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Case Note:
Arbitration territorial jurisdiction Sections 2, 14, 14 (2), 17, 21, 30, 31, 33,
and 40 of Arbitration Act, 1940 and Section 16 of Code of Civil Procedure, 1908
matter related to jurisdiction in arbitration proceedings as per Section 31 (2)
and (3) Court in which award has been filed has jurisdiction to decide matter i
n case award has been filed in Court having no jurisdiction provision of said Se
ction would not apply.
ORDER
1. O.P. NO. 531 of 1987 was filed by Sabson (India) Pvt. Ltd., Bangalore against
Neyveli Lignite Corporation and Mr. Justice V. V. Raghavan and Mr. M. G. Balasu
bramaniam (arbitrators) under Sections 14(2) and 17 of the Arbitration Act, 1940
to direct the arbitrators (respondents 2 and 3 above,) to file the award in thi
s court and for passing a decree in terms of the award in favour of the petition
er with interest and costs.
2. The matter relates to the arbitration proceedings between the petitioner M/s.
Sabson (India) Pvt. Ltd., Bangalore and Neyveli Liginite Corporation regarding
certain disputes arising out of the agreement No. CE/TS/II/Civil/24/81-82 for th
e work of supplying, fabricating and erecting large diameter pipes for their cir
culating water system Group C for Second Thermal Power Station at Neyveli. Claus
e 84 of the General Conditions of Contract provides for arbi-tration which reads
as follows:
"Any dispute or difference at any time arising between the parties as to the con
struction, meaning or effect of this agreement or as to any clause, matter or th
ing herein contained or as to the rights and liabilities of the parties hereto s
hall be, if possible settled amicably. However if this is not achieved, contrary
to expectations the matter shall be settled in arbitration by two arbitrators o
ne to be appointed by each party, who shall appoint an Umpire before entering up
on the reference. The joint decision of the two arbitrators if they are able to
agree upon such decision, otherwise the decision of the Umpire shall be final an
d binding on both the parties hereto. The proceedings of arbitrations shall be i
n accordance with the provisions of the Indian Arbitration Act, 1940 or any stat
utory modifications or re-enactment thereto or thereof for the time being in for
ce. The venue of arbitration shall be Madras. Service under this Agreement shall
notwithstanding the existence of any dispute, controversy or question, continue
during arbitration proceedings and no payments due or payable by owner to the c
ontractor shall be withheld on account of such arbitration proceedings, unless s
uch payment is the direct subject matter or one of the subject matter thereof."
It is stated in Clause 84 that the venue of arbitration shall be at Madras. Acco
rdingly the petitioner and the first respondent each nominated their arbitrators
namely Mr. Justice V. V. Raghavan, retired Judge of this Court and Mr. M. G. Ba
lasubramaniam I. A. S. (retired) and the arbitrators entered upon (sic). They al
so nominated Mr. Justice P. Ramakrishnan, ICS, (retired) as umpire in this matte
r. The petitioner filed their claim for Rs. 28,51,084/- under various heads and
the first respondent denied the liability and preferred a counter claim. The arb
itrators made and signed the award on 24-8-1987 and intimated the parties to the
arbitration the making of their award. The intimation was received by the petit
ioner on 25-8-1987. The arbitrators disallowed the claims under certain heads an
d passed an award for Rs. 7,65,000.26 in favour of the petitioner providing for
the payment of interest by the first respondent on the amounts so awarded. The p
etitioner therefore filed this petition for directing issue of notice to the res
pondents to file the award in this court and for passing a decree in terms of th
e award in their favour with interest. Mr. Justice P. K. Sethuraman ordered noti
ce to the respondents 1 to 3 directing them to file award in this court on 7-3-1
988. When the matter came before me for hearing on 10-7-1990, I passed the follo
wing order. As it has some impact on the outcome of this petition it is reproduc
ed hereunder.
"In view of the Arbitrator filing his award in this court this original petition
is ordered accordingly. However, liberty is given to the first respondent Neyve
li Lignite Corporation Limited, to take appropriate proceedings in contesting th
e award already filed in accordance with law. Issue notice of the receipt of the
award to parties. Mr. R. Krishnaswamy takes notice for Neyveti Lignite. Corpora
tion."
3. On 30-7-1990, the Neyveli Lignite Corporation represented by its Secretary, t
he first respondent in O.P. No. 531/87 filed O.P. 337/90 under Section 33 r/w Se
ction 30 of the Arbitration Act, 1940 against the petitioner in O.P. 531/87 and
the arbitrator Mr. M. G. Balasubramaniam. It is useful to re-produce paras 6 and
7 of O.P. 337/90 filed by the Neyveli Lignite Corporation in this court:
"This petition is filed by the petitioner without prejudice to their right to ob
ject to the jurisdiction of this Hon'ble Court in receiving the award filed by t
he arbitrator. A few facts relating to the present proceedings have to be stated
. The arbitrators sent a copy of the award on 28-8-1987 to the petitioner and th
e petitioner did not receive any notice of the Award by the Joint Arbitrators. M
eanwhile the petitioner herein has filed a petition under Section 14(2) read wit
h Ss. 33 and 30 of the Arbitration Act on the file of the Subordinate Judge, Cud
dalore and the said petition has been numbered as O.P. 43/89 and the said petiti
on is pending adjudication. The petitioner states that the only cause of action
for the present petition including the calling of tenders, enquiries, submission
of tender by the first respondent execution of agreement for performance of the
work and the disputes arising out of it being arising within the jurisdiction o
f the Cuddalore Civil Court and no part of action has arisen within the meaning
of Section 2(c) of the Arbitration Act to invest jurisdiction of this Hon'ble Co
urt. The petition filed by the first respon-. dent under Section 14(2) of the Ac
t directing the arbitrator to file the award into court in O.P. 53) of 1987 is w
ithout jurisdiction. This Hon'ble Court originally directed notice in that to th
e Arbitrators. The matter was posted for orders on 10-7-1990, after notice to th
e petitioner. The petitioner objected to the jurisdiction of this Hon'ble Court
to entertain the petition and this court by its order dated 10-7-1990 allowed th
e petitioner herein to raise the question of jurisdiction in the proceedings to
be taken under Section 33 of the Act. During the course of those proceedings it
was brought to the notice of the petitioner that the award has been filed by the
arbitrators on 7-3-1988 into this Hon'ble Court. Though no notice has been rece
ived from this Hon'ble Court to avoid any technical objection later, this petiti
on is filed from the date of knowledge of the filing of the award by the Arbitra
tors namely 10-7-1990. The petitioner states that this Hon'ble court has no juri
sdiction to enquire into the matter and this has to be tried as a preliminary is
sue in regard to any further steps that can be taken together by the first respo
ndent to the Award.
7. The petitioner therefore states that the first respondent having entered appe
arance and conducting the proceedings in O.P. No. 43/89 cannot validly press int
o service his petition O.P. No. 531/87 which had become infructuous by reason of
the award having been filed into court. Without prejudice to the abovesaid cont
entions the petitioner raises the following grounds for setting aside the Arbitr
ation Award on the ground of misconduct."
4. Thus, according to the Neyveli Lignite Corporation, this court has no jurisdi
ction to entertain this O.P. since the petitioner (N.L.C.) has filed a petition
under S. 14(2) r/w Ss. 33 and 30 of the Arbitration Act on the file of Sub-Court
Cuddalore in O.P. No. 43/1989 and that the said petition is pending adjudicatio
n, that the cause of action for the present petition including the calling of te
nders, enquiries, submission of tender by the first respondent, execution of agr
eement for performance of the work and (he disputes arising out of it having ari
sen within the jurisdiction of the Cuddalore Civil Court, the petition filed by
the first respondent under S. 14(2) of the Act directing the arbitrators to file
the award in thia court in O.P. 531/87 is without jurisdiction. In fact while p
assing the order on 10-7-1990, in O.P. 531/87 this court has allowed the petitio
ner Neyveli Lignite Corporation to raise the question of jurisdiction in the pro
ceedings to be taken under Section 33 of the Act. Accordingly the question of ju
risdiction of this Court to enquire into this matter was tried as a preliminary
issue at the request and consent of both the parties. Hence I proceed to deal wi
th on the question of law in regard to the maintainability of the petition in th
is court. It is also stated by Neyveli Lignite Corporation that O.P. 337/90 is f
iled by them without prejudice to the rights of agitating the jurisdiction of th
is court in receiving the award filed by the arbitrator.
5. 1 have heard Mr. T.S. Rangarajan, . learned counsel for M/s. Sabson (India) L
td., the first respondent in O.P. No. 337/90 and Mr. R. Krishnaswami on behalf o
f the Neyveli Lignite Corporation, the petitioner in O.P. 337/90. Mr. T.S. Ranga
rajan has submitted that para 84 of the contract agreement enterted into between
the parties regarding arbitration provides that the venue of the arbitration sh
all be at Madras and that Mr. Justice V.V. Raghavan, retired judge of this court
was the arbitrator nominated by the respondents and Mr. M. G. Balasubra-maniam
was the arbitrator nominated by the Neyveli Lignite Corporation, and Mr. Justice
P. Ramakrishnan, ICS a retired judge of this court was nominated as umpire and
that the arbitrators held their sittings and enquiries at Madras and made their
award dated 24-8-1987 and intimated the same on 5-8-1987. According to the learn
ed counsel the venue of the arbitration being at Madras, as per clause 84, the f
irst respondent in O.P. 337/90 filed O.P. 531/87 in this court praying for the f
iling of the award into court and for passing a decree thereby and the other rel
iefs. The arbitrators have also filed on 7-3-1988 all the records relating to th
e arbitration proceed- ings under O.P. 531/87 in this court. It is further conte
nded by Mr. Rangarajan that the arbitration agreement specifically provides that
the venue of arbitration shall be at Madras and having acted upon it, the petit
ioner Neyveli Lignite Corporation cannot now contend that the venue for filing a
ward should be a different only namely the Sub-Court at Cadalore. It is further
contended that where two places have jurisdiction and when the award has been fi
led in a particular court, there is no question of insisting that the other cour
t has jurisdiction. It is further contended that the petitioner after learning t
hat the award has been filed in this court by the order dated 7-3-198S pursuant
to the directing of this court in O.P. No. 531/87 filed O.P. No. 43/89 at Sub-Co
urt. Cuddalore which is being contested by the respondent herein by filing their
counter therein stating that pursuant to O.P. 531/87 filed by them in this cour
t, the award has been filed by them in this court and proceedings would have to
go on only before this court and therefore the appearance of this respondent and
filing counter therein setting up the case would make O.P. 531/87 in this court
infructuous.
6. Mr. R. Krishnaswamy in his reply to the above argument of Mr. T. S. Rangaraja
n has invited my attention to clause 18 of the general conditions under "Notice
inviting tenders'. The said clause 18 is reproduced herein.
"The Civil Court having ordinary original civil jurisdiction over Neyveli shall
alone have exclusive jurisdiction in regard to all claims in respect of this con
tract of whatever nature."
7. The above clause in my opinion will go to show that the parties having agreed
and restricted to the form of action now cannot go behind that clause. There is
force in the contention of the learned counsel for the Neyveli Lignite Corporat
ion. In any event the parties having accepted to the exclusive jurisdiction of t
he Civil Court having jurisdiction over Neyveli cannot be now aksed to ignore th
at clause. The agreement as stated has a specific clause with regard to exclusiv
e jurisdiction to the Civil Court over Neyveli viz., at Cuddalore.
8. Mr. T. S. Rangarajan in support of his contention relied on Kumbha Mawji v. D
ominion of India MANU/SC/0001/1953 : [1953]4SCR878 and also relied on S. 31(4) o
f the Act. To appreciate the contention raised by Mr. T. S. Rangarajan in a prop
er perspective, it is useful to extract Sections 2(c) and 31 of the Act and also
to refer to the decision in Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR8
78 , which also refers to Section 31 of sub-clause 4 of the Act.
Sections 2(c) and 31 of the Act read as follows:
SECTION 2(c)
""Court" means a Civil Court having jurisdiction to decide the question -- formi
ng the subject matter of the reference if the same has been the subject matter o
f a suit but does not, except for the purpose of arbitration proceedings under S
ection 21, include a Small Cause Court.
SECTION 31
Jurisdiction
(1) Subject to the provisions of this Act, an award may be filed in any Court ha
ying jurisdiction in the matter to which the reference relates.
(2) Notwithstanding anything contained in any other law for the time being in fo
rce and save as otherwise provided in this Act, all questions regarding the vali
dity, effect or existence of an award or an arbitration agreement between the pa
rties to the agreement or persons claiming under the term shall be decided by th
e Court in which the award under rhe agreement has been, or may be filed and by
no other Court.
(3) All applications regarding the conduct of arbitration proceedings or otherwi
se arising out of such proceedings shall be made to the court where the award ha
s been or may be filed, and to no other Court.
(4) Notwithstanding anything contained elsewhere in this Act or in any other law
for the time being in force, where in any reference, any application under this
Act has been made in a Court competent to entertain it, that Court alone shall
have jurisdiction over the atbitralion proceedings and all subsequent applicatio
ns arising out of that reference and the arbitration proceedings shall be made i
n that Court and in no other Court.
9. According to the learned counsel, where an application has been filed in a Co
urt with reference to arbitration matter that Court alone have jurisdiction to p
roceed with any subsequent matters arising in arbitration. Therefore, applying t
he tests laid down in Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR878 , wh
ere an application for filing the award has been taken, out, that Court alone wi
ll deal with subsequent matters and not any other Court. Since the award has bee
n filed by the arbitrators in this Court as early as 1988, pursuant to the order
of this Court, which is the competent Court, according to Mr. Rangarajan, in Or
iginal Petition No. 531 of 1987 any subsequent application or proceedings could
be filed in this Court only.
10. In my opinion, Mr. Rangarajan is not correct in his above submission. Sectio
n 31 of the Act prescribes the territorial jurisdiction of the court in respect
of the arbitration and then confers exclusive jurisdiction on such Court in resp
ect of the arbitration agreement and the award. Section 31(2) read with S. 2(c)
of the Act provides for the jurisdiction of the Court to decide all questions re
garding validity, effect or existence of an award or an arbitration agreement be
tween the parties to the agreement or persons claiming under them. Only that Cou
rt in which an award under the agreement has been or may be filed is competent t
o decide all such questions and no other Court. (Underling is mine). Under sub-c
l. (I) of S. 31 of the Act, an award may be filed in any Court having jurisdicti
on in the matter to which the reference relates. A court which has no jurisdicti
on in the matter, to which the reference relates (as in the present case), an aw
ard cannot be filed in that Court and subsequently that Court will not have juri
sdiction to decide the question as enumerated in Section 31(2) of the Act. Let m
e now analyse the provisions coniained in sub-cls. (1),(2), (3) and (4) of S. 31
which clearly indicate that to the exclusion of all other Courts only one Court
will have jurisdiction to deal with the proceedings incidental to the reference
and the arbitration. Sub-section (2) clearly points out in this direction when
it provides that all applications regarding the conduct of arbitration proceedin
gs or otherwise arising out of such proceedings shall be made to the Court where
the award has been or may be filed and to no other Court. Then comes sub-sectio
n (4). It opens with a non obstante clause and is comprehensive in character. Th
e non obstante clauses exclude anything contained in the whole Act or in any oth
er law for the time being in force if it is contrary to or inconsistent with the
substantive provision contained in sub-sec. (4). To that extent it carves out a
n exception to the general question of jurisdiction of the Court in which award
may be filed elsewhere provided in the Act in respect of the proceedings referre
d to in sub-section (4) will have an overriding effect in relation to the filing
of the award, if the conditions therein prescribed are satisfied. If those cond
itions are satisfied the Court other than the one envisaged in Section 14(2) or
Section 31(1) will be the Court in which award will have to be filed. That is th
e effect of the non-obstantc clause in sub-sect ion (4) of Section 31 of the Act
. Thus, sub-section (4) of Section 31 envisages exclusive jurisdiction in the Co
urt, to which an application has been made in any reference and which that Court
is competent to entertain as the Court having jurisdiction over the arbitration
proceedings and all subsequent applications arising out of reference and the ar
bitration proceedings shall have to be made in that court and in no other Court.
Thus, sub-section (4) not only confers exclusive jurisdiction on the Court to w
hich an application is made in any reference but simultaneously ousts the jurisd
iction of any other Court which may as well have jurisdiction in this behalf. In
the present case this Court is not competent to have entertained the applicatio
n in original petit ion No. 531 of 1987 or to have received the award of the arb
itrators and hence Section 31(4) of the Act will not apply. The next argument of
Mr. Rangarajan is also not tenable for the following reasons:
An objection was raised by the Neyveli Lignite Corporation in this case that thi
s Court has no territorial jurisdiction to decide the disputes between them, as
no part of the cause of action arose within the territorial jurisdiction of this
Court and as such this Court has no jurisdiction to hear this matter.
On the other hand, the contention raised on . bahalf of the contractor is that t
he proceedings were taken place in Madras, that the award was made at Madras and
the same has been challenged in this Court and that it is only this Court which
has territorial jurisdiction, to try the present case. As per the definition pr
ovided in Section 2(c) of the Act, only a Civil Court will have jurisdiction to
decide the matter in which a civil suit with regard to the matter which was refe
rred to arbitration could be filed. Under Section 31(1) it is provided that an a
ward would be filed in any Court having jurisdiction in the matter to which the
reference relates. A reading of Sections 31(1) and 2(c) of the Act will go to sh
ow that in order to decide which is the Court which has jurisdiction in the matt
er to which a reference relates, what has to be ascertained is the Court within
which the suit could have been instituted for the claim which was raised in the
reference. From the facts of the present case, it is doubtless clear that no par
t of cause of action arose in Madras. In the calling of tender, enquiries submit
ted by the contractor, execution of the agreement for the purpose of the work an
d the disputes having arisen within the jurisdiction of the city Court at Cuddal
ore, no part of the cause of action has arisen within the meaning of Section 2(c
) of the Act. Merely because under Cl. 84 of the contract agreement, the arbitra
tors held their sittings and enquiries at Madras and made their award at Madras
on 24-8-1987 and intimated the same on 24-8-1987 and filed the award on 7-3-1988
with all the records relating to the arbitration proceedings in O.P. No. 531 of
1987 in this court, it would not be sufficient to grant territorial jurisdictio
n to this Court to try the present proceedings. It is relevant to notice that no
tice by the contractors in O.P. No. 531 of 1987 was taken to Neyveli Lignite Cor
poration to their Madras Office and that the same was returned by them stating t
hat the same might be sent to their Neyveli address and in fact notice was taken
to Neyveli address by the contractor in June, 1989. Furthermore, the factum of
the arbitration proceedings having been conducted at Madras and award being file
d here, is also not relevant for the purpose of deciding as to which is the Cour
t of competent jurisdiction. In order to decide as to which Court has competent
jurisdiction to entertain such petitions, reference has got to be made, as alrea
dy mentioned to Section 2(c) read with Section 31(1) of the Act. Merely because
the arbitrators choose to hold that proceedings at Madras, where admittedly no s
uit could be instituted and choose to make the award at Madras, it would not giv
e this Court the territorial jurisdiction to decide the matter arising under the
Act. It is no doubt that Sections 31(2) and 31(3) state that it is the Court in
which the award has been filed, which will have jurisdiction to decide the matt
er. In my opinion, if an award has been filed in a Court which has no jurisdicti
on (Madras in the present case), the provisions of sub-sections (2) and (3) of S
. 31 would have no application. It has to be seen that Section 31(1) enjoins upo
n the arbitrator to file his award in the Court having jurisdiction in the matte
r. If he chooses, in violation of the provisions of Section 31(1) to file the aw
ard at Madras, which has no territorial jurisdiction, then it cannot be argued t
hat the Original Side of this Court acquires territorial jurisdiction. It is now
well established that by agreement of the parties jurisdiction cannot be confer
red on Courts which have no territorial jurisdiction to decide the matter, where
as in the present case the parties have clearly agreed that under Clause 18 of t
he general conditions under notice inviting tenders, the Civil Court having ordi
nary original civil jurisdiction over Neyveli shall alone have exclusive jurisdi
ction in regard to all claims in respect of this contract of whatever nature.
11. In order to determine which is the Court having jurisdiction in the matter,
one should first of all ascertain what the questions are, which form the subject
matter of the reference to arbitration. On a combined reading of S. 2(c) and S.
31(1) of the Act, it must be held that the citus of cause of action alone was c
onferred with the jurisdiction of a court in the matter of arbitratin and since
no part of the cause of action arose within the jurisdiction of the Original Sid
e of ourt High Court, it could not entertain the present proceedings.
12. Section 2(c) of the Act defines 'Court' as meaning a Civil Court having juri
sdiction to decide all questions forming the subject-matter of the reference if
the same had been the subject matter of a suit, but does not, except for the pur
pose of arbitration proceedings under Section 21, include a Small Cause Court. T
he jurisdiction of the Small Cause Court is barred under S. 40 as well except as
regards arbitrations in suits before it. It will be seen that under Section 31
of the Act, an award is to be filed a Court which has jurisdiction in the matter
to which the reference relates and an award filed in a Court which has no juris
diction in the matter cannot be entertained and the Court cannot pass any judgme
nt or decree in terms of the award. In order to decide the jurisdiction of the C
ourt over the subject-matter of the award, it is necessary to consider the relie
fs grnated by the award and determine wheher the Court would have jurisdction to
try a regular suit between the parties in which the relief is claimed and wheth
er such relief could be granted by the Court. In order to determine the jurisdic
tion of the Court in matter, one will have to ascertain what the questions are a
nd if the question that has arisen is one which the Court would have jurisdictio
n to entertain, then that would be'a competent court to entertain the matter. Th
us, the Court of competent jurisdiction under S. 31 of the Act is not the Court
at the place in which the agreement was entered into or the parties reside, but
the Court which will exercise the jurisdiction provided the subject matter of th
e relief falls within the competence or jurisdiction. Sec. 16 of the Code of Civ
il Procedure gives the necessary guidance for the purpose of ascertaining the ju
risdiction of the Court and provides that for the determination of any right or
interest in immovable property the suit is to be instituted where the subject-ma
tter is situate.
13. The moot question to be decided in this case is as to whether this Court has
the competence to entertain an application under S. 14(2) of the Act. No doubt
parties have agreed under the general conditions of contract that the venue of a
rbitration shall be at Madras. The parties select the venue of arbitration only
to suit their 'convenience'. Merely because the venue of arbitration is at Madra
s it does not clothe this Court with jurisdiction to entertain the application u
nder the Act.
14. In the case of Union of India v. P, Anantharaman (1991 (1) MLJ 286 : 1991 TN
LJ 69), after elobarate discussion, it has been held by me that the citus of cau
se of action would alone confer jurisdiction on Court in matters of arbitration.
The venue of arbitration proceedings depends upon the volition of parties and t
heir convenience. It is open to the parties to select a place far away from the
place where the contract was executed because such place would be easily accessi
ble and convenient. Therefore, if no cause of action has arisen in the place, wh
ere, the parties choose to hold the arbitration proceedings, the Court within wh
ose jurisdiction the arbitration proceedings are conducted will not be a compete
nt court for the purpose of the provisions of the Act. It is beyond dispute that
the petitioner in Original Petition No, 531 of 1987 (M/s. Sabson (India) Pvt. L
td.), placed reliance on clause 84, where the parties agreed upon the venue of a
rbitration to contend that this Court has the competence to entertain the applic
ation under S. 14(2) of the Act.
15. As held by the Supreme Court, sub-s. (1) of S. 31 determines the jurisdictio
n of the Court in which the award can be tiled and sub-sees. (2), (3) and (4) of
the said section were intended to make that Section 'effective' in the followin
g three different ways:
1. By vesting in One Court the authority to deal with all questions regarding th
e validity, effect or existence of an award or an arbitration agreement;
2. By casting on the persons concerned the obligation to file all applications r
egarding the conduct of arbitration proceedings or otherwise arising out of such
proceedings in the court;
3. By vesting exclusive jurisdiction in one court in which the first application
relating to the matter was filed.
It is only the Court which has got the competence to entertain an application un
der the Act will have the exclusive jurisdiction under sub-sec. (4) of Section 3
1. Therefore, the prerequisite or the essential condition for the application of
S. 31(4) of the Act is that the Court which entertain condition for the applica
tion of S. 31(4) of the Act is that the Court which enertains the first applicat
ion should be a competent Court to entertain the same. From trie mere fact that
Original Petition No. 531 of 1987 was filed in this Court, it could not be said
that this Court has exclusive jurisdiction and that the subseqeunt application m
ade by Neyveli Lignite Corporation before Cuddalore Court is not maintainable. I
have already taken the view that this court has no competence to have entertain
ed Original Petition No, 531 of 1987 because no part of the cause of action has
arisen within the Original Side of this court and the place or venue of arbitrat
ion will not give rise to any cause of action. In this view of the matter, it ha
s to be held that Original Petition No. 531 of 1987 would not have been entertai
ned by this Court in view of the reasons given above.
16. Mr. Rangarajan placed strong reliance on the judgment of the Highest Court o
n the land reported in Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR878 . I
n that case, the appellant (Khumbha Mawji) entered into an agreement with the re
spondent, (the Dominion of India) (as it then was) to manufacture and supply to
the Bengal Assam Railway, stone boulders and ballast from Chutiapara quarry. The
agreement was entered into at Calcutta, though the work was to be carried out i
n Assam. Difference arose between parties and the matter was referred to two arb
itrators and on their disagreement, the matter was referred to an umpire, who ma
de two awards in favour of Kumbha Mawji, the appellant therein. The respondent,
Dominion of India filed an application under S. 14(2) of the Act before the Cour
t of the Subordinate Judge, Gauhati in Assam, where the work was to be carried o
ut, praying that the umpire may be directed to file both the awards in Court. No
tice was issued to the umpire to file the award into that Court and on receipt o
f the copies of the award, the Subordinate Judge of Gauhati in Assam made an ord
er, directing the applicant to file a copy of the award, on 3-9-1949. On the sai
d date, the respondent, Dominion of India filed the award. Further notices and f
iling of objections in the Court of the Subordinate Judge, Gauhati were ordered.
In the meanwhile on 17-8-1949, the respondent Dominion of India made its first
application in the Gauhati Court. The appellant's Solicitors, sent a letter to t
he Registrar of the High Court, Original Side, Calcutta enclosing therewith two
original awards and requesting the High Court to direct the office to file the s
aid awards and to issue notices in respect thereof expeditiously. The Deputy Reg
istrar informed the Solicitors that the award has been filed and asked the Solic
itors to take out from the Court and serve on the parties concerned the statutor
y notice fixing a date for judgment upon the side award by the commercial Judge
of the Court. Notice was thereupon issued to both parties, which was served on t
he respondent, Dominion of India on 2-9-1949. Thus, it is seen in respect of the
se awards, proceedings were initited purporting to be. under S. 14(2) of the Act
, Simultaneously both in the Court of the Subordinate Judge of Gauhati in Assam
as well as on the Original Side of the High Court at Calcutta. The appellant, Kh
umbha Mawji in answer to the notice issued by the Gauhati Court on 3-9-1949 issu
ed by the Gauhati Subordinate Court appeared before the Court and obtained adjou
rnments from time to time. In the meanwhile, the respondent, Dominion of India,
after receiving the notice issued to them by Calcutta High Court, filed an affid
avit stating their objections to the jurisdiction of Calcutta High Court and to
the validity of the awards. The matter was taken for consideration by the Commer
cial Judge of Calcutta High Court, who overruled the objections of the responden
t before the Supreme Court and passed Judgments on the two awards. On appeal by
the respondents, Dominion of India to the Division Bench, the learned Judges rev
ersed the Judgment of the learned single Judge and held that there had been no p
roper application under S. 14(2) of the Act before Calcutta High Court and conse
quently that Court had no jurisdiction to deal with the matter. It is seen from
the Judgment of the Supreme Court that the Division Bench of Calcutta High Court
reversed the Judgment of the learned single Judge on limited grounds. Hence app
eals were filed before the Supreme Court and three questions were raised for con
sideration by the Supreme Court. The third question raised before the Supreme Co
urt, with which we are concerned was whether sub-sec. (4) of S. 31 of the Act ap
plies only where the first application under the Act was made during the course
of pendency of a reference to arbitration or also to a case like the present one
, where such first application was made after the completion of the arbitration
and on the making of an award. The Supreme Court held that sub-sec. (4) of S. 31
was not meant to be confined to applications made during the pendency of an arb
itration and that the necessity for clothing a single Court with effective and e
xclusive jurisdiction and to bring about by the combined operation of these thre
e provisions the avoidance of conflict and scramble is equally essential whether
the question arises during the pendency of an arbitration or after the arbitrat
ion is completed or before the arbitration is commenced. The Supreme Court has a
lso considered the phrase 'in any reference' and the words 'reference' and 'refe
rence to arbitration' etc., and held that the phrase 'in a reference' is compreh
ensive enough to cover also an application first made after the arbitration is c
ompleted and a final award is made. The Supreme Court was therefore of the opini
on that Section 31(4) of the Act would vest exclusive jurisdiction in the Court
in which an application for the filing of an award has been made under Section 1
4 of the Act. The Supreme Court held that the application by the respondent Unio
n of India was made before the Gauhati Court on 10-8-1949 and the move by the ap
pellant before the Calcutta High Court was on 17-8-1949 and on these facts and o
n the view of the interpretation of S. 31(4) of the Act, the Supreme Court held
that the Gauhati Court only had got the jurisdiction and not the Calcutta High C
ourt as regards the present dispute.
17. Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR878 was a case, where two
Courts had competence to entertain applications under the Act, viz., in the city
of Calcutta, where the agreement was entered into and at Gauhati in Assam, wher
e the work was to be carried out. That is not so in the present case for the rea
sons mentioned supra. In my opinion the respondent cannot derive any sustenance
to his argument through that case cited supra. Hence, 1 am of the opinion that t
he argument raised on behalf of Neyveli Lignite Corporation that this Court has
no jurisdiction under Section 14(2) ofthe Act andSection 17 of the Act is well f
ounded.
18. The decisions cited by Mr. R. Krishnaswamy learned counsel appearing for the
respondents are considered as under:
The decisions reported in Venkatasami-appa v. Srinidhi Ltd., (1950) 1 MLJ 709; S
ushil Ansal v. Union of India AIR 1980 Delhi 43 have already been dealt with by
me in extenso in my Judgment in Union of India's case (1991) 1 MLJ 286: 1991 TNL
J1 69.
In the decision reported in Virendra Saigal v. Sumatilal Jamnalal MANU/DE/0002/1
970 : AIR1970Delhi14 , the Delhi High Court held as follows at page 15:
"Section 2 of the Artbitration Act defines 'Court' means a Civil Court having ju
risdiction to decide the questions forming the subject-matter of the reference i
f the same had been the subject matter of a suit. Therefore, a competent Court w
ithin the meaning of S. 31 of the Act must be a Court which could have entertain
ed a suit between the parties in which the controversies were the same- as are t
he subject matter of the arbitration."
In the decision reported in M/s. Gulati Construction Co. v. Betwa River Board MA
NU/DE/0113/1983 : AIR1984Delhi299 , the Delhi High Court held as follows at page
300:
"In order to decide as to which Court has jurisdiction to entertain petitions un
der Section 14, reference has to be made to S. 2(c) read with S. 31(1). Merely b
ecause the arbitrator chooses to hold the proceedings in a place, where admitted
ly no suit could be instituted, and chooses to make and publish an award at that
place, it would not give the Courts of that place territorial jurisdiction to d
ecide the matters arising under the Act.
In an award has been filed in a Court which has no jurisdiction, the provisions
of S. 31(2) and (3) would have no application. If an arbitrator chooses, in viol
ation of the provisions of S. 31(1) to file the award in a Court which has no te
rritorial jurisdiction, then it cannot be argued that the said Court acquires te
rritorial jurisdiction. It is now well established that by agreement of parties
jurisdicton cannot be conferred on Courts which have no territorial jurisdiction
to decide the matter."
In the decision reported in Kumud v. Fertilizer Corporation of India Ltd. MANU/W
B/0022/1985 : AIR1985Cal89 , the Calcutta High Court held as under:
"The contention of the petitioner that the ouster clause in the present case ind
icated that the parties contemplated that if any suit would have to be filed in
connection with the contracts, that should be filed in an appropriate court at G
orakhpur and that that clause would have nothing to do with the arbitration proc
eeding cannot be accepted. For the purpose of filing an application under the Ar
bitration Act, if one has to ascertain whether a particular Court has jurisdicti
on in (he matter or not, it has to be found out whether a suit could have been f
iled in that Court on the same cause of action. If the Court is competent to ent
ertain the suit then that court will also be competent Court to entertain the ap
plication under the Arbitration Act. Applying this test it is clear that the app
ropriate Court at Gorakhpur should be the competent Court to entertain the prese
nt application under the Arbitration Act. Application returned to the petitioner
for filing in the proper Court."
In the decision in Electrical Mfg. Co. v. Crompton Engg. Co. MANU/TN/0197/1974 :
AIR1974Mad261 , a Division Bench of our High Court, consisting of K. Veeraswami
, C.J., and Raghavan, J. held that the place of execution of the agreement at Ma
dras was inconsequential and the proper test was that of the subject-matter of t
he arbitration, which did not fall within the jurisdiciton of the Madras High Co
urt.
19. In my considered opinion S. 31(4) of the Act though has an overriding effect
is not an omnipotent Section to confer jurisdiction to any Court which does not
have any competence to entertain applications in relation to arbitration. The l
aw makers also could not have intended such a situation. Section 31(4) of the Ac
t only envisages a situation where a first application has been made to a compet
ent Court, Hence, if the court to which the first application has been made is n
ot a competent court, such a Court will not have jurisdiction to entertain all s
ubsequent applications in the matter since the essential prequisite of S. 31(4)
of the Act is not satisifed.
20. In the resuli, Original Petition No. 531 of 1987 is dismissed as not maintai
nable in this Court. In view of my opinion that this Court has no jurisdiction t
o have entertained the application filed under Sec. 14(2) of the Act, Original P
etition No. 337 of 1990 filed under Sections 33 and 30 of the Act by the Neyveli
Lignite Corporation is also dismissed as not maintainable in this Court. It is
stated that the Neyveli Lignite Corporation has filed a petition under Section 1
4(2) read with Sections 33 and 30 of the Act on the file of the Sub Court, Cudda
lore and that the said petition has also been numbered as Original Petition No.
43 of 1989 and that the said petition is pending adjudication. II is also stated
that the respondents in Original Petition No. 337 of 1990 (M/s. Sabson (India)
Pvt. Ltd.) have also entered appearance and contesting the proceedings in that C
ourl. The Original Side of this Court is directed forthwith to despatch the orig
inal award and other connected records and the proceedings filed in this Court b
y the arbitrators to the Sub Court, Cuddalore to enable the said Court to procee
d with the matter. I direct the Sub Court, Cuddalore on receipt of the award and
the proceedings to issue a notice of hearing to both parties and the further pr
oceedings to be held subsequently expcditiously. It is seen from this case that
the agreement was entered into between the parties in the year 198! and that the
award was passed by the arbitrators as early as on 24-8-1987. Since the matter
is pending for a very long time unnecessarily in this Court, the Sub Court at Cu
ddalore is directed to dispose of the Original Petition No. 43 of 1989 and other
connected proceedings filed by the contractor and the NLC within three months f
rom the date of receipt of the original award and other connected records from t
his court and send a report of such compliance to this Court. The Sub Court shal
l give proper and sufficient opportunity to both parties and hear their grievanc
e and pass orders on merits in accordance with law. As I am inclined to take the
view that this Court has no jurisdiction in the matter, the Neyveli Lignite Cor
poration must succeed in their effort, and I direct the original award and the d
ocuments etc., filed by the arbitrators to be taken off the record from this Cou
rt and forwarded to the Sub Court at Cuddalore forthwith. Likewise, the office i
s also direced to return the original petitions filed by the respective petition
ers (O.P. Nos. 531 of 1987 and 337 of 1990) along with the records counter, repl
y affidavits etc. filed by them to the respective parties to enable them to file
the same in the proper Court. Time for representation of both the original peti
tions is one month from today.
21. Thus, the preliminary issue raised by both parties is answered in favour of
Neyveli Lignite Corporation (Petitioner in O. P. No. 337 of 1990) and against M/
s. Sabson (India) Pvt. Ltd. (petitioner in O.P. No. 531 of 1987). However, there
will be no costs in both the original petitions.
22. Order accordingly.
Acts/Rules/Orders:
Code of Civil Procedure, 1908 - Sections 47 and 151; Decrees and Orders Validati
ng Act, 1936
Citing Reference:
Ledgard v. Bull Mentioned
Case Note:
The case debated when would the objection to the territorial jurisdiction of the
Court granting decree be
raised in reference to the arbitration It was held that when the party had agree
d to refer the matter to
arbitration through Court he would be deemed to have waived the objection to the
territorial jurisdiction of
the Court raised by him in his written statement Further held that the correctne
ss of the procedure granting
leave as per Clause 12 of the Letters Patent or the waiver must be raised in the
proceedings before the High
Court and with no agitation in the execution proceedings
4. The only ground on which the decision of the High Court is challenged is that
the suit instituted on the original side
of the Bombay High Court was wholly incompetent for want of territorial jurisdic
tion and that, therefore, the award that
followed on the reference between the parties and the decree of Court, under exe
cution, were all null and void.
Strong reliance was placed upon the decision of the Privy Council in the case of
Ledgard v. Bull (1886) L.R. 13A.
134. In our opinion, there is no substance in this contention. There was no inhe
rent lack of jurisdiction in the Bombay
High Court where the suit was instituted by the plaintiff-decree holder. The pla
int had been filed after obtaining the
necessary leave of the High Court under clause 12 of the Letters Patent. Whether
the leave obtained had been rightly
obtained or wrongly obtained is not a matter which can be agitated at the execut
ion stage. The validity of a decree
can be challenged in execution proceedings only on the ground that the Court whi
ch passed the decree was lacking
in inherent jurisdiction in the sense that it could not have seizen of the case
because the subject matter was wholly
foreign to its jurisdiction or that the defendant was dead at the time the suit
had been instituted or decree passed, or
some such other ground which could have the effect of rendering the Court entire
ly lacking in jurisdiction in respect of
the subject matter of the suit or over the parties to it. But in the instant cas
e there was no such inherent lack of
jurisdiction. The decision of the Privy Council in the case of Ledgard vs. Bull
(1866) L.R. 13A. 134. is an authority for
the proposition that consent or waiver can cure defect of jurisdiction but canno
t cure inherent lack of jurisdiction. In
that case, the suit had been instituted in the Court of the Subordinate Judge, w
ho was incompetent to try it. By
consent of the parties, the case was transferred to the Court of the district Ju
dge for convenience of trial. It was laid
down by the Privy Council that as the Court in which the suit had been originall
y instituted was entirely lacking in
jurisdiction, in the sense that it was incompetent to try it, whatever happened
subsequently was null and void because
consent of parties could not operate to confer jurisdiction on a Court which was
incompetent to try the suit. That
decision has no relevance to a case like the present where there could be no que
stion of inherent lack of jurisdiction
in the sense that the Bombay High Court was incompetent to try a suit of that ki
nd. The objection to its territorial
jurisdiction is one which does not go to the competence of the Court and can, th
erefore, be waived. In the instant
case, when the plaintiff obtained the leave of the Bombay High Court on the orig
inal side, under clause 12 of the
Letters Patent, the correctness of the procedure or of the order granting the le
ave could be questioned by the
defendant or the objection could be waived by him. When he agreed to refer the m
atter to arbitration through Court,
he would be deemed to have waived his objection to the territorial jurisdiction
of the Court, raised by him in his written
statement. It is well settled that the objection as to local jurisdiction of a C
ourt does not stand on the same footing as
an objection to the competence of a Court to try a case. Competence of a Court t
o try a case goes to the very root of
the jurisdiction, and where it is lacking, it is a case of inherent lack of juri
sdiction. On the other hand, an objection as
to the local jurisdiction of a Court can be waived and this principle has been g
iven a statutory recognition by
enactments like s. 21 of the Code of Civil Procedure. Having consented to have t
he controversy between the parties
resolved by reference to arbitration through Court, the defendant deprived himse
lf of the right to question the
authority of the Court to refer the matter to arbitration or of the arbitrator t
o render the award. It is clear, therefore, that
the defendant is estopped from challenging the jurisdiction of the Bombay High C
ourt to entertain the suit and to
make the reference to the arbitrator. He is equally estopped from challenging th
e authority of the arbitrator to render
the award. In our opinion this conclusion is sufficient to dispose of the appeal
. It is not, therefore, necessary to
determine the other points in controversy, including the question whether The De
crees and Orders Validating Act,
1936 (Act V of 1936) had the effect of validating what otherwise may have been i
nvalid.