Supreme Court of India
RAJASTHAN STATE ELECTRICITY BOARDversusM/S. UNIVERSAL PETROL CHEMICALS LTD.
- Citation
- 2009 INSC 16
- Decided
- 12 January 2009
- Disposal
- Appeal(s) allowed
- Bench
- TARUN CHATTERJEE
Holding
A contractual ouster clause validly restricts jurisdiction to the courts at Jaipur, and therefore only the Jaipur court can entertain a petition under Section 20 of the Arbitration Act, 1940.
Summary
The Rajasthan State Electricity Board (RSEB) entered into two purchase orders and agreements with Universal Petrol Chemicals Ltd. for transformer oil, each containing an arbitration clause and an ouster clause confining jurisdiction to the courts at Jaipur, Rajasthan. Disputes arose over defective oil and the Board sought to enforce bank guarantees, prompting Universal to file a petition under Section 20 of the Arbitration Act, 1940 in the Calcutta High Court. The Calcutta High Court, relying on Section 31(4) of the Arbitration and Conciliation Act, 1996, held it had jurisdiction and dismissed the Board's challenge. On appeal, the Supreme Court examined whether the ouster clause could restrict the competent court for a Section 20 application, interpreting Sections 20, 31(3)-(4) and 41(1) of the Act in light of the Code of Civil Procedure, 1908. The Court held that the ouster clause validly limited jurisdiction to the Jaipur courts, and that Section 20 of the CPC applies to determine territorial jurisdiction for arbitration matters. Consequently, the Supreme Court set aside the Calcutta High Court’s order and directed transfer of the petition to the Jaipur district court. The appeals were allowed.
Issues considered
- The applicability of the ouster (forum selection) clause in the contract to determine the competent court for filing a petition under Section 20 of the Arbitration Act, 1940.
- Whether Section 31(4) of the Arbitration and Conciliation Act, 1996 overrides a contractual forum selection clause.
- The relevance of Section 20 of the Code of Civil Procedure, 1908, in deciding territorial jurisdiction for arbitration proceedings.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 20, s. 31(3), s. 31(4), s. 41(1)
- Code of Civil Procedure, 1908s. 20, s. 2(c)
Subjects
arbitrationjurisdictionouster clauseforum selection clauseSection 31 Arbitration ActSection 20 CPCterritorial jurisdictionpetition under Section 20contractual jurisdiction clause
Judgment
(2009] 1 S.C.R. 138
A RAJASTHAN STATE ELECTRICITY BOARD
v.
M/S. UNIVERSAL PETROL CHEMICALS LTD.
(Civil Appeal Nos. 5430-31 of 2002)
JANUARY 12, 2009
B
[TARUN CHATTERJEE AND DR. MUKUNDAKAM
SHARMA, JJ.]
ARBITRATION AND CONCILIATION ACT, 1996:
c
ss. 20, 31(4) and 41(1) - Agreement containing
arbitration clause as also an ouster clause confining to
jurisdiction of court at Jaipur - Petition uls 20 of the Act filed
in Calcutta High Court - HELD: It is only the court at Jaipur
0 which will have jurisdiction to try and decide arbitration
proceedings between the parties and also entertain a petition
u/s 20 of the Act - Code of Civil Procedure, 1908 - ss. 2(c)
and 20 - Jurisdiction of court.
The appellant Electricity Board having its base and
E operation at Jaipur placed two orders for supply of
transformer oil with the respondent, a company, having
its registered office and manufacturing unit at Calcutta.
The purchase orders were followed by two agreements.
The general conditions of contract contained an
F arbitration clause as also an ouster clause confining to
the jurisdiction of the court at Jaipur only. Disputes arose
between the parties. The respondent filed a petition uls.20
of the Arbitration Act, 1940 in the nature of a suit before
the Calcutta High Court. The suit was dismissed by order
G dated 6.3.1991. However, ultimately, the appeals of the
respondent were allowed by the Division Bench of the
High Court holding that the forum selection clause as
appearing in the agreements would not operate in view
of the specific prohibition uls.31(4) of the Act. It was also
H 138
RAJASTHAN STATE ELECTRICITY BOARD v. 139
UNIVERSAL PETROL CHEMICALS LTD.
held that the respondent having made an application A
before the Calcutta High Court, which was a Court of
competent jurisdiction to try and decide the proceedings,
that Court would be entitled to exercise the jurisdiction
and all subsequent applications would be made to the
said Court only. B
In the instant appeals filed by the Board, the question
... for consideration before the Court was: whether the
ouster clause in the agreement between the parties would
also be applicable in ascertaining the competent court for
making an application for reference u/s 20 of the
c
Arbitration Act, 1940.
Allowing the appeals, the Court
HELD: 1.1. The Division Bench of the Calcutta High D
~.
Court misread and misinterpreted the provisions of sub-
Sections (3) and (4) of s.31 of the Arbitration and
Conciliation Act, 1996, and thereby arrived at a wrong
finding to the effect that by virtue of the provisions of
s.31(4) the Calcutta High Cc.urt would have jurisdiction
E
in the matter. An analytical look at the provisions of sub-
sections (3) and (4) of Section 31 of the Act will make it
explicitly clear that any application in any reference,
.,; meaning thereby even an application u/s 20 of the Act,
/ could or should be filed in a court competent to entertain
such proceeding and having jurisdiction to decide the F
subject of the reference. Such jurisdiction would or could
be restricted by the agreements entered into by and
between the parties. [Para 27 and 28] (155-A-B-E]
1.2. As per Section 41 (1) of the Arbitration Act, 1940, G
the provisions of the Code of Civil Procedure, 1908 shall
"' apply to all proceedings before the court, and to all
appeals, under the Act. Thus, jurisdiction of the court
under the Act to entertain the proceeding for filing an
award was governed by the provisions of the Code and, H
140 SUPREME COURT REPORTS [2009] 1 S.C.R.
A therefore, s. 20 of the Code will apply in respect of
deciding the issue with regard to territorial jurisdiction of
a court as defined in s.2(c) of the Code, in respect of a
matter relating to arbitration also. [Para 16 and 25] [148-
F-G]
B
1.3. There are number of decisions of this Court
wherein it was held 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 therein,
if the parties to the contract agree to vest jurisdiction in
c one such court to try the dispute which might arise as
between themselves, such agreement would be valid and
binding.The legal proposition settled by this Court in
respect of territorial jurisdiction and applicability of s.20
of the Code to Arbitration Act is clear, unambiguous and
D explicit. The said position is binding on both the parties ;.
who were contesting the present proceeding. [Para 17
and 21) [149-E-F; 152-A]
A.B.C. Laminart (P) Ltd. v. A.P. Agencies (1989) 2 SCC
E 163; Hakam Singh v. Mis. Gammon (India) Ltd. (1971) 1 SCC
286; Angile Insulations v. Davy Ashmore India Ltd. and
Another (1995) 4 SCC 153 and Hanil Era Textiles Ltd. v.
Puromatic Filters (P) Ltd. (2004) 4 SCC 671, relied on.
1.4. In the instant case, there is indeed an ouster
F clause used in the agreements stating that the courts at
Jaipur alone would have jurisdiction to try and decide the
proceedings which could be initiated for adjudication
through the process of arbitration. Even though
otherwise the Courts at Calcutta would have territorial
G jurisdiction to try and decide such disputes, but in view
of the ouster clause it is only the courts at Jaipur which
would have jurisdiction to entertain such proceeding,
including a petition uls 20 of the Act as also all
subsequent applications arising out of the reference. The
H judgment and order of the Division Bench of the Calcutta
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 141
PETROL CHEMICALS LTD.
High Court is set aside. The Registry of the Calcutta High A
Court is directed to transfer the petition filed by the
respondent u/s 20 of the Act alongwith all the records to
the District Judge, Jaipur, who, on receipt of the said
petition alongwith the transmitted records shall allocate
it to the competent and appropriate Court, for being dealt B
with in accordance with law. [Para 22, 27and 29] [152-E-
F; 155-C, G, H; 156-A-B]
Case Law Reference:
(1989) 2 sec 163 relied on Para 17 C
(1971) 1 sec 286 relied on Para 18
(1995) 4 sec 153 relied on Para 19
(2004) 4 sec s11 relied on Para 20
D
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
5430-31 of 2002.
From the final Judgment and Order dated 17.4.2001 of the
High Court of Calcutta at Calcutta in A.P.O. Nos. 462 and 463 E
of 1992 in Special Suit No. 70 of 1990.
Puneet Jain, Sushi! Kumar Jain, Archana Tiwari and
Ashwin V. Kotemath for the Appellant.
S.C. Ghosh, Parijat Sinha, Reshmik Rea Sinha and F
Snehasish Mukherjee for the Respondent.
The Judgment of the Court was delivered by
DR. MUKUNDAKAM SHARMA, J. 1. Being aggrieved G
by the common judgment and order dated 17.04.2001 passed
by the Division Bench of the High Court of Calcutta in Appeal
Number 462 and 463 of 1992, allowing the appeals filed by the
respondent against the judgment of a learned Single Judge, .
these civil appeals have been preferred where special leave H
142 SUPREME COURT REPORTS [2009] 1 S.C.R.
A was granted. Since both these appeals involve similar questions
of law and facts and arise out of the same impugned order, we
propose to dispose of both these appeals by this common
judgment and order.
8 2. The appellant Board which is having its base and
operation at Jaipur placed an order for supply of 50 kiloliter of
transformer oil with the respondent Company which is having
its registered office and manufacturing unit at Calcutta vide
purchase order No. RSEB/SE/Proc.1/TN-1261/U/Petrochemical/
C 937 dated 23.9.1985 for an amount of Rs. 6,09, 144/-. In terms
of clause 5 of the said purchase order, the respondent was
required to deposit security in the form of bank guarantee for
an amount equivalent to 2 per cent of the contract value. In
addition, the respondent was also required to furnish a
performance guarantee equivalent to 5 per cent of the contract
D value for satisfactory performance and due execution of the
said contract. Subsequent to the aforesaid purchase order, an
agreement was also entered into between the parties on
16.10.1985 at Jaipur.
E 3. Subsequently the appellant Board placed another
purchase order vide No. RSEB/SE/Proc.l/TN-1312/202 dated
02.12.1987 for supply of 150 kiloliter of transformer oil for an
amount of Rs. 19,50,000/-. Similar to the previous purchase
order, in the present purchase order also the respondent was
F required to furnish the bank guarantee equivalent to 2 per cent
of the contract value towards security deposit and equivalent
to 5 per cent of the contract value towards performance
guarantee. Accordingly an agreement was also entered into
between the parties on 16. 12. 1987 at Jaipur.
G 4. In terms of the abovesaid two purchase orders and
agreements thereon the respondent was required to furnish
bank guarantee to the tune of Rs. 1,79,200/-. In compliance to
the said condition with respect to the bank guarantee the
respondent furnished four bank guarantees for amounts of Rs.
H
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 143
PETROL CHEMICALS LTD. [DR. MUKUNDAKAM SHARMA, J.]
12200/-, Rs. 30500/-, Rs. 39000/ - and Rs. 97500/-. These A
guarantees were executed by the Allahabad Bank at Jaipur
Branch on behalf of their Main Branch at Calcutta.
5. Before we proceed further it would be appropriate for
us to extract herein the relevant clauses with respect to B
adjudication of the disputes, if any, which were common in both
the agreements. Clause 30 of the General Conditions of the
..,;. Contract inter alia stipulates as under:-
"30 ..... The contract shall for all purposes be construed
according to the laws of India and subject to jurisdiction c
of only at Jaipur in Rajasthan Courts only ..........."
Clause 31 of the General Conditions of the Contract, which
is an arbitration clause, reads as under:-
D
"31. ARBITRATION
(a) If at any time any question, dispute to difference
whatsoever which may arise between the Purchaser and
the Supplier upon or in relation to Contract, either party
may forthwith to the order a notice in writing of the existence E
of such question(s)/dispute(s) differences and the same
shall be referred to the Chairman, RSEB, Jaipur or any
,.. person appointed by him for the purpose (herein referred
to the 'Arbitrator'). Such reference shall be deemed to be
a submission to the arbitration within the meaning of the F
Indian Arbitration Act, 1940 and the statutory modifications
made thereof.
(b) The award of the Arbitrator shall be final and binding
on both the parties. G
(c) Upon every or any such reference, the cost incidental
to such reference and an award shall be in the discretion
of the Arbitrator who may determine the amount thereof
and direct the same to be borne and paid.
H
144 SUPREME COURT REPORTS [2009) 1 S.C.R.
A (d) Work under the Contract shall, if reasonably possible,
continue during the arbitration proceedings and no
payment due or payable by the Purchaser shall be withheld
on account of such proceedings."
B In the second purchase order which is dated 02.12.1987,
in addition to the above mentioned clauses, a clause was also
incorporated which is with respect to the jurisdiction of the
Court in case of disputes:
"DISPUTES
c
All disputes, differences or questions whatever which may
arise between the Purchaser and the Supplier upon or in
relation with or in connection with the contract shall be
deemed to have arisen at Jaipur (Rajasthan) and no Court
D other than the Court at Jaipur (Rajasthan) shall have
jurisdiction to entertain or try the same."
A clause, namely, Clause 7 was also incorporated in the
bank guarantee which is with respect to the jurisdiction of Courts
for adjudication of disputes arising under the bank guarantee.
E
The said clause reads as under:-
"All disputes arising in the said Bank Guarantee between
the Bank and the Board or between the supplier or the
""'r
Board pertaining to this guarantee shall be subject to the
F courts only at Jaipur in Rajasthan."
6. Somehow the disputes arose between the parties. The
appellant alleged that the respondent has failed to perform his
part of the contract inasmuch as the respondent has supplied
G defective transformer oil and as such on receipt of such supply,
the same was rejected by the Board requiring the respondent
to replace the same. Thereafter the appellant took steps for
invocation of the bank guarantees in view of the fact that the
respondent has failed to adhere to the aforesaid requirement
H and also neglected to replace the defective transformer oil.
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 145
PETROL CHEMICALS LTD. [DR. rvlUKUNDAKAM SHARMA, J.]
7. The respondent being aggrieved by the actions taken A
by the appellant filed a petition under Section 20 of The
Arbitration Act, 1940 (for short the "Act") in the nature of a suit
in the High Court at Calcutta being Special Suit No. 70of1990.
In the said suit, the respondent also moved an application under
Section 41 of the Act seeking interim reliefs. The appellant B
herein contested the aforesaid suit. By an Order dated
~
' 06.03.1991, the learned Single Judge of the High Court
~ dismissed the petition and also vacated the interim order which
was passed earlier.
8. On appeal being filed by the respondent, the said order
c
of 06.03.1991 passed by the learned Single Judge was set
aside and the matter was remanded back for fresh
consideration.
9. Consequent upon the aforesaid order of remand, the D
learned Single Judge again heard the suit and passed a
similar order dismissing the petition filed by the appellant under
Section 20 of the Act. Being aggrieved by the said final order
passed by the learned Single Judge, two appeals were filed
before the Division Bench which were heard together and the E
same were allowed by the Division Bench under the impugned
order dated 17 .04.2001.
10. The said impugned judgment and order is under
challenge in both the appeals on which we heard the learned F
counsel appearing for the parties who had taken us through the
relevant documents. By the impugned order, the Division Bench
of the Calcutta High Court held that the forum selection clause
as appearing in the agreements between the parties would not
operate in view of the specific prohibition under Section 31 (4)
G
of the Act. It was also held that since the respondent had made
an application before the Calcutta High Court having competent
jurisdiction to try and decide the proceedings, the said Calcutta
Court would be entitled to exercise jurisdiction and that all
subsequent applications would be made to that Court only as
H
146 SUPREME COURT REPORTS [2009) 1 S.C.R.
A first application was made in that Court by the respondent.
Consequently, the appeals were allowed and the judgment of
the learned Single Judge was set aside. The matter was
directed to be listed before the Single Judge for passing
consequential orders in terms of the directions issued by the
B Division Bench.
11. Contentions that were raised on behalf of the appellant
in the present appeals before us, revolves around the issue of
territorial jurisdiction of the Calcutta High Court in entertaining
C the said petition under Section 20 of the Act.
12. According to the appellant, the Calcutta High Court
would have no jurisdiction to entertain and decide the aforesaid
petition under Section 20 of the Act and that it is only the Court
at Jaipur which would have territorial jurisdiction to entertain and
D decide any such petition filed by any of the party, in view of the
specific intention of the parties as disclosed from the
stipulations in the purchase order and agreements entered into
between the parties.
E 13. The learned counsel for the respondent, on the other
hand submitted before us that the provision of Section 31 of
the Act is clear and in terms thereof and in view of the specific
prohibition therein any proceeding between the parties would
have to be instituted within the jurisdiction of the Calcutta High
F Court and therefore the impugned judgment and order passed
by the High Court of Calcutta is legal and valid.
14. In the light of the aforesaid submissions made by
learned counsel for both the parties, we proceed to decide the
issues as to whether or not the Calcutta High Court had
G territorial jurisdiction to entertain the petition filed by the
respondent under Section 20 of the Act as also the application
filed under Section 41 of the Act seeking interim orders and
also as to whether it is the Jaipur Court only which will have
territorial jurisdiction to entertain any such request. For proper
H appreciation of the points at issue, it would be appropriate to
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 147
PETROL CHEMICALS LTD. [DR. MUKUNDAKAM SHARMA, J.}
set out the abovementioned legislative provisions of the Act, A
which are as under:
20. Application to file in Court arbitration agreement. - (1)
Where any persons have entered into an arbitration
agreement before the institution of any suit with respect to B
the subject matter of the agreement or any part of it, and
where a difference has arisen to which the agreement
applies, they or any of them, instead of proceeding under
Chapter II, may apply to a Court having jurisdiction in the
matter to which the agreement relates, that the agreement C
be filed in Court.
(2) The application shall be in writing and shall be
numbered and registered as a suit between one or more
of the parties interested or claiming to be interested as
plaintiff or plaintiffs and the remainder as defendant or D
defendants, if the application has been presented by all the
parties, or, if otherwise, between the applicant as plaintiff
and the other parties as defendants.
(3) On such application being made, the Court shall direct E
notice thereof to be given to all parties to the agreement
other than the applicants, requiring them to show cause
within the time specified in the notice why the agreement
shou Id not be fiied.
(4) Where no sufficient cause is shown, the Court shall F
order the agreement to be filed, and shall make an order
of reference to the arbitrator appointed by the parties,
whether in the agreement or otherwise, or, where the
parties cannot agree upon an arbitrator, to an arbitrator
appointed by the Court. G
(5) Thereafter the arbitration shall proceed in accordance
with, and shall be governed by, the other provisions of this
Act so far as they can be made applicable.
H
148 SUPREME COURT REPORTS [2009] 1 S.C.R.
A 41. Procedure and powers of Court. - Subject to the
provisions of this Act and of rules made there under-
(a) the provisions of - the Code of Civil Procedure, 1908,
(5of1908.) shall apply to all proceedings before the Court,
and to all appeals, under this Act, and
8
(b) the Court shall have, for the purpose of, and in relation
to, arbitration proceedings, the same power of making
orders in respect of any of the matters set out in the
Second Schedule as it has for the purpose of, and in
c relation to, any proceedings before the Court:
Provided that nothing in clause (b) shall be taken to
prejudice any power which may be vested in an arbitrator
or umpire for making orders with respect to any of such
D matters.
15. There is no dispute with regard to the fact that the
parties entered into various agreements which are referred to
above. The said agreements admittedly also contained forum
E selection clauses between the parties whereby and whereunder
the parties agreed that the said contracts and agreements, in
relation to any dispute or difference would be subject to the
jurisdiction of courts at Jaipur in Rajasthan.
16. Therefore, the issues which we are required to address
F here is whether the ouster clause in the agreement between
the parties will also be applicable in ascertaining the competent
court for making an application for reference under section 20
of the Act. As per Section 41 (1) of the act the provisions of
the Code of Civil Procedure, 1908, (for short "the Code") shall
G apply to all proceedings before the Court, and to all appeals,
under the Act. Section 20 of the Code, which is with respect to
the jurisdiction of courts for institution of suit, reads as under:
20. Other suits to be instituted where defendants reside
H or cause of action arises.
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 149
PETROL CHEMICALS LTD. [DR. MUKUNDAKAM SHARMA. J.]
Subject to the limitations aforesaid, every suit shall be A
instituted in 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 8
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 commencement of the suit C
actually and voluntarily resides, or carries on
business, or personally works for gain, provided that
in such case eithei 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, D
acquiesce in such institution; or
(c) the cause of action, wholly or in part, arises.
Explanation.-A corporation shall be deemed to carry on E
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.
17. There are number of decisions of this Court wherein it
was held that where there may be two or more competent courts F
which can entertain a suit consequent upon a part of the cause
of action having arisen therein, if the parties to the contract
agree to vest jurisdiction in one such court to try the dispute
which might arise as between themselves, such agreement
would be valid and binding. In A.B.C. Laminart (P) Ltd. v. A.P. G
Agencies [(1989) 2 SCC 163], this Court stated thus;
"21. From the foregoing decisions it can be reasonably
deduced that where such an ouster clause occurs, it is
pertinent to see whether there is ouster of jurisdiction of H
150 SUPREME COURT REPORTS [2009) 1 S.C.R.
A other courts. When the clause is clear, unambiguous and
specific accepted notions of contract would bind the
parties and unless the absence of ad idem can be shown,
the other courts should avoid exercising jurisdiction. As
regards construction of the ouster clause when words like
a "alone", "only", "exclusive" and the like have been used
there may be no difficulty. Even without such words in
appropriate cases the maxim "expressio unius est
exclusio a/terius" - expression of one is the exclusion of
another - may be applied. What is an appropriate case
c shall depend on the facts of the case. In such a case
mention of one thing may imply exclusion of anolther. When
certain jurisdiction is specified in a contract an intention
to exclude all others from its operation may in such cases
be inferred. It has therefore to be properly construed."
D 18. The said decision also referred to and relied upon an
earlier decision of this Court in Hakam Singh v. Mis. Gammon
(India) Ltd. [1971 (1) SCC 286]. The said decision was
rendered in the light of facts of a similar contract where clause
12 of the tender provided for arbitration whereas clause 13
E provided;
"Notwithstanding the place where t:1e work under this
contract is to be executed, it is mutually understood and
agreed by and between the parties hereto that this Contract ...
F shall be deemed to have been entered into by the parties
concerned in the city of Bombay and the court of law in
the city of Bombay alone shall have jurisdiction to
adjudicate thereon."
G The question which fell for consideration of this Court in
the said case was whether the Court at Bombay alone had
jurisdiction over the dispute. In that context, it was held that the
Code in its entirety applied to proceedings under the Arbitration
Act by virtue of Section 41 of that Act and that the jurisdiction
of the Court under the Act to entertain a proceeding for filing
H
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 151
PETROL CHEMICALS LTD. [DR. MUKUNDAKAM SHARMA, J.]
an Award was accordingly governed by the provisions of the A
Code. Reference was made to the provisions of Section 20 of
the Code, with all the terms of Section 20(a) of the Code read
with explanation thereto, the respondent Company which had
its principal place of business at Bombay was liable to be sued
at Bombay. B
It was further held that where two or more courts have
jurisdiction to try a suit or proceeding, an agreement between
the parties that the dispute between them shall be tried in one
of such courts was not contrary to public policy and that such C
an agreement did not contravene the provisions of Section 28
of the Contract Act.
19. Similar view was also reiterated in Angile Insulations
v. Davy Ashmore India Ltd. and Another((1995) 4 SCC 153].
D
20. In Hani/ Era Textiles Ltd. v. Puromatic Filters (P) Ltd.
[(2004) 4 SCC 671], it was held by this Court that where two
or more courts have jurisdiction under the Code, it is
permissible to have an agreement between the parties
restricting the place of suing to any one of them and if such r::
restriction is placed in the agreement, the same cannot be said
to be contrary to public policy and does not contravene Section
28 of the Contract Act. It was however, made clear that such
restriction cannot be made and the parties cannot by
agreement confer jurisdiction on a court which otherwise it does F
not possess under the Code.
This Court also considered the scope of Section 20 of the
Code in the said case and by referring to the said provision it
was held that when ouster clause is clear, unambiguous and
specific, accepted notions of contract would bind parties and G
unless absence of ad idem can be shown courts should avoid
exercising jurisdiction. While arriving at the said finding this
Court followed the ratio laid down in A.B.C. Laminart (P) Ltd.
(supra).
H
152 SUPREME COURT REPORTS [2009] 1 S.C.R.
A 21. The aforesaid legal proposition settled by this Court
in respect of territorial jurisdiction and applicability of Section
20 of the Code to Arbitration Act is clear, unambiguous and
explicit. The said position is binding on both the parties who
were contesting the present proceeding. Both the parties with
B their open eyes entered into the aforesaid purchase order and
agreements thereon which categorically provide that all disputes
arising between the parties out of the agreements would be
adjudicated upon and decided through the process of
arbitration and that no court other than the court at Jaipur shall
c have jurisdiction to entertain or try the same. In both the
agreements in clause 30 of General Conditions of the Contract
it was specifically mentioned that the contract shall for all
purposes be construed according to the laws of India and
subject to jurisdiction of only at Jaipur in Rajasthan Courts only
and in addition in one of the purchase order the expression used
0
was that the Court at Jaipur only would have jurisdiction to
entertain or try the same.
22. In the light of the aforesaid facts of the present case,
the ratio of all the aforesaid decisions which are referred to
E hereinbefore would squarely govern and apply to the present
case also. There is indeed an ouster clause used in the
aforesaid stipulations stating that the coUi ts at Jaipur alone
would have jurisdiction to try and decide the said proceedings
which could be initiated for adjudication and deciding the
F disputes arising between the parties with or in relation to the
aforesaid agreements through the process of arbitration. In
other words, even though otherwise the Courts at Calcutta
would have territorial jurisdiction to try and decide such
disputes, but in view of the ouster clause it is only the courts at
G Jaipur which would have jurisdiction to entertain such
proceeding.
23. The Division Bench of the Calcutta High Court was
aware of the clauses and stipulations in the agreements and
H was also aware of the abovementioned decisions of this Court,
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 153
PETROL CHEMICALS LTD. [DR. MUKUNDAKAM SHARMA, J.)
but the Division Bench held that the said forum selection clause A
agreed to and entered into between the parties would not apply
in view of the specific provision of Section 31 (4) of the Act. The
said provision as well as sub-Section (3) are extracted below:-
"31. Jurisdiction B
(1) .....................
(2) .....................
(3) All applications regarding the conduct of arbitration c
proceedings 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.
(4) Notwithstanding anything contained elsewhere in this
D
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 arbitration proceedings and
all subsequent applications arising out of that reference,
and the arbitration proceedings shall be made in that Court E
and in no other Court."
24. Having noticed the aforesaid provision of Section
.., 31 (4), the Division Bench held that since the aforesaid provision
starts with a nor1-obstantive clause, the said provisions would F
only apply and would come into operation. The Division Bench
finally held thus:
"The said argument cannot be sustained after a plain
reading of Section 31 (4) of the Act. It is clear from the G
--.. language used therein that where in any application has
been made in a court, competent to entertain, in that c~se
that court alone shall have jurisdiction. The requirement is
not that the application should be allowed. Since in the
• instant case admittedly an application under Section 20
H
154 SUPREME COURT REPORTS [2009] 1 S.C.R.
A has been made, which is an application in a reference,
Calcutta High Court will have jurisdiction."
The said findings were rendered by the Division Bench
upsetting the findings of the learned Single Judge who had held
8 that the non-obstantive clause appearing in sub-Section (4) of
Section 31 would not be attracted in the present case where
the parties by an agreement had agreed to a particular forum
having jurisdiction over the dispute between the parties for
adjudication.
c 25. Section 20 of the Code will apply in respect of deciding
the issue with regard to territorial jurisdiction of a court in
respect of a matter relating to arbitration also, for in Hakam
Singh (supra), it was held that the jurisdiction of the court under
the Act to entertain the proceeding for filing an Award was
D governed by the provisions of the Code. We also at this stage
may appropriately refer to the definition of the word "Court" as
appearing in Section 2(c) of the Act wherein the expression
"Court" is defined to mean "a Civil Court having jurisdiction to
decide the questions forming the subject matter of the reference
E if the same had been the subject matter of a suit, but does not
except for the purpose of arbitration proceedings under Section
21, include a Small Cause Court."
26. Sub-section (3) precedes sub-Section (4) of Section
F 31 of the Act. The said sub-Section provides that all
applications regarding the conduct of arbitration proceedings
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. Sub-Section (4) on the other hand states that where
G in any reference any application under the Arbitration Act has
been made in a Court competent to entertain, then that Court
alone would have jurisdiction over the arbitration proceedings
and all subsequent applications arising from that matter and
arbitration proceedings shall be made in that court and in no
-..--
other court.
H
RAJASTHAN STATE ELECTRICITY BOARD v. UNIVERSAL 155
PETROL CHEMICALS LTD. [DR MUKUNDAKAM SHARMA, J.]
27. An analytical look at the provisions of sub-Sections (3) A
and (4) will make it explicitly clear that any application in any
reference, meaning thereby even an application under Section
20 of the Act could or should be filed in a court competent to
entertain such proceeding and having jurisdiction to decide the
subject of the reference. Such jurisdiction would or could be B
restricted by the agreements entered into by and between the
parties. The parties have clearly stipulated and agreed that no
._ other court, but only the court at Jaipur will have jurisdiction to
try and decide the proceedings arising out of the said
agreements, and therefore, it is the Civil Court at Jaipur which C
would alone have jurisdiction to try and decide such issue and
that is the court which is competent to entertain such
proceedings. The said court being competent to entertain such
proceedings, the said Court at Jaipur alone would have
jurisdiction over the arbitration proceedings and all subsequent
applications arising out of the reference. The arbitration 0
proceedings have to be made at Jaipur Court and in no other
court.
28. In our considered opinion, the learned Division Bench
of the Calcutta High Court misread and misinterpreted the E
provisions of sub-Sections (3) and (4) of Section 31 of the Act
and thereby arrived at a wrong finding to the effect that by virtue
of the aforesaid provision of Section 31 (4) the Calcutta High
Court would have jurisdiction in the matter.
F
29. In view of the aforesaid findings and conclusions arrived
at by us holding that it is only the Court at Jaipur which will have
jurisdiction to try and decide the arbitration proceedings
between the parties and also entertain a petition of the
aforesaid nature i.e. Section 20 of the Act, we set aside and G
quash the judgment and order of the Division Bench of the
Calcutta High Court. Both the appeals are allowed to the
aforesaid extent. The Registry of the Calcutta High Court is
directed to transfer the petition filed by the respondent under
Section 20 of the Act alongwith all the records to th·e District
H
156 SUPREME COURT REPORTS (2009) 1 S.C.R.
A Judge, Jaipur, as expeditiously as possible but not latter than
four weeks from the date of receipt of this order. The District
Judge, Jaipur on receipt of the said petition alongwith the
transmitted records shall allocate it to the competent and
appropriate Court, which would thereafter issue Notice to both
8 the parties. The concerned Court shall thereafter deal with the
matter in accordance with law.
30. The registry of this Court is directed to send a copy of
this order to the Registrar, Calcutta High Court and also to
District Judge, Jaipur for necessary action.
c
R.P. Appeals allowed.
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