Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2009 Supreme(SC) 33

2009(1) Supreme 121
SUPREME COURT OF INDIA
Tarun Chatterjee and Dr. Mukundakam Sharma, JJ.
Rajasthan State Electricity Board — Appellant
versus
M/s. Universal Petrol Chemicals Ltd. — Respondent
Civil Appeal Nos. 5430-5431 of 2002
Decided on : 12-01-2009

Advocates appeared:
For the Appellant :Puneet Jain, Sushil Kumar Jain, Ms. Archana Tiwari and Ashwin V. Kotemath, Advocates.
For the Respondent:S.C. Ghosh, Parijat Sinha, Ms. Reshmik Rea Sinha and Snehasish Mukherjee, Advocates.

IMPORTANT POINT
When ouster clause is clear, unambiguous and specific, accepted notions of contract would bind parties and unless absence of ad idem can be shown Courts should avoid exercising jurisdiction.

Headnote:Arbitration Act, 1940 – Sections 20, 31(4) – Civil Procedure Code, 1908 – Section 20 – Agreement entered into between appellant Board and respondent for supply of transformed oil – Disputes between parties – Suit filed by respondent u/s 20 of Act in High Court at Calcutta – Dismissed by High Court – On remand, petition filed by appellants u/s 20 dismissed – Appeals – Allowed by High Court holding that since respondent had made an application before calcutta high Court having competent jurisdiction to try and decide proceedings, said Calcutta Court would be entitled to exercise jurisdiction and that all subsequent applications would be made to that Court only as first application was made in that Court by respondent – Appeal – An analytical look at provisions of subsections (3) and (4) of section 31 of Act shows that any application in any reference, meaning thereby even an application u/s 20 of Act could or should be filed in a Court competent to entertain such proceeding and having jurisdiction to decide subject of reference – Such jurisdiction would or could be restricted by agreements entered into by and between the parties – Parties had clearly stipulated and agreed that no other court, but only Court at Jaipur would have jurisdiction to try and decide proceedings arising out of said agreements – Hence it was Court at Jaipur which alone had jurisdiction to try and decide such issue – High Court erred in holding that by virtue of Section 31(4) of Act, Calcutta High Court had jurisdiction in matter – Impugned judgment of High Court set aside – Appeals allowed. (Paras 26 to 29)
       Facts of the case :
       An agreement was entered herein in the instant case between appellant Board and respondent for supply of transformed oil. On disputes between parties suit was filed by respondent u/s 20 of Act. High Court subsequently held that since respondent had made an application before Calcutta High Court having competent jurisdiction to try and decide proceedings said Calcutta Court would be entitled to exercise jurisdiction and that all subsequent application would be made to that court only as first application was made in that Court by respondent.
       Findings of the court :
       An analytical look at provisions of subsections (3) and (4) of Section 31 of Act shows that any application in any reference, meaning thereby even an application u/s 20 of Act could or should be filed in a Court competent to entertain such proceding and having jurisdiction to decide subjectof reference. Such jurisdiction would or could be restricted by agreements entered into by and between the parties. Since parties had clearly stipulated and agreed that no other Court, but only court at Jaipur would have jurisdiction to try and decide proceedings arising our of said agreements. Hence held that it was Court at Jaipur which alone had jurisdiction to try and decide such issue.
       Result : Appeals allowed.

JUDGMENT

Dr. Mukundakam Sharma, J. —

1.Being aggrieved by the common judgment and order dated 17.04.2001 passed by the Division Bench of the High Court of Calcutta in Appeal Number 462 and 463 of 1992, allowing the appeals filed by the respondent against the judgment of a learned Single Judge, these civil appeals have been preferred where special leave was granted. Since both these appeals involve similar questions of law and facts and arise out of the same impugned order, we propose to dispose of both these appeals by this common judgment and order.

2.The appellant Board which is having its base and operation at Jaipur placed an order for supply of 50 kiloliter of transformer oil with the respondent Company which is having its registered office and manufacturing unit at Calcutta vide purchase order No. RSEB/SE/Proc.I/TN-1261/U/Petrochemical/937 dated 23.9.1985 for an amount of Rs. 6,09,144/-. In terms of clause 5 of the said purchase order, the respondent was required to deposit security in the form of bank guarantee for an amount equivalent to 2 per cent of the contract value. In addition, the respondent was also required to furnish a performance guarantee equivalent to 5 per cent of the contract value for satisfactory performance and due execution of the said contract. Subsequent to the aforesaid purchase order, an agreement was also entered into between the parties on 16.10.1985 at Jaipur.

3.Subsequently the appellant Board placed another purchase order vide No. RSEB/SE/Proc.I/TN-1312/202 dated 02.12.1987 for supply of 150 kiloliter of transformer oil for an amount of Rs. 19,50,000/-. Similar to the previous purchase order, in the present purchase order also the respondent was required to furnish the bank guarantee equivalent to 2 per cent of the contract value towards security deposit and equivalent to 5 per cent of the contract value towards performance guarantee. Accordingly an agreement was also entered into between the parties on 16.12.1987 at Jaipur.

4.In terms of the abovesaid two purchase orders and agreements thereon the respondent was required to furnish bank guarantee to the tune of Rs. 1,79,200/-. In compliance to the said condition with respect to the bank guarantee the respondent furnished four bank guarantees for amounts of Rs. 12200/-, Rs. 30500/-, Rs. 39000/- and Rs. 97500/-. These guarantees were executed by the Allahabad Bank at Jaipur Branch on behalf of their Main Branch at Calcutta.

5.Before we proceed further it would be appropriate for us to extract herein the relevant clauses with respect to adjudication of the disputes, if any, which were common in both the agreements. Clause 30 of the General Conditions of the Contract inter alia stipulates as under:-

“30.....The contract shall for all purposes be construed according to the laws of India and subject to jurisdiction of only at Jaipur in Rajasthan Courts only...........”

Clause 31 of the General Conditions of the Contract, which is an arbitration clause, reads as under:-

“31.ARBITRATION

(a)If at any time any question, dispute to difference whatsoever which may arise between the Purchaser and the Supplier upon or in relation to Contract, either party may forthwith to the order a notice in writing of the existence of such question(s)/dispute(s) differences and the same shall be referred to the Chairman, RSEB, Jaipur or any person appointed by him for the purpose (herein referred to the ‘Arbitrator’). Such reference shall be deemed to be a submission to the arbitration within the meaning of the Indian Arbitration Act, 1940 and the statutory modifications made thereof.

(b)The award of the Arbitrator shall be final and binding on both the parties.

(c)Upon every or any such reference, the cost incidental to such reference and an award shall be in the discretion of the Arbitrator who may determine the amount thereof and direct the same to be borne and paid.

(d)Work under the Contract shall, if reasonably possible, continue during the arbitration proceedings and no pay

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2009 Supreme(SC) 33

2009(1) Supreme 121SUPREME COURT OF INDIATarun Chatterjee and Dr. Mukundakam Sharma, JJ.Rajasthan State Electricity Board — AppellantversusM/s. Universal Petrol Chemicals Ltd. — RespondentCivil Appeal Nos. 5430-5431 of 2002Decided on : 12-01-2009

IMPORTANT POINTWhen ouster clause is clear, unambiguous and specific, accepted notions of contract would bind parties and unless absence of ad idem can be shown Courts should avoid exercising jurisdiction.

Cases Referred (4)

2009(1) Supreme 121
SUPREME COURT OF INDIA
Tarun Chatterjee and Dr. Mukundakam Sharma, JJ.
Rajasthan State Electricity Board — Appellant
versus
M/s. Universal Petrol Chemicals Ltd. — Respondent
Civil Appeal Nos. 5430-5431 of 2002
Decided on : 12-01-2009

IMPORTANT POINT
When ouster clause is clear, unambiguous and specific, accepted notions of contract would bind parties and unless absence of ad idem can be shown Courts should avoid exercising jurisdiction.