Supreme Court of India
BALAJI COKE INDUSTRY PVT. LTD.versusM/S MM BHAGWATI COKE (GUJ) PVT. LTD.
- Citation
- 2009 INSC 1120
- Decided
- 9 September 2009
- Disposal
- Case Allowed
- Bench
- ALTAMAS KABIR
Holding
An express agreement that disputes be arbitrated in Kolkata confers exclusive jurisdiction to the Kolkata courts, rendering the Gujarat court without territorial or pecuniary jurisdiction, and the transfer petition must be allowed.
Issues considered
- Whether an express clause in a contract designating Kolkata as the jurisdiction for arbitration defeats the jurisdiction of a court in Gujarat where part of the cause of action may have arisen.
- Whether the Gujarat court had territorial or pecuniary jurisdiction to entertain the Section 9 application despite the parties’ forum agreement.
- Whether the choice‑of‑forum clause is void under Section 28 of the Indian Contract Act, 1872 or contrary to public policy.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 9
- Code of Civil Procedure, 1908s. 16, s. 20, s. 25
- Constitution of Indias. Article 139A(2)
- Indian Contract Act, 1872s. 28
Subjects
ArbitrationJurisdictionTransfer PetitionChoice of ForumHigh‑Seas Sale AgreementSection 9Article 139APecuniary JurisdictionTerritorial JurisdictionPublic Policy
Judgment
[2009) 14 (ADDL.) S.C.R. 241
... ~ A
BALAJI COKE INDUSTRY PVT. LTD.
v.
M/S MM BHAGWATI COKE (GUJ) PVT. LTD.
(Transfer Petition (Civil) No. 78 of 2009) .
SEPTEMBER 9, 2009
B
[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]
.Ji
Constitution of India, 1950 - Article 139A(2) - Transfer
petition - High Seas Sale Agreement between parties -
Express clause therein that sale contract subject to Kolkata c
jurisdiction - Dispute between parties - Application u/s. 9 of
the Act before Bhavnagar court, Gujarat by respondent since
part of the cause of action purportedly arose in Bhavnagar -
~ Appellant seeking transfer of application pending in
Bhavnagar court to Calcutta High Court - Held: Transfer D
petition to be allowed - Parties knowingly and voluntarily
agreed that sale agreement subject to Kolkata jurisdiction -
E.ven if courts in Gujarat also had jurisdiction to entertain
action arising out of agreement, disputes decided in Kolkata
by Arbitrator in Kolkata will be valid - Arbitration and E
,
_ _...... Conciliation Act, 1996 - s. 9 - Code of Civil Procedure, 1908
-s. 25.
.
The appellant and the respondent- company entered
into a specific High Seas Sale Agreement. It was
specifically provided in the agreement that the sale F
agreement would be subject to Kolkata jurisdiction.
Dispute arose between the parties. Respondent filed
petition u/s. 9 of the Arbitration and Conciliation Act; 1996
before the Principal Civil Judge, Bhavnagar (Gujarat)
since a part of the cause of action purportedly arose G
-+ within the jurisdiction of the Bhavnagar Court. Hence, the .
present transfer petition by the appellant seeking transfer
of the arbitration application pending in the court of the
241 H
242 SUPREME COURT REPORTS [2009) 14 (ADDL.) $.C.R. '
~~-
'
A Principal Civil Judge, Bhavnagar (Gujarat) to the Calcutta
j
High Court. !
Allowing the transfer petition, the Court
HELD: 1.1. In the instant case, the parties had I
B
knowingly and voluntarily agreed that the contract t
arising out of the High Seas Sale Agreement would be ~
,IL
subject to Kolkata jurisdiction and even if the courts in
Gujarat also had jurisdiction to entertain any action
arising out of the agreement, the agreement to have the
c disputes decided in Kolkata by an Arbitrator in Kolkata,
West Bengal, was valid and the respondent-company
had wrongly chosen to file its application· under section
9 of the Arbitration and Conciliation Act before the
)--
Bhavnagar Court (Gujarat) in violation of such agreement.
D [Para 18] [251-F-G]
1.2. It is accepted that the invoc:ation of the
jurisdiction of the Principal Senior Civil Judge, ~
Bhavnagar, Gujarat, was contrary to the express terms I
E of the High Seas Sale Agreement; that the respondent
had deliberately, with mala fide intention, failed to
,+...- ·'
disclose the specific High Seas Sale Agree·ment in the ~
application u/s. 9 of the Act and the agreement to sell was
disclosed; that when the venue for arbitration had been
F
expressly agreed to between the parties to be Kolk~~'
West Bengal, and also having regard to the fact that the
L
Arbitrator to be appointed was to be a person based in
Kolkata, it is only the Courts at Kolkata which had both
pecuniary and territorial jurisdiction to entertain all
applications in con·nection with the High Seas Sale
G Agreement; that the Principal Senior Civil Judge at j-
-+- ,,.
Bhavnagar (Gujarat), neither has the territorial nor
pecuniary jurisdiction to entertain or determine any '•'
dispute between the parties arising out of the agreement;
H
BALAJI COKE INDUSTRY PVT. LTD. v. MAA BHAGWATI 243
COKE (GUJ) PVT. LTD.
that no part of the cause of action had arisen within the A
jurisdiction of the Bhavnagar Court in Gujarat so as to
enable it to assume jurisdiction in respect of the
transaction arrived at in Kolkata and the parties had
agreed under the agreement clause that the sale contract
would be subject to Kolkata jurisdiction; and that it was s
in such circumstances the petitioner was impelled to file
the transfer petition for transfer of the pending case in the
Bhavnagar Court to the Calcutta High Court. It is directed
that the Arbitration Application pending in the Court of
Principal Civil Judge, Bhavnagar (Gujarat) be transferred c
to the Calcutta High Court. [Paras 7, 8, 9, 11 and 19] [246-
F-G· 247-A-D· 248-E-F· 252-B]
' ' '
A.B.C. Laminart (P) Ltd. vs. A.P. Agencies 1989 (2) SCC
173; Hakam Singh vs. Gammon (India) Ltd. AIR 1971 SC
740, relied on. D
Geo. Miller and Co. Ltd. vs. United Bank of India and Ors.
69 (1997) Delhi Law Times 616; R.S.D. V. Finance Co. Pvt.
Ltd. vs. Shree Vallabh Glass Words Ltd. 1993 (2) SCC 130,
referred to. E
.. ,...4.
Case Law Reference:
69 (1997) Delhi Law Times 616 Referred
to. Para 10
1989 (2) sec 113 Relied on. Para 18
F
AIR 1971 SC 740 Relied on. Para 18
1993 (2) sec 130 Referred to. Para 17
CIVIL ORIGINAL JURISDICTION : Transfer Petition (Civil) G
No. 78 of 2009.
Under Article 139A (2) af the Constitution of India.
Gaurav Mitra, Vinay P. Tripathi, Abha Jain for the
H
244 SUPREME COURT REPORTS [2009) 14 (ADDL.) S.C.R.
A Appellant.
Jitendra Malkan, Syed Ahmad Saud, Shakil Ahmed Syed,
Mohd. Moonis Abbasi for the Respondent.
The Judgment of the Court was delivered by
B
ALTAMAS KABIR, J. 1. This Transfer Petition under
Article 139A(2) of the Constitution of India read with the relevant . ~
provisions of the Supreme Court Rules and Section 25 of the
Code of Civil Procedure has been filed by Balaji Coke
c Industries Pvt. Ltd. for transfer of Arbitration Application No.1
of 2008, titled Mis Maa Bhagwati Coke (Guj) Pvt. Ltd. vs.
Balaji Coke Industry Pvt. Ltd., pending in the Court of the
Principal Senior Civil Judge at Bhavnagar (Gujarat) to the
Calcutta High Court.
D 2. Briefly stated, the facts are that the Petitioner Company
registered under the Companies Act and having its registered
office at 12, Ho-Chi Minh Sarani, Flat 28, Second Floor,
Kolkata, is carrying on business in the trade of coking coal. The
Respondent, which is engaged in the business of processing
E coking coal into hard coke, requires coking coal as raw material
to be used in its processing unit for transformation into met
coke (hard coke). On 29th April, 2005, the Petitioner Company
entered into an agreement with the Respondent Company to
supply 15,000 Metric Tonnes of coking coal of Indonesian
F Origin. The agreement to sell provided that the cargo would be
sold to the Respondent on High Seas basis. The said
agreement was executed in Kolkata within the jurisdiction of the
Calcutta High Court.
3. Clause 11 of the aforesaid agreement contains an
G
Arbitration Clause which reads as under:-
"In case of any dispute or difference arising between the
parties hereto or any claim or thing herein contained or the
construction thereof or as to any matter in any way
H
BALAJI COKE INDUSTRY PVT. LTD. v. MAA BHAGWATI 245
-·lo..__ COKE (GUJ) PVT..LTD. [ALTAMAS KABIR, J.]
~ ..... connected with or arising out of these presents or the A
operation thereof or the rights, duties or liabilities of either
" party thereof, then and in every such case the matter,
differences in disputes shall be referred to an arbitrator in
Kolkata, West Bengal, India in accordance with and
subject to the provisions of the Arbitration and Conciliation B
Act, 1996, or any other enactment or statutory
modifications thereof for the time being in force. The place
of arbitration shall be Kolkata."
[Emphasis supplied]
c
Pursuant to the aforesaid agreement dated 29th April,
2005-, the parties entered into a specific High Seas Sale
Agreement on 7th May, 2005, wherein it was specified that the
contracted coal would be supplied to the Respondent from a
vessel named MV Gulf Ranger. The total sale consideration for D
the consignment was mentioned as Rs.8, 11,80,000/-. Clause
14 of the said High Seas Sale Agreement provided that the
sale contract would be subject to Kolkata jurisdiction.
4. Disputes having arisen between the parties, the E
Respondent herein by its letter dated 20th December, 2008,
,. -4 invoked the arbitration clause and requested the Petitioner
Company to confirm the appointmen~ of a retired Judge of the
Gujarat High Court, Hon'ble Mr. Justice K.M. Mehta, to be the
Sole Arbitrator. In the said letter, the Respondent alleged that
F
the Petitioner was in possession of Rs.3,43, 73,485/- which
belonged to the Respondent and was being enjoyed by the
Petitioner instead of handing over the same to the Respondent.
It was also alleged that the Respondent was entitled to receive
6,793 Metric Tonnes of material from the Petitioner on the basis
of the aforesaid sum lying with the Petitioner. It was alleged that G
the Petitioner was not issuing delivery orders in favour of the
Respondent for release of the said material and that the same
was currently lying in a plot owned by the Respondent, but under
the control and supervision of the Petitioner in Gujarat within
the jurisdiction of the Bhavnagar Civil Courts. H
246 SU.PREME COURT REPORTS [2009] 14 (ADDL) S.C.R.
~
A 5. The petitioner wrote back .to the Respondent on 9th
January, 2009, denying all the allegations and in particular
. ,-
denying the fact that it had received any sum of money from
the Respondent or that the Respondent was entitled t~ receive
any material, as alleged. A preliminary objection was also
B raised by the Petitioner to the appointment of Mr. Justice K.M.
Mehta as the Sole Arbitrator in terms of Clause 11 of the
Agreement dated 29th April, 2005, particularly when the said
clause stipulates that the disputes shall be referred to an
Arbitrator in Kolkata, West Bengal, India, and Mr. Justice K.M.
c Mehta was based in Ahmadabad. It was expressly stated by
the petitioner that the appointment of the learned Judge as Sole
Arbitrator would be wholly contrary to the express terms of the ......
arbitration clause. \
•,
6. According to the Petitioner, it was surprised to receive
D summons issued by the. Principal Senior Civil Judge, r
Bhavnagar (Gujarat) to appear before the said Court on 17th
January, 2009, in Arbifration Application No. 1 of 2008
purported to have been filed by the Respondent-Company
under Section 9 of the Arbitration and Conciliation Act, 1996,
E praying for an injunction to restrain the Petitioner; his servants
and agents from disposing, selling, diverting or alienating the
material in question or any part thereof and-for the issuance of ~-
a direction to the Petitioner to issue delivery orders for 6, 793
MT of coking coal in favour of the Respondent. ·
F
7. Appearing in support of the Transfer Petition, Mr. Gaurav
Mitra, learned Advocate, submitted that the invocation of the
jurisdiction of the Principal Senior Civil Judge at Bhavnagar,
Gujarat, was contrary to the express terms of the High Seas
Sale Agreement dated 7th May, 2005, wherein it had been
G
expressly stated that the sale. contract would be subject to
Kolkata jurisdiction. Mr. Mitra submitted that the Respondent
had deliberately, with ma/a fide intention, failed to disclose the
specific High Seas Sale Agreement dated 7th May, 2005, in
the application under Section 9 of the aforesaid Act, since it
H
BALAJI COKE INDUSTRY PVT. LTD. v. MM BHAGWATI 247
COKE (GUJ) PVT. LTD. [ALTAMAS KABIR, J.]
....t.....
....,. contained the specific jurisdiction clause by which all disputes
arising out of or relating to the arbitration agreement were to
A
be filed within the jurisdiction of the Courts at Kolkata. What
was disclosed was merely the agreement to sell dated 29th
April, 2005.
B
8. Mr. Mitra further submitted that when the venue for
arbitration had been expressly agreed to between the parties
to be Kolkata, West Bengal, and also having regard to the fact
that the Arbitrator to be appointed was to be a person based
in Kolkata, it is only the Courts at Kolkata which had both
pecuniary and territorial jurisdiction to entertain all applications
c
in connection with the High Seas Sale Agreement.
9. Mr. Mitra submitted that the learned Principal Senior
Civil Judge at Bhavnagar (Gujarat), neither has the territorial
nor pecuniary jurisdiction to entertain or determine any dispute D
between the parties arising out of the agreement referred to
hereinabove and the jurisdiction of the Gujarat Court has been
invoked with ma/a fide motive, in violation of the terms of the
agreement agreed to between the parties.
E
10. In support of his aforesaid submissions, Mr. Mitra
referred to and relied upon the judgment of a learned Single
,. ~
Judge of the Delhi High Court in the case of Geo. Miller & Co.
Ltd. vs. United Bank of India & others [69 (1997) Delhi Law
Times 616], where since the parties had agreed to the
F
jurisdiction of a particular Court to entertain disputes arising out
of an arbitration agreement between the parties, it was held that
where two or more Courts have jurisdiction under the Code of
Civil Procedure to try a suit or proceeding, an agreement
between the parties that the disputes between them shall be
tried in one of such Courts is not contrary to public policy nor G
does it contravene the provisions of Section 28 of the Indian
Contract Act, 1872. It was also observed that the choice of
Forum agreed to and accepted by the parties should normally
be respected. Mr. Mitra also pointed out that in the aforesaid
decision, the learned Judge had relied upon two decisions of H
248 SUPREME COURT REPORTS [2009] 14 (AOOL.) S.C.R.
>
A this Court in (i) A.B. C. Laminart (P) Ltd. vs. A.P. Agencies
[1989 (2)SCC 173); and (ii) Hakam Singh vs. Gammon (India)
... ~
(
=
Ltd. [AIR 1971 SC 740 (1971) 1 SCC 286), wherein it was
held that where there might be two or more competent Courts
which can entertain a suit consequent upon a part of the cause
B of action having arisen therein, if the parties to the contract
agreed to vest jurisdiction in one of such Courts to try any
dispute which might arise between themselves, the agreement
would be valid. It was also urged that if the purport of the
agreement was to completely oust the jurisdiction ofthe Court,
c such a condition would be unlawful and void being against
public policy and would, therefore, be hit by Section 28 of the
Contract Act. However, if it was found that the jurisdiction
agreed to would also be an appropriate jurtsdiction in the matter
of the contract; it could not be said that it ousted the jurisdiction
of the Court. ,.......
D
11. In addition to the above, Mr. Mitra submitted that even
if the provisions of Section 20 of the Code of Civil Procedure
were to be applied, no part of the cause of action had arisen
within the jurisdiction of the Bhavnagar Court in Gujarat so as
E to enable it to assume jurisdiction in respect of the transaction
arrived at in Kolkata and the parties had agreed under clause
14 of the agreement that the sale contract would be subject to ,)..--..
Kolkata jurisdiction. Mr. Mitra urged that it was in such
circumstances and also having regard to clause 11 of the
F aforesaid agreement, which provided for the place of arbitration
to be Kolkata, that the petitioner was impelled to file the transfer
petition for transfer of the pending case in the Bhavnagar Court
to the Calcutta High Court.
12. Responding to Mr. Mitra's submissions, Mr. Jitendra
G
Malkan, learned Advocate, urged that since the cause of action
for the Section 9 application had arisen within the jurisdiction 1-
of the Bhavnagar Court in Gujarat, having regard to even the
decisions· cited by Mr. Mitra, the Bhavnagar Court had·
juris~iction to entertain the said application. Mr. Malkan
H
BALAJI COKE INDUSTRY PVT. LTD. v. MM BHAGWATI 249
COKE {GUJ) PVT. LTD. [ALTAMAS KABIR, J.]
submitted that after discharge of the goods at port Pipavav in A
-···~
Gujarat, the same were stored in the godown of the Petitioner-
Company at its own premises within the jurisdiction of the
Bhavnagar Court and since the relief prayed for by the
Respondent-Company was for release of 6, 793 MT of coking
coal from the said consignment, the application under Section a
9 of the Arbitration and Conciliation Act, 1996 had been rightly
..
f ,.!.
filed before the learned Single Judge at Bhavnagar.
13. Mr. Malkan submitted that having regard to the
provisions of Sections 16 and 20 of the Code of Civil
Procedure, the suit had been rightly filed before the Bhavnagar
c
.j
' Court, inasmuch as, it related to the coal which was lying within
the jurisdiction of the Bhavnagar Court. Mr. Malkan submitted
that even taking into consideration the decisions of this Court
~~
in A.B.C. Laminart (P) Ltd. (supra) and Hakam Singh (supra},
...... it could not be contended that the jurisdiction of the Bhavnagar D
Court stood ousted by either Clause 11 or Clause 14 of the
High Seas Sale Agreement, which had provided that the sale
contract would be subject to Kolkata jurisdiction. Mr. Malkan
urged that there was, therefore, no ground to allow the
Petitioner's prayer for transfer of the Arbitration Application E
No.1 of 2008, pending in the Court of Principal Civil Jupge
- > .... (Senior Division) at Bhavnagar to the Calcutta High Court.
14. Mr. Malkan also submitted that neither Clause 11· nor
Clause 14 conferred exclusive jurisdiction on the Courts in F
Kolkata. Since the agreement did not use expressions such as
... "alone", "only" and "exclusive", which could be construed to have
completely ousted the jurisdiction of the Courts in Gujarat, it
could not be contended that the jurisdiction of the Court in
Bhavnagar stood ousted from entertaining the· respondent's
G
application under Section 9 of the Arbitration and Conciliation
I
4" Act, 1996.
15. The only question which falls for our consideration is
(
whether, notwithstanding the mutual agreement to make the
' High Seas Sale Agreement subject to Kolkata jurisdiction, it H
•
250 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.
A would be open to the Respondent-Company to contend that -IL-
since a part of the cause of action purportedly arose within the
jurisdiction of the Bhavnagar Court, the application filed ·under
Section 9 of the Arbitration and Conciliation Act, 1996, before
the Principal Civil Judge (Senior Division), Bhavnagar (Gujarat),
B would still be maintainable. The aforesaid question has often
troubled the courts with one view being that since the parties
to the agreement had agreed to a particular forum, they could
no longer resile from the said position and claim that other
courts, where a part of the cause of action may have arisen,
c would also have juri$diction to entertain a suit or other
proceeding. The other view has been that if by the said
agreement the rightful jurisdiction of a court was sought to be
ousted and a court was vested with the jurisdiction to entertain
a suit, which it did not have, the same would be contrary to the
D provisions of Section 28 of the Indian Contract Act, 1872, being 4-
contrary to public policy.
16. One of the earlier judgments on this dichotomy of views
is that of this Court in Hakam Singh (supra). Faced with the
question as to whether an agreement arrived at between two
E parties that one of t'.vc :curts having jurisdiction, would decide
all disputes relating to such agreement, was hit by the
provisions of Section 28 of the Indian Contract Act, 1872, this A- -
Court held that where two courts or more have jurisdiction to
try a suit or proceeding under the provisions of the Code of Civil
F Procedure, an agreement between the parties that one of such
courts would have jurisdiction to decide the disputes arising
between the parties from such agreementwould not be contrary
to public policy and would not, therefore, be contrary to the
provisions of Section _28 of the Indian Contract Act, 1872.
G
17. The said question once again arose in the case of
A.B. C. Laminart (P) Ltd. (supra), wherein following the decision
in Hakam Singh (supra), but relying on the maxim ex dolo malo
non oritur actio, this Court held that by an agreement which
absolutely ousted the jurisdiction of a court having jurisdiction
H
BALAJI COKE INDUSTRY PVT. LTD. v. MAA BHAGWATI 251
COKE (GUJ) PVT. LTD. [ALTAMAS KABIR, J.]
to decide the matter, would be unlawful and void, being contrary A
·"·~
to public policy under Section 28 of the Indian Contract Act. But
~ so long as the parties to a contract do not oust the jurisdiction
of all the courts, which would otherwise have jurisdiction to
decide the cause of action under the law, it could not be said
that the parties had by their contract ousted the jurisdiction of B
the court. This Court went on to observe that where _there may
be two or more competent courts which can entertain a suit
consequent upon a part of the cause of action having arisen
therewithin, if the parties to the contract agree to vest
jurisdiction in one such court to try the dispute which might arise c
between them, the agreement would be valid. The question also
arose in R.S.D. V. Finance Co. Pvt. Ltd. vs. Shree Val/abh
Glass Words Ltd., [(1993) 2 sec 130], where an endorsement
"Subject to Anand (Gujarat) jurisdiction", was relied upon to
--t contend that only Courts in Anand would have jurisdiction to D
,>.
entertain any dispute relating to such jurisdiction and the suit
filed in Bombay on the ground that the cause of action arose
in Bombay was not maintainable. In the said case, this Court
held that since apart from the endorsement on the deposit
receipt, there was no formal agreement between the parties,
- . ,,
the said endorsement would not divest the co~rts in Bombay
of their jurisdiction to entertain the suit. As will be evident from
the facts of the suit, the same stood .on a different footing and
does not advance the case of the respondent in any way.
E
18. In the instant case, the parties had knowingly and F
voluntarily agreed that the contract arising out of the High Seas
Sale Agreement would be subject to Kolkata jurisdiction and
even if the courts in Gujarat also had jurisdiction to entertaii:i
any action arising out of the agreement, it has to be held that
the agreement to have the disputes decided in Kolkata by an G
Arbitrator in Kolkata, West Bengal, was valid and the
Respondent-Company had wrongly chosen to file its application
under Section 9 of the Arbitration and Conciliation Act before
the Bhavnagar Court (Gujarat) in violation of such agreement.
The decisions of this Court in A.B. C. Laminart (P) Ltd. (supra) H
252 SUPREME COURT REPORTS [2009) 14 (ADDL.) S.C.R.
A as also Hakam Singh (supra) are very clear on the point.
19. Having regard to the above, we are inclined to accept
the submissions made on behalf of the petitioner and we are
of the view that the transfer petition should be allowed. We,
accordingly, do so and direct that Arbitration Application No.1
8
of 2008 titled Mis Maa Bhagwati Coke (Guj) Pvt. Ltd. vs. Balaji
Coke Industry Pvt. Ltd., pending in the Court of Principal Civil
Judge (Senior Division), Bhavnagar (Gujarat), be transferred
to the Calcutta High Court.
C 20. There will, however, be no order as to costs.
N.J. Transfer Petition allowed.
-
.....
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