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CASE NO.:

Appeal (civil) 2232 of 2000

PETITIONER:

KHALEEL AHMED DAKHANI

RESPONDENT:

HAITI GOLD MINES CO. LTD.

DATE OF JUDGMENT: 27/03/2000

BENCH:

D.P. WADHWA & DORAISWAMY RAJU

JUDGMENT:

JUDGMENT

2000 (2) SCR 575

The Judgment of the Court was delivered by D.P. WADHWA, J. We grant leave

to appeal.

This appeal is directed against judgment dated 29/30.7.1999 of the High

Court of Karnataka given in revision filed by the respondent whereby High

Court set aside the orders dated 24.5.1999 and 21.6.1999 of the Principal

District Judge, Raichur. By order dated 24.5.1999 the Principal District

Judge, Raichur issued warrants of attachment of moveable properties of the

respondent as described in the application for execution filed by the

appellant. By order dated 21.6.1999 the learned Principal District Judge

dismissed the application of the respondent praying for lifting of the

attachment already issued against it.

Appellant is a building contractor. Respondent is a Government company of

the Government of Karnataka under the Companies Act, 1956. Respondent

awarded the contract for construction of a school building at Hatti in

District Raichur to the appellant. An agreement dated 9.3.1995 was duly

entered into. Clause 35 of the agreement contained the arbitration clause.

Disputes and differences having arisen appellant moved the Chief Justice of

the High Court of Karnataka under Section 11 of the Arbitration and

Conciliation Act, 1996 (for short the 'Act') for appointment of an

arbitrator. The application was allowed and Mr. H.S. Bhat, Chief Engineer

(retired), who was resident of Bangalore was appointed as an arbitrator

with a direction to complete the arbitration proceedings and to submit his

Award within four months. Arbitration proceedings were held at Banglore

where also the Award dated 28.8.1998 was made. Arbitrator awarded some of

the claims of the appellant while disallowing a few others. Respondent

filed application for setting aside the Award by making an application

under Section 34* of the

34. Application for setting aside arbitral award. (I) Recourse to a court

against an arbitral award may be made only by an application for setting

aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if -

(a) the party making the application furnishes proof that -(i) a

party was under some incapacity; or

(ii) the arbitration agreement is not valid under law to which the parties

have subjected it or, failing any indication thereon, under the law for the

time being in force; or

(iii) the party making the application was not given proper notice of the

appointment of an arbitrator or of the arbitral proceedings or was

otherwise unable to present his case; or (iv) the arbitral award deals

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with a dispute not contemplated by or not falling within the terms of the

submission to arbitration, or it contains decisions on matters beyond the

scope of the submission to arbitration :

Provided that, if the decisions on matters submitted to arbitration, can be

separated from those not so submitted, only that part of the arbitral award

which contains decisions on matters not submitted to arbitration may be set

aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was

not in accordance with the agreement of the parties, unless such agreement

was in conflict with a provision of this Part from which the parties cannot

derogate, or, failing such agreement, was not in accordance with this part;

or

(b) the court finds that -

(i) the subject-matter of the dispute is not capable of settlement by

arbitration under the law for the time being in force, or Act in the court

of Principal City Civil Judge, Bangalore. While this application was

pending appellant as decree-holder filed an application for execution of

the Award in the court of Principal District Judge, Raichur. It was on this

application that orders for attachment of properties of the respondent were

issued. When respondent sought lifting of its attachment by filing an

application, the same was dismissed. Aggrieved respondent went to the High

Court in revision. High Court allowed the revision of the respondent and

set aside the two orders of the Principal District Judge, Raichur which we

have mentioned above. Now it is the appellant who has come to this Court.

It would appear that by filing the execution application in the court at

Raichur appellant wanted to enforce the Award under Section 36** of the

Act. When the court at Raichur issued warrants of attachment it was not

aware of pendency of the application of the respondent under Section 34 of

the Act in the court at Bangalore. Appellant had made no mention in his

application about the pendency of the proceedings at Bangalore. However,

when the respondent filed application before the Principal District Judge,

Raichur for lifting of the order of attachment it was brought to his notice

the pendency of the application under Section 34 of the Act for setting

aside the Award. Now, the learned Principal District Judge, Raichur held

that Principal City Civil Court, Bangalore had no jurisdiction to entertain

the application under

(ii) the arbitral award is in conflict with the public policy of India.

Explanation. - Without prejudice to the generality of sub-clause (ii), it

is hereby declared, for the avoidance of any doubt, that an award is in

conflict with the public policy of India if the making of the award was

induced or affected by fraud or corruption or was in violation of section

75 or section 81.

(3) An application for setting aside may not be made after three months

have elapsed from the date on which the party making that application had

received the arbitral award or, if request had been made under section 33,

from the date on which that request had been disposed of by the arbitral

tribunal :

Provided that if the court is satisfied that the applicant was prevented by

sufficient cause from making the application within the said period of

three months it may entertain the application within a further period of

thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the court may,

where it is appropriate and it is so requested by a party, adjourn the

proceedings for a period of time determined by it in order to give the

arbitral tribunal an opportunity to resume the arbitral proceedings or to

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take such other action as in the opinion of arbitral tribunal will

eliminate the grounds for setting aside the arbitral award.

** 36. Enforcement. - Where the time for making an application to set aside

the arbitral award under section 34 has expired of such application having

been made, it has been refused, the award shall be enforced under the Code

of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a

decree of the court. Section 34 of the Act. On this premise he dismissed

the application of the respondent and confirmed the order of attachment.

In support of his argument that court at Bangalore would have no

jurisdiction Mr. Rajiv Dutta, learned counsel for the appellant, referred

to a decision of this Court in Patel Roadways Limited, Bombay v. Prasad

Trading Company, [1991] 4 SCC 270. In this case Patel Roadways Limited had

its principal office at Bombay and branch offices at various other places.

Prasad Trading Company entrusted certain consignments of goods to Patel

Roadways Limited at its subordinate office in the State of Tamil Nadu for

delivery at Delhi. The goods reached Delhi but in damaged conditions.

Prasad Trading Company instituted a suit for damages in the court at Madras

within whose jurisdiction the subordinate offices of Patel Roadways Limited

were situated and where the goods were entrusted for transport. A plea was

raised by the Patel Roadways Limited in its defence that when the contract

was entered into between the parties it was agreed that only Bombay court

would have jurisdiction and as such court in Madras had no jurisdiction. It

was in this context that this Court considered clause (a) of Section 20 and

explanation thereto in Code of Civil Procedure (for short 'Code')*. The

question which was before this Court was as to whether in view of the

relevant clause in the contract between the parties the court at Bombay

alone had jurisdiction and the jurisdiction of the courts at Madras where

the suit was instituted was barred. It was submitted by the Patel Roadways

that apart from the courts within whose territorial jurisdiction the goods

were delivered to the appellant for transport, the courts at Bombay also

had jurisdiction to entertain a suit arising out of the contract between

the parties in view of the Explanation to

* 20 Other suits to be instituted where defendants reside or cause of

action arises. - Subject to the limitations aforesaid, every suit shall be

instituted in a Court within the local limits of whose jurisdiction -

(a) the defendant, or each of the defendants where there are more than

one, at the time of the commencement of the suit, actually and voluntarily

resides, or carries on business, or personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of

the commence-ment of the suit, actually and voluntarily resides, or carries

on business, or personally works for gain, provided that in such case

either the leave of the Court is given, or the defendants who do not

reside, or carry on business, or personally work for gain, as aforesaid,

acquiesce in such institution; or

(c) the cause of action, wholly or in part, arises.

Explanation. A corporation shall be deemed to carry on business at its sole

or principal office in India or, in respect of any cause of action arising

at any place where it has also a subordinate office, at such place. Section

20 of the Code inasmuch as the principal office of the appellant was

situated in Bombay. According to it since courts at two places namely

Madras and Bombay had jurisdiction in the matter, the jurisdiction of the

courts in Madras was ousted by the clause in the contract whereunder the

parties had agreed that jurisdiction to decide any dispute under the

contract would be only in the courts at Bombay. Consequently the courts

where the suit was instituted had no jurisdiction to entertain it. This

Court said that "the explanation is really an Explanation to clause (a)

viz. as to where the corporation can be said to carry on business. This, it

is clarified, will be the place where the principal office is situated

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(whether or not any business actually is carried on there) or the place

where a business is carried on giving rise to a cause of action (even

though the principal office of the corporation is not located there) so

long as there is a subordinate office of the corporation situated at such

place. The linking together of the place where the cause of action arises

with the place where a subordinate office is located clearly shows that the

intention of the legislature was that, in the case of a corporation, for

the purposes of clause (a), the location of the subordinate office, within

the local limits of which a cause of action arises, is to be the relevant

place for the filing of a suit and not principal place of business. If the

intention was that the location of the sole or principal office as well as

the location of the subordinate office (within the limits of which a cause

of action arises) are to be deemed to be places where the corporation is

deemed to be carrying on business, the disjunctive "or" will not be there.

Instead, the second part of the Explanation would have read "and, in

respect of any cause of action arising at any place where it has a

subordinate office, also at such place". It, therefore, held that the

explanation provides an alternative locus for the Corporation's place of

business, not an additional one. Thus, this Court was of the view that

clause (c) was not attracted to confer jurisdiction on courts at Bombay and

the appellant has admittedly its subordinate offices at Madras where the

goods in the case were delivered to it for the purpose of transport the

Court at Bombay had no jurisdiction at all to entertain the suit and that

the parties could not confer jurisdiction on the courts at Bombay by an

agreement.

In view of the decision of this Court in Patel Roadways Limited, Bombay v.

Prasad Trading Company, [1991] 4 SCC 270, it cannot be said that the

Principal District Judge, Raichur had no jurisdiction to entertain the

matter. But then the question arises, as rightly posed by the High Court,

if in the given facts and circumstances of the case, could the Principal

District Judge, Raichur had made to orders which are impugned,

particularly, when it was brought to his notice pendency of the proceedings

under Section 34 of the Act in the Court of Principal City Civil Judge,

Bangalore where the appellant itself had filed a CAVEAT under Section 148A

of the Code and also an application under Section 9* of the Act seeking

interim relief. Learned Principal District Judge, Raichur also did not take

notice of clause 35 of the contract which constituted arbitration agreement

between the parties which specifically provided that only the courts in

Bangalore would have jurisdiction to entertain any claim for enforcement of

the award. Principal District Judge, Raichur had no doubt jurisdiction in

the matter but his holding that the Principal City Civil Judge. Bangalore

would have no jurisdiction does not commend to us. It cannot always be

said, in view of Section 20 of the Code, that only one court will have

jurisdiction to try the suit. It is not that the Principal City Civil

Court, Bangalore is not a court within the meaning of Section 2(e)** of the

Act. Whether Principal City Civil Judge, Bangalore has jurisdiction in the

matter or not is still pending with him which proceedings were filed

earlier in time than the execution application by the appellant in the

* 9. Interim measures, etc. by court. - A party may, before or during

arbitral proceedings or at any time after the making of the arbitral award

but before it is enforced in accordance with section 36, apply to a court-

(i) for the appointment of a guardian for a minor or a person of

unsound mind for the purpose of arbitral proceedings, or

(ii) for an interim measures of protection in respect of any of the

following matters, namely-

(a) the preservation, interim custody or sale of any goods which are the

subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

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(c) the detention, preservation or inspection of any property or thing

which is the subject-matter of the dispute in arbitration, or as to which

any question may arise therein and authorising for any of the aforesaid

purposes any person to enter upon any land or building in the possession of

any party, or authorising any samples to be taken or any observation to be

made, or experiment to be tried, which may be necessary or expedient for

the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the court to

be just and convenient,

and the Court shall have the same power for making orders as it has for the

purpose of, and in relation to, any proceedings before it

* * "Court" means the principal Civil Court of original jurisdiction in

a district, and includes the

High Court in exercise of its ordinary original civil jurisdiction, having

jurisdiction to decide the questions forming the subject matter of the

arbitration if the same had been the subject matter of a suit, but does not

include any civil court of a grade inferior to such principal Civil Court,

or any Court of Small Causes" District Court at Raichur. The award had not

attained finality. In these circumstances we are of the view that the

Principal District Judge, Raichur should not have entertained the

application for execution and order attach-ment of movable properties of

the respondents. The High Court referred to the concession by both the

parties that all the applications under the Act had to be treated as

original suits and if the court finds that it had no jurisdiction to

entertain, it cannot dismiss the suit but has to return the same for the

presentation to the proper Court. Whatever may be the concession of the

parties, we are of the view in the circumstances of the present case

Principal District Judge, Raichur should have stayed his hands and should

not have entertained the execution application by the appellant. High Court

took a correct view of the matter and rightly set aside the impugned

orders.

We, therefore, find no merit in the appeal. It is dismissed with costs.