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High Court Of Calcutta
A. K. GANGULY, PRANAB KUMAR CHATTOPADHYAY
UNIVERSAL PETROCHEMICALS LIMITED - Appellant
Versus
RAJASTHAN STATE ELECTRICITY BOARD - Respondent
A. P. O. 462 Of 1992
Decided On : 04/17/2001
ARBITRATION ACT, 1940 - SECTION 31(4) - FORUM SELECTION CLAUSE - APPLICATION UNDER SECTION 20 - JURISDICTION - EFFECT OF SECTION 31(4) ON FORUM SELECTION CLAUSE - WHETHER SECTION 31(4) WILL OVERRIDE A CONTRACT BETWEEN THE PARTIES - WHETHER A PRIVATE CONTRACT CAN OVERRIDE A STATUTE.
Fact of the Case:
1. Universal Petrochemicals Ltd. (appellant) entered into two separate contracts with Rajasthan State Electricity Board (Board) for supply of transformer oil. 2. Appellant furnished four bank guarantees to cover the said amount. 3. Board alleged that the oil supplied by the appellant is of defective quality and invoked the bank guarantee. 4. Appellant filed an application under Section 20 of the Arbitration Act, 1940 (Act) for an order of reference and an application under Section 41 of the Act seeking an interim order, restraining the Board from demanding or receiving any payment under the Bank guarantees. 5. Board filed an application seeking dismissal of the appellant's application under Section 20 of the Act and revocation of leave under Clauses 12 and 14 of the Letters Patent. 6. Trial Judge dismissed the appellant's application under Section 20 of the Act and vacated the interim order passed on the Section 41 application. 7. Appellant filed an appeal which was set aside by the Appellate Court and the matter was remanded to the Trial Court for fresh consideration. 8. Trial Judge again dismissed the Section 20 application and vacated the final order passed in Section 41 application.
Finding of the Court:
1. Section 31(4) of the Act has an overriding effect and operates as an ouster of jurisdiction of all other courts which may have jurisdiction in the matter. 2. A private contract cannot override a statute. 3. Section 31(4) will override any agreement between the parties, including a forum selection clause. 4. An application under Section 20 of the Act is an application in the matter of a reference and the court in which the first such application is made will have exclusive jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference. 5. The Trial Judge erred in dismissing the Section 20 application and recalling the final order passed on the Section 41 application.
Issues: 1. Whether Section 31(4) of the Act will override a forum selection clause in a contract. 2. Whether a private contract can override a statute. 3. Whether the Trial Judge erred in dismissing the Section 20 application and recalling the final order passed on the Section 41 application.
Ratio Decidendi: 1. Section 31(4) of the Act has an overriding effect and operates as an ouster of jurisdiction of all other courts which may have jurisdiction in the matter. 2. A private contract cannot override a statute. 3. Section 31(4) will override any agreement between the parties, including a forum selection clause. 4. An application under Section 20 of the Act is an application in the matter of a reference and the court in which the first such application is made will have exclusive jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference. 5. The Trial Judge erred in dismissing the Section 20 application and recalling the final order passed on the Section 41 application.
Final Decision: 1. Appeals allowed. 2. Judgments and orders passed by the Trial Judge set aside. 3. Section 20 application filed by the appellant is maintainable before this Court and the same may be placed before the appropriate Bench immediately for early disposal. 4. Order passed on Section 41 application is restored. 5. No order as to costs.
( 1 ) THESE two appeals arise out of two separate judgments and orders passed by the learned Trial Judge while dealing with one proceeding. Both the appeals were heard analogously as the facts are same, subject matter of disputes are similar and the parties are identical. The facts of the case are briefly summarised hereinbelow.
( 2 ) UNIVERSAL Petrochemicals Ltd. the appellant herein, entered into two separate contracts for supply of transformer oil to Rajasthan State Electricity Board (herinafter called the Board ). In terms of those agreements, the appellant was to furnish bank guarantee for a total sum of Rs. 1,79,200/. The appellant furnished four bank guarantees to cover the said amount. The case of the appellant is that the entire quantity of transformer oil under Contract No. TN 1261 was duly supplied by it by December, 1986 and the same was accepted by the Board without any objection. In respect of the other contract, being Contract No. TN 1312, the appellant contended that the transformer oil was delivered after it was tested and certified in Calcutta by the representative of the Board. Such supply was completed by June, 1988.
( 3 ) BUT the disputes and differences arose between the parties on the Board's unauthorised invoking of the bank guarantee alleging that the oil supplied by the appellant is of defective quality.
( 4 ) SO in view of the arbitration clause contained in the agreement, the appellant on 28th June, 1990 filed an application under Section 20 of the Arbitration Act, 1940 (hereinafter called the Act) after obtaining leave under Clauses 12 and 14 of the Letters Patent. An application under Section 41 of the Act was also filed on that date seeking an interim order, restraining the Board from demanding or receiving any payment under the Bank guarantees and an interim order was passed on that date which was later on confirmed.
( 5 ) THEN an application was also filed by the Board wherein the Board prayed for, inter alia, dismissal of the application filed by the appellant herein under Section 20 of the Act and alternatively, made a prayer for a direction that the said application under Section 20 filed by the appellant herein be taken off the file. In the said application the Board further prayed for revocation of leave under Clauses 12 and 14 of the Letters Patent. The Board also prayed for dismissal of the application filed by the appellant herein under Section 41 of the Arbitration Act and the stay of the operation of the interim order dated 25th June, 1990 passed by the Court on the application under Section 41 filed by the appellant.
( 6 ) ON 6th March, 1991 application under Section 20 filed by the appellant herein and also the application filed by the Board came up for hearing before the learned Trial Judge when the said learned Judge dismissed the application filed under Section 20 of the Act by the appellant herein and also vacated the interim order passed on the Section 41 application though the said application filed under Section 41 of the Arbitration Act had been finally disposed of on an earlier date.
( 7 ) ON an appeal filed by the appellant, the said order of 6th March, 1991 was set aside by the Appeal Court and the matter was remanded to the Trial Court for fresh consideration. The learned Trial Judge, thereafter heard the matter again pursuant to the direction of the Appellate Court and passed similar order dismissing the Section 20 application filed by the appellant herein and final order passed in Section 41 application was also vacated.
( 8 ) CURIOUSLY enough the learned Trial Judge delivered two separate judgments and passed two different orders on the same day that is on 13th March, 1992 in order to dismiss the Section 20 application filed by the appellant therein and also to vacate the final order passed in Section 41 application though the said application under Section 41 was finally disposed of by an earlier order dated 1st August, 1990, From
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