Supreme Court of India
SHREE SUBHLAXMI FABRICS PVT. LTD.versusCHAND MAL BARADIA AND ORS.
- Citation
- 2005 INSC 161
- Decided
- 29 March 2005
- Disposal
- Appeal(s) allowed
- Bench
- D M DHARMADHIKARI
Holding
Contentious issues, including the existence of an arbitration agreement and jurisdictional objections, must be decided by the arbitral tribunal under Section 16, rendering the High Court’s injunction invalid.
Summary
Shree Subhlaxmi Fabrics Pvt. Ltd. initiated arbitration against Chand Mal Baradia under a clause in their contract. Baradia filed a suit in the Calcutta Civil Court seeking an injunction to restrain the arbitration, claiming that no arbitration agreement existed and that the contract’s jurisdiction clause limited disputes to the courts of Bombay, rendering the Calcutta court competent. The trial court dismissed the injunction, but the Calcutta High Court stayed the arbitration, holding that Baradia had an arguable case. On appeal, the Supreme Court held that objections to the existence or validity of an arbitration agreement, as well as jurisdictional challenges, must be decided by the arbitral tribunal under Section 16 of the Arbitration and Conciliation Act, 1996, and not by the civil court at the stage of appointing an arbitrator. Consequently, the High Court’s injunction was erroneous, the trial court’s view was affirmed, and the appeal was allowed, setting aside the High Court order.
Issues considered
- The appropriate forum for raising objections to the existence of an arbitration agreement under the Arbitration and Conciliation Act, 1996.
- Whether a civil court may grant an injunction staying arbitration proceedings when the existence of an arbitration agreement is contested.
- The effect of a contractual clause stating that disputes shall be decided by the courts of Bombay and no other court on the jurisdiction of the Calcutta court.
- The applicability of Section 16 of the Arbitration and Conciliation Act, 1996 to jurisdictional challenges at the stage of arbitrator appointment.
Legislation cited
- Arbitration and Conciliation Act, 1996s. 11, s. 16, s. 4, s. 5, s. 7
- Code of Civil Procedure, 1908s. Order 39 Rules 1 and 2, s. Order 43 Rule 1(r), s. Section 151
Subjects
ArbitrationArbitration agreementSection 16InjunctionCourt jurisdictionCPC Order 39Arbitration and Conciliation Act 1996Jurisdictional challengeArbitral tribunal competence
Judgment
A SH REE SUBHLAXMI FABRICS PVT. LTD.
v.
CHAND MAL BARADIA AND ORS.
MARCH 29, 2005
B [G.P. MATHUR AND D.M. DHARMADHIKARI, JJ.]
Arbitration and Conciliation Act, 1996-Section 16--0bjection regarding
non-existence ofarbitration agreement-Jurisdiction ofcivil court to entertain-
C On facts, Plaintiff seeking injunction against arbitration proceedings on the
ground that there was no arbitration agreement-Trial court declining but
High Court granting injunction on the ground that plaintiff has arguable
case-On appeal, Held: Contentious issues are not to be gone into or decided
at the stage ofappointment ofan arbitrator-Aggrieved party can raise all the
objections including objection regarding non-existence ofan arbitration clause
D before the arbitral tribunal-Thus, High Court erred in granting injunction- -,
Code of Civil Procedure, 1908-0rder 39, Rules 1 and 2.
';,.
Plaintiff, a cloth merchant had been purchasing the cloth material
E
from an agent of defendant no. 1 having office at Calcutta under terms
dictated by defendant no. 1. Dispute arose between them and defendant
no. 1 referred the matter to arbitration. Plaintiff filed suit for injunction
and application under Order 39 Rules 1 and 2 CPC, restraining arbitration
-
I
proceedings on the ground that there was 110 arbitration agreement
between them. Defendant no. 1 contested the application contending that
the indent letter, bills/invoices which were sent to plaintiff mentioned that
F disputes were subject to Bombay jurisdiction and in case of dispute, same
shall be referred to defendant no. 2. Trial Court dismissed the application
holding that the arbitration proceedings having already commenced, it
cannot interfere with the functioning of the arbitrator. On appeal, High
Court stayed the arbitration proceedings. Hence the present appeal.
G Defendant No. 1 contended that the indent (contract) contained a
clause that in case of dispute, the same shall be referred to defendant No.
2; that defendant No. 2 had sent a notice to the plaintiff asking it to
nominate an arbitrator from the panel/list supplied to it and also to remit
an amount of Rs. 200 towards the fee of arbitration. The notice was duly
H 1138
SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA J J39
replied along with Rs. 200 and the plea of non-existence of arbitration A
clause in the agreement could be raised before the arbitrator under Section
16 of the Arbitration and Conciliation Act, 1996.
Plaintiff contended that a part of cause of action had accrued at
Calcutta and the plaintiff had never consciously agreed to any condition ,
that any dispute arising shall be decided by the courts at Bombay and by 'B
no other courts and, therefore, the court at Calcutta had the jurisdiction
to try the suit.
Allowing the appeal, the Court
HELD : 1. The contentious issues should not be gone into or decided C
at the stage of appointment of an arbitrator and no time should be wasted
in such an exercise. The remedy of the aggrieved party is to raise an ~
objection before the arbitral tribunal, as under Section 16 of the
Arbitration and Conciliation Act, 1996, it is empowered to rule about its
own jurisdiction. It is, therefore, open to the plaintiff to raise all the pleas D
before defendant No. 2 including a plea that there is no arbitration
agreement between the parties for referring any dispute for arbitration.
Also that in response to the notice issued by defendant No. 2 the plaintiff
had sent a communication raising certain pleas and had also remitted an
- amount of Rs. 200 as fee for arbitration. In such circumstances, the view 1
taken by the Tri~I Court was just and proper and the High Court erred E
in granting an injunction in favour of the plaintiff and staying the
proceedings before defendant No. 2. (1148-F-H; 1149-A]
Konkan Railway Corpn. ltd v. Mehul Construction Co., [2000) 7 SCC
201; State ofOrissa and Ors. v. Gokulananda.J_ena, (2003) 6 SCC 465; Food
Corporation ofIndia v. Indian Council ofArbitration and Ors., (2003) 6 SCC F
564; Hakam Singh v. Gammon (India) Ltd., (1971) 1 SCC 286; A.B.C.
Laminart (P) ltd v. A.P. Agencies, (1989) 2 SCC 163 and Angile Insulation
v. Davy Ashmore India ltd., (1995) 4 SCC 153, referred to. r;
2. In the case on hand, the clause in the indent is very clear, viz., G
"court of Bombay and no other court". The trial court on consideration
of material on record held that the court at Calcutta had no jurisdiction
to try the sµit. The High Court noted that the invoice contained clause.
like "under jurisdiction of the court from where the goods have beenl
dispatched" and in the indent (contract) a clause like "dispute under this
contract shall be decided by the courts of Bombay and by no other courts". H
1140 SUPREME COURT REPORTS [2005) 2 S.C.R.
A The approach of the High Court is not correct. The plea of the jurisdiction -
goes to the very root of the matter. The trial court having held that it had
no territorial jurisdiction to try the suit, the High Court should have gone
deeper into the matter and until a clear finding was recorded that the court
had territorial jurisdiction to try the suit, no injunction could have been
granted in favour of the plaintiff by making rather a general remark that
B the plaintiff has an arguable case that he did not consciously agree to the
exclusion ·or t~e jurisdiction of the court. (1150-D-F, G-H; 1151-A]
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7653 ofi004
C From the Judgment and Order dated 21.5.2002 of the Calcutta Righ
Court in F.M.A. No. 190 of 2001.
M.N. Krishnamani, Jaideep Gupta, Abhijit Sengupta and Balender Dixit,
with them for the Appellants: ·
D V.A. Mohta, B.S. Banthia, Nilakanta Nayak, Rana Mukherjee and Indra
Makwana, with him for the Respondents.
The Judgment of the Court was delivered by
G.P. MA THUR, J. This appeal by special leave has been preferred
against the judgment and order dated 21.5.2002 of Calcutta High Court by
E which the application moved by the first respondent under Order 39 Rule l
and 2 and Section 151 CPC was allowed and Hindustan Chambers of
Commerce, Mumbai (second respondent) was restrained from proceeding in
Arbitration Case Nos. A/186 and A/187 subject to deposit of Rs. 2 lakhs by
the first respondent with the Registrar General within two days offeceipt of '
F the certified copy of the order.
The first respondent Chand Mal Baradia filed Title Suit No. 993 of
1999 in the City Civil Court at Calcutta for permanent injunction restraining
the defendants from proceeding with the arbitration proceedings, which had '-
been initiated by the appellant Shree Subhlaxmi Fabrics Pvt. Ltd. The case
G of the plaintiff (first respondent) in brief is that he was carrying on business
under the name and style of Mis. C'hand Mal Prakash Chand & Co. at Calcutta;
that Shree Subhalaxmi Fabrics Pvt. Ltd., Mumbai {defendant No. I), which
is a company registered under the Companies Act and sells cloth through its
agent Mis. Naresh Enterprises, which has its office at Calcutta, under the
-
H terms and conditions as diciated by defendant No. 1; that the plaintiff was_
SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA [MATHUR, J.J 1141
getting supplies against the orders placed by him at Calcutta through the A.
agent of defendant No. I; that all such supplies were made by the agent to
the plaintiff at Calcutta at his premises No. 160, Jamunalal Bajaj Street and
all payments made by the plaintiff were collected by this agent on behalf of
defendant No. 1 at Calcutta; that the plaintiff was taking delivery of goods
at Calcutta on the basis of Railway Receipts/Lorry Receipts and consignment B
notes from the said agent M/s. Naresh Enterprises. The case of the plaintiff
further is that there was no arbitration agreement between the plaintiff and
defendant No. l at· any point of time for referring their disputes to any
arbitrator; that he was not a member of defendant No. '2 Mis. Hindustan
Chambers of Commerce, having its office in Mumbai. As the plaintiff became
seriously ill some time in early part of 1997, he could not look after his C
business and consequently there was some delay in making payments to
defendant No. l; that the plaintiff paid more than Rs. 4 lakhs to defendant
No. l and the last payment was made on 27.2.1999; that in April, 1999 the
plaintiff received two notices from defendant No. 2 intimating that the
defendant No. I had initiated arbitration proceedings and the plaintiff was
asked to nominate an arbitrator and send a sum of Rs. 200 as arbitration fee; D
that the defendant No. 2 had no jurisdiction or authority to act as an arbitrator
and accordingly the plaintiff requested it not to proceed with the arbitration
case. The case of the plaintiff further is that the defendant No. I initiated
--- another arbitration proceeding bearing No. A/186 before defendant No. 2
claiming that Mis. Chand Mal Prakash Chand & Co. was also the proprietor E
of Arihant Textiles; that the plaintiff informed by sending a letter to defendant
No. 2 on 18.5.1999 that he had never placed any order in the name of
Arihant Textiles at any point of time and, therefore, the case be dropped. The
plaintiff filed an application under Order 39 Rule 1 and 2 and Section 151
· CPC for restraining the defendants from proceeding with the arbitration cases.
pl
The appellant Shree Subhlaxmi Fabrics Pvt. Ltd. (defendant No. l)
opposed the prayer for grant of injunction and also filed an application under
Section 20 read with Section 151 CPC on the ground inter alia that the
defendant No. I is a cloth merchant, which is carrying on business all over
India; that M/s. Naresh Enterprises having its office at Calcutta had been G
engage<t as a middleman by the appellant, who procured a buyer namely
Chand Mal Prakash Chand & Co. represented by Chand Mal Baradia and
Ors. at Calcutta; that M/s. Naresh Enterprises contacted defendant No. l at
Mumbai for supply of cloth upon which the defendant No. I sent their indents
through the said middleman to the said Mis. Chand Mal Prakash Chand &
Co. (plaintiff), which was duly accepted by them; that the defendant No. I H
1142 SUPREME COURT REPORTS [2005] 2 S.C.R.
A supplied cloth valued at approximately Rs. 20 lakhs in 1996-97 to the plaintiff;
that in the indents (contracts) terms and conditions were mentioned and
condition Nos. 6 and 7 read as under : -
''Clause - 6. Dispute under this contract shall be decided by the Court
of Bombay and no other. courts.
B Clause - 7. If any dispute arises about the transaction the same
shall have to be referred to the Hindustan Chamber of
Commerce, Bombay, for decision under .its Arbitration
Rules.''
c Itl) was further stated in the application filed by the appellant (defendant No.
that in the indent/offer letter, which was pre1med and sent by the middleman
Mis. Naresh Enterprises, to the office of defendant No. l a condition was
mentioned regarding jurisdiction of courts, which reads as under : -
"UNDER JURISDICTION OF THE COURT FROM WHERE THE
D GOODS HAVE BEEN DESPATCHED".
In. all the bills/invoices, which were sent to the plaintiff, it was !!pecifically
mentioned at the top "subject to Mumbai jurisdiction" and at the left hand
-
"~ . . side at the bottom tile following. was written : - .·
"In case of dispute arising out of the transaction between the
E vendors and the purchaser and the brokers or agent either for
payment or any other dispute in relation to the transaction, the
same shall be referred to the Hindustan Chamber of Commerce,
Mumbai, for decision under its Arbitration Rules and the Award
made thereunder shall be binding upon the parties.''
F
Since dispute arose between the parties regarding payment of the goods sold
and delivered, the appellant referred the matter to the Hindustan Chamber of
Commerce, Mumbai, for arbitration and appointed Shri Shikhar Chand Jain
as its arbitrator. The Hindustan Chamber of Commerce (defendant No. 2) had
entered upon the reference and had served a notice upon the plaintiff by letter
G dated 31.3 .1999 calling upon them to appoint one of their arbitrators from the
panel/list sent by it and further to deposit Rs. 200 as arbitration fee. The said
letter was duly replied by the plaintiff on 20.4.1999 along with a fee of Rs.
200. A specific plea was thus raised by defendant No . .J that the court at
Calcutta had no territorial jurisdiction to try the suit and further that in view
of the arbitration agreement contained in the indent (contract) and also the
H
SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA [MATHUR, J.J J 143
fact that the plaintiff had already responded to the notice issued by the' A
defendant No. 2, there was no ground for granting any injunction order in
their favour.
The City Civil Court at Calcutta, after a detailed consideration of the ·
matter, held that the said court had no jurisdiction to try the suit and further
that the arbitration proceedings having already commenced, the civil court B
should not interfere with the functioning of the arbitrator (defendant No. 2).
It was accordingly held that the plaintiff had no prima facie case to go for
trial and the balance of convenience lies in favour of the defendants. It was
further held that the plaintiff will not suffer any irreparable injury in the
event of refusal of injunction. The application was accordingly dismissed by 'C
the order dated 22.2.2000.
Feeling aggrieved by the order of City Civil Court the plaintiff preferred
an appeal before the Calcutta High Court under Order 43 Rule I (r) CPC. The '
High Court held that an objection as to the existence of the arbitration
agreement can be taken either before the arbitrator or by way of a suit in a D
competent court, the initial choice being of the aggrieved party. If the court
is approached, it is a matter of discretion of the court even at the final
hearing, whether to decide the suit or to refer the matter to the arbitrator,
- allowing a decision by the arbitrator himself on the point. Regarding
jurisdiction the High Court held that the plaintiff has no doubt an arguable
case that he did not consciously agree to the exclusion oft.he jurisdiction of E
the courts. It.was further held that the plaintiffs plea that "from where the
goods have been dispatched" is not sufficiently specific as to exclude a
court's jurisdiction is no doubt an arguable case. On these findings the appeal
was allowed and all further proceedings in arbitration cases A/186 anJ A/
187, initiated by the defendant No. I before defendant No. 2, were stayed p
subject to the plaintiff's depositing Rs. 2 lakhs-with the Registrar General
within two days of the receipt of the certified copy of the order.
Shri M.N. Krishnamani and Shri Jaideep Gupta, learned senior advocates,
who have appeared for the appellant Shree Subhlaxmi Fabri:;s Pvt. Ltd.
(defendant No. I) have assailed the order of the High Court on two grounds. G'
The learned counsel have submitted that the indent (contract) contained a
clause that in case any dispute arises about the transaction the same shall
have· to be referred to the Hindustan Chamber of Commerce, Mumbai, for
decision under its Arbitration Rules and as such there was an arbitration
agreement between the parties, which was invoked by the appellant by making H
l 144 SUPREME COURT REPORTS (2005] 2 S.C.R.
A a reference to defendant No. 2. The defendant No. 2 had sent a notice to the
plaintiff asking it to nominate an arbitrator from the panel/list supplied to it
and also to remit an amount of Rs. 200 towards the fee of arbitration. The
plaintiff responded by sending a reply and also an amount of Rs. 200. In such
circumstances the plaintiff cannot contend that there is no arbitration agreement
between the parties. That apart it is open to the plaintiff to raise such a plea
B before the arbitrator under Section 16 of The Arbitration and Conciliation
Act, 1996 (hereinafter referred to "the Act"). The second ground urged is
that there was an agreement between the parties that the disputes arising
under the contract shall be decided by the courts at Bombay and by no other
courts and consequently courts at Calcutta had no territorial jurisdiction to
C entertain the suit. The learned counsel have thus submitted that the High
Court committed manifest error of law in granting an injunctiOn order in
favour of the plaintiff and in passing a restraint order staying further
proceedings before the arbitrators.
Shri V.A. Mohta, learned senior counsel for the respondent No. l
D (plaintiff), on the other hand, submitted that there was no arbitration agreement
between the parties as contemplated by Section 7 of the Act and, therefore,
the reference made to the arbitrator by the appellant is wholly invalid and the
defendant No. 2 has no jurisdiction to proceed with the arbitration. He has
E
further submitted that a part of cause of action had accrued at Calcutta and
the plaintiff had never consciously agreed to any condition that any dispute
arising between the parties shall be decided by the courts at Bombay and by
-
no other courts and, therefore, the court at Calcutta had the jurisdiction to try
the suit.
Before examining the contentions raised by the learned counsel for the
p parties it will be convenient to take note of certain provisions of the Act.
Sections 4, 5, 7 and 16 of the Act read as under : -
"4. Waiver of right to object. - A party who knows that -
(a) any provision of this part from which the parties may derogate,
or
G
(b) any requir~ment under the arbitration agreement,
has not been complied with and yet proceeds with the arbitration
without stating his objection to such-non-comp·tiance without undue
deiijor, if a time limit is provided for stating that objection, within
H that period of time, .shall be deemed to have waived his right to so
SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA (MATHUR, l]}} 45
object.'' A
"5. Extent of judicial intervention. - Notwithstanding anything
contained in any other law for the time being in force, in matters
governed by this Part, no judicial authority shall intervene except
where so provided in this part."
B
"7. Arbitration agreement. - (l) In this part, "arbitration agreement"
means an agreement by the parties to submit to arbitration all or
certain disputes which have arisen or which may arise between them
in respect of a defined legal relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration C
clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in -
(a) a document signed by the parties; D
(b) an exchange of letters, telex, telegrams or other means of
telecommunication which provide a record of the agreement;
·or
-
(C) an exchange of statements of claim and defence in which E
the existence of the agreement is alleged by one party and
not denied by the other.
(5) The_ reference in a contract to a document containing an arbitration
clause constitutes an arbitration agreement if the contract is in writing
and the reference is such as to make that arbitration clause part of the p
contract."
"16. Competence of arbitral tribunal to rule on its jurisdiction. - (1)
The arbitral tribunal may rule on its own jurisdiction, including ruling
on any objections with respect to the existence or validity of the
arbitration agreement, and for that purpose, - G
(a) an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of
the contract; and
(b) a decision by the arbitral tribunal that the contract is null
H
1146 SUPREME COURT REPORTS [2005] 2 S.C.R.
A and void shall not entail ipso Jure the invalidity of the
arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be
raised not later than the submission of the statement of defence;
however, a party shall not be precluded from raising such a plea
B merely because that he has appointed, or participated in the
appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond
the scope of its authority is raised during the arbitral proceedings.
c (4) The arbitral tribunal may, in either of the cases referred to in sub-
section (2) or sub-section (3), admit a later plea if it considers the
delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in sub-
D section (2) or sub-section (3) and, where the arbitral tribunal takes a
decision rejecting the plea, continue with the arbitral proceedings and
make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an
application for setting aside such an arbitral award in accordance
B with section 34."
Section 5 of the Act provides that notwithstanding anything contained
in any other law for the time being in force, in matters governed by Part I
(Sections 2 to 43), no judicial authority shall intervene except where so
provided in the said part. This clearly indicates the legislative intent to
F minimize supervisory role of courts to ensure that the intervention of the
court is minimal. Section 4 is a deeming provision, which lays down that
where a party proceeds with the arbitration without stating his objection to""
non-compliance of any provision of Part I from which the part~es n1ay derogate ''
or any requirement under arbitration agreement, it shall be deemed that he
G has waived his right to so object. Section 7 provides that the arbitration
agreement shall be in writing and such an agreement may be in the form of
an arbitration clause in a co!1tract or in the form of a separnte agreement.
Sub-section (4) of Section 7 provides the conditions under which a document
or exchange of letter or exchange of statement of claim and. defence may
amount to an arbitration agreement. Section 16 of the Act is important and
H it provides that the arbitral tribunal may rule on its owri jurisdiction, including
SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA [MATHUR, J.] J ]47
ruling on any objections with respect to the existence or authority of the A
arbitration agreement.
Section 11 of the Act provides for appointment of arbitrators and sub-
section (6) thereof empowers the Chief Justice of the High Court or any
person or institution designated by him to make such an appointment on the
happening of certain conditions enumerated in clauses (a), (b) or (c). B
In Konkan Railway Corpn. Ltd v. Mehul Constf'uction Co., [2000] 7
SCC 201, a three Judge Bench of this Court held that at the stage when a
party has approached the Chief Justice for appointment of an arbitrator, the
contentious issues should not be decided at that stage and the aggrieved party C
can raise all the objections including objection regarding non-existence of an
arbitration clause before the arbitral tribunal. The Bench observed as under
in para 4 of the report : -
"When the matter is placed before the Chief Justice or
his nominee under Section 11 of the Act it is imperative for the D
said Chief Justice or his nominee to bear in mind the legislative
intent that the arbitral process should be set in motion without
any delay whatsoever and a!! contentious issues are left to be
raised before the Arbitral Tribunal itself. At that stage it would '
not be appropriate for the Chief Justice or his nominee to entertain
any contentious issue between the parties and decide the same. ,E
A bare reading of Sections 13 and 16 of the Act makes it crystal
clear that questions with regard to the qualifications,
independence and impartiality of the arbitrator, and in respect
of the jurisdiction of the arbitrator could be raised before the
arbitrator who would decide the
same .................................................................... . F
Section 16 empowers the Arbitral Tribunal to rule on its own as
well as on objections with respect to the existence or validity of
the arbitration agreement. Conferment of such power on the
arbitrator under the 1996 Act indicates the intention of the G
legislature and its anxiety to see that the arbitral process is set
in motion. This being the legislative intent, it would be proper
for the Chief Justice or his nominee just to appoint an arbitrator
without wasting any time or without entertaining any contentious
issues at that stage, by a party objecting to the appointment of
H
1148 SUPREME COURT REPORTS [2005] 2 S.C.R.
A an arbitrator. If this approach is adhered to, then there would be
no grievance of any party and in the arbitral proceeding, it
would be open to raise any objection, as provided under the
Act. ................ "
Similar view has been taken in State ofOrissa and Ors. v. Gokulananda
B Jena, [2003] 6 sec 465, where this Court held as under : -
"However, we must notice that in view of Section 16 read with
Sections 12 and 13 of the Act, as interpreted by the Constitution
Bench of this Court in Konkan Rly. Corpn. Ltd. v. Rani
Construction (P) Ltd., [2002] 2 SCC 388 almost all disputes
c which could be presently contemplated can be raised and agitated
before the arbitrator appointed by the Designated Judge under
Section 11(6) of the Act. From the perusal of the said provisions
of the Act, it is clear that there is hardly any area of dispute
which cannot be decided by the arbitrator appointed by the
Designated Judge ...... ''
D
In Food Corporation of India v. Indian Council of Arbitration and
Ors .• [2003] 6 SCC 564 para 14, it was emphasized that the legislative intent
underlying the 1996 Act is to minimize the supervisory roles of courts in the
arbitral process and nominate/appoint the arbitrator without wasting time,
E leaving all contentious issues to be urged and agitated before the arbitral
tribunal itself. It was further held that even in the old law, common sense
approach alone was commended for being adopted in construing an arbitration
clause more to perpetuate the intention ·of the parties to get their disputes
resolved through the alternate disputes redressal method of arbitration rather
than thwart it by adopting a narrow, pedantic and legalistic interpretation.
F
The consistent view taken by this Court, therefore, is that contentious
issues should not be gone into or decided at the stage of appointment of an
arbitrator and no time should be wasted in such an exercise. The remedy of
the aggrieved party is to raise an objection before the arbitral tribunal as
under Section 16 of the Act it is empowered to rule about its own jurisdiction.
G It is, therefore, open to the plaintiff to raise all the pleas before defendant No.
2 including a plea that there is no arbitration agreement between the parties
for referring any dispute for arbitration before the Hindustan Chamber of
Commerce, Mumbai. It is also important to note that in response to the notice
issued by -defendant No. 2 the plaintiff had sent a communication raising
H certain pleas and had also remitted an amount of Rs. 200 as fee for arbitration.
SHREE SUBHLAXMI FABRICS PVT. LTD. v. CHAND MAL BARADIA [MA THUR, J.J 1149
In such circumstances we are of the opinion that the view taken by the City A
Civil Court was just and proper and the High Court erred in granting an
injunction in favour of the plaintiff and staying the proceedings before
defendant No. 2.
The other point, which needs consideration, is that the appellant had
raised a specific plea by moving an application under Section 20 read with B
Section 151 CPC before the trial court that the court at Calcutta had no
territorial jurisdiction to try the suit. According to the appellant the indent
(contract) contained a clause that the dispute under the contract shall be
decided by the court at Bombay and by no other court. That apart it was
defendant No. I, which had commenced arbitration proceedings before C
defendant No. 2 and both are situate in Bombay.
The plaintiff wants that the Hindustan Chamber of Commerce (defendant
No. 2) may be restrained from proceeding with arbitration of the dispute,
which has been raised by the appellant Shree Subhlaxmi Fabrics Pvt. Ltd.
(defendant No. 1). Both deferydant No. 1 and defendant No. 2 have their D
offices at Bombay. Insofar as commencement of proceedings before defendant
No. 2 by defendant No. 1 is concerned, no part of cause of action has accrued
in Calcutta.
In Hakam Singh v. Gammon (India} Ltd, [1971] I SCC 286, it has
been held that it is not open to the parties to confer by their agreement E
jurisdiction on a court which it does not possess under the Code. But where
two courts or more have under the Code of Civil Procedure jurisdiction to try
a suit or a 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 and that such an agreement does not contravene Section 28 of the F
Contract Act. In A.B.C. Laminart (P) Ltd v. A.P. Agencies, [1989] 2 SCC
163, it was held as under : -
"When the court has to decide the question of jurisdiction
pursuant to an ouster clause it is necessary to construe the ousting
expression or clause properly. Often the stipulation is that the G
contract shall be deemed to have been made at a particular
place. This would provide the connecting factor for jurisdiction
to the courts of that place in the matter of any dispute on or
arising out of that contract. It would not, however, ipso facto
take away jurisdiction of other courts. Where an ouster clause
occurs, it is pertinent to see whether there is ou~ter of jurisdiction H
1150 SUPREME COURT REPORTS [2005] 2 S.C.R.
A of 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 ~~oid exercising jurisdiction. As regards construction of
ouster clause when words like 'alone', 'only', 'exclusi.ve' and
the like have been used there may be no difficulty. Even without
B such words in appropriate cases the maxim 'expressio unius est
exclusion alterius' - expression of one is the exclusion of another
may be applied. What is an appropriate case shall depend on the
facts of the case. In such a case mention of one thing may imply
exclusion of another. When certain jurisdiction is specified in a
c contract an intention to exclude all others from its operation
may in such cases be inferred. It has therefore to be properly
construed.''
This view has been reiterated in Angile Insulation v. Davy Ashmore
India Ltd., [1995] 4 SCC 153.
D
In the case on hand the clause in the indent is very clear, viz., "court
of Bombay and no other court''. The trial court on consideration of material
on record held that the court at Calcutta had no jurisdiction to try the suit.
The High Court in the earlier part of the judgment noted that the invoice
E contained clause like "under jurisdiction of the court from where the goods
have been dispatched" and in the indent (contract) a clause like "dispute
under this contract shall be decided by the courts of Bombay and by no other
courts". Further, while recording its findings on the plea raised by the appellant · ·
regarding jurisdiction it held as under : -
F "In the facts and circumstances of this case, the plaintiff has no
doubt an arguable case that he did not consciously agree to the
exclusion of the jurisdiction of the courts of its business. Its
case that "from where the goods has been dispatched", is not
sufficiently specific as to exclude a court's jurisdiction, is no
doubt an arguable case."
G
In our opinion the approach of the High Court is not correct. The plea
of the jurisdiction goes to the very root of the matter. The trial court having
held that it had no territorial jurisdiction to try the suit, the High Court should
have gone deeper into the matter and until a clear finding was recorded that
H the court had territorial jurisdiction to try the suit, no injunction could have
SHREE SUBHLAXMI FABRICS PVT LTD. v. CHAND MAL BARADIA [MATHUR, J.J 115 J
been granted in favour of the plaintiff by making rather a general remark that · A
the plaintiff has an arguable case that he did not consciously agree to the
exclusion of the jurisdiction of the court.
On overall consideration of the matter, we are clearly of the opinion
that on the facts and circumstances of the case the view taken by the trial
court was perfectly correct and the High Court has erred in reversing its order B
and granting an injunction in favour of the plaintiff.
The appeal is accordingly allowed with costs and the judgment and
order dated 21.5.2002 of the High Court is set aside. ·
D.G. Appeal allowed. C
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