The main legal point established in the judgment is the requirement to raise objections to jurisdiction at the earliest possible opportunity and the applicability of CPC provisions to the Arbitration and Conciliation Act, 1996.

(PRAYER: Appeal filed under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 against the order of the learned single Judge passed in Application Nos.4149 of 2004 and 2232 of 2005, dated 15.07.2005.)

THE HON’BLE CHIEF JUSTICE

This appeal is directed against the order of the learned single Judge in an application under Section 9 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) making absolute the prohibitory order restraining the Garnishee, the second respondent in this appeal, from making any payment to the appellant.

2. The appeal arises under the following circumstances: -

The appellant is a company incorporated under the Companies Act, 1956 having its Registered Office at Hyderabad. In or around January, 2003 the appellant had called for tenders for the works of Erection, Testing and Commissioning and Power Evacuation and distribution system for the Biomass Best Power Plant of 6 MW capacity. The tender submitted by the first respondent was accepted, and seven purchase orders were issued by the appellant to the first respondent with annexures specifying the works and prices. As per Clause –11 of the agreement any difference in the interpretation of the terms of the agreement or dispute arising in executing the contract shall be resolved by reference to arbitrators under the provisions of the Arbitration and Conciliation Act, 1996. Clause-14 stipulates that for all practical purposes the jurisdiction of Hyderabad Courts will be final. There is no dispute that the first respondent completed the works covering all the purchase orders and a completion certificate was issued.

3. The first respondent filed Application No.4149 of 2004 before this Court under Section 9 of the Act praying for a prohibitory order restraining the second respondent/Garnishee from paying to the appellant the amounts, and consequently restraining the appellant from receiving monies and directing the second respondent to deposit the amount to the credit of the above application. According to the first respondent, there was an outstanding amount of Rs.60.50 lakhs payable by the appellant to the first respondent. The first respondent sent several letters demanding payment of monies, the receipt of which is not denied by the appellant. However, the appellant failed to pay the monies or replied to any of the letters. Further, according to the first respondent the appellant is in financial crisis. It owes more than Rs.1.6 crore to various persons and all its assets are encumbered.

4. On 24.3.2005 an ex parte prohibitory order came to be passed restraining the Garnishee/second respondent in this appeal, from making any payment to the appellant. The appellant filed a counter in Application No.4149 of 2004 and filed Application No. 2322 of 2005 for vacating the interim order. The appellant contended that the cause of action arose within the State of Andhra Pradesh where the Project was located and executed and from where the payments were made. It has been specifically agreed between the parties under the jurisdiction clause “that for all practical purposes the jurisdiction of Hyderabad Courts will be final”, and therefore the Courts at Hyderabad will have jurisdiction excluding the jurisdiction of all other Courts. The appellant further contended that the first respondent has totally paid a sum of Rs.1,58,02,685.80 against the total supplies of Rs.1,39,03.280.72 without going into the correctness of quantity and value of supply. The total value of the supply figures is only Rs.1,39,03,280.72 as per the statement of accounts of the first respondent. However, the correct amount due as verified by the Chartered Accountant would be only Rs.1,38,58,280. Thus, the appellant has made excess payment of Rs.19,44,405.80, which is to be reimbursed by the first respondent, and no amount is due to the first respondent. It was pointed out that there is a Power Purchase Agreement with the Garnishee for a period of 20 years from January 200