1971 (1) TMI 109 - SC - Companies Law

Whether the entire cause of action had arisen at Varanasi and the parties could not by agreement confer jurisdiction on the Courts at Bombay, which they did not otherwise possess? Held that - Since an application for filing an award in respect of a dispute arising out of the terms of the agreement could be filed in the Courts in the City of Bombay, both because of the terms of cl. 13 of the, agreement and because the respondents had their Head Office where they carry on business at Bombay, the agreement between the parties that the Courts in Bombay alone shall have jurisdiction to try the proceeding relating to arbitration was binding between them. Appeal dismissed.

Summary

Issues: Jurisdiction of Courts under Arbitration Act and Code of Civil Procedure, Interpretation of contractual clauses, Applicability of terms in arbitration agreement

In this case, the main issue revolved around the jurisdiction of the Courts under the Arbitration Act and the Code of Civil Procedure, specifically concerning the interpretation and applicability of certain contractual clauses in an arbitration agreement. The appellant had agreed to construction work for the respondent based on a written tender that contained clauses referring disputes to arbitration and specifying the jurisdiction of the Courts in Bombay. Disputes arose, leading to the appellant seeking an order for arbitration in Varanasi, while the respondent argued that only the Courts in Bombay had jurisdiction based on the agreement's terms.

The Trial Judge initially ruled in favor of the appellant, stating that the jurisdiction could not be conferred on the Courts in Bombay as the cause of action had arisen in Varanasi. However, the High Court of Allahabad, in its revisional jurisdiction, overturned this decision, declaring that the Courts in Bombay had jurisdiction under general law and that the agreement's terms were binding, thus directing the case to be filed in Bombay. The appellant then appealed to the Supreme Court.

The Supreme Court analyzed the relevant provisions of the Arbitration Act and the Code of Civil Procedure, emphasizing that the entire Code of Civil Procedure applies to proceedings under the Arbitration Act. The Court noted that while parties cannot confer jurisdiction on a Court that it does not possess under the Code, an agreement specifying a particular Court for dispute resolution is not against public policy if multiple Courts have jurisdiction. The Court further clarified that the respondent company, having its principal office in Bombay, could be sued there as per the Code.

The Court rejected the appellant's argument that the term "corporation" in the Code's Explanation II only referred to a statutory corporation, not a company under the Indian Companies Act. The Court held that a company registered under the Indian Companies Act falls under the definition of a corporation in the Code. Ultimately, the Court upheld the High Court's decision, stating that the agreement's terms regarding jurisdiction were binding due to the respondent's business presence in Bombay. The appeal was dismissed, affirming the jurisdiction of the Courts in Bombay for the arbitration proceedings.