood crystallized under the law
applicable to buildings at the time of institution of the suit.
Once again, the said judgment did not consider
jurisdiction of the territorial Court.
The said two judgments are therefore, clearly
distinguishable. It is submitted that the judgment of Bombay
High Court in case of Fazlehussein vs. Yusufally (supra)
clearly applies to the facts of the present case.
For the foregoing reasons, we are of the considered
opinion that the Bombay High Court has jurisdiction to
entertain Section 9 application of the respondents herein. We,
therefore, request the Bombay High Court to proceed on
merits to determine the matter in accordance with law. For
the reasons set out above, the civil appeal ought to be rejected
by this Court and we do so accordingly. No costs.
In view of this order, the appellant is directed to file their
affidavit in reply on merits in the pending Section 9
proceedings.
27991



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