Harji Engineering Works Pvt. Ltd vs Bharat Heavy Electricals Limited ...
2023 Latest Caselaw 2596 Cal/2

                    IN THE HIGH COURT AT CALCUTTA
                    Ordinary Original Civil Jurisdiction
                             ORIGINAL SIDE
                          (Commercial Division)

Present :
Hon'ble Justice Moushumi Bhattacharya.

                              A.P. 474 of 2023

                      Harji Engineering Works Pvt. Ltd.
                                     vs
                 Bharat Heavy Electricals Limited & Anr.


     For the petitioner        :          Mr. Sirsanya Bandopadhyay, Adv.
                                          Mr. Rahul Kumar Singh, Adv.
                                          Mr. Aditya Kanodia, Adv.
                                          Mr. Sourajit Dasgupta, Adv.
                                          Mr. Nilkanta Basak, Adv.


     For the respondents       :          Mr. Rohit Das, Adv.
                                          Ms. Kishwar Rahman, Adv.
                                          Ms. Sristi Roy, Adv.
                                          Mr. Preetam Majumdar, Adv.



     Last heard on              :         05.09.2023




     Delivered on               :         12.09.2023.




Moushumi Bhattacharya, J.

1. The petitioner has filed the present application under section 9

of The Arbitration and Conciliation Act, 1996 for an injunction

restraining the respondent no. 1 Bharat Heavy Electricals Limited

(BHEL), from invoking and encashing the performance bank guarantee

issued by the respondent no. 2 Punjab and Sind Bank and the modified

performance bank guarantee of 7th April, 2021 and 8th March, 2022

respectively.

2. The respondent no. 1 BHEL is represented and learned counsel

appearing for BHEL takes a preliminary objection to the maintainability

of the application. Counsel submits that the High Court is not the

"Court" within the meaning of section 2(1)(e) of the Act for the purposes

of the present application as no part of cause of action arose within the

original territorial jurisdiction of this Court and the respondent no. 1 as

well as the petitioner do not have any office or place of business within

the original territorial jurisdiction of this Court. Counsel submits that

the Notice Inviting Tender (NIT) was issued by BHEL from its Power

Sector Eastern Region (PSER) at Salt Lake City, Kolkata, the Work

Order was issued by BHEL from New Delhi and the contract was

required to be performed in Jharkhand. Counsel further relies on the

amended General Conditions of Contract (GCC) and the Work Order to

urge that the seat of arbitration has been designated to be the place

from where the contract is issued, which is Salt Lake City, Kolkata.

3. Learned counsel appearing for the petitioner opposes the point

of maintainability on the ground of jurisdiction to say that the parties

intended that the seat of the arbitral tribunal would be in Kolkata and

that the words in Bracket are only meant for the convenience of the

arbitral tribunal or the parties for conducting the proceedings of the

arbitration. Counsel submits that the bracketed portion does not

change the seat of arbitration from Kolkata to North 24 Parganas. It is

submitted that it was the express intention of the parties to vest the

jurisdiction of the arbitration in Kolkata and that this Court would

therefore have the authority to decide the dispute.

4. The relevant clauses of the GCC and Work Order should be

reproduced to understand the competing contentions better.

5. Clause 2.2 of the amended GCC constituting part of the NIT

dated 31st October, 2020 contains a general forum selection clause and

provides as follows.

"Clause 2.2.- The contract shall be governed by the Law for the time being in force in the Republic of India. Subject to Clause 2.21.1 or 2.21.2 of this Contract, the Civil Court having original Civil Jurisdiction at Delhi for PSNR, at Kolkata for PSER, at Nagpur for PSWR and at Chennai for PSSR, shall alone have exclusive jurisdiction in regard to all matters in respect of the Contract."

6. Clause 34.0 of the Work Order also contains a general forum

selection clause which is similar to clause 2.2 of the GCC

"Clause 34.0.- The contract shall be governed by the Law for the time being in force in the Republic of India. Subject to Clause 35.1 or 35.2 of this Contract, the Civil Court having original Civil Jurisdiction at Delhi for PSNR, at Kolkata for PSER shall alone have exclusive jurisdiction in regard to all matters in respect of the Contract."

7. The amended GCC constituting part of the NIT contains the

arbitration agreement between the parties in clause 2.21.1.1.

"Clause 2.21.1.1- The seat of arbitration shall be Kolkata (the place from where the contract is issued). The Contract shall be governed by and be construed as per provisions of the laws of India. Subject to this provision 2.21.1.1 regarding ARBITRATION, the principal civil court exercising ordinary civil jurisdiction over the area where the seat of arbitration is located shall have exclusive jurisdiction over any DISPUTE to the exclusion of any other court."

8. Clause 35.1.1 of the Work Order also contains an arbitration

agreement which is identical to clause 2.21.1.1 of the GCC.

"Clause 35.1.1- The seat of arbitration shall be Kolkata (the place from where the contract is issued). The Contract shall be governed by and be construed as per provisions of the laws of India. Subject to this provision 35.1.1 regarding ARBITRATION, the principal civil court exercising ordinary civil jurisdiction over the area where the seat of arbitration is located shall have exclusive jurisdiction over any DISPUTE to the exclusion of any other court."

9. The dispute arises out of a contract consisting of the arbitration

agreement where the respondent no. 1 BHEL urges that the seat of

arbitration will be the place from whether the contract is issued, namely,

that the bracketed portion will get precedence. The petitioner on the

other hand contends that the parties intended to mean the seat of

arbitration to be in Kolkata and the bracketed portion was inserted only

for the purpose of fixing the venue for the convenience of the

parties/arbitrator.

10. The issue which falls for adjudication, on the point of

maintainability, is whether the parties intended that the seat of

arbitration would be the place where the contract is issued that is the

PSER, DJ-9/1, Salt Lake City, Kolkata- 700091 or the Courts in

Kolkata in general. If the respondent is correct, then the High Court

would be divested of its jurisdiction to hear the matter and the

application must be relegated to the Commercial Court at Rajarhat.

11. The first issue which needs to be clarified in respect of the

arbitration agreement is on the generalised term "Kolkata" as used in

the arbitration clause both in the amended GCC as well as the Work

Order. This is relevant since under the Commercial Courts Act, 2015,

there are at least two commercial courts in "Kolkata" and a total four

Courts within the territorial jurisdiction of Kolkata. This would be clear

from sections 3, 4 and 5 of the 2015 Act which empowers the State

Government, in consultation with the concerned High Courts, to

constitute such number of Commercial Courts at the District level as

may be necessary for the purpose of exercising the powers conferred on

those Courts under the Act.

12. Section 3 covers Commercial Courts at the District level, at the

level of the District Judge as well as the High Courts having ordinary

original civil jurisdiction. Hence, "Kolkata" in the arbitration agreement

is found to be used in a vague and generalised manner. This was also

noticed by a Coordinate Bench in Sunil Hi-Tech Engineers Ltd. vs.

Bharat Heavy Electricals Limited in AP No. 966 of 2016 where the Court

found such generalised clauses to be flawed for the purpose of

designating the Court with jurisdiction. It must however to be

mentioned that the comment of vagueness was made on the

unamended clause 2.2 before it changed to the present form and made

subject to clause 2.21.1. This Court also took a similar view in Srei

Equipment Finance Limited vs. Seirra Infraventure Private Limited; 2020

SCC OnLine Cal 1790. This Court is therefore of the view that the

arbitration clause must spell out the exclusivity of the

identified/designated court for the purpose of conferring jurisdiction.

13. The import of a parenthesis is to clarify the immediate preceding

part which falls outside the bracket. In other words, the bracketed

portion specifies or explains the part which falls outside the bracket. A

similar point arose before a Coordinate Bench in Golden Edge

Engineering Private Limited vs. Bharat Heavy Electricals Limited; AIR

2020 CAL 217 where the Court looked at an identical clause and held

that the words contained in the brackets would have to be purposively

interpreted to mean that the jurisdiction of the Court in its Original Side

will not be attracted as the agreed seat of arbitration lies within the

District of North 24 Parganas and not in the original territorial

jurisdiction of this Court. The decision in Golden Edge was affirmed in

appeal by the order of the Division Bench dated 30th June, 2020 : APO

69 of 2020, GA 856 of 2020 with AP 191 of 2020. It is substantially

settled that the more specific arbitration clause will prevail over a

general forum selection clause.

14. In any event, the amended clause 2.2 of GCC and clause 34.0 of

the work order respectively state that the clauses are subject to clauses

2.21.1/2.21.2 of the GCC and clauses 35.1/25.2 of the work order

respectively. Clause 43.0 of the NIT provides the order of precedence of

the documents constituting part of the contract between the parties

and specifies that amendment/clarification will prevail over technical

documents including the NIT, unamended GCC and Special Conditions

of Contract.

15. The petitioner has relied on Dozco India Private Limited v.

Doosan Infracore Company Limited; (2011) 6 SCC 179 to urge the

proposition that a bracket should not be allowed to control the main

clause. The decision of the Supreme Court should however be explained

by the arbitration clause in Dozco which is set out below.

"Article 22. Governing Laws - 22.1: This agreement shall be governed by and construed in accordance with the laws of The Republic of Korea.

Article 23. Arbitration - 23.1: All disputes arising in connection with this agreement shall be finally settled by arbitration in Seoul, Korea (or such other place as the parties may agree in writing), pursuant to the rules of agreement then in force of the International Chamber of Commerce."

16. The parenthesis above would show that the words within the

bracket ".... (or such other place as the parties may agree in writing)...."

cannot be seen as clarificatory as to the part of Seoul, Korea where the

arbitration is to take place. The parenthesis simply allowed the parties

to select a different venue other than Seoul, Korea. The Supreme Court

was of the view in this context that the bracketed part could not be

allowed to control the main clause and proceeded to hold that the

bracketed portion is only for the purpose of further explanation.

17. In the present case, the bracketed portion in clause 2.21.1.1

of the GCC and clause 35.1.1 of the work order do not detract from the

word "Kolkata" by allowing the parties to choose a different seat (as

was argued by the petitioner in Dozco). The bracketed portion in the

present case explains and clarifies as to the specific part of Kolkata

which was chosen by the parties as the seat of arbitration. Dozco

therefore does not apply to the facts of the present case for the above

reason.

18. Interpretation of an agreement involves principles of

construction of contracts and is a matter of ascertainment of the

meaning which the document would convey to a reasonable person

having knowledge of the background which would reasonably be

available to the parties in the situation in which they were at the time

of the contract. The meaning of the documents is what the parties

would reasonably have been understood to mean

"The background may not merely enable the reasonable man to choose

between the possible meanings of words which are ambiguous but even (as

occasionally happens in ordinary life) to conclude that the parties must, for

whatever reason, have used the wrong words or syntax: see Mannai

Investment Co. Ltd. v. Eagle Star Life Assurance Co. Ltd.; 1997 AC 749.

..........

The duty of the Court is not to delve deep into the intricacies of human mind to

explore the undisclosed intention, but only to take the meaning of words used

i.e. to say expressed intentions. If one meaning is more in accord with what the

Court considers to be the underlined purpose and intent of the contract, or part

of it, than the other, then the Court will choose the former or rather than the

latter."

Ref: Bangalore Electricity Supply Company Limited (BESCOM) v. E.S.

Solar Power Private Limited; (2021) 6 SCC 718.

19. In the present case, the arbitration clause in the GCC and in

the Work Order specifies that the seat of arbitration shall be Kolkata

but clarifies that the seat will be the place from where the contract is

issued. The latter part is within brackets. The ordinary and plain

meaning of this clause with due weightage given to the intention of the

parties while inserting this clause, post-amendment, cannot and

would not point to any other construction besides holding that the

parties intended to "seat" the arbitration at the place from where the

contract is issued. The entire contract documents including the NIT

and the correspondence between the parties including the termination

letter specifies in a box at the bottom of each of the pages the place of

issue of the contract which is

"Power Sector Eastern Region (PSER), DJ-9/1, Salt Lake City, Kolkata - 700091"

This is the place from where the tender has been issued.

20. Therefore, the agreed seat of arbitration lies in that part of the

metropolitan area of Kolkata which lies within the District of North 24

Parganas, that falls within the jurisdiction of the Commercial Court at

Rajarhat. The original territorial jurisdiction of the High Court at

Calcutta will not be attracted in this case.

21. The argument of the respondent of the non-maintainability of

the present application succeeds. The view of the Court is borne out

from the above reasons.

22. AP 474 of 2023 is accordingly dismissed as not being

maintainable. There shall be no order as to costs.

Urgent photostat certified copies of this judgment, if applied for,

be supplied to the parties upon fulfillment of requisite formalities.

(Moushumi Bhattacharya, J.)