2007 (3) TMI 722 - SC - Companies Law

Whether the Additional Civil Judge (Senior Division) Faridabad was right in dismissing the application filed under section 14 of the Arbitration Act 1940 filed by M/s Chopra Land Developers Pvt. Ltd. ( the Developer ) on the basis of Award dated 29.3.1994 given by the Arbitrator in the above court for want of jurisdiction? Whether application dated 12.4.1994 filed by the Developer in the trial court at Faridabad was maintainable? Held that - Appeal dismissed. The Award is made the rule of the court by the trial court on 31.5.2006 in view of the impugned judgment of the High Court. We have also gone through the Award. We do not wish to express any opinion on the merits however the fact remains that the arbitrator entered upon the reference on 24.8.1992. He fixed the date of hearing on 5.9.1992. On 5.9.1992 the appellant appeared before him. The arbitrator was absent. The Award has been given almost after fourteen months and that too after 14.10.1993 when the appellant herein moved an application under section 20 of the Act for appointment of a new arbitrator. Taking into account the above circumstances we set aside the ex parte Order dated 31.5.2006 passed by the trial court at Faridabad making Award dated 29.3.1994 the rule of the court. Consequently we direct restoration of the matter to the file of the Court of Additional Civil Judge (Senior Division) Faridabad in Case No. 7 instituted on 12.4.1994 titled M/s Chopra Land Developers Pvt. Ltd. v. Jatinder Nath and anr. The trial court will re-examine the question on merits as to whether the Award given by the arbitrator on 29.3.1994 should or should not be made the rule of the court. The trial court will have to decide whether to extend the period for making the Award or not whether to supercede the reference or not. The trial court will proceed in accordance with law. Any observation on the merits of the case mentioned herein above shall not be treated as opinion of this Court. Further the trial court will proceed on the basis that it has territorial jurisdiction to decide the above matter. Appeal dismissed.

Summary

Issues Involved:
1. Territorial Jurisdiction of the Trial Court
2. Validity of the Ex Parte Award

1. Territorial Jurisdiction of the Trial Court:

The primary issue was whether the Additional Civil Judge (Senior Division), Faridabad had the territorial jurisdiction to entertain the application under Section 14 of the Arbitration Act, 1940, filed by the Developer for making the award dated 29.3.1994 the rule of the court. The appellant contended that since the suit land was located in Saket, New Delhi, the trial court at Faridabad lacked jurisdiction. The agreement between the parties, however, included Clause 21, which stipulated that only Faridabad courts would have jurisdiction in case of any dispute.

The trial court initially ruled that it lacked jurisdiction, citing Section 31(4) of the Act, which states that an award may be filed in any court having jurisdiction in the matter to which the reference relates. The trial court found that the property in dispute was located in Delhi, and thus, the application should have been filed in Delhi.

The High Court, however, overturned this decision, holding that the parties had validly conferred exclusive jurisdiction upon the Faridabad court through Clause 21 of their agreement. The High Court emphasized that Section 20 of the CPC allows parties to choose jurisdiction if more than one court has concurrent jurisdiction, and such a choice is not against public policy.

The Supreme Court agreed with the High Court, noting that the agreement was a pure Development Agreement, and the dispute was not akin to a suit for land. The appellant remained the owner, and the Developer was merely a contractor financing the construction. The Court concluded that the Faridabad court had jurisdiction to entertain the application under Section 14 of the Act, as the parties had agreed to it, and the appellant resided in Faridabad at the time of the contract.

2. Validity of the Ex Parte Award:

The second issue was whether the ex parte award dated 29.3.1994 was non est because it was made beyond the four-month period stipulated under the Act. The appellant argued that the arbitrator became functus officio after the expiry of four months from entering upon the reference, and thus, the award was invalid.

The Supreme Court noted that the arbitrator entered upon the reference on 24.8.1992, and the award was made on 29.3.1994, well beyond the four-month period. However, the Court emphasized that merely failing to make an award within the specified time does not automatically invalidate the award. The Court has the power to extend the period under Section 28 of the Act, exercising judicial discretion.

The Supreme Court observed that the appellant had filed objections before the trial court but chose to remain absent, resulting in an ex parte decree on 31.5.2006. The Court set aside this ex parte order, restoring the matter to the file of the Additional Civil Judge (Senior Division), Faridabad, to decide on the merits of whether the award should be made the rule of the court and whether to extend the period for making the award.

Conclusion:

The Supreme Court dismissed the civil appeal, affirming the High Court's decision that the Faridabad court had territorial jurisdiction. The matter was remanded to the trial court to decide on the merits of the award, including whether to extend the time for making the award. The trial court was instructed to proceed on the basis that it had territorial jurisdiction and to re-examine the merits of the case in accordance with the law.