2007 (5) TMI 658 - SC - Companies Law

Summary

Issues Involved:
1. Maintainability of the application u/s 11 of the Arbitration and Conciliation Act, 1996.
2. Territorial jurisdiction of the City Civil Court, Hyderabad.

Summary:

1. Maintainability of the application u/s 11 of the Arbitration and Conciliation Act, 1996:
The appellant, The Indian Iron and Steel Co. Ltd., contested the application filed by the respondent, M/s. Tiwari Road Lines, under Section 11 of the Arbitration and Conciliation Act, 1996, on the grounds that the agreement between the parties mandated arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration. The Supreme Court noted that Clause 13.1 of the agreement explicitly required disputes to be settled by arbitration as per these rules. The respondent did not attempt to resolve the dispute through the agreed procedure and directly approached the City Civil Court, Hyderabad. The Court held that under Sub-section (2) of Section 11, parties are free to agree on a procedure for appointing arbitrators, and recourse to the Chief Justice or his designate can only be taken if the agreed procedure fails. Since the parties had an agreed procedure, the application under Section 11 was not maintainable, and the City Civil Court had no jurisdiction to appoint an arbitrator. Consequently, the orders dated 31.03.2004 and 27.12.2004 appointing a retired judicial officer as arbitrator were set aside.

2. Territorial jurisdiction of the City Civil Court, Hyderabad:
The appellant also argued that the City Civil Court, Hyderabad, lacked territorial jurisdiction as no part of the cause of action arose there. The tenders were floated, and the agreement was executed in Kolkata. The High Court had erroneously concluded that the court at Hyderabad had jurisdiction because the bank guarantee was furnished and encashed there. The Supreme Court found merit in the appellant's contention but did not express a final opinion on this issue, given the decision on the main point regarding the maintainability of the application under Section 11.

Conclusion:
The appeal was allowed with costs, and the judgments and orders of the High Court of Andhra Pradesh and the City Civil Court, Hyderabad, were set aside. The parties were directed to resolve their disputes through arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration.