Territorial jurisdiction in arbitration agreements prevails over statutory provisions when parties explicitly state preferred jurisdiction in contracts.

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 cl.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. cl.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 ........"
cl.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 refe