M. Sathyanarayanan, J.@mdashThe Appellants are Respondents 1 & 2 in Application No. 6498 of 2010 filed by the Respondent herein/claimant. The said Application has been filed u/s 9of the Arbitration and Conciliation Act, 1996 (in short ''Arbitration Act'') praying for a prohibitory order directing the Appellants herein/Respondents in the said Application to furnish security to the tune of Rs. 3,50,12,958/- or such other sum as this Court directs within such time this Court stipulates together with an order of conditional attachment and in the event of default, attachment of the property described in the schedule through the District Court pending initiation and disposal of the arbitral proceedings and the enforcement of the award. The Respondent also filed Application No. 6551 of 2010 praying for the relief of selling the vehicles, equipments and machineries in ''as is where is'' condition in a public auction or a private treaty and to pay the sale proceeds to the Applicant.
2. Learned Judge, vide order dated 27th Jan., 2011, has taken into consideration the interim report of the Advocate Commissioner and the earlier order dated 16th Dec., 2010 made in Application Nos. 6498 & 6551 of 2010 and passed an order directing the Advocate Commissioner to publish the sale notice in one vernacular newspaper and one English daily, which are having circulation in the local area and sell the 18 vehicles/equipments through public auction and also to file a report. The learned Judge also directed the Appellants'' herein/borrowers not to deal with any of the items lying in Medipally, Ramagundam, Karimnagar District and Jhurala Hydro Project, Mahaboob Nagar, Andhra Pradesh, in any manner.
3. Subsequently, on 7th Feb., 2011, this Court passed an order in Application No. 6498 of 2010 directing the Appellants herein to furnish security to the tune of Rs. 3,50,12,958/- within a period of three weeks from the date of receipt of a copy of the order, failing which, order of attachment will be passed without further reference to the Court. The learned Judge, while passing the order, has taken into consideration the report of the learned Advocate Commissioner dated 7th Feb., 2011, wherein it has been stated that the Appellant herein had sold the vehicles/equipments despite the orders passed by this Court and, therefore, directed the parties to appear before this Court on 14th Feb., 2011. Accordingly, the Appellants appeared and the 1st Appellant herein filed an Affidavit dated 14th Feb., 2011, stating that he has not violated the orders passed by this Court, as indicated by the Advocate Commissioner in the interim report filed and, further, stated that 6 vehicles are in the custody of Sri Durga Bhavani Turning Works, Vijayawada and also undertook not to remove the vehicles from the said work place pending further orders.
4. As per the grounds of this Appeal, the subject matter of challenge is the order dated 27th Jan., 2011, made in Application No. 6498 of 2010 and a perusal of the order would disclose that the order was actually passed in Application No. 6551 of 2010 permitting the Advocate Commissioner to sell the vehicles and equipments through public auction.
5. When it was pointed out to the learned Senior Counsel appearing for the Appellants, he made a submission that this Court should look into the substance than form and what was intended to be challenged is the order dated 7th Feb., 2011 made in Application No. 6498 of 2010 in which the conditional order of attachment came to be passed and, therefore, the said order alone is the subject matter of challenge in this Appeal.
6. This Court heard the submissions of the learned Senior Counsel appearing for the Respondent and is of the view that in order to avoid multiplicity of proceedings, the present proceedings are taken as the Appeal challenging the vires of the abovesaid order dated 7th Feb., 2011. However, this Court points out that the Counsel on record should have been careful while preferring this Appeal as the error in challenging a wrong order had caused some inconvenience to the Court.
7. The facts in brief, necessary for the disposal of this Appeal are as follows:
A Loan-cum-Hypothecation Agreement came to be entered into between the 1st Respondent herein and the borrower, namely, the 1st Appellant at Chennai on 28th March, 2009, with regard to excavators, loaders, mining tipper lorries and hydraulic excavators. The 2nd Appellant herein and one Medarametla Subbaramaiah Naidu stood as guarantors for the due repayment of the money. As per the said agreement, the 1st Appellant is liable to pay a sum of Rs. 4,70,02,112/-. in 23 installments. The first installment commenced on 17th May, 2009 with the last installment ending on 17th March, 2011 for 18 vehicles/equipments. For the due repayment of the loan, Medarametla Subbaramaiah Naidu and Mrs. G. Lalithamma had Executed Deeds of guarantee at Chennai.
8. According to the Respondent, the 1st Appellant herein had paid the first five installments in full and committed default from the 6th installment, which falls due on 17th Oct., 2009 and inspite of repeated requests made by them, either to pay the dues or to surrender the vehicles/equipments, the 1st Appellant has failed to comply with the said request and as on 9th June, 2010, a sum of Rs. 3,50,12,958/- is due and payable by the Appellant and the other guarantors and the Respondent is also entitled for further compensation @ 36% on the installments due and payable till full and final settlement.
9. Since the Loan-cum-Hypothecation Agreement provides for Arbitration in the event of any dispute or difference, touching or concerning the agreement, or any condition as to the rights, duties and liabilities of the parties, apprehending that the 1st Appellant herein may secrete the vehicles/equipments out of reach, the Respondent invoked Section 9 of the Arbitration Act and filed the following Applications on the file of this Court:
(i) Application No. 3585 of 2010.-- for appointment of Advocate Commissioner to seize and deliver the equipments and vehicles, more fully described in the schedule with the aid of police;
(ii) Application No. 4373 of 2010.-- to pass a prohibitory order against the garnishees, namely, M/s. Ram Projects and M/s. Nagarjuna Constructions, Hyderabad, from paying any amount to the tune of Rs. 3,50,12,958/- to the Appellants and direct them to deposit the amount to the credit of the said Application;
(iii) Application No. 6498 of 2010.-- to pass an order directing the Appellants herein to furnish security to the tune of Rs. 3,50,12,958/- or such other sum this Court may fix and direct the Appellants to furnish security, failing which, order attachment of the property; and
(iv) Application No. 6551 of 2010.-- to pass an order directing the Advocate commissioner to sell the seized vehicles/equipments/ machineries in its ''as is where is'' condition in public auction or by way of private treaty and pay the sale proceeds to the Respondent.
10. Learned Single Judge passed an order in Application No. 6551 of 2010 appointing an Advocate Commissioner to seize the vehicles/ equipments/machineries. The Advocate Commissioner, pursuant to the warrant of appointment dated 12th July, 2010, had proceeded to the place of work near Medipally District, Andhra Pradesh for seizure and filed four interim reports dated 6th Aug., 2010, 18th Nov., 2010, 27th Jan, 2011 and 7th Feb., 2011 respectively. A perusal of the interim reports would disclose that in respect of the vehicles/equipments, neither the engine nor any tyres were found and most of the vehicles/equipments were in damaged condition and in respect of Volvo-EC-460 - Hydraulic Excavator in Sl. No. 14701, the entire vehicle has been totally dismantled by the Appellants herein.
11. The Appellants herein filed counter in Application No. 3585 of 2010 stating among other things that so far they have paid a sum of Rs. 1.43 Crores in 7 installments towards the financial facility availed by them from the Respondent and have also prepared a valuation report in respect of the vehicles available at site and as per the said report, the vehicles are valued at Rs. 3.96 Crores. It is further averred in the Counter Affidavit that default in payment was due to unforeseen setback in their business and, consequently, they were not able to fulfill their obligation to the Respondent and further stated that the interim reports of the Advocate Commissioner are unrealistic and the allegations are unsupported by any materials. It is further stated that payments were made at Hyderabad and there is no breach of contract, as a sum of Rs. 1 Crore is due from the Respondent herein.
12. It is useful and relevant to extract paragraphs 12 & 13 of the Counter Affidavit:
12. I submit that the Respondent held discussions with the representatives of the Applicant Company on 29.5.2010 wherein two options were proposed - either to handover the equipment and conduct sale by following auction procedure or to dispose of the equipment by the Respondent. The Respondent also insisted that if an auction was to be conducted then the same should not be done at a throw away price but must be held in a transparent manner so as to secure the best price for the equipment. For this purpose, the Respondent also approached the Registered Valuer who valued the vehicle and submitted a valuation report, which was also forwarded to the Applicant-Company on 20.6.2010. The Respondent further submit that it does not intend to hive of the equipment and further submits that the equipment are in a state of repair and that it undertakes to repair the same and hand over to the Applicant Company. However, due to incessant rains in the area and given the hilly terrain, the repairs could not be carried out and hence there has occurred a delay. The Respondent is also willing to find a suitable buyer after the repair work is completed. I submit that the Advocate Commissioner''s Report filed on two occasions reveals several factual errors. I crave leave of this Hon''ble Court to submit the objections to the Advocate Commissioner''s report at a later date.
13. I submit that without final touches the other hand if the Respondent is allowed to carry out the minor repairs and thereafter sale is conducted by open auction, it would fetch a far better price that would clear the liability of the Respondent to the Applicant and in fact fetch us payment of Rs. 1 Crore by the Applicant to the Respondent. In fact during the course of pendency of the present Application pursuant to order of this Hon''ble Court the Applicant has also taken symbolic possession of the equipment.
13. The learned Judge has passed an order dated 16th Dec., 2010 in Application No. 6498 of 2010 in Application No. 4373 of 2010 and Application No. 6551 of 2010 in Application No. 3585 of 2010 directing the Advocate Commissioner to seek the help of the financier and get a valuer for valuing the vehicles/equipments and file a Report and also taken into consideration the particular order dated 12th Aug., 2010, has directed Respondents 4 to 6 therein/garnishees to deposit the amount withheld by them payable to the 1st Appellant herein to this Court on or before the next hearing date on 5th Jan., 2011.
14. It is also pertinent to point out at this juncture that at the time of passing the order dated 27th Jan., 2011 in Application No. 6498 of 2010 in Application No. 4373 of 2010 & Application No. 6551 of 2010 in Application No. 3585 of 2010, which is the subject matter of challenge in this Appeal, objection has not at all been taken with regard to the Territorial jurisdiction of this Court to entertain the Applications u/s 9 of the Arbitration Act. Paragraphs 12 & 13 of the Counter Affidavit filed by the Appellants herein would also indicate that the Appellants herein had prayed for permission to carry out the minor repairs to the vehicles/equipments/ machineries before conducting the public auction as it would fetch a far better price, which would ultimately clear their liability to the Respondent herein.
15. This Court, keeping in mind the stand of the Appellants herein at the earliest point of time in respect of the Applications filed by the Respondent herein u/s 9 of the Arbitration Act, 1996, heard the submissions of the learned Senior Counsel for the Appellants and the learned Senior Counsel for the Respondent.
16. Mr. T.K. Seshadri, learned Senior Counsel appearing for Mr. T.K. Bhaskar, learned Counsel for the Appellants, made the following submissions:
(a) This Court is not having Territorial jurisdiction to deal with the Applications filed u/s 9 of the Arbitration Act, 1996 as no part of the cause of action arises within the jurisdiction of this Court except the Loan-cum-Hypothecation Agreement and the deeds of guarantees were executed at Chennai. Admittedly, the registered office of the Respondent is located at Mumbai and all payments towards the said agreement had been made at Andhra Pradesh, which is outside the jurisdiction of this Court.
(b) Clause 17.2 of the Loan-cum-Hypothecation Agreement states that the venue of Arbitration shall be at Mumbai and, therefore, the Courts at Mumbai alone have the jurisdiction to entertain any dispute with respect to the abovesaid agreement.
(c) Though the deeds of guarantee were executed at Chennai, since those agreements form part of the Loan-cum-Hypothecation Agreement, and that Clause 17.2 also provides that the venue of Arbitration shall be at Mumbai, this Court does not possess Territorial jurisdiction to deal with the present dispute.
(d) The interim reports of the Advocate Commissioner bristle with many factual errors and the learned Single Judge, carried away by the same, has erroneously accepted the same and ordered the sale of vehicles and by doing so, has not permitted the Appellants herein to sell the vehicles/equipments/machineries to third-parties, who offered very good price, which would have ultimately cleared their liability.
17. In support of his submissions, learned Senior Counsel has invited the attention of this Court to the Loan-cum-Hypothecation Agreement, schedule to the said agreement, deeds of guarantee executed by the guarantors, interim reports of the Advocate Commissioner and also the various orders passed by the learned Single Judge, including the impugned order and the subsequent order dated 7th Feb., 2011.
18. Learned Senior Counsel for the Appellants has also placed reliance upon the following judgments to substantiate his submission that this Court is not at all having Territorial jurisdiction to entertain the Applications filed by the Respondent herein u/s 9 of the Arbitration Act:
1.
2. M. Venkatasamiappa v. Srinidhi, Ltd., 1950 (1) MLJ 709 (DB);
3.
4. Union of India v. P. Anantharaman & another, 1991 (1) MLJ 286 (SB);
7.
8. Scanwell Logistics (India) Pvt. Ltd., Chennai v. Blaiklock Compass World Transport (HK) Ltd. and others, 2010 (2) CTC 675 (DB) : AIR 2010 Madras 125 (DB);
9.
10. Sri Rajah Satrucherla and others v. Maharaja of jeypore and others, 1919 ILR 813 (PC).
19. Per contra, Mr. T.V. Ramanujun, learned Senior Counsel for the Respondent submits that the order under challenge cannot be termed as an order at all and, therefore, the Appeal itself is not maintainable. It is further contended by the learned Senior Counsel for the Respondent that the objection with regard to the jurisdiction of this Court to entertain the Application u/s 9 of the Arbitration Act has not been taken at the earliest point of time and, thereby, the Appellants had consented to the jurisdiction of this Court to entertain these Applications and it is also clearly disclosed in their Counter Affidavit. In respect of the Application filed u/s 9 of the Arbitration Act, leave of this Court under Clause 12 of the Letters Patent need not be obtained as part of cause of action has arose within the jurisdiction of this Court.
20. It is further submitted by the learned Senior Counsel for the Respondent that admittedly the Loan-cum-Hypothecation Agreement and Deeds of Guarantee were executed at Chennai and the Respondent is also having a Branch Office at Door No. 47, Monteith Road, Egmore, Chennai-8 and, hence, this Court is having Territorial jurisdiction to entertain the abovesaid Applications. Lastly, it is submitted by the learned Senior Counsel for the Respondent that the conduct on the part of the 1st Appellant deserves condemnation as the four interim reports of the Advocate Commissioner, appointed by this Court, would disclose that the material parts of the vehicles/equipments/machineries have been removed and as on today, the said items are worthless and taking into consideration of the fact that the material value of those items are going down day by day, learned Judge has directed the Advocate Commissioner to obtain valuation and, thereafter, ordered him to conduct public auction and, in fact, the Appellants had also agreed to the same, subject to the rider that they may be permitted to sell the same to third parties of their choice. Therefore, learned Senior Counsel for the Respondent contends that in the absence of specific challenge to the order dated 7th Feb., 2011 and the conduct of the Appellants herein in not raising any objection as to the Territorial jurisdiction of this Court to entertain the Application filed u/s 9 of the Arbitration Act at the earliest point of time, and their conduct in removing the vital parts of the vehicles/equipments/machineries, the present Appeal is liable to be dismissed with exemplary costs.
21. In support of his submissions, learned Senior Counsel for the Respondent placed reliance upon the following judgments:
(2) Decision of a Division Bench of the Calcutta High Court in the matter of GPI Textiles Ltd v. Pramod Metals & others, FMAT No. 470 of 2010 dated 24.6.2011.
22. This Court paid its best attention to the submissions made by the learned Senior Counsel appearing for the Appellants and the learned Senior Counsel for the Respondent and also perused the materials available on record and also perused the documents, to which its attention was specifically drawn and also the decision relied on by the respective learned Senior Counsel appearing for the parties.
23. As already indicated in the earlier paragraphs, the Loan-cum-Hypothecation Agreement came to be executed at Chennai and the Deeds of Guarantee were also executed by the 2nd Appellant as well as another person, namely, Medarametla Subbaramaiah Naidu at Chennai. The 1st Appellant is also having its branch office at Chennai. It is also very relevant to extract the following clauses in the Loan-cum-Hypothecation Agreement entered into between the Respondent and the 1st Appellant:
1.2 "Agreement" means this Loan Agreement together with Summary Schedule, Supplementary Schedule/s, Annexures, Supplementary Agreement/s attached and/or that may be attached in future thereto.
3.2 All payments of the Loan Installments and other charges and moneys due under this Agreement shall be payable by the Borrower to the Lender at the Corporate office, or at such other addresses as may be specified in the Schedule hereto and shall deemed to have been paid on the date on which the amounts thereunder are realized.
... ... ...
17. Arbitration
17.1 Any question dispute or difference that arises between parties or any of them touching or concerning this agreement or any condition herein contained or as to the rights, duties or liabilities of parties hereto or any of them either during the continuance of the agreement or after termination or purported termination hereof shall be referred to the sole Arbitrator to be appointed by the Lender, according to the provisions of Arbitration & Conciliation Act, 1996 and rules thereunder and any amendment thereto from time to time shall apply.
17.2 The award of the Arbitrator shall be final, conclusive and binding on all the parties, and all the parties undertake to carry out the award immediately without any delay. The venue of the Arbitration shall be Mumbai.
18. General
18.1 This Agreement may be amended only in writing and shall be binding upon and to the benefit of the parties hereto.
18.2 All costs, charges and expenses including the stamp duty in respect of this Agreement shall be borne by the Borrower.
18.3 The Borrower shall submit copies of its financial statements duly audited as also the unaudited half yearly statements and tax assessment order and returns every year and such other information as may be required by the Lender and/or the institution/s providing the refinance to the Lender.
18.4 No relaxation, forbearance, delay or indulgence by the Lender in enforcing any of the terms and conditions of this Agreement or the granting of time by the Lender to the Borrower shall prejudice, affect or restrict the rights and powers of the Lender hereunder nor shall any waiver by the Lender of any breach hereof operate as the waiver of any subsequent or any continuing breach hereof.
18.5 Any notice or demand hereunder shall be in writing and signed by the Lender or its authorized representative and may be made by leaving the same or sending it through post/courier addressed to the Borrower to the address specified or the address last known to the Lender; and a notice or demand so given or made shall be deemed to given or made on the date it was so left or, as the case may be, two business days following that on which it was so posted/ couriered, and shall be effectual notwithstanding the same may be returned undelivered and notwithstanding the Borrowers changes of address.
18.6 The Borrower shall execute at its own cost in favour of the Lender or its nominee any further additional/fresh deeds/documents, etc., whenever required by the Lender to do so.
18.7 If any provision of this agreement is illegal, invalid or unenforceable for any reason whatsoever, it will be severed from the remaining provisions, which will remain unaffected.
18.8 The Borrower shall, in the event of any change in authorised signatories, keep the Lender informed, and shall also make immediate arrangement to replace the post dated cheques issued, if any, not still encashed with Fresh cheques signed by new signatories. Failure to keep the Lender informed of the change or to replace the cheques shall be construed as default and Lender may take any such action that they may deem fit.
18.9 The Borrower declares and represents that every statement and representation made and every particular given by it in relation to this transaction are true and correct.
18.10 Words importing the plural shall, except where the context otherwise requires include the singular and vice versa. The pronouns he, she or it and their cognate variations are used as interchangeable and should be interpreted in accordance with the context. Clause headings are for convenience only and shall be considered for the purpose of interpretation.
19. Jurisdiction
19.1 This agreement shall be governed by and construed in all respects with the Indian laws and the parties hereto agree that any matter or issues arising hereunder or any dispute hereunder shall, at the option/direction of the Lender, be subject to the non-exclusive jurisdiction of the Courts of the city of Mumbai. This shall not however limit the rights of the Lender to take proceedings in any other Court of competent jurisdictions.
24. A perusal of the impugned order dated 27th Jan., 2011 as well as the order dated 7th Feb., 2011, would indicate that the Appellants'' herein, who are arrayed as Respondents in the said proceedings, did not raise any objection with regard to the Territorial jurisdiction of this Court at the earliest point of time and only in the grounds filed in this Appeal, such objection has been raised.
25. In the decision in
10. In
The policy underlying Section 11 of the Suits Valuation Act, as also of Sections 21 & 99 of the Code of Civil Procedure, is that when a case has been tried by a Court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds, unless a failure of justice has resulted. The policy of the legislature has been to treat objections as to jurisdiction, both territorial and pecuniary as technical and not open to consideration by an Appellate Court, unless there has been prejudice on the merits.
11. In
Counsel for the Plaintiff-Respondent submitted that it was open to the Defendants to waive this objection, and if they did so, they could not subsequently take the objection. This submission is well founded. As a general rule, neither consent nor waiver nor acquiescence can confer jurisdiction upon a Court, otherwise incompetent to try the Suit. But, Section 21 of the Code provides an exception, and a defect as to the place of suing, that is to say, the local venue for suits cognizable by the Courts under the Code may be waived under this Section. The waiver u/s 21 is limited to objections in the Appellate and Revisional Courts. But, Section 21 is a statutory recognition of the principle that the defect as to the place of suing under Sections 15 to 20 may be waived. Independently of this Section, the Defendant may waive the objection and may be subsequently precluded from taking it
26. Keeping the ratio laid down by the Division Bench of this Court in the above-cited decision in mind, this Court considered the decisions relied on by the learned Senior Counsel for the Appellant and also the factual background of this Appeal.
27. In
28. In M. Venkatasamiappa v. Srinidhi Ltd., 1950 (1) MLJ 709, the scope of Sections 31 (1) & (2)(c) of the Arbitration Act, 1940, came up for consideration and it has been held that the Court in Madras has no jurisdiction to receive the award and only the Court in Bangalore has jurisdiction for the following reason:
In order to determine which is the Court having jurisdiction in the matter, you should first of all ascertain what the questions are, which form the subject-matter of the reference to Arbitration. You then proceed to ask; supposing these questions had arisen in a suit, which is the Court which would have jurisdiction to entertain the Suit ? That Court would be the Court having jurisdiction under the Arbitration Act also. The Court which would have jurisdiction would be not the Court at the place in which the agreement was entered into or where the Defendant resides, but the Court which would have jurisdiction in respect of the questions forming the subject-matter of the reference.
The question of residence would become relevant only should it arise out of or in connection with the subject-matter of the dispute and the reference.
29. In
30. In Union of India v. P. Anantharaman & another, 1991 (1) MLJ 286, again the scope of Section 31 of the Arbitration Act, 1940 came up for consideration. The facts of the case would disclose that a Petition was filed u/s 14(2) of the Arbitration Act, 1940 to direct the Arbitrator to file the original award and as per the agreement, the works are to be executed at Avadi, within the jurisdiction of the Sub-Court at Poonamallee. A stand was taken that since the Petitioner as well as the 2nd Respondent have permanent address in Madras City, this Court (High Court) has jurisdiction for passing the decree in terms of the award passed by the 1st Respondent/Arbitrator. This Court, on the facts of the case, held that no part of cause of action arose within the Original Side jurisdiction of this Court and, therefore, ordered the Registry to return the original award for filing the same before the appropriate Court.
31. In The
32. In
33. In
34. As regards lack of Territorial jurisdiction is concerned, reliance was placed upon the decision of the Privy Council reported in Setrucharlu Ramabhadra Raju Bahadur & others v. Maharaja of Jeypore, 1919 ILR (42) 813, wherein it has been held that notwithstanding that no objection as to the jurisdiction has been taken in the Sub-Court with regard to the decree for sale of mortgaged property, such an objection can be taken before the Appellate Court.
35. In the decision reported in
36. There cannot be any difficulty in accepting the proposition laid down by the Hon''ble Supreme Court and this Court in the above cited decisions. It is settled position of law that ratio laid down in decisions can be made applicable to the facts and circumstances of each case and keeping the well-settled principle of law in mind, this Court has carefully analyzed the facts of this case.
37. A perusal of the Loan-cum-Hypothecation Agreement would disclose that in the event of dispute or difference arise between the parties, concerning the said agreement, or any condition as to the rights, duties and liabilities of the parties, it can be referred to the sole Arbitrator in accordance with the provisions of the Arbitration and Conciliation Act. As per Clause 17 (2), the award of the Arbitrator shall be final, conclusive and binding on all the parties and all the parties undertook to carry out the award immediately without delay and the venue of the Arbitration shall be at Mumbai. The Respondent herein, by invoking the said clause, has filed the claim statement before the Arbitrator at Mumbai on 24th July, 2010.
38. As per clause 19 of the said agreement, the agreement shall be governed by and construed in all aspects with the Indian laws and the parties hereto (Respondent and the 1st Appellant) agree that any matter or issues arising hereunder or any dispute hereunder shall, at the option/discretion of the lender (Respondent) be subject to the Non-Exclusive jurisdiction of the Courts of the State of Mumbai. This shall not, however, limit the rights of the lender (Respondent) to take proceedings in any other Court of competent jurisdiction.
39. The execution of the Loan-cum-Hypothecation Agreement and the Deeds of Guarantee is not in serious dispute. As per Clause 19, no exclusive jurisdiction has been conferred on the Courts of the State of Mumbai and it has been clearly indicated in the said clause that the Non-Exclusive jurisdiction of the Courts of the State of Mumbai shall not, however, limit the rights of the lender (Respondent herein) to take appropriate proceedings in any other Court of competent jurisdiction. Accordingly, the Respondent has invoked the jurisdiction of this Court and filed the Application u/s 9 of the Arbitration Act, 1996.
40. It is also pertinent to point out at this juncture that the Deeds of Guarantee were executed at Chennai and one of the clauses of the Letter of Guarantee also states that nothing contained in Section 17 of the Arbitration Act, shall in any way, affect the right of any of or preclude the parties to/ from seek/seeking such interim relief/s in any Court of competent jurisdiction, including the interim relief u/s 9 of the Arbitration Act and the Rules framed thereunder.
41. Clause (e) of the letter of guarantee also reads that the venue of Arbitration shall be Mumbai or such other place as the lender may in the sole discretion determine and the Courts in Mumbai or such other place shall have exclusive jurisdiction.
42. Apart from the clause in the Loan-cum-Hypothecation Agreement and Deeds of Guarantee, the Appellant, in the Counter Affidavit filed in response to the Petition u/s 9 of the Arbitration Act has not objected to the Territorial jurisdiction of this Court to entertain these Applications and, in fact, had also consented for the sale of the vehicles, subject to the condition that they may be permitted to negotiate with the third parties for effecting such a sale.
43. In
44. It is to be noted at this juncture the stamp on the Loan-cum-Hypothecation Agreement would disclose that it was executed at Chennai and the Deeds of Guarantee were also executed at Chennai. There is no specific denial in the Counter Affidavit filed by the Appellants herein to the Application filed u/s 9 of the Arbitration Act as to the execution of the said agreements.
45. The Hon''ble Supreme Court, in the decision reported in
46. Learned Senior Counsel appearing for the Appellants made an attempt by submitting that even assuming, without admitting, that this Court has jurisdiction to entertain the Application, in the absence of leave to sue under Clause 12 of the Letters Patent, the Applications are liable to be rejected.
47. A Division Bench of this Court, in the decision reported in
48. Though it is vehemently contended by the learned Senior Counsel for the Appellant that the subject matter of Arbitration has not arisen within the jurisdiction of this Court, this Court is of the view that the said submission lacks merit.
49. In
The jurisdiction of the Court in matter of a contract will depend on the suits of the contract and the cause of action arising through connecting factors. In the matter of a contract there may arise causes of action of various kinds. In a Suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the Suit may be filed either at the place where the contract was made or at the place were it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A Suit on a contract, therefore, can be filed at the place where it was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a Suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a Suit can be filed in a Court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a Suit in respect of the breach can always be filed at the place where the contract should have been performed or the performance completed. If the contract is to be performed at the place where it is made, the Suit on the contract is to be filed there and nowhere else. In suits for agency actions the cause of action arises at the place where actions are to be rendered and payment is to be made by the agent. Part of cause of action arises where money is expressly or impliedly payable under a contract. In cases of repudiation of a contract, the place where repudiation is received is the place where the Suit would lie. If a contract is pleaded as part of the cause of action giving jurisdiction to the Court where the Suit is filed and that contract is found to be invalid, such part of cause of the action disappears.
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 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 Court. Where an ouster clause occurs, it is pertinent to see whether there is ouster of jurisdiction 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 avoid exercising jurisdiction. As regards construction of the ouster clause when words like ''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 exlusio 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 contract an intention to exclude all other from its operation may in such cases be inferred. It has therefore to be properly construed.
Where the clause under which it was claimed that there was ouster of jurisdiction of Courts only stated that any dispute arising out of sale would be subject to jurisdiction of Court within whose jurisdiction order was placed but there were no exclusive words like ''exclusive'', ''alone'', ''only'' and the like, other jurisdictions having connecting factors were not clearly, unambiguously and explicitly excluded.
50. As per the ratio laid down in the said decision, the performance of a contract is a part of cause of action and a Suit in respect of a breach can always be filed at the place where the contract should have been performed or it is completed and the jurisdiction of the Court in the matter of contract will depend on the suits of the contract and the cause of action arising through connecting factors. It has been further held that if there is a stipulation that the contract shall be deemed to have been made at a particular place, the same would provide the connecting factor for jurisdiction of the Courts of that place in the matter of any dispute and/or arising out of that contract. As regards ouster of jurisdiction, it has been held in the said decision that 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 Court should avoid exercising jurisdiction and when certain jurisdiction is specified in a contract, an intention to exclude all other from its operation may in such case be inferred.
51. In the case on hand, Clause 19(1) stipulates that it is subject to the Non-Exclusive jurisdiction of the Courts of the State of Mumbai and shall not, however, limit the rights of the lender (Respondent) to take proceedings in any other Court of competent jurisdiction. Therefore, by virtue of the said clause, exclusive jurisdiction has not been conferred on the Courts of the State of Mumbai and if a part of cause of action arose within the jurisdiction of this Court, the Application u/s 9 of the Arbitration Act can be filed here and, accordingly, the Applications were filed on the file of this Court after obtaining leave under Clause 12 of the Letters Patent.
52. As already pointed out in the earlier paragraphs, the Appellants, who are Respondents 1 & 2 in the said Applications, have subjected themselves to the jurisdiction and not even raised an objection as to want of Territorial jurisdiction on the part of this Court to entertain the said Applications and, in fact, consented for the sale of the vehicles, subject to the rider that they may be permitted to negotiate with the third parties for effecting such a sale.
53. In view of the above said uncontroverted facts, the point raised by the learned Senior Counsel for the Appellants as to the lack of Territorial jurisdiction on the part of this Court to entertain the Applications, for the first time in this Appeal, does not merit acceptance. The present Appeal, being devoid of merits, deserves dismissal. Accordingly, this Original Side Appeal is dismissed. Consequently, connected Miscellaneous Petition is closed. In the circumstances, there will be no order as to costs.
