Allowed

L and T Finance Ltd. v. Spotlight Tradecom Pvt. Ltd. and 2 Ors.

Bombay HC1 Jul 2013ARBP/63/2013

Case brief

AI extract

What is this about?

Petitioner sought appointment of a Court Receiver over hypothecated equipment and confirmation of jurisdiction under Section 9 of the Arbitration Act dismissing jurisdiction objections by respondents. The court held Mumbai jurisdiction exists based on performance location and sanctioned loan origin.

What did the court decide?

Appointment of Court Receiver in respect of the equipments described in Exhibit-G; Interim injunction; Disposal of petitions.

L and T Finance Ltd. Vs Spotlight Tradecom… — Contract and Commercial Disputes | Bombay HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 62 OF 2013

¶5

L & T Finance Limited, ) a Company incorporated under the ) provision of The Companies Act, 1956, ) having its Registered office at ) L & T House, N. M. Marg, Ballard Estate) Mumbai – 400 001 and Corporate Office ) at the Metropolitan 8^th Floor, C-25/C-26, ) ‘E’ Block, Bandra Kurla Complex, ) Bandra (East), Mumbai – 400 051 ) ..... Petitioner

¶6

VERSUS

¶7

1. M/s.Spotlight Tradecom Pvt. Ltd. ) (Borrower), having its address at ) Mango Lane, 1^st Floor, Room No. 105, ) Kolkata – 700 001 ) 2. Ms.Saloni Chaudhary, (Guarantor), ) D/o. Bijoy Choudhary, having her address) at 84, 2^nd Floor, Salt Lake City, ) Kolkata – 700 091 ) 3. Mr.Varun Passary, (Guarantor), ) S/o. Late Santosh Passary, having his ) address at Shree Complex, 5^th Floor, ) 13, Super Market, Raurkela, ) Orissa – 769 001 ) 4. Mr.Sanjay Singh, ) 119/8, Chittaranjan Avenue, ) Kolkata – 700 073. ) ..... Respondents

¶8

ALONGWITH

¶9

ARBITRATION PETITION NO. 63 OF 2013

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..... Petitioner

VERSUS

1. M/s.Spotlight Tradecom Pvt. Ltd. ) (Borrower), having its address at ) 2A, Ganesh Chandra Avenue, ) Commerce House, 7^th Floor, Room No.1, ) Cabin No. 3, Kolkata – 700 013 ) And also at :- ) 15, Parasar Road, Kolkata – 700 029 ) West-Bengal ) 2. Ms.Saloni Passary, (Guarantor), ) W/o. Varun Passary, having her address at) BH-84, Salt Lake, Sector – 2, ) Kolkata – 700 091 ) 3. Mr.Varun Passary, (Guarantor), ) S/o. Late Santosh Passary, having his ) address at CL-279, Sector – 2, ) Salt Lake City, Kolkata – 700 091 ) ..... Respondents

¶17

Ms.S.I.Joshi, a/w. Mr.Sandesh Godse, i/b. S.I.Joshi & Co. for the Petitioner.

¶18

Mr.Rohan Cama, a/w. Mr.G.C.Mohonty, i/b. G.C.Mohonty & Associates for the Respondents.

¶19

CORAM : R.D. DHANUKA, J.

¶20

RESERVED ON : 20^th JUNE, 2013

¶21

PRONOUNCED ON : 1^st JULY, 2013

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JUDGMENT :

By consent of parties, both petitions were heard together and are being disposed of by this common order. Some of the relevant facts for the purpose of deciding these petitions are as under :-

¶27

By this petition filed under section 9, petitioner seeks appointment of Court Receiver in respect of the equipments described in Ex.G and also list of properties described in Ex.H to the petition and other reliefs.

¶28

Relevant facts in Arbitration Petition No. 62 of 2013 :-

¶29

Vide loan agreement dated 1^st January, 2011, the petitioner granted loan to the 1^st respondent in the sum of Rs.54,45,000/- on the terms and conditions setout in the said agreement. Respondent no.1 agreed to repay the entire amount with interest totaling to Rs.67,35,720/- in monthly installments. Under clause 13 of the said agreement, consequence in the event of default on the part of the borrowers is provided. The petitioner had option to terminate the loan agreement, initiate legal action and repossess and sell without any orders from the court in addition to various other rights. Respondent no.1 executed deed hypothecating the equipments in favour of the petitioner described in Ex.G to the petition. Respondent nos.2 to 4 executed separate deed of guarantee dated 1^st January, 2011 in favour of the petitioner.

¶30

It is the case of the petitioner that the respondents committed default in making repayment of installment. The petitioner issued demand cum termination notice dated 22^nd November, 2012 through their advocate and terminated the said agreement and called upon the respondent to pay Rs.42,61,300/- as on 6^th November, 2012 comprising of balance of 15^th installment and arrears of 16^th to 21^st installments and also overdue charges etc. The petitioner also demanded

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further loan installment of Rs. 29,74,000/- and further overdue compensation. There was neither any reply to the said notice by the respondents nor any repayment made in response to the said notice. The petitioner has already invoked arbitration agreement and has appointed Mr.Bharat B. Jain advocate as sole arbitrator. According to the petitioner as on 16^th November, 2012, respondents were liable to pay a sum of Rs.42,61,300/- with further overdue compensation thereof.

¶35

Respondents have filed affidavit in reply opposing this petition and have also raised issue of territorial jurisdiction of this court to entertain this petition. Relevant facts in Arbitration Petition No. 63 of 2013 :- 5. Vide loan agreement dated 31^st January, 2012, petitioner lent and advanced a sum of Rs.1,95,20,000/- to the 1^st respondent who agreed and undertook to repay the said loan with interest at Rs. 2,59,19,160/- in monthly installments. Respondent nos. 2 and 3 executed deed of guarantee in favour of the petitioner on 31^st January, 2012. Respondent no.1 also executed demand promissory note and deed of hypothecation, both dated 31^st January, 2012.

¶36

It is the case of the petitioner that respondents committed default in making repayment of the installment. The petitioners’ through their advocate issued a notice dated 21^st November, 2012 terminating the said agreement and demanded a sum of Rs.2,56,23,846/- payable as on 16^th November, 2012 with further interest thereon and also appointed Mr.Bharat B. Jain advocate as sole arbitrator. There was neither any response to the said notice nor any repayment by the respondents.

¶37

According to the petitioners as on 16^th November, 2012 a sum of Rs.

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2,56,23,846/- with further interest thereon at the rate of 36% per annum due and payable by the respondents to the petitioner.

¶42

Respondents have filed affidavit in reply opposing this petition on various grounds and have raised issue of territorial jurisdiction of this court to entertain this petition.

¶43

SUBMISSION OF PARTIES

¶44

Mr.Cama, learned counsel appearing for the respondents raises preliminary objection about territorial jurisdiction of this Court to entertain this petition. It is submitted that the respondents are carrying on business and is having registered office at Kolkata. Respondents had approached the petitioner’s branch Manager at Kolkata Branch for availing of finance from the petitioner. It is submitted that the loan was sanctioned for purchase of excavators. Respondent no.1 procured those machines and started their work at site in the District of Keonjhar, Odissa. It is submitted that payments were made from time to time to the petitioner at Kolkata Branch office of the petitioner. Mr.Cama submits that respondents have filed a writ petition against the petitioner and others in the High Court of Orissa, Cuttack restraining the petitioners to take any coercive measures including taking forcible possession of the machineries. It is submitted that the loan agreement between the parties was stamped by the office of the Stamp, Superintendent, Kolkata. Place of agreement mentioned in the said agreement is Kolkata. It is submitted that even location of asset shown is Kolkata in the said agreement. One of the supplier from whom those equipments were purchased was at Kolkata and another supplier at Bhubneshwar. It is submitted that deeds of guarantee were executed by the guarantors at Kolkata.

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Mr.Cama, learned counsel submits that cause of action for filing this petition is not on the basis of place of payment made by the petitioner but has to be on the basis of non-repayment of loan by the parties who is outside the territorial jurisdiction of this Court. It is submitted that even if the disbursement of the loan is from Mumbai, such disbursement was directly made by the petitioners to the suppliers of the equipments to the respondents at Kolkata or Bhubneshwar. It is submitted that jurisdiction would depend upon the acts of the respondents and not the petitioners. Mr.Cama submits that no act was done on the part of the respondents at Mumbai and thus even by consent, parties cannot confer jurisdiction on the court which otherwise does not have. It is submitted that merely because in Clause 19 of the agreement, it is provided that the dispute between the lender and borrower shall be subject to the non-exclusive jurisdiction of the courts of the city of Mumbai that would not confer jurisdiction on this court as no part of cause of action has arisen at Mumbai.

¶49

Learned counsel placed reliance upon judgment of the Supreme Court in case of A.B.C.Laminart Pvt. Ltd. and another vs. A.P.Agencies, Salem reported in AIR 1989 SC 1239 and in particular paragraphs 11 to 16, 18, 21 and 22 which reads thus :-

¶50

The jurisdiction of the Court in matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors.

¶51

A cause of action means every fact, which, if traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant

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since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.

¶56

Under Section 20(c) of the CPC subject to the limitation stated theretofore, every suit shall be instituted in a court within the local limits of whose jurisdiction the cause of action, wholly or in part arises. It may be remembered that earlier Section 7 of Act 7 of 1888 added Explanation III as under:

¶57

Explanation III. In suits arising out of contract the cause of action arises within the meaning of this section at any of the following places, namely:

¶58

the place where the contract was made ;

¶59

the place where the contract was to be performed or performance thereof completed ;

¶60

the place where in performance of the contract any money to which the suit relates was expressly or impliedly payable.

¶61

The above Explanation III has now been omitted but nevertheless it may serve a guide. There must be a connecting factor.

¶62

In the matter of a contract there may arise causes of action of various kinds. In a suit for damages for breach of contract the cause of action

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consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else In suits for agency actions the cause of action arises at the place where the contract of agency was made or the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the suit would lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the Court where the suit is filed and that contract is found to be invalid, such part of cause of the action disappears. The above are some of the connecting factors.

¶67

So long as the parties to a contract do not oust the jurisdiction of all the Courts which would otherwise have jurisdiction to decide the cause of action under the law it cannot be said that the

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parties have by their contract ousted the jurisdiction of the Court. If under the law several Courts would have jurisdiction and the parties have agreed to submit to one of these jurisdictions and not to other or others of them it cannot be said that there is total ouster of jurisdiction. In other words, where the parties to a contract agreed to submit the disputes arising from it to a particular jurisdiction which would otherwise also be a proper jurisdiction under the law their agreement to the extent they agreed not to submit to other jurisdictions cannot be said to be void as against public policy. If on the other hand the jurisdiction they agreed to submit to would not otherwise be proper jurisdiction to decide disputes arising out of the contract it must be declared void being against public policy. Would this be the position in the instant case ?

¶72

In Hakam Singh v. Gammon (India) Ltd. MANU/SC/0001/1971 : [1971]3SCR314 where the appellant agreed to do certain construction work for the respondent who had its principal place of business at Bombay on the terms and conditions of a written tender. Clause 12 of the tender provided for arbitration in case of dispute. Clause 13 provided that not withstanding the place where the work under the contract was to be executed the contract shall be deemed to have been entered into by the parties at Bombay, and the Court in Bombay alone shall have jurisdiction to adjudicate upon. On dispute arising between the parties the appellant submitted a petition to the Court at Varanasi for an order under Section 20 of the Arbitration Act, 1940 that the agreement be filed and an order of reference be made to an arbitrator or arbitrators appointed by the Court. The respondent contended that in view of the Clause 13 of the arbitration agreement only the Courts at Bombay had jurisdiction. The Trial Court also held that the

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entire cause of action had arisen at Varanasi and the parties could not by agreement confer jurisdiction on the Courts at Bombay which they did not otherwise posses. The High Court in revision held that the Courts at Bombay had jurisdiction under the general law and hence could entertain the petition and that in view of Clause 13 of the arbitration agreement the petition could not be entertained at Varanasi and directed the petition to be returned for presentation to the proper Court, On appeal therefrom one of the questions that fell for consideration of this Court was whether the Courts at Bombay alone had jurisdiction over the dispute. It was held that the CPC in its entirety applied to proceedings under the Arbitration Act by virtue of Section 41 of that Act. The jurisdiction of the Court under the Arbitration Act to entertain proceedings for filing an award was accordingly governed by the provisions of the CPC, By the terms of Section 20(a) of the CPC read with explanation II thereto the respondent company which had its principal place of business at Bombay was liable to be sued at Bombay. It was held that it was not open to the parties to agreement to confer by their agreement jurisdiction on a Court which did not possess under the Code. But where two Courts or more have under the CPC jurisdiction to try the suit or proceeding an agreement between the parties that the dispute between them shall be tried one of such Courts was not contrary to public policy and such an agreement did not contravene Section 28 of the Contract Act. Though this case arose out of an arbitration agreement there is no reason why the same rule should not apply to other agreements in so far as jurisdiction is concerned, Without referring to this decision a Division Bench of the Madras High Court in Nanak Chand v. T.T. Elect. Supply Co. MANU/TN/0162/1975 : AIR1975Mad103 observed that competency of a

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Court to try an action goes to the root of the matter and when such competency is not found, it has no jurisdiction at all to try the case. But objection based on jurisdiction is a matter which parties could waive and it is in this sense if such jurisdiction is exercised by Courts it does not go to the core of it so as to make the resultant judgment a nullity. Thus it is now a settled principle that where there may be two or more competent Courts which can entertain a suit consequent upon a part of the causes action having arisen there within, if the parties to the contract agree to vest jurisdiction in one such court to try the dispute which might arise as between themselves the agreement would be valid. If such a contract is clear, unambiguous and explicit and not vague it is not hit by Sections 23 and 28 of the Contract Act This can not be understood as parties contracting against the Statute Mercantile Law and practice permit such agreements.

¶81

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

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may in such cases be inferred. It has therefore to be properly construed.

¶86

Coming to Clause 11 we already found that this clause was included in the general terms and conditions of sale and the order of confirmation No. 68/59 dated 2.10.1974 with the general terms and conditions was sent from Udyognagar, Mohmadabad, Gujarat to the respondent's address at 12 Suramangalam Road Salem, Tamilnadu. The statement made in the Special Leave Petition that Udyognagar, Mohamadabad, Gujarat is within the jurisdiction of the civil Court of Kaira has not. been controverted. We have already seen that making of the contract was a part of the cause of action and a suit on a contract therefore could be filed at the place where it was made. Thus Kaira court would even otherwise have had jurisdiction. The bobbins of metallic yarn were delivered at the address of the respondent at Salem which, therefore, would provide the connecting factor for Court at Salem to have jurisdiction. If out of the two jurisdictions one was excluded by Clause 11 it would not absolutely oust the jurisdiction of the Court and, therefore, would not he void against public policy and would not violate Sections 23 and 28 of the Contract Act. The question then is whether it can construed to have excluded the jurisdiction of the Court at Salem. In the clause 'any dispute arising out of this sale shall be subject to Kaira jurisdiction' ex facie we do not find exclusive words like 'exclusive', 'alone, 'only' and the like. Can the maxim 'expressio unius est exclusio alterius' be applied under the facts and circumstances of the case ? The order of confirmation is of no assistance. The other general terms and conditions are also not indicative of exclusion of other jurisdictions. Under the facts and circumstances of the case we hold that while connecting factor with Kaira jurisdiction was

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ensured by fixing the situs of the contract within Kaira other jurisdictions having connecting factors were not clearly, unambiguously and explicitly excluded. That being the position it could not be said that the jurisdiction of the Court at Salem which Court otherwise had jurisdiction under law through connecting factor of delivery of goods thereat was expressly excluded. We accordingly find no error infirmity in the impugned judgment of the High Court.

¶91

Mr.Cama then submits that petitioner cannot seek any relief against respondent nos. 2 and 3 who were guarantors and had signed a separate deed of guarantee as the petitioner did not invoke the arbitration agreement under the said deed of guarantee in the notice invoking arbitration agreement. Mr.Cama placed reliance upon the judgment of the Supreme Court in case of S.N.Prasad, Hitek Industries (Bihar) Limited vs. Monnet Finance Limited and others reported in (2011) 1 SCC 320 and in particular paragraphs 8, 9, 10, 21 and 22 which reads thus :-

¶92

Thus there can be reference to arbitration only if there is an arbitration agreement between the parties. The Act makes it clear that an Arbitrator can be appointed under the Act at the instance of a party to an arbitration agreement only in respect of disputes with another party to the arbitration agreement. If there is a dispute between a party to an arbitration agreement, with other parties to the arbitration agreement as also non-parties to the arbitration agreement, reference to arbitration or appointment of arbitrator can be only with respect to the parties to the arbitration agreement and not the nonparties.

¶93

There is no dispute that the loan agreements among the first respondent (lender), the second respondent (borrower) and the third respondent (guarantor)

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contained a provision for arbitration. The said provision for arbitration is extracted below:

¶98

“ In the event of any dispute, question or difference arising out of or in connection with this agreement and the respective rights and obligations of the parties hereunder, the same shall be referred to the arbitration in accordance with the provisions of the Arbitration Act, 1940. ”

¶99

But the appellant was not a party to the same. In fact appellant's letter of guarantee for Rs. 75 lakhs was given on 27.10.1995, prior to the dates of the two loan agreements. It is also not in dispute that the letter dated 27.10.1995 given by appellant to the first respondent did not contain a provision for arbitration; and that except the said letter dated 27.10.1995, the appellant did not execute any document or issue any communication.

¶100

An arbitration agreement between the lender on the one hand and the borrower and one of the guarantors on the other, cannot be deemed or construed to be an arbitration agreement in respect of another guarantor who was not a party to the arbitration agreement. Therefore, there was no arbitration agreement as defined under Section 7(4)(a) or (b) of the Act, in so far as appellant was concerned, though there was an arbitration agreement as defined under Section 7(4)(a) of the Act in regard to the second and third respondents. As the letter dated 27.10.1995 does not refer to any document containing an arbitration clause, there is also no arbitration agreement between first respondent and appellant as contemplated under Section 7(5) of the Act.

¶101

The first respondent contended that the appellant having agreed to be a guarantor for the repayment of the loan, can not avoid arbitration by contending that he was not a signatory to the loan agreement containing the arbitration clause. It was submitted that the liability of the principal debtor and guarantors was joint and several and therefore there could be only one proceeding against

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all of them; and that if the contention of the appellant was accepted, it would necessitate two proceedings in regard to the same loan transaction and same cause of action, that is an arbitration proceedings against the borrower and one of its guarantors (respondents 2 and 3) and a separate suit against the other guarantor (appellant). It was further submitted that multiple proceedings may lead to divergent findings and results, leading to an anomalous situation.

¶106

It was also submitted that the letter dated 27.10.1995 guaranteeing the loan of Rs. 75 lakhs was written by the appellant, as a Director of the borrower company; and that as the appellant had already given a guarantee letter dated 27.10.1995, he was not required to execute the tripartite loan agreements containing the arbitration clause; that the appellant was aware of the terms of the loan and was further aware that loan agreements with arbitration clause had to be executed; and that therefore it should be deemed that the appellant had agreed to abide by the terms contained in the loan agreements, including the arbitration clause. We find no merit in these contentions.

¶107

On the issue of territorial jurisdiction raised by the respondents, Mrs.Joshi, learned counsel appearing on behalf of the petitioner submits that the registered office of the petitioner is situated at Mumbai from where the petitioner had sanctioned and disbursed loan to the 1^st respondent. 1^st respondent had executed demand promissory note and agreed to repay the loan with interest at the registered office of the petitioner at Mumbai. Respondents also agreed and undertook to repay the loan amount and other charges due under the said agreement at the Corporate office of the petitioner at Mumbai. Learned counsel submits that deed of guarantee executed by the guarantors was submitted to the petitioner at Mumbai as is obvious from the deed of guarantee itself which was address to the petitioner

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at its office at Mumbai. Even deed of guarantee provides that the said guarantee was subject to the non exclusive jurisdiction of the Court at Mumbai. Clause (f) of the said deed of guarantee provides that the said agreement was governed by Indian Law and subject to the exclusive jurisdiction of the court in Mumbai. Learned counsel placed reliance upon clause 3.3 and clause 19 of the loan agreement which are extracted as under :-

¶112

3.3 All payments of the Loan installments and other charges and moneys due under this Agreement shall be payable by the Borrower to the Lender at the Corporate office, or at such other addresses as may be specified in the Schedule hereto and shall deemed to have been paid on the date on which the amounts thereunder are realized.

¶113

19 Jurisdiction

¶114

This Agreement shall be governed by and construed in all respects with the Indian laws and the parties hereto agree that any matter of issues arising hereunder or any dispute hereunder shall, at the option/discretion of the Lender, be subject to the non-exclusive jurisdiction of the courts of the city of Mumbai. This shall not however limit the rights of the Lender to take proceedings in any other court of competent jurisdiction.

¶115

Mrs.Joshi also placed reliance upon the bank statement of the petitioner to demonstrate that payment to the supplier of equipments on behalf of the respondents was also made by the petitioner from the bank account of the petitioner with the bank situated at Mumbai. Mrs.Joshi placed reliance upon the judgment of this court in case of Tata Finance Ltd. vs. M/s.Himachal Fibres Ltd. and another delivered on 6^th November, 2001 passed by F.I.Rebello, J. (as His Lordship then was) in Arbitration Petition No. 546 of 2001 and in particular paragraph 1 which reads thus :-

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Heard forthwith. On behalf of the respondents their first objection was the jurisdiction of this Court to hear the matter on the ground that no part of the cause of action has arisen within the jurisdiction of this Court and considering that clause 20.9 is of no consequence. It is pointed out that even the moneys were not payable within the jurisdiction of this Court considering the agreement itself. On behalf of the respondents learned Counsel has drawn my attention to the supplementary agreements under which the moneys were payable at Mumbai. Considering that part of the cause of action has arisen within the jurisdiction of this Court, by virtue of clause 20.90 it is this Court alone that will have jurisdiction. The first objection, therefore, is rejected.

¶120

Mrs.Joshi, learned counsel also placed reliance upon the judgment of this Court (R.Y.Ganoo, J.) delivered on 21^st April, 2010 in case of L & T Finance Limited vs. Sahyadri Earthmovers and others in Arbitration Petition No. 457 of 2009 and in particular paragraphs 3 to 5 which reads thus :-

¶121

After perusing the documents, namely hypothecation cum loan agreement, it is clear that the loan agreement dated 7.6.2007 was executed at Pune, Deed of Guarantee was also executed at Pune. Clause 3.2 of the loan agreement indicates that the payment is to be made by the borrower at Corporate Office i.e. at Mumbai. With this important clauses with reference to the terms of the agreement the learned Advocate Mr.Balasaheb Deshmukh appearing for the Respondents had contended that the Court at Mumbai has no jurisdiction as according to him no part of cause of action has arisen in Mumbai. He further submitted that in order to decide the jurisdiction of the Court in Arbitration Petition one may refer to the provision of Section 20 of the Code of Civil Procedure and then decide on the basis of the facts appearing in the matter as to whether the Court has jurisdiction or not. He had relied upon the

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judgment in case of Kotak Mahindra Finance Limited v. T. Thomas Educational Trust and Others reported in Mh.L.J. 1(2004) 1112. Mr.Deshmukh submitted that since the documentation was done at Pune, property – excavator is at Pune, Pune Court will have jurisdiction and Bombay Court will not have jurisdiction. He had submitted that merely because the payment is to be made at Mumbai in accordance with clause 3.2 of the Loan Agreement, Mumbai Court will have no jurisdiction. He had submitted that part payments were made at Pune and the Petitioners have accepted the said payment and therefore clause 3.2 has been given up by the Petitioners. He therefore submitted that this Court has no jurisdiction as no cause of action has arisen within the jurisdiction of Mumbai.

¶126

Learned Advocate Mrs.Joshi submitted that the correspondence as regards sanction of the loan has proceeded from Mumbai, so far as the Petitioners are concerned and the loan was sanctioned at Bombay. According to her, grant of loan at Mumbai is sufficient to say that part of cause of action has arisen within Mumbai. She has drawn my attention to the correspondence and from the said correspondence it can be seen that loan was granted at Mumbai and letters were sent to the Respondent No.1. She had also drawn my attention to clause 3.2 by which payments were agreed to be made at Mumbai. She had relied upon the judgment in the case of A.B.C. Laminart Pvt. Ltd. & Anr. vs. A.P. Agencies Sales reported in (1989) 2 SCC 163 and had drawn my attention to para 15 to contend that Mumbai Court will have jurisdiction since the payment was made at Mumbai and the contract was made at Mumbai.

¶127

I have verified the facts and it is clear that the loan agreement was signed at Pune. The other

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documents were also signed at Pune. However, clause 3.2 of the loan agreement clearly indicates that the payment was to be made at Corporate Office at Mumbai i.e. to say performance of the Agreement was to be made at Mumbai. This will mean that part of cause of action has arisen within the territorial limits of Mumbai. The Supreme Court in the case of ABC Laminart Private Ltd. and another has observed that the place of performance will be one of the place where the cause of action can be said to have arisen. Merely because some payments were made at Pune and they were accepted by the Petitioners at Pune does not mean that the Petitioners have give up clause 3.2 mentioned in the agreement. This will mean that the part of cause of action did arise in Mumbai in as much as it was the duty of the Respondent to make payment in Mumbai. Hence I observe that this Court has jurisdiction to try and entertain this petition.

¶132

Mrs.Joshi also placed reliance upon the judgment of this court (R.D.Dhanuka, J.) delivered on 31^st January, 2013 in case of L & T Finance Limited vs. M/s.Kandla Cargo Carriers and anr. in Arbitration Petition No. 1028 of 2012 and in particular paragraphs 3, 4, 5 and 6 which reads thus :-

¶133

The learned counsel for the petitioner invited my attention to the issue of jurisdiction raised by the respondent in the affidavit In reply. The reply indicates that the jurisdiction of this court is challenged on the ground that the loan agreement was entered into at Gandhidham and the respondents are also carrying on business outside the territorial jurisdiction of this court.

¶134

The learned counsel for the petitioner invited my attention to the loan cum hypothecated agreement entered into between the parties. Clause 3.2, 17.2 and 19.1 of the said agreement are extracted below.

¶135

“3.2 All payments of the loan installments and

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other charges and moneys due under this Agreement shall be payable by the Borrower to the Lender at the Corporate Office, or at such other addresses as may be specified in the Schedule hereto and shall deemed to have been paid on the date on which the amounts thereunder are realized.

¶140

17.2The award of the arbitrator shall be final, conclusive and binding on all the parties, and all the parties undertake to carryout the award immediately without any delay. The venue of the arbitration shall be Mumbai.

¶141

19.1 This agreement shall be governed by and construed in all respects with the Indian laws and the parties hereto agree that any matter or issues arising hereunder or any dispute hereunder shall, at the option/discretion of the Lender, be subject to the non-exclusive jurisdiction of the courts of the city of Mumbai. This shall not however, limit the rights of the Lender to take proceedings in any other court of competent jurisdictions.”

¶142

The learned counsel for the petitioner submits that the corporate office of the petitioner is at Mumbai. The loan was sanctioned from Mumbai. Under clause 3.2 of the agreement, the respondents were liable to make repayment of the installments at corporate office or at such other addresses as may be specified in the schedule. It is submitted that as the loan is sanctioned from Mumbai, substantial part of the cause of action had arisen in Mumbai and in view of the agreement recorded in clause 19.1 of the agreement that in case of dispute between the parties, it would be subject to non exclusive jurisdiction of the courts at city of Mumbai, this court has jurisdiction to entertain and try this petition.

¶143

Considering the averments made in the petition and the aforesaid clauses of the agreement, it is clear that the substantial part of the cause of action had arisen at Mumbai. The loan was sanctioned from Mumbai. In view of the fact that the part of cause of action had

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arisen at Mumbai and in view of the clause 19.1 which provides for non exclusive jurisdiction at the courts of city of Mumbai, in my view this court has jurisdiction to entertain, try and dispose of the present petition.

¶148

Mrs.Joshi distinguished the paragraph of the judgment of the Supreme Court in case of A.B.C.Laminart Pvt. Ltd. and another (supra) relied upon by Mr.Cama, the learned counsel appearing for the respondents and laid emphasis on paragraphs 15, 16 and 18. It is submitted that as loan was sanctioned from the registered office of the petitioner situated at Mumbai and respondents had agreed to repay the loan at Mumbai and the deed of guarantee as well as promissory note was executed at Mumbai, substantial part of cause of action took place at Mumbai. In view of clause 19 of the loan agreement by which both parties had agreed to confer jurisdiction to non-exclusive of the court of city at Mumbai, this court has jurisdiction to try and dispose of the present petition.

¶149

On merits, Mrs Joshi, learned counsel appearing for petitioner submits that respondents have committed default in making repayment of installments to the petitioner. There is no reply to notice of demand issued by the petitioner. Financial condition of the respondent is bad. Under the provisions of the agreement, in case of default, petitioner is entitled to resume possession of the hypothecated equipments. It is submitted that if Receiver is not appointed in respect of the suit equipments and if the securities are not protected, even if the petitioner succeeds in arbitration proceedings, petitioner would not be able to recover any amount from the respondents. Learned counsel submits that the respondents had filed a writ petition in the High Court of Orissa at Cuttack against the petitioner and others. By an order dated 17^th January 2013, High Court of Orissa passed an interim order directing that no coercive action shall be taken

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against the respondents herein till 21^st February 2013 subject to the respondents depositing a sum of Rs.9,40,000/- with the petitioner herein in two equal installments. It is submitted that respondents have not even deposited the said amount of Rs.9,40,000/- or any part thereof as directed by the High Court of Orissa at Cuttack with the petitioner. It is submitted that it shows that the respondents are not in a position to pay even Rs.9,40,0000/- which would indicate that if reliefs as sought by the petitioner are not granted, petitioner would not be able to recover any amount from the respondents.

¶154

Mr Cama, learned counsel appearing for the respondents on the other hand submits that without prejudice to the rights and contentions of the respondents, respondents are ready and willing to deposit a sum of Rs.9,40,000/- in this Court and thus, no drastic order of appointment of Court Receiver shall be passed by this Court against the respondents. It is submitted that order of High Court of Orissa at Cuttack prima facie indicates that the liability of the respondents would not be more than the said amount directed to be deposited. The learned counsel submits that no case is made out by the petitioner for grant of interim measures. Learned counsel submits that though respondents has arranged some funds and approached the petitioner for making payment, petitioner however refused to accept the payment and demanded the entire arrears of loan amount which was not possible for the respondents to comply with. Respondents also made various allegations against the learned arbitrator in affidavit in reply. Mr Cama then submits that respondents have already made statement on 13^th February 2013 that till the next date of hearing, respondents shall not part with possession or create any third party rights, alienate and/or encumber equipments described in Exhibit-G to the petition and are willing to continue the said statement till disposal of the arbitration proceedings and thus, appointment of Court Receiver is not warranted.

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In re-joinder, Mrs Joshi learned counsel appearing for the petitioner submits that since respondents have admittedly not complied with the order passed by High Court of Orissa at Cuttack to deposit even sum of Rs.9,40,000/- and respondents have to pay, according to the petitioner, sum of Rs.42,62,200/- as on 17^th November 2012 with further interest thereon, petitioner deserves to be granted relief by way of appointment of court Receiver in respect of the suit equipments. It is submitted that mere injunction in respect of the suit equipments would not be sufficient in view of the huge claim of the petitioner against the respondents. Petitioner has already terminated the agreement in accordance with the provisions of the loan agreement and it is entitled to recall the entire amount and resume possession of the equipments/machines Respondents have committed default in making repayment. Learned counsel also invited my attention to para 12 of the Affidavit of respondents to demonstrate that respondents themselves have admitted that due to current mining crisis and some financial stringency, respondents have committed default in repayment of installments. It is the case of the respondents that due to scam/corruption in allotting the mining by some political leaders, the Central Government issued Notification and appointed Shah Commission to investigate the matter and in the interim period, the extraction of coal mines were restricted/prohibited resulting in machines becoming idle due to which respondents were unable to generate funds for making payment of installments. Mrs Joshi also invited my attention to para 22 of the Affidavit in reply to show admission of financial stringency on the part of the respondents which according to respondents, resulted in default in making repayment of loan installments.

¶159

Reasons and Conclusion :

¶160

As far as issue of jurisdiction raised by the respondents is concerned, on perusal of the averments made in para 28 of the petition, it is noticed that corporate

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office of the petitioner is situated at Mumbai. I have also perused the bank statement produced by the petitioner of the account petitioner has with the bank situated at Mumbai which indicates that the petitioner had released payment to the supplier of equipments to the respondents from such bank accounts situated at Mumbai. In my view, Mrs Joshi is right in her submission that loan amounts were disbursed by the petitioners from Mumbai. It is also the case of the petitioner that loan was sanctioned from Mumbai. In my prima facie view, since the amounts were disbursed from Mumbai, submission of the petitioner appears to be correct that loan must have been sanctioned from Mumbai. There is no serious dispute about this averment of the petitioner that the loan was sanctioned from Mumbai. On perusal of the Deeds of Guarantee signed by the guarantors, it is clear that the same was addressed to the petitioner at Mumbai. Even Promissory Note, in one of the matter was forwarded to the petitioner at Mumbai. Loan agreement as well as Deed of Guarantee categorically records that the dispute, if any, shall be subject to the non-exclusive jurisdiction of the Courts in city of Mumbai. Clause 3.3 of the agreement provides that all payments of the loan installments and other charges and moneys due under the loan agreement shall be payable by the respondents to the petitioner at the Corporate office or at such other addresses as may be specified in the Schedule. Perusal of the Schedule annexed to the agreement shows that it does not provide any other place of payment. Merely because installments were paid by the respondents at the branch office of the petitioner situated at Kolkatta, would not oust the jurisdiction of this Court to entertain and try this petition. In my view since the substantial part of cause of action including various acts on the part of the respondents were done within the territorial jurisdiction of this Court and in view of Clause 3.3 read with Clause 19 of the loan agreement as well as provisions of Bank Guarantee by which exclusive jurisdiction on one of the two Courts having concurrent jurisdiction i.e. Courts in city of Mumbai has been

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conferred, this Court has jurisdiction to entertain, try and dispose of the present proceedings.

¶169

This court in the Judgment in case of M/s Tata Finance Ltd. Vs. M/s Himachal Fibres Ltd. (supra) delivered on 6^th November 2001 has held that as part of cause of action has arisen within the jurisdiction of this Court, in view of non exclusive jurisdiction clause conferring the jurisdiction on Bombay High Court, this Court alone shall have jurisdiction. Similar view has also been taken by this Court in case of L & T Finance Ltd. Vs. Sahyadri Earthmovers & Ors. (supra) . This Court after considering the judgment of Supreme Court in case of A.B.C. Laminart Pvt. Ltd. (supra) has considered similar clause of the loan agreement which provided that payment was to be made at the Corporate Office at Mumbai and has held that performance of agreement was to be made at Mumbai and since part of cause of action has arisen in territorial jurisdiction of Mumbai, this Court would have jurisdiction to entertain, try and dispose of the petition. It is also held that some payments were made by the petitioner at Pune and they were accepted by the petitioners at Pune does not mean that the petitioners have give up clause 3.2 mentioned in that agreement. It is also held that part of cause of action did arise in Mumbai in as much as it was the duty of the respondent to make payment at Mumbai. In my view facts of this case are identical to the facts in case of L & T Finance Vs. Sahyadri Earthmovers & Ors. (supra) .

¶170

This Court (R.D.Dhanuka,J.) in case of L & T. Finance Ltd. Vs. M/s Kandla Cargo Carriers and Anr. (supra) has construed similar clauses of the agreement and has held that substantial part of cause of action had arisen at Mumbai. Loan was sanctioned from Mumbai and thus, in view of Clause-19.1 which provides for non-exclusive jurisdiction at the courts of city of Mumbai, this

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Court alone has jurisdiction to entertain, try and dispose of this petition. Petitioner is right in placing reliance on paragraphs 15, 16 and 18 of Judgment of Supreme Court in case of A.B.C Laminart Pvt. Ltd.(supra) which have been already referred and followed by this Court in some of the judgments referred to aforesaid. I am respectfully bound by the Judgment of Supreme Court in Case of A.B.C. Laminart Pvt. Ltd. (supra) and other three judgments of this Court.

¶175

The Supreme Court in the case of A.B.C. Laminart Pvt. Ltd. and another (supra) has held that if under the law several Courts would have jurisdiction and the parties have agreed to submit to one of these jurisdictions and not to other or others of them, it cannot be said that there is total ouster of jurisdiction. Where the parties to a contract have agreed to submit the disputes arising from it to a particular jurisdiction, which would otherwise also be a proper jurisdiction under the law, their agreement to the extent they agreed not to submit to other jurisdictions cannot be said to be void as against public policy. In my view, since, the substantial part of cause of action has arisen within the territorial jurisdiction of this court, this court would be the court having proper jurisdiction and in view of the parties having agreed to confer exclusive jurisdiction to this court, this petition flied by the petitioner in this court is within territorial jurisdiction of this court.

¶176

As far as submission of Mr. Cama that no relief in this petition can be granted against respondent nos. 2 and 3 who were guarantors on the ground that in the notice dated 21.11.2012 issued by the petitioner terminating the loan agreement and referring the dispute to arbitration, petitioner did not invoke the arbitration agreement in the deed of guarantee is concerned, on perusal of the letter dated 21.11.2012 by which arbitration agreement was invoked, it is clear that in

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the said letter, there was reference to the loan agreement and also deed of guarantee. Respondent nos. 2 and 3 were called upon to repay the loan amount as guarantors. It is not in dispute that in the Deed of Guarantee separately signed by respondent nos. 2 and 3, arbitration agreement exits. In my view there is no substance in this submission made by Mr. Cama that the arbitration agreement recorded in the deed of Guarantee has not been invoked by the petitioner and thus no relief against the guarantors can be granted in this proceedings filed under section 9 of the Arbitration Act, 1996. On perusal of the loan agreement and in particular clause 1.8 makes it clear that the loan documents means loan agreement, dated of guarantee and various other documents referred therein. The deed of guarantee signed by respondent nos. 2 and 3 also refers to the loan agreement executed between the petitioner and respondent no. 1. Petitioner is thus entitled to seek relief against principal borrowers as well as the guarantors in the same petition in view of the existence of the arbitration agreement between the parties. The Deed of guarantee executed by respondent nos. 2 and 3 was in furtherance of the loan agreement executed by respondent no. 1 and was to secure repayment of loan given by the petitioner to respondent no. 1. In my view, this court thus can grant relief under section 9 against respondent nos. 2 and 3 also in the same petition.

¶181

As far as judgment of the Supreme Court in the case of S. N. Prasad, Hitek Industries (Bihar) Limited (supra) relied upon by Mr. Cama for the respondent is concerned, on perusal of the said judgment, it is clear that the appellant before the Supreme Court in that case had given guarantee letter in favour of the respondents which did not contain arbitration clause. The appellant was not party to the loan agreement which contained arbitration clause. When the appellant signed the guarantee letter, the loan agreement which contained

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arbitration clause did not even exist and was executed in future after execution of the guarantee letter by the petitioner. With these facts under consideration, it was held by the Supreme Court that the question of the appellant impliedly agreeing to arbitration clause recorded in the loan agreement did not arise. Considering the facts of this case, however, it is clear that it is not in dispute that the respondent no. 2 and 3 had signed separate deed of guarantees which admittedly contained arbitration clause. In my view, facts of the judgment in the case of S.N. Prasad (supra), relied upon by the respondents are clearly distinguishable with the facts of this case and reliance placed on the said judgment thus is of no assistance to the respondents.

¶186

On perusal of the petition with annexures and also affidavit in reply and annexures thereto, in my prima facie view, respondents have committed default in making repayment of installments. Several installments are unpaid by the first respondent to the petitioner. There was no response to the notice of demand. Loan Agreement has been already terminated by the petitioner. Perusal of record also indicates that even sum of Rs.9,40,000/- directed to be paid by the High Court of Orissa at Cuttack while granting injunction against the petitioner from taking any coercive steps, has not been deposited. According to petitioner as on 16^th November 2012, sum of Rs.42,61,300/- with further interest thereon is due and payable. Perusal of affidavit also indicates that the respondents have admitted that they have committed default in making repayment of installments. It is however alleged that default is committed due to mining crisis and some financial stringency. Respondents have admitted that due to financial stringency, respondents could not deposit the first installment by 8^th June 2013 as directed by High Court of Orissa at Cuttack. In view of these admitted facts and in view of the default in respect of several installments committed by the first respondent, in

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my view case is made out by the petitioner for appointment of Court Receiver in respect of hypothecated equipments. In my prima facie view, petitioner has good chances of succeeding in arbitration proceedings. If Court Receiver is not appointed in respect of hypothecated equipments which are lying in custody of the first respondent, even if petitioner succeeds, petitioner may not be able to recover any amount from the respondents. I therefore pass the following order.

¶191

(i) Court Receiver High Court Bombay is appointed as receiver in respect of the equipments described in Exhibit-G in both the petitions with further direction to appoint respondent No.1 or such other person found in possession of such equipments as agent of the Court Receiver on usual terms and conditions and on payment of royalty and furnishing security. If respondent No.1 refuses to accept the agency of Court Receiver within two weeks from the date of such offer, Court Receiver is directed to submit report in this Court in that regard. In that event, petitioner would be at liberty to apply for further interim relief.

¶192

(ii) Till the Court Receiver takes possession of equipments as directed aforesaid, there shall be interim injunction in terms of prayer clause (e).

¶193

(iii) Petitions are disposed of in aforesaid terms. No order as to costs.

¶194

Mr.Cama, the learned counsel for the respondents seek stay of operation of the order of appointment of the Court Receiver which is vehemently opposed by Smt.Joshi the learned for the petitioner. Application for stay of appointment of the Court Receiver is refused.

L and T Finance Ltd. v. Spotlight Tradecom Pvt. Ltd. and 2 Ors.

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L and T Finance Ltd. v. Spotlight Tradecom Pvt. Ltd. and 2 Ors.

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