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High Court Of Calcutta
Pratibha Bonnerjea
GANPATRAI AGARWALL - Appellant
Versus
THE FERTILISER CORPORATION OF INDIA - Respondent
Matter Nil Of 1983
Decided On : 06/27/1983
ARBITRATION - Forum Selection Clause - Effect - Jurisdiction of Court - Discretion to Consider Balance of Convenience - Ouster Clause - Oppressive Nature - Interpretation of Section 31(4) of the Arbitration Act, 1940.
Fact of the Case:
The petitioner and respondent entered into a contract for the purchase of abandoned fertilizer plants. The contract contained a forum selection clause stating that it would be subject to the jurisdiction of the Dhanbad Court. Disputes arose between the parties, and the petitioner filed a special suit under Section 20 of the Arbitration Act for filing the arbitration agreement and also took out an application under Section 41 of the said Act for restraining the respondent from enforcing the three bank guarantees.
Finding of the Court:
1. The court has jurisdiction to entertain the application under Section 41 of the Arbitration Act, but the forum selection clause in the agreement is binding on the parties. 2. The court has the discretion to consider the balance of convenience in cases where two or more courts have jurisdiction and a suit or proceeding has been started in one of such courts having jurisdiction. 3. However, where there is an express and clear forum selection clause in the agreement, the question of the court's discretion or consideration of balance of convenience will not arise at all because such an agreement is binding on the parties. 4. The ouster clause in the present case is clear and not oppressive. Therefore, the court should not entertain the application.
Issues: 1. Whether the court has jurisdiction to entertain the application under Section 41 of the Arbitration Act, 1940, despite the forum selection clause in the agreement. 2. Whether the court has the discretion to consider the balance of convenience in this case. 3. Whether the ouster clause in the agreement is oppressive.
Ratio Decidendi: 1. The court has jurisdiction to entertain the application, but the forum selection clause in the agreement is binding on the parties. 2. The court has the discretion to consider the balance of convenience in cases where two or more courts have jurisdiction and a suit or proceeding has been started in one of such courts having jurisdiction. 3. However, where there is an express and clear forum selection clause in the agreement, the question of the court's discretion or consideration of balance of convenience will not arise at all because such an agreement is binding on the parties. 4. The ouster clause in the present case is clear and not oppressive. Therefore, the court should not entertain the application.
Final Decision: The application is returned to the petitioner for filing in the proper forum.
( 1 ) THE long history of this case is as follows:--The petitioner entered into a contract with the respondent for purchase of abandoned fertiliser plants for Rupees 40,02,500/- on "as is where is'' basis pursuant to respondent's invitation to tender No. 14/80 dated 30-5-1980. The terms of the said contract are contained in the petitioner's offer dated 23-5-1980 and the respondent's letter of acceptance dated 30-5-1980. By this letter, the respondent (hereinafter referred to as the FCI) admitted having received Rs. 5,00,000/-from the petitioner by way of earnest money. The petitioner was to pay Rs. 5,00,00,000/- by way of security deposit. By this letter of acceptance, the FCI adjusted this aforesaid earnest money against the said security and directed the petitioner to pay the balance Rs. 45. 00. 000/- within 15 days in the manner as follows:-- (1) Rs. 5,00,000/- by crossed bank draft. (2) Rs. 40,00,000/- by unconditional and irrevocable bank guarantee.
( 2 ) PURSUANT to the said letter, the petitioner furnished one bank guarantee for Rs. 4,00,00,000/- through the Punjab and Sind Bank on 11-6-1980 and paid Rs. 5,00,000/- in cash on 12-6-80. On 7-7-80 the FCI issued a sale letter in favour of the petitioner which provided that all the general terms and conditions of sale as specified in the tender document subject to agreed amendment/modification on the basis of the discussions on 20/21/-3-1980 and 9/5/1980, would govern the transaction. The modified terms arrived at on 20/21-3-1980 and 9-5-1980 would appear from the minutes of the said two meetings which form part of this sale letter. The two important variations which were made are as follows :--1. That the weights of plants indicated in the notice inviting tender were inclusive of weights of the foundations and those weights should be treated as deleted and the weights should be treated as approximate weights. 2. Dismantling and lifting of the plants should be completed within 18 months from the date of acceptance of petitioner's offer. The entire payment of the price to be made to the FCI by equal monthly instalments within 12 months time. The value of the goods lifted by the petitioner should not be more than the payment of quarterly instalments and this would be assessed by the FCI and the assessment will be binding on the petitioner.
( 3 ) THE said sale order also contains a dismantling schedule which shows the sequence in which different plants have to be dismantled and removed by the
petitioner in four instalments. It appears that the net effect of these modifications is that the FCI agrees to accept purchase price in four equal instalments as also to give delivery of the plants in four instalments. The petitioner will be entitled to lift the goods after FCI will assess the proportionate value of the goods to see that it may not exceed the amount of instalment paid. This agreement was challenged by the Workers' Union of the FCI and it obtained an order of stay from the Supreme Court on 25-8-1980. The said petition was, ultimately dismissed on 13-11-1980.
( 4 ) ON 2-12-1980 the petitioner paid the first instalment of Rs. 1,00,06,250/- and Rs. 4,00,250/- on account of sales tax and prayed for permission to lift the first lot of the plants mentioned in the dismantling schedule of the sale letter. The FCI allowed the petitioner to remove the Ammonia plants as per dismantling schedule on 5-12-80. The dismantling, however, could not be completed due to local labour trouble which started on 7-2-81. Faced with this situation, the petitioner prayed for rearrangement of payment up to 29-3-1981. On 27-3-1981, the On 9-3-81 the FCI granted extension of time for payment of the second instalment up to 29-3-1981. On 27-3-1981, the petitioner however, requested the FCI to extend the period up to 28-4-1981 and alleged that the FCI did not allow the petitioner to lift the entire Ammonia plant although 9 months had elapsed. On 31-3-1981 the petitioner paid to
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