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2006 Supreme(Kar) 845
2007(5) Rar. L.J. 229
V. GOPALA GOWDA AND C.R. KUMARASWAMY, JJ.
SYKO BAG INDUSTRIES, BANGALORE AND ANOTHER -Appellant
versus
ICDS LIMITED, MANIPAL AND ANOTHER -Respondent
Miscellaneous First Appeal No. 1499 of 2003.
Decided on :8th November, 2006
Sriyuths N.S. Satishchandra, R. Nataraj, A. Sampath, Mahesh V., Prashanth N., Kusuma P., Chandrashekar and Raghavendra, Advocates for Appellants;
Sri T.N. Raghupathy, Advocate for Respondent-1.
Headnote:Arbitration and Conciliation Act, 1996 - Preamble - Object of the Act - Stated. [Gopala Gowda, J]: (i) to comprehensvely cover international commercial arbitration and conciliation as also a domestic arbitration and conciliation. (ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration; (iii) to provide that the arbitral tribunal gives reason for its arbitral award; (iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction; (v) to minise the supervisory role of courts in the arbitral process; (vi) to permit an arbitral tribunal to use medication, conciliation or other procedure during the arbitral proceedings to encourage settlement of disputes; (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; (viii) to rpvide that a settlemetn agreement reached by the parties as a result of conciliation proceedings will have the same status and effect an arbitral award on agreed terms on the substance of the dispute rednered by an arbitral tribunal; and (ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conventions relating to foreign arbitral awards to which India is a party applies, will be terated a s a foreign award. By a careful reading the aforesaid objects of the Act, it makes clear that the dispute in relation to the commercial matters between the parties has to be resolved by the Arbitrator and the Court as expeditiously as possible either in relation to domestic arbitration or international domestic arbitration by conciliation proceedings. The provisions of CPC are applicable to the arbitral proceedings as they are Civil in nature as stated under Section 4 of CPC as observed by the A.P High Court decision in the case of B. Ramaswamy referred to supra. In the absence of any specific provisions in the Act which are contrary to the provisions of CpC, which would affect the rights of a party under special law or local law in force or such jurisdiction conferred has to be applied to the case on hand.
Cases Referred: 2002 (1) SCC 475; 2002 (3) Kar L.J. 265; AIR 1971 SC 740; AIR 2003 SC 1177; AIR 1965 Mys. 316; AIR 2001 Kar 364; AIR 2002 Kar 252; AIR 1985 AP 62; AIR 1917 Del 201; AIR 1963 HP 9; AIR 2002 SC 2308; Savita Garg Vs. Director National Heart Institute; 1996(2) SCC 132; AIR 2004 AP 280; (2004) 3 SCC 250; AIR 1964 AP 365; AIR 2001 Kar 364.
Code of Civil Procedure, 1908 - Section 4(1) - Applicability of Code - Applicable to arbitration proceedings except to inconsistency if any to the law of arbitration. [Gopala Gowda, J]: It is an undisputed fact that Hire-purchase agreement between the parties is entered at Udupi, the subject matter of the dispute is for recovery of money involved with regard to supply of machinaries and the immovable property of the appellants is offered as collateral security. The Award is passed by the Arbitrator stating that if amount awarded by Arbitrator is not paid by appellants, if Section 16(c) of CPC is applied to the fact situation as contended by first respondent s counsel then, the subject matter of Arbitration and the purpose of conducting Arbitral proceedings by the Arbitral Tribunal on the basis of agreement between the parties was held at Udupi and the award passed by the Arbitrator will be defeated. In respect of that Arbitration Award either of the party can question the correctness of the same by filing a petition under Section 34 to the Civil Court which has got original civil jurisdiction fro the purpose of revoery of money due from the first appellant. Therefore the Civil Court viz; District Court jurisdiction at Udupi is not taken away. If Section 16(c) comes in the way for the purpose of sale of immovable B-Schedule property which was given as collateral security by the first appellant to the first respondent for having supplied by the machinaries on credit basis to it by them, the same cannot be applied to the case on hand for the reason that alternative prayer in the claim petiton of the first respondent before the second respondent was that if the amount is nto paid by the appellants to the first respondent as awarded by the Arbitrator, in that event, the sale of immovable property has to be made for recovery of the amount awarded against them by treating the award as the decree of the Civil Court under CPC.
Cases Referred: 2002 (1) SCC 475; 2002 (3) Kar L.J. 265; AIR 1971 SC 740; AIR 2003 SC 1177; AIR 1965 Mys. 316; AIR 2001 Kar 364; AIR 2002 Kar 252; AIR 1985 AP 62; AIR 1917 Del 201; AIR 1963 HP 9; AIR 2002 SC 2308; Savita Garg Vs. Director National Heart Institute; 1996(2) SCC 132; AIR 2004 AP 280; (2004) 3 SCC 250; AIR 1964 AP 365; AIR 2001 Kar 364.
Arbitration and Conciliation Act, 1996 - Section 16 - Jurisdiction of District Court - Agreement entered into at place U - Arbitration held at place U - District court at place U has jurisdiction to consider validity of award - Collateral security given by party who obtained supplies under the agreement - On default to comply award, secured property to be proceeded against - Held, it can be proceeded against treating award as decree.
Cases Referred: 2002 (1) SCC 475; 2002 (3) Kar L.J. 265; AIR 1971 SC 740; AIR 2003 SC 1177; AIR 1965 Mys. 316; AIR 2001 Kar 364; AIR 2002 Kar 252; AIR 1985 AP 62; AIR 1917 Del 201; AIR 1963 HP 9; AIR 2002 SC 2308; Savita Garg Vs. Director National Heart Institute; 1996(2) SCC 132; AIR 2004 AP 280; (2004) 3 SCC 250; AIR 1964 AP 365; AIR 2001 Kar 364.
Arbitration and Conciliation Act, 1996 - Sections 36 and 19 - Applicability of CPC -Applicable in the absence of any specific provisions in the Act which are contrary to provisions of CPC.
JUDGMENT
The order impugned in this appeal passed by the District Judge, Udupi, dated 27-11-2002 in AS. No. 98 of 2002, on the question of jurisdiction of the said Court after interpretation of Section 2(1)(e) of the Arbitration and Conciliation Act, 1996 (hereinafter called as 'the Act' in short) made by the learned Judge, has returned the petition to the appellants herein for presenting the same before the jurisdictional Court by granting time till 12-12-2002 to facilitate the appellants to name the Court to which they propose to present the same is questioned before this Court inter alia contending that the learned District Judge has wrongly applied Section 16(c) of the Civil Procedure Code, 1908 ignoring the relevant fact of dispute between the parties involved in the arbitration proceedings, which is in relation to the loan transaction and not a suit for foreclosure of the immovable property of the first appellant which is furnished as collateral security to the respondent. The sale or redemption of mortgage was charged upon the immovable property namely, 'B' schedule property furnished by the first appellant as collateral security to the first respondent. Therefore, the learned Counsel Sri N.S. Satish Chandra for appellants contends that the learned District Judge has made observation in the order impugned stating that the said Court has no jurisdiction to entertain the petition of the appellants by accepting the plea taken by the first respondent with regard to the territorial jurisdiction of Principal District Judge Court after referring to the decision of the Supreme Court in Gagandeep Pratishthan Private Limited and Others v M/s. Mechano and Another, wherein the Supreme Court has held that the question relating to territorial jurisdiction of the Court is an important aspect, the same shall be taken and decided as a preliminary issue and it goes to the root of the matter, which finding of the learned District Judge is erroneous in law, as he has not taken into consideration the dispute between the parties in relation to money recovery in respect of the machineries supplied by the first respondent to the first appellant for which Schedule 'B' immovable property was furnished by it as collateral security to the first respondent. Therefore the claim of the first respondent before the Arbitrator in the Arbitral proceedings is not in relation to subject matter of the above immovable property. The relief granted by the Arbitrator for sale of 'B' Schedule property in the event of money awarded in the award in favour of the first respondent cannot be recovered. Therefore, the reliance placed upon by the learned District Judge under Section 16(C) of the CPC in support of his conclusion that the District Court has no territorial jurisdiction to entertain the petition filed by the appellants ignoring the definition of the Civil Court under the Act, wherein it has been specifically stated that the District Judge and the High Court in exercise of its ordinary civil jurisdiction to decide I the questions "forming the subject-matter of the arbitration, if the same had been the subject-matter of a suit". The subject-matter of the arbitration between the parties before the Arbitrator was for recovery of money due from the first appellant to the first respondent for having supplied the machineries to it. There was a dispute in this regard between the parties and the second respondent was appointed as an Arbitrator and dispute was referred to him for adjudication, he has passed the award directing the appellants to pay in all a sum of Rs. 23,33,595/- with interest at 18% p.a. on Rs. 12,70,336/- from 11-11-1999 till realisation and also pay a sum of Rs. 7,750/- as the cost of Arbitral proceedings. Aggrieved by the award the petition was filed before the Principal District Judge, Udupi by the appellants and the same was numbered as A.S. No. 98 of 2002. The learned Principal District Judge has accepted the submission ma
