M/S. A.A. Construction (P) Ltd. vs M/S. Lifeline Medicare Ltd.
1994 Latest Caselaw 628 Del

JUDGMENT

Usha Mehra, J.

1. M/s. A.A. Construction (P) Ltd., by this petition under Section 20 of the Arbitration Act, (hereinafter called the Act) has sought the appointment of an Arbitrator pursuance to the arbitration agreement executed with M/s. Lifeline Medicare Ltd. (respondent herein). It is the case of the petitioner that work was awarded by the respondent for construction of a factory at 945-946, Village Khandsa, Behrampur, District Gurgaon, Haryana. The Arbitration Agreement was executed on 31st January, 1992. Period of completion stipulated therein was six months. however, according to petitioner from the very beginning the respondent created hindrances in the smooth and timely execution and completion of the work. Neither timely drawings nor instructions were provided, even the payments were not made in time. With the result there was prolongation of the execution of the work causing loss to the petitioner. The Managing Director of the respondent assured the petitioner that the amounts would be paid without any further delay. On this assurance petitioner started speedy completion of the work but the payments were not made as assured. Serious disputes arose regarding non payment in time, delay in execution of the work due to lapses on the part of the respondent causing loss to the petitioner. Since these dispute could not settled mutually, therefore, petitioner invoked the provisions of clause No. 29 of the agreement. The respondent instead of settling the dispute or appointing an arbitrator has terminated the contract. Under these circumstances, the present petition has been preferred.

2. Notice to respondent was issued to show cause why arbitration agreement be not filed. In reply, the respondent took up the plea that this court has no jurisdiction to appoint an arbitrator. PA because the cause of action arose at District Gurgaon, Haryana. On merits, it has been denied that any hinderance was caused or the delay could be attributed to the respondent. It has also been denied that payments due were not made in time. In fact the petitioner could not compete the work in time, therefore, payments in time could not be made to the petitioner. Petitioner illegally suspended the work since January, 1994, with the result progress of the factory came to a halt. The work executed by the petitioner was defective. Letter written by the petitioner to the architect of the respondent was in order to cover up his lapses and delay. It is further pleaded that the respondent never refused to appoint an arbitrator. However, the dispute has been on the name of the arbitrator as proposed by the petitioner. Differences and disputes having arisen not denied by the respondent.

3. I have heard counsel for the parties and perused the record. So far as arbitration clause in the agreement is concerned that has not been disputed. As already referred above, from the pleadings of the parties, the factum of disputes having arisen has not been denied. It also not been denied by the respondent that the disputes raised are referable to the arbitration. Respondent's main objection to the appointment of an arbitrator as pleaded in its reply has been as to who should be appointed as the arbitrator. This is so far merits of the case are concerned.

4. However, an interesting legal point has been raised by Ms. Tasneem Ahmedi, counsel for the respondent regarding the jurisdiction of this court. She contended that this court has no jurisdiction because the work was executed at Gurgaon in the State of Haryana. Hence, the subject matter of the disputed being situated beyond the jurisdiction of this court, therefore, this court cannot entertain this petition. In order to support her submissions she drew my attention to Section 2(c) of the Act. The same is reproduced as under :

"Section 2(c) : "Court" means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not except for the purpose of arbitration proceedings under Section 21 in include a Small Cause Court."

5. Ms. Ahmedi relying on the definition of the "Court" stated that while deciding a petition under Section 20 of the Act, this court will be treated as Civil Court and the petition will be treated as a civil suit. The subject-matter of reference has to be the same as if the same has been subject-matter of a suit. The suit for the same cause of action could not have been filed at Delhi because the subject-matter of the dispute i.e., factory constructed by the petitioner is situated in Haryana. The High Court of Punjab & Haryana alone has the jurisdiction.

6. Ms. Ahmedi in order to reinforce her contention relied on the case of The Electrical Manufacturing Co. Ltd., Calcutta and another v. The Crompton Engineering Co. (Madras) Ltd., Madras, . Facts of that case were that the arbitration agreement was executed at Madras but the subject-matter of the arbitration fell within the jurisdiction of the Calcutta High Court. Petitioner therein filed an application under Section 20 of the Act before the Madras High Court on the ground that since the agreement was executed at Madras, therefore, the Madras High Court had the jurisdiction. While rejecting this contention, the court opined that the place of execution of the agreement was inconsueqential. The proper test was that of the subject-matter of the arbitration and since that did not fall within the jurisdiction of the Madras High Court, therefore, rejected the petition. The reliance on this decision, to my mind, is of no help to her, because the Electrical Manufacturing Co. Ltd. (supra) came for consideration before the Full Bench of our own High Court in the case of Sh. Ram Rattan Bhatia v. Food Corporation of India and another . This court distinguished the Madras case on the ground in the said case Madras High Court did not take not of the provision of Section 20 of the Code of Civil Procedure (in Short 'Code')

7. Section 41 of the Act prescribes the procedure and the powers of the Court. The said Section reads as under :

Section 41 :

"Subject to the provisions of this Act and of Rules made there under :

(a) the provision of the Code of Civil procedure, 1908, shall apply to all proceedings before the court, and to all appeals, under this Act; and

(b) the court shall have, for the purpose of and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to, any proceedings before the Court :

Provided that nothing in Clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any such matters".

8. Section 20 of the Code enables the plaintiff to institute a suit in a court within whose jurisdiction the defendant at the time of commencement of the suit, actually or voluntarily resides or carries on business or personally works for gain. Section 41 of the Act has made the provisions of the Code applicable to all proceedings before the court to determine the question as to which Court will be competent to entertain the proceedings under the Act. While dealing with this proposition, the Full Bench of this court considered the question as to whether the provision of Section 2(c) of the Act and Section 20 of the Code are mutually destructive of each other and incapable of being harmonised so that only such court will have jurisdiction to entertain proceedings under the Act which has jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit. The Full Bench in Ram Rattan Bhatia's case considered the ambit and scope of the provisions of the Code in its applicability to the proceedings under the Act. Relying on the Supreme Court in the case of Hankam Singh v. M/s. Gammon (India) Ltd. wherein it was held that the Code in its intirely applies to proceedings under the Act and that the jurisdiction of the courts under the Act to entertain a proceedings for filing an award was accordingly governed by the provision of the Code. Hence, after analysing all the provisions this court in Ram Rattan Bhatia's case held that it would be futile to contend that the court competent to entertain proceedings under the Act would only be the court envisaged in Section 2(c) of the Act and provision of clauses (a) & (b) of Section 20 of the Code would not be attracted in determining the forum to entertain proceedings under the Act.

9. Supreme Court in Hankam Singh (supra) case sustained the jurisdiction of the Bombay Court because there the respondent had their principal office at Bombay. Moreover, it was the term of the agreement that in respect of a cause of action arising under the agreement the courts at Bombay alone would have the jurisdiction. It was further held that he residence or carrying on business of a party apart form the accrual of the cause of action were the factors relevant for determining the territorial jurisdiction in an arbitration cases.

10. I am reinforced in coming to the conclusion that this court has the jurisdiction, because the respondent M/s. Lifeline Medicare Ltd., has its registered office at Delhi. It actually carries on business and works for gain at Delhi besides the execution of the agreement at Delhi. Moreover, the respondent has also filed a suit for injunction against the petitioner at Delhi which is listed as Suit No. 376/94. In the said suit the respondent has admitted that this court has the jurisdiction because the agreement was executed at Delhi, parties work for gain at Delhi and also the cause of action arose at Delhi. In para 13 of that said suit, this respondent (plaintiff in that suit) admitted that whatever claim the defendants (petitioner herein) may have against that plaintiff company would be the subject-matter of arbitration. In view of the admission made by the respondent in the suit, it cannot be said that this court has no jurisdiction to entertain this petition. It does not lie with the respondent to blow hot and cold in the same breadth. In its suit No. 376/94, the present respondent has invoked the jurisdiction of this court for the same subject-matter. But to petitioner's petition challenge to jurisdiction has been made. This shows contradiction in the stand of the respondent.

11. Moreover, clause 30 of the agreement in question which is reproduced as under, gives jurisdiction to Delhi Court :

"30 All disputes arising out of or in any way connected with this agreement shall be deemed to have arisen in New Delhi and only the Courts in New Delhi shall have jurisdiction to determine the same."

12. The work "only" has been used for giving exclusive jurisdiction to Delhi Court in exclusion to all other courts. For this reason also this court will have the jurisdiction. To arrive at this conclusion reliance can be placed on the case of A.B.C. laminart Pvt. and another v. A.P. Agancies. Salem (1989 SC p. 1239), where the Supreme Court observed that :

13. When the court has to decide the question of jurisdiction pursuant to an ouster clause it in necessary to construe the ousting expression or clause properly. Often the stipulation is that the contract shall be deemed to have been made at a particular place. This would provide the connecting factor for jurisdiction to the courts of that place in the matter of any dispute on or arising out of the contrat. It would not however, ipso facto take a away jurisdiction of other courts. Where an ouster clause occurs it is pertinent to see whether there is ouster of jurisdiction of other courts. When the clause is clear, unambiguous and specific accepted motions of contract would blind the parties and unless the absence of ad idem can be shown, the other courts should avoid exercising jurisdiction. As regards construction of the ouster clause when words like "alone", exclusive" and the like have been used there may be no difficulty. Even without such words in appropriate case shall depend on the facts of the case. In such a case mention of one thing may imply exclusion of another. When certain jurisdiction is specified in a contract and intention to exclude all other from its operation may in such cases be inferred. It has, therefore, to be properly construed."

14. From the above discussion and after analysing the provision of Section 2(c) of the Act read with Section 20 of the Code and the provision of the agreement the only irresistable conclusion which can be arrived at is that this court has the jurisdiction.

15. On merits, the arbitration agreement in admitted between the parties. Disputes have arisen which are not denied by the respondent. The only plea taken for not referring the matter to arbitration is that the name of the arbitrator has not been agreed to between the parties which to my mind, is no ground to refuse referring the disputes to arbitration. Under these circumstance, when the parties are not mutually agreeable to to the name of an arbitrator, then this court has the power to appoint an arbitrator as held by the Supreme Court in the case of M/s. G. Ramachandra Reddy & Co. v. Chief Engineer, Madras Zone, Military Engineering Service . Accordingly, I appoint Justice M. K. Chawla (Retd.) Judge of this court as the Sole Arbitrator. He would adjudicate the disputes as mentioned in para 11 of the petition and para 11 of the rejoinder and make and publish his award within time. He shall be paid Rs. 5,000/- per effective hearing and 2,500 per non effective hearing.

16. With these observations the petition stands disposed.

I.A. 1969/94 in S. 394-A/94

17. For arguments on this application to come up on 12th January, 1995.