2019 (2) TMI 1939 - HC - Indian Laws

Jurisdiction to hear the present case - Restraint from invoking/encashing the bank guarantee - Section 9 of the Arbitration and Conciliation Act, 1996 - HELD THAT - It is evident that on the date, the District Judge, Patna transferred the case to the court of 5th Additional District Judge, Patna - There are no substance in the submission of learned counsel for the respondent that once the District Judge transferred the case to the court of learned 5th Additional District Judge, Patna who has concurrent jurisdiction with the District Judge, the order cannot be faulted on this ground alone. Since the statutory court was already notified by the State Government in exercise of power under Section 3 of the Commercial Courts Act and it was the District Judge posted in the Civil Court at Divisional Headquarter alone and no other District Judge or Additional District Judge. Hence, the court below had no jurisdiction to pass the impugned order. Therefore, impugned order is fit to be set aside on this ground alone. Misconduct of proceedings - material irregularity - HELD THAT - The impugned order would not reveal that what was the submission of the appellant before the court below. The appellant had raised the issue of locus of the respondent herein to bring the case. Appellant had raised the issue of jurisdiction of the court below to pass the order but nothing has been discussed in the impugned order - There is no dispute that every judicial order should contain objective reasons supported by material on the record and should also depict that there is no violation of natural justice. The impugned order suffers from aforesaid infirmity, hence, the same is not sustainable on this ground also. Whether the respondent had no locus to bring the case for arbitration or to file application under Section 9 of the Arbitration and Conciliation Act, 1996? - HELD THAT - Submission of the appellant is that M/s. SPML Infra Limited was the real party and the respondent herein was a proforma party as per the agreement for the reason that only a successful bidder could have been appointed as distribution franchisee and successful bidder was M/s. SPML Infra Limited and M/s. SPML Infra Limited had undertaken its liability under the agreement. Therefore, in absence of M/s. SPML Infra Limited, no order could have been passed or should have been passed by the court below. The matter is remitted back to the Commercial Court, Patna to hear and pass necessary order according to law - Appeal allowed by way of remand.

Summary

Issues Involved:
1. Jurisdiction of the 5th Additional District Judge, Patna.
2. Validity of the interim injunction order.
3. Locus standi of the respondent to bring the case.

Issue-wise Analysis:

1. Jurisdiction of the 5th Additional District Judge, Patna:

The appellant challenged the jurisdiction of the 5th Additional District Judge, Patna, to hear the matter after the enactment of the Commercial Courts, Commercial Division, and Commercial Appellate Division of High Courts Act, 2015. The Act, which came into force on 31.12.2015, mandated that only the District Judge posted in the Civil Court of the Divisional Headquarter could serve as the Judge of the Commercial Court. The State Government's notification dated 03.03.2017 confirmed this arrangement. Section 15 of the Act necessitated the transfer of pending cases to the Commercial Court. Therefore, the 5th Additional District Judge, Patna, lacked jurisdiction to pass the impugned order, making it fit to be set aside on this ground alone.

2. Validity of the Interim Injunction Order:

The appellant argued that the learned court below had misconducted the proceeding and acted with material irregularity. The court failed to discuss the case of the parties or examine the respondent's locus standi. The interim injunction was issued in a casual manner without serving notice to the opposite party, which violated principles of natural justice. The impugned order did not contain objective reasons supported by material on the record, rendering it unsustainable.

3. Locus Standi of the Respondent to Bring the Case:

The appellant contended that M/s. SPML Infra Limited was the real party, having submitted the bank guarantee and performance guarantee, while the respondent was merely a Special Purpose Vehicle (SPV) to perform the responsibilities. The respondent, therefore, had no locus standi to bring the case for arbitration or file an application under Section 9 of the Arbitration and Conciliation Act, 1996. The court noted that this issue should be decided by the Arbitrator or the court exercising jurisdiction under Section 9, and any finding by this Court would prejudice their mind.

The agreement defined the roles of the Distribution Franchisee, Distribution Licensee, and the SPV, indicating that M/s. SPML Infra Limited was the successful bidder and the primary responsible party. The respondent, as an SPV, was incorporated to perform the obligations under the Distribution Franchisee Agreement. The appellant argued that in the absence of M/s. SPML Infra Limited, no order should have been passed by the court below.

Conclusion:

The impugned order was set aside due to jurisdictional issues and other infirmities. The matter was remitted back to the Commercial Court, Patna, for a fresh hearing and necessary orders according to law. The appeal was allowed, and the interim application for stay was disposed of accordingly.