Dismissed

Jain Automobiles H.P.C. Dealer through Its Dealer and Proprietor D.C. Jain v. Hindustan Petroleum Corporation Limited

Allahabad HC16 Dec 2020ARPL/23/2020

Case brief

AI extract

What is this about?

Appeal under Section 37 and application under Section 11(6) of the Arbitration & Conciliation Act arising from a dealership agreement whose Clause 65 conferred exclusive jurisdiction on the courts at Lucknow. The court held that Kanpur courts and the High Court lacked jurisdiction, that Section 4 waiver did not apply as arbitral proceedings had not commenced, and dismissed both matters.

What did the court decide?

Appellant-applicant granted liberty to approach the court having jurisdiction as per the agreement clause within four weeks, to be entertained without going into the question of limitation.

Jain Automobiles H.P.C. Dealer through Its Dealer and… — Arbitration | Allahabad HC (2020)

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Reserved

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Court No. - 10

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Case :-	Appeal U/S Conciliation 2020	37 of Arbitration & Act, 1996 No. - 23 of
Appellant :-	Jain Autom Through Its D.C. Jain	obiles H.P.C. Dealer Dealer And Proprietor
Respondent :-	Hindustan Limited	Petroleum Corporation
Counsel for Appellant :-	Manu Khare
Counsel for Respondent :-	Vikas Budhw	ar

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With
Case :-	Arbitration & Conciliation Application U/S 11(4) No. - 45 of 2020
Applicant :-	Jain Automobile, H.P.C. Dealer
Opposite Party :-	Hindustan Petroleum Corporation Limited
Counsel for Applicant :-	Manu Khare
Counsel for Opposite Party :-	Vikas Budhwar

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Hon'ble Rohit Ranjan Agarwal,J.

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Heard Sri Manu Khare, learned counsel for the appellantapplicant and Sri Vikas Budhwar, learned counsel for the respondents.

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These two connected matters were heard together and are being decided by a common order.

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Arbitration Appeal No. 23 of 2020 filed under Section 37 of the Arbitration & Conciliation Act, 1996 (for short ‘Act of 1996’) arises out of judgment and order dated 06.12.2019 passed in Arbitration Case No. 31/70/2019 (Jain Automobiles Vs. Hindustan Petroleum Corporation Ltd.) by Presiding Officer, Commercial Court, Kanpur Nagar. While Arbitration & Conciliation Application No. 45 of 2020 has been filed under Section 11 (6) of the Act of 1996 for appointment of independent Arbitrator in terms of provisions of Clause 66 of agreement dated 29.01.2013.

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Facts of the case in nutshell are, that appellant-applicant M/s. Jain Automobiles is the sole proprietorship firm dealing in the business of petroleum products. It has a retail outlet with MS site located at Cantonment, M.G. Road, Kanpur Nagar, and HSD site located at village Bidhuna, NH-34, Kanpur Nagar. A dealership agreement was executed between the appellant-applicant and respondent Hindustan Petroleum Corporation Ltd. (hereinafter referred as the ‘Corporation’) on 29.01.2013 which provides in Clause 65 and 66 for referring the matter to arbitration in case of dispute between the parties. Further the Courts in city of Lucknow shall have the jurisdiction to entertain any suit, application or other proceedings in respect of any claim or dispute arisen under the said agreement.

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It appears that the Corporation carried out its inspection on 03.07.2018 at HSD site, wherein certain irregularities were found. A show cause notice was issued on 20.08.2018, but no reply was submitted, as such, the respondent Corporation passed an order imposing monetary penalty of Rs. 25,000/- on 17.04.2019. While on 20.08.2018 another inspection was conducted, this time on the MS site of the appellantapplicant, wherein certain discrepancies were found. Show cause notice was issued on 15.02.2019, which was replied by the appellant-applicant on 27.02.2019. Fate of this notice culminated on 02.06.2020 when the respondent Corporation proceeded to pass an order imposing monetary

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penalty of Rs. 25,000/- and suspending the sales and supply for a period of fifteen days from 05.06.2020.

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3^rd inspection was conducted on 04.09.2018 at HSD site of the appellant-applicant and a show cause notice was issued on 25.03.2019 which was replied on 07.04.2019. The respondent Corporation on 04.06.2019 passed an order for imposition of monetary penalty of Rs. 45,000/-. 4^th inspection was conducted on 17.11.2018 on the retail outlet of the appellant-applicant at the HSD site, a show cause notice was issued on 30.08.2019 which was replied on 12.09.2019. 5^th inspection was made on 03.04.2019 during which minor irregularities such as toilet facilities were found not clean and one power nozzle was delivering product short by 20 ML, accordingly, a show cause notice was again issued on 09.05.2019 which was replied by the appellant-applicant on 17.05.2019, whereon the respondent Corporation on 03.06.2020 proceeded to issue warning-cum-guidance letter with regard to the irregularities so mentioned. On 13.01.2020 again an inspection was conducted at HSD site of the appellant-applicant for the sixth time and pursuant thereto a show cause notice was issued on 05.02.2020, a reply to which was submitted on 17.02.2020 but till date no decision has been taken.

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As the appellant-applicant came to know that the respondent Corporation was going to stop the sales and supply at Mall Road and Bidhuna petrol pump, a notice dated 18.03.2019 was given invoking the arbitration clause as per agreement dated 29.01.2013. The appellantapplicant on 19.03.2019 filed a petition under Section 9 of the Act of 1996 for restraining the respondent and its officer from abruptly stopping the sales and supply of petrol, diesel, lubricants and allied petroleum products.

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On 19.07.2019 the respondent Corporation wrote a letter to the appellant-applicant seeking waiver under Section 12 (5) of the Act of 1996, to the notice given on 02.05.2019 and 12.06.2019 invoking the agreement clause dated 29.01.2013, against the inspections made on

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03.07.2018 and 04.09.2018. Presiding Officer, Commercial Court, Kanpur Nagar vide judgment and order dated 06.12.2019 while deciding the Arbitration Case No. 31/70/2019 injuncted the respondent Corporation from stopping the supply and sale of petrol, diesel and other lubricants at appellant-applicant’s petrol pump at Mall Road and Bidhuna for three months or till the appointment of Arbitrator whichever was earlier. This order has been assailed in Arbitration Appeal No. 23 of 2020. While arbitration application under Section 11 of the Act of 1996 has been filed by the appellant-applicant in the month of June 2020 for the appointment of Arbitrator, which has been numbered as Arbitration & Conciliation Application No. 45 of 2020.

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Sri Manu Khare, learned counsel appearing for the appellantapplicant, submitted that during the year 2018-19 seven inspections were carried out at the retail outlet and remark given by the inspecting agency was satisfactory. According to him the dispute between appellantapplicant and the respondent Corporation arose when proprietor of Jain Automobile Sri Dalpat Chand Jain who also had a retail outlet of petrol and diesel pump at Fazalganj, Kanpur Nagar in the name of Prem Automobile was closed down in March 2018 and the possession of the said pump was handed over to its owner Smt. Sushila Jain in June 2018. As the some officers of the respondent Corporation wanted to take possession of the premises in question which was objected by Dalpat Chand Jain and was intervened by the police authorities, the officers of the respondent Corporation got angry and they invented this device of harassing appellant-applicant at present site.

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A written complaint was given by the owner of the premises Sushila Jain to the District Magistrate and Senior Superintendent of Police, Kanpur Nagar on 11.02.2019. While the respondent Corporation had approached this Court through Writ Petition No. 5473 of 2019 (Hindustan Petroleum Corporation Ltd. Vs. State of U.P. & others) wherein Dalpat

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Chand Jain, proprietor of Jain Automobiles, was also made a party and the said writ petition was dismissed by this Court on 15.02.2019.

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According to Sri Khare guideline no. 8.5.6 of the Marketing Discipline Guidelines issued by the respondent Corporation which is binding upon them provides, that a show cause notice is to be issued within 30 days of inspection upon dealer alongwith report and other documents. In the present dispute the inspection was conducted on 20.08.2018, while notice, as mandated under the guidelines, was not issued within 30 days and was issued after 179 days i.e. on 15.02.2019. Appellant-applicant had replied the said notice within time and when they came to know that the officers of the respondent Corporation were planning to disrupt the supply and sale, a notice invoking arbitration was given on 18.03.2019 and, thereafter, on 19.03.2019 a petition under Section 9 of the Act of 1996 was filed. It is submitted that the court below while granting interim injunction failed to consider that Section 9 (2) of the Act of 1996 provides that in case any interim measure under Subsection 1 of Section 9 is granted then arbitral proceedings was to be commenced within a period of 90 days from the date of such order, however, in the present case interim measure was granted on 06.12.2019, which was much later than invocation of arbitration clause, thus, restriction of 90 days as provided under Section 9 (2) is not applicable in the present case.

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It was further contended that the appeal was filed sometimes on 5/6 March, 2020 and due to pandemic Covid-19 the application under Section 11 was filed on 19.06.2020, however, there is no limitation for filing application under Section 11, while Section 43 (1) of the Act of 1996 provides that Limitation Act, 1963 is applicable to arbitration proceedings, thus, in view of Article 137 of the Limitation Act the limitation of three years would be applicable. Reliance has been placed upon the decision in case of Prasar Bharti Vs. Maa Communication, AIR 2011 Delhi 26 .

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The second limb of argument is that though the Courts at Lucknow had the exclusive jurisdiction due to the fact that Clause 65 is a exclusive jurisdiction clause but Section 9 petition was filed at Kanpur which was never objected by the respondent Corporation either at Kanpur or before this Court and thus in view of Section 4 of the Act of 1996 the right to object stands waived. Reliance has been placed upon the decision of Apex Court in the case of M/S. Swastik Gases (P) Limited Vs. Indian Oil Corporation Limited, 2013 (9) SCC 32 and Indus Mobile Distribution (P) Limited Vs. Datawind Innovations Private Limited, 2017 (7) SCC 678 .

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It was further contended that in view of Section 16 Arbitral Tribunal can rule on its jurisdiction including any objection with respect to existence or validity of arbitration agreement, as held in M/S. Uttarakhand Purva Sainik Kalyan Nigam Limited Vs. Northern Coal Field Limited, 2020 (2) SCC 455 . Reliance has also been placed upon the decision of Apex Court in case of Mayavati Trading (P) Limited Vs. Pradyuat Deb Burman, 2019 (8) SCC 714 , Harshad Chiman Lal Modi Vs. DLF Universal Limited and others, 2005 (7) SCC 791 , Kirloskar Computer Services Limited Vs. Laxmi General Finance Limited, 2006 (4) CTC 509 and Bharat Sanchar Nigam Limited and another Vs. Motorola India Private Limited, 2009 (2) SCC 337 .

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Lastly, it was contended that the regional office of the respondent Corporation at the time of execution of agreement was at Lucknow, however, it was subsequently shifted to Kanpur, thus, all communication with regard to the present dispute is through the Kanpur office. It has been further contended that if the application under Section 11 is not maintainable before this Court it may be transferred to Lucknow Bench of this Court.

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Per contra Sri Vikas Budhwar, learned counsel appearing for the respondent Corporation, at the very outset, submitted that Clause 65 of the agreement clearly provides that Courts in the city of Lucknow shall have

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the jurisdiction to entertain any suit, application or other proceedings in respect of any claim or dispute arising under this agreement. Once a particular Court is designated in the agreement then it has exclusive and sole jurisdiction to dispute and no other Court can entertain the same. Reliance has been placed upon decision of the Apex Court in the case of A.B.C. Laminart Private Limited and Another Vs. A.P. Agencies, Salem, 1989 (2) SCC 38 , Rajasthan State Electricity Board Vs. M/S. Universal Petrol Chemicals Limited, 2009 (3) SCC 107 and Swastik Gases Private Limited (Supra) .

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Sri Budhwar then contended that merely because the respondent Corporation had not raised the issue of jurisdiction before the Commercial Court would not restrain the respondent Corporation from raising the said objection in proceedings under Section 11 of the Act of 1996. Reliance has been placed upon the decision of Indus Mobile Distribution (P) Limited (Supra) . Section 42 of the Act of 1996 provides for jurisdiction with respect to arbitration as provided in the agreement and Court alone shall have the jurisdiction over the arbitral proceedings, and Court is defined under Section 2 (1) (e) of the Act of 1996 which means Principal Civil Court of original jurisdiction and in the present case this Court is not a Principal Civil Court of original jurisdiction and only Courts at Calcutta, Bombay, Delhi and Madras/Chennai are the Courts having original jurisdiction. Reliance has been placed upon the decision of Apex Court in case of State of West Bengal and others Vs. Associated Contractors, 2015 (1) SCC 32, paragraph nos. 16, 17, 20, 22, 24 and 25, Indus Mobile Distribution (P) Limited (Supra) and the judgment of Bombay High Court in case of Afcons Infrastructure Limited Vs. Konkan Railway Corporation Limited (Arbitration Petition No. 10 of 2019) , paragraph nos. 19 and 20.

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It was further contended that the provisions of Section 4 of the Act of 1996 are not applicable as the same are applicable only in respect to arbitration proceedings before the Arbitrator and not referable to the filing

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of any application before the Court for appointment of Arbitrator. Sri Budhwar then contended that the appellant-applicant has tried to bring in the subsequent event and cause of action through rejoinder affidavit wherein reference of FIR against the appellant-applicant has been referred for an incident occurring on 05.06.2020 as Arbitrator cannot decide the dispute referable to FIR being criminal in nature. Reliance has been placed upon the decision of Apex Court in case of N. Radhakrishnan Vs. M/S. Maestro Engineers and others, 2010 (1) SCC 72 .

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Sri Budhwar, replying to the arguments made as to the appeal, submitted that Section 9 of the Act provides for interim measure by the Court and in the present case, admittedly the appellant-applicant sent legal notice on 18.03.2019 invoking the arbitration clause. The respondent Corporation on 19.07.2019 had written a letter to the appellant-applicant seeking waiver under Section 12 (5) of the Act of 1996 as post 2015 amendment the Arbitrator could not be appointed by the Chairman and Managing Director and only after waiver by the agreement under Subsection 5 of Section 12 any Arbitrator could have been appointed. Thus, the only recourse which was available to the appellant-applicant was filing application under Section 11 of the Act for appointment of independent Arbitrator.

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He further tried to impress upon that provisions of Section 21 will not give any benefit to the appellant-applicant as Section 21 itself provides that unless otherwise agreed by the parties, arbitral proceedings in respect of particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent, while in the present case as notice invoking arbitration is of 18.03.2019 the respondent Corporation had sought waiver on 19.07.2019, as the appellant-applicant had not given the right of appointment of Arbitrator to the respondent Corporation, the motion for commencement of arbitration did not fructify as the power to appoint Arbitrator does not vest with the Corporation. Reliance has been placed upon decision of Apex Court in

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case of TRF Limited Vs. Energo Engineering Project Limited, 2017 (8) SCC 377 .

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Sri Budhwar then contended that the order of court below dated 06.12.2019 came to an end on 05.03.2020 but no application was filed under Section 11 for the appointment of Arbitrator before this Court, while the appeal was filed on 05.03.2020. Thus, the order dated 06.12.2019 passed by the Commercial Court, Kanpur Nagar, has out lived its life, as the respondent Corporation on 02.06.2020 had now passed an order imposing monetary penalty of Rs. 25,000/- and suspending supply and sale for fifteen days.

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I have heard learned counsel for the parties and perused the material on record.

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These two connected matters raise two points for consideration. Firstly, whether the Court at Kanpur as well as this Court has jurisdiction to try and deal with the present case. Secondly, in view of Section 4 of the Act of 1996 whether by not raising question of jurisdiction, the right of Corporation stood waived and can be questioned in proceedings under Section 16.

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Now coming to the first point as to whether the Court at Kanpur or this Court had the exclusive jurisdiction to entertain and try the case in view of Section 65 of the agreement dated 29.01.2013. Before proceeding further a glance of Clause 65 and 66 of the agreement dated 29.01.2013 is necessary to appreciate the controversy, which is extracted here as under;

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“ 65. This agreement has been made at Lucknow and All payments thereunder shall be due and made at Lucknow otherwise directed by the Corporation the Court in the city of Lucknow along shall have jurisdiction to entertain any suit, application or other proceeding in respect of any claim or dispute arising under this agreement.

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66. Any dispute or difference of any nature whatsoever or regarding any right, liability, act, omission or account of any of the parties hereto arising out of or in relation to this agreement (other than those in respect of which the decision

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of any person, is by the agreement expressed to be final binding) shall be referred to the sole arbitration of the Chairman and Managing Director of the Corporation or of some Officer/Retired Officer of the Corporation or Retired Officer of other Oil PSUs or Retired Senior Central Government Officer who may be nominated by the Chairman and Managing Director. The dealer will not be entitled to raise any objection to any such Arbitrator on the ground that the Arbitrator is or was an Officer and/or share holder of the Corporation or that he has to deal with or dealt with the matters to which the contract relates or that in the course of his duties as an Officer or the Corporation he had expressed view on all or any of the matters in dispute of difference. In the event of the Arbitrators to whom the matter is originally referred vacating his office or being unable to act for any reason the Chairman and Managing Director as aforesaid at the time of such vacation of office or inability to act, shall designate another person to act as Arbitrator in accordance with the terms of the agreement such person shall be entitled to proceed with the preference from the point at which it was left by his predecessor. It is also a term of this contract that no person other than the Chairman and Managing Director or a person nominated by such Chairman and Managing Director of the Corporation as aforesaid shall act as Arbitrator hereunder. The cost of arbitration shall be shared equally by the parties. The award of the arbitration so appointed shall be final, conclusive and binding on all parties to the agreement, subject to the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification of or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause.

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The award shall be made in writing within six months after entering upon the reference or within such extended time not exceeding further four months as sole arbitrator shall by a writing under his own hands appoint.”

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From the reading of Clause 65 it is clear that the Courts in the city of Lucknow shall have the jurisdiction to entertain any suit, application or other proceeding in respect of any claim or dispute arising under the agreement. Thus the exclusive jurisdiction clause categorically provided for any dispute to be referred to the Court at Lucknow. Section 2 (1) (e) defines the term ‘Court’ which includes Principal Civil Court of Original Jurisdiction in a district and includes the High Court while exercising

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its ordinary original civil jurisdiction having the jurisdiction to take decision upon question forming the subject matter of arbitration. Section 2 (1) (e) is quoted here as under;

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“ Section 2 (1) (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.”

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In A.B.C. Laminart Pvt. Ltd. & Another (Supra) the Supreme Court categorically held that when the clause is clear, unambiguous and accepted notions of contract would bind the parties unless the absence of ad idem can be shown, the other Courts should avoid exercising jurisdiction. Relevant paragraph No. 21 is extracted here as under;

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“ 21. 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 'expressiounius est exclusioalterius'-expression of one is the exclusion of another may be applied. What is an appropriate case shall depend on the facts of t he 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.”

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In Rajasthan Electricity Board (Supra) while dealing with the applicability of Section 20 it was held that when parties with their open eyes had entered into an agreement and the same categorically provided that all dispute arising between them out of agreement would be adjudicated upon and decided through process of arbitration and that no other Court than the Court at Jaipur shall have the jurisdiction to entertain and try the

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same, thus, only the Court at Jaipur would have the jurisdiction to entertain or try the same. The said judgment was passed relying upon the law laid down in A.B.C. Laminart Pvt. Ltd. & Another (Supra).

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Again the Apex Court in case of Swastik Gases Private Limited (Supra) had the occasion to consider as to the jurisdiction of the Court as to proceedings under Section 2 (1) (e) and 11 of the Act of 1996 read with Section 20 (c) of the Code of Civil Procedure and held as under;

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“31. In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What appellant says is that part of cause of action has also arisen in Jaipur and, therefore, Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11. Having regard to Section 11 (12)(b) and Section 2(e) of the 1996 Act read with Section 20(c) of the Code, there remains no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court has jurisdiction in the matter. The question is, whether parties by virtue of clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of clause 18 of the agreement, the jurisdiction of Chief Justice of the Rajasthan High Court has been excluded?

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For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like ‘alone’, ‘only’, ‘exclusive’ or ‘exclusive jurisdiction’ have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties - by having clause 18 in the agreement – is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have

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jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner. ”

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In case of Indus Mobile Distribution Private Limited (Supra) the matter again came up for consideration before the Apex Court wherein the seat of arbitration in the agreement was provided as Mumbai while the application under Section 9 and 11 was filed before the Courts at Delhi. Apex Court clarified the legal position as to the juridical seat of arbitration and venue of arbitration. Relevant paragraph Nos. 13, 14, 18, 19 and 20 are extracted here as under;

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“ 13. This Court reiterated that once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration. (See: paragraph 138).

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14. In Reliance Industries Ltd. v. Union of India, (2014) 7 SCC, 603, this statement of the law was echoed in several paragraphs. This judgment makes it clear that “juridical seat” is nothing but the “legal place” of arbitration. It was held that since the juridical seat or legal place of arbitration was London, English courts alone would have jurisdiction over the arbitration thus excluding Part I of the Indian Act. (See: paragraphs 36, 41, 45 to 60 and 76.1 and 76.2). This judgment was relied upon and followed by Harmony Innovation Shipping Limited v. Gupta Coal India Limited and Another, (2015) 9 SCC 172 (See: paragraphs 45 and 48). In Union of India v. Reliance Industries Limited and Others, (2015) 10 SCC 213, this Court referred to all the earlier judgments and held that in cases where the seat of arbitration is London, by necessary implication Part I of the Arbitration and Conciliation Act, 1996 is excluded as the supervisory jurisdiction of courts over the arbitration goes along with “seat”.

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18. The amended Act, does not, however, contain the aforesaid amendments, presumably because the BALCO judgment in no uncertain terms has referred to “place” as “juridical seat” for the purpose of Section 2(2) of the Act. It

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further made it clear that Section 20(1) and 20 (2) where the word “place” is used, refers to “juridical seat”, whereas in Section 20 (3), the word “place” is equivalent to “venue”. This being the settled law, it was found unnecessary to expressly incorporate what the Constitution Bench of the Supreme Court has already done by way of construction of the Act.

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19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction – that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the CPC be attracted. In arbitration law however, as has been held above, the moment “seat” is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.

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20. It is well settled that where more than one court has jurisdiction, it is open for parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases Private Limited v. Indian Oil Corporation Limited, (2013) 9 SCC 32. This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal and Another v. Chhattisgarh Investment Limited, (2015) 12 SCC 225. Having regard to the above, it is clear that Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps

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under Section 9 in the Mumbai Court. Appeals are disposed of accordingly.”

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Further Section 42 of the Act of 1996 provides for the jurisdiction of a Court where any application is made with respect to an arbitration agreement, and that Court alone shall have the jurisdiction over the arbitral proceedings and all applications arising out of that agreement, the arbitral proceedings shall be made in that Court and not in any other Court. Section 2 (1) (e) has to be read alongwith Section 42 of the Act and in the present context the Court at Kanpur as well as this Court did not have any jurisdiction for entertaining the application under Section 9 or Section 11 as Clause 65 of the agreement provides for exclusive jurisdiction at Lucknow. Thus, Courts only at Lucknow have jurisdiction to entertain applications in the matter.

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31. In Associated Contractors (Supra) , Apex Court held as under;

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“ 24. If an application were to be preferred to a Court which is not a Principal Civil Court of original jurisdiction in a district, or a High Court exercising original jurisdiction to decide questions forming the subject matter of an arbitration if the same had been the subject matter of a suit, then obviously such application would be outside the four corners of Section 42. If, for example, an application were to be filed in a court inferior to a Principal Civil Court, or to a High Court which has no original jurisdiction, or if an application were to be made to a court which has no subject matter jurisdiction, such application would be outside Section 42 and would not debar subsequent applications from being filed in a court other than such court.

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25. Our conclusions therefore on Section 2(1)(e) and Section 42 of the Arbitration Act, 1996 are as follows:

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(a) Section 2(1)(e) contains an exhaustive definition marking out only the Principal Civil Court of original jurisdiction in a district or a High Court having original civil jurisdiction in the State, and no other court as “court” for the purpose of Part-I of the Arbitration Act, 1996.

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(b) The expression “with respect to an arbitration agreement” makes it clear that Section 42 will apply to all applications made whether before or during arbitral proceedings or after an Award is pronounced under Part-I of the 1996 Act.

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(c) However, Section 42 only applies to applications made under Part-I if they are made to a court as defined. Since applications made under Section 8 are made to judicial authorities and since applications under Section 11 are made to the Chief Justice or his designate, the judicial authority and the Chief Justice or his designate not being court as defined, such applications would be outside Section 42.

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(d) Section 9 applications being applications made to a court and Section 34 applications to set aside arbitral awards are applications which are within Section 42.

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(e) In no circumstances can the Supreme Court be “court” for the purposes of Section 2(1)(e), and whether the Supreme Court does or does not retain seisin after appointing an Arbitrator, applications will follow the first application made before either a High Court having original jurisdiction in the State or a Principal Civil court having original jurisdiction in the district as the case may be.

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(f) Section 42 will apply to applications made after the arbitral proceedings have come to an end provided they are made under Part-I.

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(g) If a first application is made to a court which is neither a Principal Court of original jurisdiction in a district or a High Court exercising original jurisdiction in a State, such application not being to a court as defined would be outside Section 42. Also, an application made to a court without subject matter jurisdiction would be outside Section 42.

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The reference is answered accordingly.”

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Thus, the argument raised by Sri Khare cannot be accepted that as the question of jurisdiction was never raised at Section 9 stage and, thus, raising an objection at the stage of Section 11 was not permissible. Once the agreement provided for exclusive jurisdiction clause whether any objection is raised or not will not confer any jurisdiction upon the Court trying the same which is barred by agreement clause and the Courts mentioned in the agreement clause shall only have the jurisdiction to try the case, as the law stands settled in case of A.B.C. Laminart Pvt. Ltd. & Another (Supra), Swastik Gases Private Limited (Supra) and Indus Mobile Distribution Private Limited (Supra).

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Now coming to the second issue as regard to the applicability of Section 4 which is waiver of right to object.

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Sri Khare had tried to impress upon the fact that once the application under Section 9 was filed before the Court at Kanpur and no objection being raised by the respondent Corporation as to jurisdiction, thus the right stood waived in view of Section 4 of the Act of 1996 and any objection as to jurisdiction can be raised before the arbitral tribunal under Section 16 and not at this stage.

¶89

From the reading of Section 4 of the Act of 1996 it culls out that question of waiver can only be raised by a party during arbitration proceedings. Here, in the present case, the arbitration has not started and an application has been moved under Section 11 for appointment of an Arbitrator, while Section 9 application was moved before the commencement of the arbitral proceedings and also the appointment of Arbitrator, thus question of waiver cannot be pressed in by the appellantapplicant at this stage, and the issue in regard to the jurisdiction of Court goes to the root cause of the case and in no way Section 4 can come into the rescue of the appellant-applicant.

¶90

Had the, arbitration proceedings commenced and application under Section 9 was moved during arbitral proceedings then the question of waiver could have been considered. Reliance has been placed upon decision of Apex Court in case of Motorola India Private Limited (Supra) is of no help as in that case the arbitral proceedings were on and the Court in reference to that had held that Section 4 was applicable. Relevant paragraph No. 39 is extracted here as under;

¶91

“39. Pursuant to Section 4 of the Arbitration and Conciliation Act, 1996, a party who knows that a requirement under the arbitration agreement has not been complied with and still proceeds with the arbitration without raising an objection, as soon as possible, waives their right to object. The High Court had appointed an arbitrator in response to the petition filed by the appellant. At this point, the matter was closed unless further objections were to be raised. If further objections were

¶92

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¶93

to be made after this order, they should have been made prior to the first arbitration hearing. But the appellant had not raised any such objections. The appellant therefore had clearly failed to meet the stated requirement to object to arbitration without delay. As such their right to object is deemed to be waived. ”

¶94

Thus looking from both the angles it can safely be said that as exclusive jurisdiction Clause 65 of the agreement provided for the dispute to be redressed before the Courts at Lucknow, thus the filing of application under Section 9 as well as 11 before the Courts at Kanpur and this Court was not maintainable at the behest of appellant-applicant. Furthermore no benefit of Section 4 could be extended as the arbitral proceedings had not commenced.

¶95

Though other factual aspect has been raised by Sri Khare which this Court declines to go through as it has already been held that this Court as well as the Court at Kanpur does not have the jurisdiction to entertain the application under Section 9 and 11 of the Act of 1996.

¶96

Considering the facts and circumstances of the case, I find that no interference is required in the appeal as well as application under Section 11 (6) for the appointment of Arbitrator by this Court and the same are being dismissed .

¶97

However, the appellant-applicant is granted liberty to approach the concerned Court having jurisdiction as per agreement clause within a period of four weeks from today, in case, the appellant-applicant approaches the concerned Court the same will be entertained without going into the question of limitation.

¶98

[Rohit Ranjan Agarwal,J.]

¶99

Order Date :- 16.12.2020 Shekhar

¶100

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Jain Automobiles H.P.C. Dealer through Its Dealer and Proprietor D.C. Jain v. Hindustan Petroleum Corporation Limited

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Jain Automobiles H.P.C. Dealer through Its Dealer and Proprietor D.C. Jain v. Hindustan Petroleum Corporation Limited

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