Holding

The parties are bound by the contract’s jurisdiction clause; therefore, the transfer petition is allowed and the matters are to be transferred to the Jhansi court.

Summary

Shree Baidyanath Ayurved Bhawan Pvt. Ltd. entered into a distribution agreement with M/s S. Bhatia Enterprises that contained an arbitration clause designating the court at Jhansi, U.P., as the forum for disputes. Disagreements led to the appointment of two different arbitrators, each issuing an award, and the parties filed applications under Sections 34 and 9 of the Arbitration and Conciliation Act, 1996 in courts at Jhansi and Ludhiana respectively, along with numerous civil suits in various courts. The company filed a writ petition under Article 32 of the Constitution seeking a transfer of all these proceedings to the Jhansi court. The Supreme Court held that the parties are bound by the contractual jurisdiction clause and that, ordinarily, such an agreement must be given effect. Consequently, the transfer petition was allowed and the cases were ordered to be sent to the District Judge, Jhansi for further distribution to appropriate courts.

Issues considered

The contractual arbitration clause conferring jurisdiction on the Jhansi court should be given effect despite multiple proceedings in other courts.
Whether the transfer of all pending arbitration applications and civil suits to the Jhansi court is appropriate under Article 32.
Validity of the appointments of the two arbitrators and the scope of their awards under the Arbitration and Conciliation Act.

Legislation cited

Arbitration and Conciliation Act, 1996s. 34, s. 36, s. 9
Code of Civil Procedures. 25

Subjects

ArbitrationJurisdiction clauseTransfer of suitArticle 32Section 34Section 9Contractual forum selectionCivil Procedure

Judgment

[2009] 12 S.C.R. 353

SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. A
v.
PRAVEEN BHATIA & ORS.
(Transfer Petition (C) No. 61 of 2007)

AUGUST 4, 2009
B
[S.B. SINHA AND CYRIAC JOSEPH, JJ.]

CONSTITUTION OF IND/A, 1950:

Article 32 - Writ petition seeking transfer of arbitration c
cases and other suits - Under an agreement between parties,
jurisdiction conferred on court at Jhansi (U.P.) - Different
arbitrators appointed by parties - Awards - Suits filed in
Jhansi (U.P.) as also in Ludhiana (Punjab) - Petition under
Article 32 seeking transfer of cases converted into transfer
0

- petition - Held: Parties are governed by terms of contract
which conferred jurisdiction on courts, the same should
ordinarily be given effect to - Transfer petition allowed -
Cases directed to be transferred to District Judge, Jhansi who
in turn would transfer the same to appropriate courts - E
Arbitration and Conciliation Act, 1996 - ss. 9 and 34.

The petitioner, a manufacturer of ayurvedic
medicines, entered into an agreement with a firm,
respondent No.5, the other respondents being its
partners, for the purpose of distribution of its product. F
The agreement contained an arbitration clause stating that
the jurisdiction of the court to determine the dispute
between the parties would be at Jhansi (U.P.). Disputes
arose between the parties, and the petitioner appointed
an arbitrator. Though the respondents appeared before G
the said arbitrator and filed copies of pleadings,
subsequently they absented. They were stated to have
appointed a different arbitrator who gave an award
against the petitioner. The petitioner filed a petition u/s.
353 H
354 SUPREME COURT REPORTS (2009] 12 S.C.R.

A 34 of the Arbitration and Conciliation Act, 1996 in the
Court of District Judge, Jhansi to set aside the said
award. The respondent firm filed 5 applications uls. 9 of
the Act in the Court of District Judge, Ludhiana. During
the period 2006-2008, 14 civil suits were filed by petitioner
B in different courts. The petitioner filed a writ petition
under Article 32 of the Constitution of India with a prayer
for grant of a writ of mandamus or any other appropriate
writ transferring the cases mentioned in Annexure-1 to
)r
court of Jhansi. The said writ petition was permitted to
c be converted into the transfer petition.

Allowing the transfer petition, the Court

HELD: 1.1. The parties are governed by the terms of
the contract. If, in terms of the provisions of the contract,
D they by agreement conferred jurisdiction on one of the
courts which would have otherwise jurisdiction to deal • .-
with the matter, the same should ordinarily be given
effect to. [Para 13] [361-C-D]

A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies, Salem
E
(1989) 2 SCC 163; Hanil Era Textiles Ltd. v. Puromatic Filters
(P) Ltd. (2004) 4 SCC 671 and Rajasthan State Electricity
Board v. Universal Petrol Chemicals Ltd. (2009) 3 SCC 107, ~ ..
referred to

F 1.2. It is not in dispute that two awards have been
made by two different arbitrators. Objections to the said
awards have been filed by both the parties. One of the
questions which, thus, is required to be taken into
consideration is as to whether the appointment of
G respective arbitrators by the parties was valid and, thus, __. •
whether the arbitrators had acted within the four corners
of the arbitration agreement. [Para 14] [362-E-G]

1.3. The cases mentioned in Annexure-1 to the
H
I SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. 355
""' v. PRAVEEN BHATIA & ORS.
Transfer Petition are directed to be transferred to Jhansi. A
It is true that respondent No.6 is not a party to the
arbitration agreement but he is claiming interest under the
firm which had appointed him as its distributor pursuant
to such an authority having been conferred upon the
firm by the company. Therefore, his case also should be B
transferred. The court concerned should send the
records of the respective cases to the District Judge,
Jhansi who shall in turn transfer them to the courts
~
having appropriate jurisdiction. [Para 15 and 16] [362-G-
H; 363-A-B] c
Case Law Reference:

(1989) 2 sec 163 referred to para 13

(2004) 4 sec 671 referred to para 13
D
~ (2009) 3 sec 107 referred to para 13
CIVIL ORIGINAL JURISDICTION : Transfer Petition (Civil)
Nos. 61 of 2007.

Under Section 25 of The Code of Civil Procedure. E

Sunil Gupta, T.S. Doabia, Rishi Maheshwari, Shally Bhasin
Maheswari, Vikramjeet Banerjee, Anne Mathew, B.
" Rangnathan, Atul Shankar Mathur, Shruti Verma (for M/s.
Khaitan & Co.) Anil Grover, Manish Kumar, Pramod Swarup, F
V.P. Singh, Anil Kumar Jha, Sunita Sharma, Subhash Kaushik,
Anil Katiyar (for D.S. Mahra) J.S. Bhatti, Shree Pal Singh, Ajay
Pal, Kuldip Singh, Javed Mahmud Rao for the appearing
Parties.

... The Judgment of the Court was delivered by G
'
S.B. SINHA, J. 1. Shree Baidyanath AyuNed Bhawan Pvt.
Ltd. (hereinafter referred to as 'the company' for the sake of
brevity) is a company registered and incorporated under the
Indian Companies Act, 1956. It manufactures Ayurvedic H
356 SUPREME COURT REPORTS (2009] 12 S.C.R.

A medicines. For the purpose of distribution of its products, it ).

engages Carrying and Forwarding Agents to receive goods
from it, store them and sell them to stockiests.

2. The company appointed M/s. S. Bhatia Enterprises,
B Ludhiana (Respondent No.5 herein) (for short, 'the firm') of
which Praveen Bhatia, Ramkishan Bhatia, Ashwani Bhatia and
Promila Bhatia are partners. The agreement between the
parties incorporating the terms of conditions of the said contract
of carrying and forwarding agency contained an arbitration
clause. Allegedly, the jurisdiction of the Court to determine the
C dispute between the parties was fixed at Jhansi. Respondents
are said to have committed misappropriation of a huge amount
.·..
which was pointed out in the audit reports of 2000 and 2001.
Furthermore, they are said to have created several other forged
and fraudulent credits in favour of some entities in which they
D had substantial interest which was allegedly detected by the
Company's Account Manager.

3. Parties hereto invoked the arbitration clause contained
in the said agreement. The company appointed oni;i Shri M.P. .....
E Dixit as an Arbitrator. The respondents are said to have
appeared before the said Arbitrator and filed copies of the
pleadings, applications etc. and also collected a copy of the
note-sheet but absented themselves from other and further
proceedings before the Arbitrator. Respondent, however,
F alleged that the purported agreement dated 1.10.1999 is a
forged one and, in fact, an agreement had been entered into
by and between the company and the firm on 1.4.1999.

4. The firm, however, appointed one Mr. Sudesh Kukreja
who is said to have made an award against the appellant for a
G sum of Rs.4, 70,000/- on or about 23.1.2004. The said award ..> •
has been received by the Company at Jhansi on 31.3.2004
whereafter an objection under Section 34 of the Arbitration and
Conciliation Act, 1996 (for short, 'the Act') is said to have been
filed in the Court of District Judge, Jhansi.
SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. 357
v. PRAVEEN BHATIA & ORS. [S.B. SINHA, J.]
_,_ 5. The Firm filed five applications under Section 9 of the A
Act which were marked as Application No.68, 69, 72, 73 and
74 of 2004 through its partners against the company in the Court
of District Judge, Ludhiana.

6. Mr. Dixit is said to have made an award in favour of the B
company awarding a sum of Rs.3,56,54,487.37 at Jhansi upon
adjusting the amount of security amounting to Rs.20 lakh as well
as the amount of commission etc.

7. One Atul Saggar on behalf of Kay Pee Agencies,
Ludhiana, who is said to have been appointed as a distributor C
at Ludhiana on or about 30.8.2004 filed a civil suit praying for
a declaration that the cheque given by him for supply of goods
to the company by Mis. Bhatia as null and void.

8. The respondents filed an application for setting aside D
4 the eward pronounced by Shri Dixit in the Court of District
"" Judge, Ludhiana on or about 23.12.2004. The Firm also filed
three Civil Suits in the Court of Civil Judge, Ludhiana alleging
defamation i:igainst them_ The appellant filed objections to the
t:xecution Petition filed by the respondents and during the E
period 2006 - 2008 appeared to have filed 14 civil suits in
different courts, the det?ils whereof are as under :
---
S.No CASE NO. FILED COURT SUBJECT
AUTHORITY MATTER
F
1. Arbt. 2004 Distt. Petition U/s. 34
S.No.12 Jhansi Arbitration Act
for setting aside
arbitration award
pronounced by G
' ~- Sudesh Kukreja
in favour of
Praveen
Bhatia
H
358 SUPREME COURT REPORTS [2009] 12 S.C.R.

A 2. C.S.No.227 2005 Distt. Petition U/s 9 of
Judge, Arbitration Act for
Jhansi securing award of
M.P. Dixit by
restraining Bhatias
B from selling his
property etc.

3. C.S.No.390 2005 - do - Suit for
declaration/
c recovery of
damages against
opposite parties
due to making of
forged agreement
D dt.1.4.99 by
Bhatias. +

4. C.S.No.28 2005 - do - Declaration and
recovery suit of
•
Rs.23,86,37 4/-
E from Praveen
Bhatia and Nandi
Jain.

5. C.S.No.388 2005 - do - Declaration and
F recovery suit of
Rs.23,41,870/-

6. C.S.No.386 2005 - do - Declaration and
recovery suit of
G Rs.9,30.222/- from
> •
Karanveer and
Praveen Bhatia.

7. C.S.No. 2005 - do - Declaration and
H not known recovery suit of
SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. 359
v. PRAVEEN BHATIA & ORS. [S.B. SINHA, J.]
Rs.13,25,748/- A
from Ravinder
Singh.

8. C.S.No.387 2005 - do - Declaration and
Recovery suit of B
Rs.91,410/- ,.
against credit
note from Praveen
Bhatia
c
9. C.S.No.389 2005 Civil Suit for damages
Judge for defamation
1
(Jr. caused by false
Division) and defamatory
Jhansi notice
D
by Opposite Part\
+ in Punjab Kesri.

.. 10 C.S.No.27 2006 - do - Declaration and
Recovery suit of
Rs.11, 16,847/- E
from Tarvinder and
Praveen Bhatia

11 C.S.No.26 2006 - do - Declaration and
recovery suit of F
Rs.14,68,864/-
from Sanjeev Tara
and Praveen
Bhatia
G
; ( 12 - do - Suit for
C.S.No.25 2006
declaration/
recovery of
- Rupees 1 lakh 20
thousand as
H
360 SUPREME COURT REPORTS [2009] 12 S.C.R.

A outstanding dues
from Praveen
Bhatia and
Sukhraj Singh Gill
Kharad.
B
13. C.S.No.116 2006 Civil Defamation suit
Judge, for damages for
Jr. lodging false FIR
Division, No.139 by
Jhansi Opposite Parties.
c
14. Arb.S.No.03 2006 DJ Petition under
Section 36 of
Arbitration Act for
execution of
D Award given by
Mr. M.P. Dixit.

9. The Company filed objections for release of goods
wherein an order of attachment has been passed. Three
E revision applications were also filed before the High Court of
Punjab and Haryana which were said to have been withdrawn.
The Company filed a writ petition under Article 32 of the
Constitution of India before this Court praying, inter alia, for the -. •
following reliefs:
F "Grant a writ of mandamus or any other appropriate writ,
a writ for transferring the cases mentioned in Annexure-1
be transferred to Court of Jhansi."

10. However, the said writ petition was permitted to be
G converted into a transfer petition.
> •

11. Mr. Sodhi, learned counsel appearing for some of the
respondents, would qontend that having regard to the fact that
the Company would nofsuffer any prejudice in the event the civil
H suits filed by the firm and/or its partners are permitted to be
\

SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. 361
v. PRAVEEN BHATIA & ORS. [S.B. SINHA, J.]
A
, " detennined at different courts in the State of Punjab, particularly
when the company has an office in Punjab and Haryana and,
thus, the balance of convenience lies in allowing the civil
proceedings to be tried at their original courts of filing. It was
urged that in some of the matters, evidences were being led.
B
12. Mr. Bhatt, learned counsel appearing on behalf of the
respondents, urged that the purported agreement being a
forged one, the question of the parties being bound thereby
does not arise.
""'
13. The parties hereto are governed by the terms of the c
contract If, in terms of the provisions of the contract, they by
agreement conferred jurisdiction on one of the courts which
-1 would have otherwise jurisdiction to deal with the matter, the
same should ordinarily be given effect to.
D
~ In A.B.C. Laminart Pvt. Ltd. & Anr. v. A.P. Agencies,
Salem ((1989) 2 SCC 163], this Court held that when the Court
has to decide the question of jurisdiction pursuant to an ouster
clause, it is necessary to constrwe the same !Jroperly. In such
" an event, it was opined that other courts should avoid exercise
E
of jurisdiction. [See also Hani/ Era Textiles Ltd. v. Puromafic
Filters (P) Ltd. ((2004) 4 SCC 671]
~ ,)
Yet again in Rajasthan State Electricity Board v. Universal
Petrol Chemicals Ltd. ((2009) 3 SCC 107], this court held:
F
' "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 G
\ -l proceeding. Both the parties with 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
H
--""
'
362 SUPREME COURT REPORTS [2009] 12 S.C.R.

A · arbitration and that no court other than the court at Jaipur
shall 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
B and subject to jurisdiction of only at Jaipur in Rajasthan
Courts only and in addition in one of the purchase order
the expression used was that the Court at Jaipur only would
have jurisdiction to entertain or try the same."

It was opined :
c
"35. 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
D at Jaipur which 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
E proceedings and all subsequent applications arising out
of the reference. The arbitration proceedings have to be
made at Jaipur Court and in no other court."
\.
14. It is not in dispute that two awards have been made
by two different arbitrators. Objections to the said awards have
F been filed by both the parties. One of the questions which, thus,
is required to be taken into consideration is as to whether the
appointment of respective arbitrators by the parties was valid
and, thus, whether the arbitrators had acted within the four
corners of the arbitration agreement.
G
)
15. It is true that respondent No.6 is not a party to the
arbitration agreement but he is claiming interest under the firm
who had appointed him as its distributor pursuant to such an
authority having been conferred upon the firm by the company.
H We, therefore, are of the opinion that although stricto sensu
SHREE BAIDYANATH AYURVED BHAWAN PVT. LTD. 363
v. PRAVEEN BHATIA & ORS. [S.B. SINHA, J.]
respondent No.6 is not a party to the contract, his case also A
should be transferred.

16. The transfer petition, therefore, is allowed. The cases
mentioned in Anexure-1 thereto are directed to be transferred
to Jhansi. The Court concerned should send the records of the B
respective cases to the District Judge, Jhansi who shall in turn
transfer them to the courts having appropriate jurisdiction in this
behalf. The transferee court therefore should issue notices to
the parties after fixing date(s) of hearing in the matters
transferred to their courts. c
I R.P. Transfer Petition allowed.