1973 Supreme(Mad) 73

Madras High Court
K. VEERASWAMI,RAGHAVAN
Electrical Manufacturing Co.Ltd., Calcutta - Appellant
Versus
Crompton Engineering Co.(Madras) Ltd., Madras - Respondent
Decided On : 02/09/1973

Headnote:

ARBITRATION - JURISDICTION - APPLICATION TO FILE ARBITRATION AGREEMENT - COURT HAVING JURISDICTION - DEFINITION - SUBJECT-MATTER OF REFERENCE - CAUSE OF ACTION - PLACE OF EXECUTION OF AGREEMENT - PLACE OF ENTRUSTMENT OF GOODS AND ALLEGED WRONGFUL CONVERSION - COURT'S JURISDICTION TO DETERMINE DISPUTES.

Fact of the Case:

The plaintiffs entered into an agreement with the first defendant whereunder the first defendant agreed to fabricate all requirements of steel towards the sub-station structures of the plaintiffs in three different areas. The said agreement inter alia contained the following terms and conditions - (i) Cromptons, (the plaintiffs herein) are to provide the Electrical Manufacturing Co. Ltd., (the first defendant herein) with all the steel and zinc required for fabrication and galvanisation of towers and structures ordered from time to time by the plaintiffs. (ii) The Electrical Manufacturing Co. Ltd. (the first defendant herein), shall provide free of charge sufficient separate space for the storage of the steel and zinc entrusted to them by Cromptons. (iii) The Electrical Manufacturing Co. Ltd. (the first defendant herein), shall maintain proper accounts of steel and zinc received from Cromptons and send to Cromptons fortnightly statements of receipts, issues and stocks of steel and zinc. (iv) The said Electrical Manufacturing Co. Ltd., (the first defendant) shall not in any circumstance use the steel or zinc or any part thereof entrusted to them except for the purpose stipulated in the agreement. On behalf of the first defendant and as their agents another Company by name E. M. C. Projects (P.) Ltd., Calcutta, hereinafter referred to as the second defendant, was handling some of the matters of the first defendant, in order to maintain with care and speed, the works which were entrusted to the first defendant and a supplementary, agreement dated 8-10-1965 was executed at Madras between the plaintiff, the first defendant and the second defendant. The plaintiffs on their part gave a tender on 26-3-1962 to the Madhya Pradesh Electricity Board, Jabalpur (not a party herein) for fabrication of steel towers and erection thereof in three different areas, viz., Bhilai Bodghat area and Jabalpure-Narasighpur area and Korba-Amarkantak area. The said tender was accepted on 16-2-1964 by the Madhya Pradesh Electricity Board and a contract was entered into between the plaintiff and the Madhya Pradesh Electricity Board for the fabrication of towers and erection thereof in specified areas. The contract itself provides that the fabrication of the tower members will be got done by the Electrical Manufacturing Co. Ltd. (first defendant). The said contract contains a specific clause (clause X) to the effect that the plaintiffs are responsible for the steel delivered at the fabricators works and for affording facilities to the Board's Engineers for inspection of steel stocks etc. Pursuant to the contract entered into by the plaintiffs with the Madhya Pradesh Electricity Board, and on the basis of the agreement dated 11-7-1962, the Madhya Pradesh Electricity Board was periodically supplying steel to the first defendant with which the first defendant carried out the fabrication work of the steel towers and supplying the same to the plaintiffs towards their contract with the Madhya Pradesh Electricity Board. According to the plaintiffs, out of the steel supplied by the Madhya Pradesh Electricity Board to the first defendant after carrying out the fabrication work in the two areas referred to, large quantities of steel were left with the first defendant as the balance of stock. Further in regard to the third work, the Madhya Pradesh State Electricity Board placed an order with the first defendant for supply of stubs which was complied with, but when they were called upon to fabricate and supply tower parts for the third work they defaulted. The plaintiff's case is that the first defendant misapplied a large quantity of steel supplied to them which they are bound to account and that they are bound to return to the plaintiffs 3407 metric, tons of steel entrusted to them and unused. The first defendant, however, put forward various counter claims against the plaintiffs and denied their liability to return to the plaintiffs 3407 metric tons of steel. The plaintiffs, therefore, have filed the present application under Section 20 of the Arbitration Act, 1940, for the reliefs mentioned therein contending that the agreement dated 11-7-1962 and the supplemental agreement dated 8-10-1965 were both executed at Madras and that the whole cause of action had arisen at Madras within the jurisdiction of the court. The plaintiffs also filed an application No. 2762 of 1971 for leave to file the petition in this court under Cl. 12 of the Letters Patent and Section 20, C. P. Code and obtained leave ex parte on 22-12-1971.

Finding of the Court:

The court held that the subject-matter of the reference included the execution of the contract between the parties under which the dispute had arisen and that the agreement having been executed at Madras, this court has jurisdiction to decide the question forming the subject-matter of the reference.

Issues: Whether the court has jurisdiction to entertain the suit and make an order appointing an arbitrator to decide the disputes between the parties.

Ratio Decidendi: The definition of the word 'court' under Section 2(c) of the Act and construing the words 'with respect to subject-matter of the agreement' occurring in Section 20(1) of the Act and the circumstances that the factum of execution of the agreement at Madras not being in question, the subject-matter of the agreement is not the execution of the agreement, but the place where the alleged misuse of the surplus steel supplied to the first defendant took place, viz., Sealdah, which is within the jurisdiction of the Calcutta High Court and that it is the Calcutta High Court that has jurisdiction to entertain the application under Section 20 and proceed to determine the application in accordance with Section 20 of the Act.

Final Decision: Appeal allowed.