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TMI Blog2006 (8) TMI 594X X X X Extracts X X X X X X X X Extracts X X X X ..... y be assumed by a Court exercising jurisdiction in a place where no part of the cause of action has arisen, if the respondent being a Company has a Corporate Office at the place where the Court is moved. The facts leading to the filing of the above appeal are as follows: The appellant was in the process of setting up an integrated steel plant having the capacity of 1.25 million tonnes of the manufacture of iron and steel in Bellary District, Karnataka. For its manufacturing operations, the appellant required large quantities of industrial gases, namely, oxygen, nitrogen and argon for such production. To this end, the appellant, in conjunction with M/s Praxair Pacific Limited decided to enter into agreements to incorporate the respondent-Company in Karnataka. The respondent-Company was to set up an Air Separation Plant (ASP) in the same complex in Bellary, Karnataka for the purpose of supplying the appellant with the required quantities of industrial gases. The respondent-Company was incorporated in Bangalore with a 50:50% share holding between the appellant and the Praxair Pacific Limited, which was subsequently changed to 26:74%. On 19.02.1996, Pipeline Supply Agreement (PSA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidence of cure of the condition specified, or provide an explanation of why is that its performance is in accordance with the terms and conditions of this Agreement, and also specify three (3) dates, all of which must be within thirty (30) days from the date of its response, for a meeting to resolve the dispute. The claiming party will then select one (1) of the three (3) dates, and a dispute resolution meeting will be held at the place specified by the responding party. Each party shall have the right to require that individuals representing Buyer and Seller who have the authority to execute this Agreement or amendments thereto, be in attendance at the dispute resolution meeting. If the parties cannot, in good faith discussions, resolve their dispute, they shall submit the dispute to arbitration in the manner set forth below in Article 17.2 17.2 Any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, non-performance, interpretation of the respective rights and liabilities of the parties under the Agreement; or invalidity thereof which cannot be fully and satisfactorily resolved or settled by the parties hereto pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice of arbitration pursuant to Article 17.2 of the PSA. The notice of arbitration was issued by the respondent in Bellary, Karnataka and served upon the appellant in Bellary and Bangalore, Karnataka. The appellant wrote a letter pointing out that unilateral action threatened by the respondent was contrary to the letter and spirit of the PSA read with the Settlement Agreement, as the respondent was under the obligation to first meet the product requirements of the appellant. The appellant, in view of the urgent need to protect its interests, filed Arbitration Petition No. 9 of 2005 before the Principal District Judge, Bellary on 06.02.2005 seeking appropriate orders to restrain the respondent from breaching the PSA read with the Settlement Agreement. On 07.02.2005, an interim order was passed by the Principal District Judge, Bellary restraining the respondent from insisting upon an artificial ceiling of 40 TPD of LAR. The respondent filed an I.A. No.4 in the said arbitration petition under Section 151 of the CPC read with Section 42 of the Arbitration Act to dismiss the arbitration petition filed by the appellant at Bellary. On 05.03.2005, the Principal District Judge, Bellary dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the Act would prevail over the provisions of the Letters Patent when determining questions under the Act, including questions as to jurisdiction; e) the High Court ought to have appreciated that for a court to exercise jurisdiction under section 9 of the Act, the court must be a Court as defined under Section 2(1)(e) of the Act and where the cause of action has arisen; f) the High Court, after observing in paragraph 7 of the Impugned Order that no part of the cause of action had arisen at Mumbai failed to appreciate that it was only the Bellary Courts, which had the jurisdiction to entertain disputes arising from the PSA and the Settlement Agreement since the entire cause of action had arisen in Mumbai; g) the High Court erred in ignoring the settled law that it is the situs of cause of action and not the place of business, which is the deciding factor in determining jurisdiction under Section 2(1)(e) of the Act; h) the High Court failed to appreciate that the mere venue of arbitration, and situs of the corporate office of the respondent does not vest jurisdiction in a court under Section 2(1)(e) of the Act. It is also contended that the judgment of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpreted the provisions of the Act and Clause 12 of the Letters Patent and the net effect of the impugned order is that it renders nugatory the competency of the Courts having jurisdiction where admittedly the entire cause of action has arisen. Further it affords jurisdiction to courts on the basis of an enactment, namely, the Letters Patent which would not apply since in arbitration matters, jurisdiction must be solely determined by Section 2(1)(e) of the Act. Mr. C.A. Sundaram, learned senior counsel appearing for the respondent submitted that an order holding that the Court has no jurisdiction to entertain, try and dispose off an arbitration petition under Section 9 of the Act would necessarily imply or entail a refusal to grant relief under Section 9 of the Act and that such an order would, therefore, be an order under Section 9 of the Act and would, therefore, be appealable. In other words, where a Court holds that it has jurisdiction to entertain, try and dispose off a petition under Section 9 of the Act, such determination of an issue would be one in aid of determination of an issue under Section 9 and would, therefore, also be a decision under Section 9 of the Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Original Jurisdiction of the Bombay High Court. During the pendency of the said Section 9 petition, the Registered Office of the appellant was transferred to Mumbai. At the time when the issue of jurisdiction was argued before the learned Single Judge, the Registered Office of the appellant had already been transferred to and was situated in Mumbai within the local limits of the Ordinary Original Jurisdiction of the Bombay High Court. It is submitted that by Section 120 of the CPC, various sections of the Code including Section 20 thereof, are made inapplicable to Chartered High Courts like the Bombay High Court. Therefore, it is submitted that for determining the question of jurisdiction of the Bombay High Court as a Chartered Court, the provisions of Section 20 of the CPC are inapplicable and that only the provisions of Clause XII of the Letters Patent are applicable. Mr. Sundaram submitted further that the jurisdiction of a Court under Section 2(1)(e) of the 1996 Act is not in any manner restricted to the situs of the cause of action and that it is inconceivable that the legislature could have intended to restrict or circumscribe the scope and ambit of the jurisdiction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 20 including the clarification made by the explanation, should be read in Clause 12 of the Letters Patent. In our opinion, no good reason has been made out in reconsideration of the judgment in Food Corporation of India case (supra). The reasons are as under: In our view, a judgment of this Court will not be reconsidered unless a subsequent Bench believes it has laid down wrong principles of law by ignoring a provision of law or otherwise not following a direct binding precedent. In the instant case, this Court in Food Corporation of India case (supra) followed the provision of law i.e. Clause 12 of Letters Patent and Section 120 CPC which itself made the provisions \026 Section 16, 17 and 20 CPC inapplicable. The judgment of this Court will not be referred for reconsideration by a subsequent coordinate Bench merely because the subsequent Bench may have arrived at a different conclusion had there not been an earlier judgment. That law is the principle of stare decisis adopted and followed in the Indian Courts. None of the conditions necessary for reconsidering an earlier direct precedent has arisen in the instant case. Hence, the submission made by Mr. Nariman in this cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt of original jurisdiction in district. (ii) a High Court in exercise of its original civil jurisdiction\005\005having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit. For the purpose of the present Petition under Section 9 of the 1996 Act, we are concerned with the jurisdiction of the Bombay High Court which is a Chartered High Court under the Letters Patent exercising Original Civil Jurisdiction. It is relevant that there are only three Chartered High Courts in India which exercise jurisdiction under their respective Letters Patent which continue to apply in full force and effect which Letters Patent are inter alia protected by Article 225 of the Constitution. Mr. Nariman submitted that the principle in the explanation to Section 20 CPC should be applied to Clause 12 of the Bombay Letters Patent. It is submitted that although admittedly, Section 20 of the CPC does not, in terms, apply to the High Court in exercise of its original civil jurisdiction, it is settled law that the principles of the CPC should nevertheless be applied, as far as possible, to proceedings of a civil nature, eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions shall not apply to the high Court in the exercise of its original civil jurisdiction, namely, section 16, 17 and 20. Thus for the purpose of determining the Original Civil Jurisdiction of the Bombay High Court, Section 20 of the CPC 1908 has been specifically excluded and has no application. Only the provisions of clause 12 of the Letters Patent are required to be considered to determine the jurisdiction of the Hon ble Bombay High Court. Under Clause 12 of the Letters Patent, the Bombay High Court would have jurisdiction to entertain and try an Arbitration Petition even if no cause of action has arisen within its jurisdiction, provided the Respondent has an office at Mumbai. This Court in Food Corporation case while considering the definition of Court under section 2(c) of the 1940 Act has held that: (i) jurisdiction of a Chartered High court is to be determined by clause 12 of the Letters Patent. (ii) by virtue of the section 120 of the CPC, 1908, the provisions of section 20 of the CPC do not apply to Chartered High Courts (such as Bombay) exercising original civil jurisdiction. (iii) that under clause 12 of the Letters Patent, the Bombay High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he principal office is located meaning thereby that what their Lordships in the Patel Roadways case held that was that a suit can be filed where a subordinate office is situate if a part of the cause of action arises or otherwise only where the principal office is situate. In Food Corporation case, this court pointed out that as per section 20 (and a mere perusal of such section would show this is so) a suit can be filed where the cause of action arises or where the principal office is situate. In any event, it is submitted that such observation was merely obiter in seeing out what section 20 CPC stated and formed no part of the judgment and ratio decidendi, since this court then proceeded to hold that section 20 had no application to the Bombay High Court by virtue of section 120 CPC (which was never a matter in issue in the Patel Roadways case) but was the only matter in issue in the Food Corporation case and proceeded to consider the jurisdiction of the Bombay High Court under clause 12 of its Letters Patent. While doing so, an interpretation of section 20 CPC became totally unnecessary for arriving at its decision in the Food Corporation case and in fact was not applied at a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be applied to Letters Patent has no substance and merit. The principles of Section 20 cannot be made applicable to clause 12 of the Letters Patent since the CPC itself by section 120 specifically excludes the applicability of Section 20 of the CPC to Chartered High Courts. It is submitted that when the CPC itself provides that Section 20 is specifically excluded, the principles of Section 20 cannot be made applicable or be attracted when a corporation is being sued under the Letters Patent. The judgment of this Court in Sarguja Transport case (1987) 1 SCC 5 cannot apply for the following reasons:- (i) the principles of CPC were made applicable to Writ Petitions on the premise that these would not be contrary to the provisions of Article 226. (ii) If the appellant s argument is accepted it would render section 120 of the CPC nugatory and otiose since section 120 expressly refers to three sections (i.e. sections 16, 17 and 20) and makes them inapplicable. (iii) The Letters Patent, is a special charter conferring jurisdiction on Chartered High Courts. When there is a special enactment such as the Letters Patent, which expressly lays down the criteria on the jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n separate fields i.e. The Letters Patent specifically conferring jurisdiction on Chartered High Courts and the CPC conferring jurisdiction on all other courts. (ii) There is clearly a difference between the scope of the Letters Patent and the CPC. The difference being evident upon a plain reading of section 120 of the CPC. Mr. Nariman, in reply to the above submission of Mr. Sundaram, contended that the above decision supports the appellant s stand, since there is no conflict whatsoever between relevant provisions of the Letters Patent and the CPC in the instant case. It is submitted that clause 12 of Letters Patent and Section 20 of CPC are in pari materia and sets out similar test for the determination of where a suit may be filed and that the appellant is merely seeking to apply the additional clarificatory principle relating to corporate defendants stated in Section 20 of CPC to Clause 12 of the Letters Patent. It is, therefore, submitted that the decision of this Court in P.S. Sathappan case (supra) does not detract from the appellant s contention but in fact supports its contention. UNIFORMITY RULE: There is no question of uniformity rules applying since section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was interpreting section 20 of the CPC and not clause 12 of the Letters Patent. That this was clearly the case is made evident from the fact that the learned judge (Hon ble Justice Lahoti as he then was) who rendered this judgment was a party to the Bench of this Court in the FCI case which was concerned with clause 12 of the Letters Patent and applies with full force in this case. (c) the interpretation of the key words the questions forming the subject matter have been completely overlooked and/or not given effect to by the Karnataka High Court and the Delhi High Court. The respondent submits that the subject matter of arbitration may be situated anywhere but a Chartered High Court would nonetheless have jurisdiction to decide the questions forming subject matter of arbitration if the requirements of clause 12 of the Letters Patent are satisfied. (d) This Court in the FCI case which arose while interpreting section 2(c) of the Arbitration Act (which is in pari materia with section 2(e) of the 1996 Act) qua clause 12 of the Letters Patent has held that Bombay High Court would have jurisdiction under clause 12 of the Letters Patent if the respondent has an office in Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne in Bellary. Finally, the correspondence in relation to the threatened action also took place at Bellary. Mr. Nariman further submitted that as per the decision of this Court in Patel Roadways Limited, under Section 20, the place of business of a Corporation, for the purposes of the institution of a suit against it, would be the place at which the cause of action arose, if a subordinate office of the Corporation was located at that place, or failing which, the place of the principal office of the Corporation. Therefore, he submitted that in the Patel Roadways judgment, it was held that the words place of business used in Section 20(a) of the CPC would, in relation to a Corporation, refer exclusively to the place at which the cause of action arose, if a subordinate office of the Corporation was also situated there. In such circumstance, no suit can be initiated in the court with jurisdiction over the principal office of the corporation under Section 20(a). It is only in cases where there is no subordinate office at the place at which the cause of action arose, that a suit may be instituted under Section 20(a) in the court with jurisdiction over the principal office of the corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below have been noted by the Bombay High Court in impugned order dated 2.3.2006. (a) The parties themselves have chosen Mumbai to be the situs for the Arbitration proceedings (clause 17.2 (i) of the Agreement) (b) The arbitration clause specifically provides for a dispute resolution meeting to be held to resolve the dispute between the parties as a pre-condition for invocation of the arbitration clause which meeting was held at Bombay at the request of the appellant. (c) The Pipeline Supply Agreement (under which the disputes have arisen) was approved by the Board of Directors of the appellant Company in Bombay. (d) The pipeline Supply Agreement as amended was reviewed and discussed by the Board of Directors of the appellant Company in Bombay. (e) The Settlement Agreement dated 23.6.2003 was adopted at the meeting of the respondent Board of Directors where the appellant s nominees on the respondents Board were also present. (f) That the entire Senior Management of the appellant is located at Mumbai. It may be noted that in Mayur (H.K) Ltd. Ors vs. Owners Parties, Vessel M. V. Fortune Express Ors. (2006) 3 SCC 100 this Court (in para 27) observed that the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e competence of the Court as in the case of a court having jurisdiction on the subject matter of the dispute. That is why if a court has no territorial jurisdiction (but is otherwise competent to hear a matter) should the matter be heard and decided by such Court without demur, the judgment will be valid and not void or non est. It is for this reason that insofar as territorial jurisdiction is concerned, the relevant time to determine the existence of the jurisdiction would be when the matter is heard. SUBSEQUENT SHIFT OF REGISTERED OFFICE CANNOT GIVE RISE TO JURISDICTION: Mr. Nariman contended that the subsequent shift of Registered Office cannot give rise to jurisdiction He submitted that the Letters Patent specifically and expressly refers to the time of commencement of the suit as the relevant time to determine jurisdiction of the Court. It states that: \005 if the cause of action shall have arisen, either wholly, or, in case the leave of the Court shall have been first obtained, in part, within the local limits of the ordinary original jurisdiction of the said High Court, or if the defendant at the time of the commencement of the suit shall dwell or carry on busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re this Court. (a) The arbitration hearings are being conducted at Bombay as per the Agreement. (Clause 17.2) (b) 8 full days of hearings had already been held before this appeal was heard. Further hearings of 4 days have also taken place on the 7th, 9th, 10th and 11th of August, 2006 and further 5 days hearing for final and submissions are scheduled for 16th to 20th October, 2006. (c) The record comprises of several thousand pages of documents complied in over 12 voluminous box files all available in Mumbai. (d) The appellants Directors and Senior Officers are in Mumbai and have been attending the hearings to instruct their lawyers in Mumbai. (e) Evidence has been recorded and closed by both parties in the arbitration. (f) The parties had agreed on Mumbai as a convenient location for the conduct of the arbitration. It is contended that the appellant is indulging in forum shopping to vest jurisdiction at Bellary, Karnataka with an ultimate objective of challenging the Award before the Civil Court at Bellary rather than the Bombay High Court. The appellant has relied upon two judgments, namely, (i) Rameshwar Ors. Vs. Jot Ram Anr. (1976) 1 SCC 194 (i ..... 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