Veena Enterprises Ltd. vs Greater Noida Industrial ...
2005 Latest Caselaw 1227 Del

JUDGMENT

Swatanter Kumar, J.

1. The petitioner has filed the present petition under Section 11 of the Arbitration and Conciliation Act, 1996 praying that the Court may appoint an independent Arbitrator for adjudication of the claims of the petitioner as the respondents have failed to discharge their contractual obligation in compliance with the arbitration clause between the parties and as per the requirements of law, despite service of the notice.

2. The prayer of the petitioner is primarily objected to by the respondent on a legal ground that this Court has no territorial jurisdiction to entertain and decide the present petition as no cause of action or part thereof has arisen within the territorial jurisdiction of this Court.

3. To examine the merit of the only objection taken, reference to certain basic facts would be necessary. The petitioner is a company incorporated under the Companies Act, 1956 with its registered office at New Delhi. They entered into a contract with the respondent, which was signed by the parties on 5th July, 2003 for undertaking construction work of Peripheral Cement Road in Gautam Buddha University at Greater Noida, Uttar Pradesh. The said work was to be completed within one year. The petitioner submitted a tender on 12th June, 2003 and the same was duly accepted and communication of acceptance was received by the petitioner at their Delhi office on 18th June, 2003. In furtherance to the letter of respondent, the petitioner claims to have submitted performance securities by way of bank guarantee for the project work in addition to the fact that Rs.7,50,000/- were already deposited as security amount. The bank guarantees were furnished by the petitioner through its banker at Delhi. The contract between the parties was executed on 5th July, 2003. It is further the case of the petitioner that the work was commenced by the petitioner in accordance with the terms and conditions of the contract but the same was stalled from time to time due to severe hardships faced by the petitioner on account of callous, unfair, unreasonable and unjustified attitude of the respondent. Unprecedented rains and no provision of site for storage purpose are amongst the causes, which have been stated by the petitioner. The hardships faced by the petitioner were brought to the notice of the respondent vide letters dated 26th July, 2003, 23rd August, 2003, 30th August, 2003, 20th September, 2003 and 27th October, 2003. However, the petitioner could successfully undertake and complete various jobs and claim that an amount of Rs.1,94,103.97 is outstanding on the part of the respondent for the work undertaken by the petitioner for the months July-September, 2003. The claimant also claim an amount to the extent of Rs.57,08,570/- which was furnished as bank guarantee dated 1st July, 2003 issued by the Indian Overseas Bank, New Delhi in favor of the respondent. It is averred on behalf of the petitioner that the work at the project site was unilaterally and arbitrarily stopped by the respondent on 27th September, 2003 with the help of Local Police giving cause to the serious dispute between the parties. The various requests of the petitioner were not considered by the respondent.

4. The letter dated 20th October, 2003 was addressed by the petitioner to the Engineer-in-Charge requesting him to take decision in terms of clause 32 of the contract in relation to the various disputes, which have been raised by the petitioner. However, the said Engineer failed to take any action on the requests and did not give his decision which in any case could be termed as final within the meaning of the contract and against which the petitioner could take appropriate remedy. Resultantly, having left with no alternative, the petitioner served a notice of protest dated 23rd July, 2004 upon the respondents and also called upon them to act in accordance with the Arbitration Clause by appointing an Arbitrator and referring the disputes raised in the statement of claims. However, no steps were taken. The cause of action, according to the petitioner, arose on 28th August, 2004 when the prescribed period of 30 days expired and the petitioner now filed the present petition under Section 11 of the Act.

5. Despite grant of opportunities by the Court, the respondent failed to file the reply to the petition. Resultantly, the matter was heard without reply of the respondent.

6. Learned counsel, appearing for the respondent, while relying upon the documents on record neither disputed existence and validity of the arbitration clause nor he disputed the service of notice and failure on the part of the respondent to appoint an Arbitrator. However, while strongly relying upon the judgment of the Supreme Court in the case of Oil & Natural Gas Commission v. Utpal Kumar Basu and Ors., the contention raised is that no cause of action or no part of cause of action which could be termed as integral cause of action has arisen within the territorial jurisdiction of this Court and as such the petition is not maintainable before this Court for lack of territorial jurisdiction. Further argument raised is that the petitioner has not complied with the pre-requirements in terms of the contract for invocation of the arbitration clause.

7. As far as the second submission raised on behalf of the respondent is concerned, it is apparently without any merit. No doubt clause 33 of the contract executed between the parties contemplates that, before the party to the contract can invoke the arbitration clause, it must take recourse to the remedy under the contract i.e. under clause 31 read with clause 33. Clause 31 of the contract between the parties clearly states that all works to be executed under the directions and subject to approval in all respects of the Engineer-in-Charge. Further clause 32 deals with protest/lodging of disputes. Under this clause, the contractor has a right to file written protest with the Engineer-in-Charge stating the basis of objections in relation to varied matters within the stipulated time. The instructions and decision shall be final and if the contractor is dissatisfied with the decision given under clause 33 (a) under clause (b) of the same clause the contractor gets a right to invoke the arbitration agreement. It has been specifically averred in paragraph 17 of the petition that the petitioner had invoked clause 32 and vide letters dated 23rd October, 2003 and 6th November, 2003 a reference was made to the Engineer-in-Charge in form 9 but no decision was taken by him under Clause 32 and the plaintiff was left with no other alternative but to serve a notice and invoke arbitration clause. It is also averred in para 20 of the petition that Chief Executive Officer has failed to discharge his contractual obligation and in fact has violated the contractual obligation in not appointing an arbitrator in accordance with the terms and conditions of the arbitration clause. As such the contention raised on behalf of the respondent can only be noticed to be rejected. Coming to the territorial jurisdiction it is conceded position that letter dated 18th June, 2003 was written by the Greater Noida Industrial Development Authority to the petitioner at their registered office at New Delhi. This letter clearly stated that -"The tender submitted by you on 12.06.2003 for the above work has been accepted on behalf of the Chief Executive Officer, Greater Noida Industrial Development Authority". Vide same letter the petitioner was directed to comply with certain terms and conditions of furnishing bank guarantee, seeking labour license and to mobilise the material for commencement of the work and fact that the work should be completed by 31st June, 2003. As a consequence of this letter, the petitioner furnished the bank guarantee and all other documents from various agencies from Delhi and the bank guarantees were executed by the Indian Overseas Bank at New Delhi. But for this letter of acceptance nothing else would follow, the parties would not have entered into a regular contract which as stated was executed at Allahabad. The averments made in the petitioner, which of course remain unrebutted, it is difficult for the Court to hold that no cause of action arises or had arisen within the territorial jurisdiction of this Court. In fact to examine whether cause of action or any part thereof has arisen within the territorial jurisdiction of this Court as contemplated under Section 2(1)(e) of the Arbitration and Conciliation Act, 1996 read with Section 20 of the Code of Civil Procedure, one must look not to a mere act but material acts of the parties, which would give legitimate cause to an action in law. In other words, cause of action essentially would include within its ambit and scope material part of the cause of action. Every act may give rise to a cause of action or part thereof of every material link of the chain of acts and commissions which led to the finalisation of contract would certainly give rise to a cause of action as understood in law. At this stage it may be appropriate to refer to the judgment of the Supreme Court in the case of A.B.C. Laminart Pvt. Ltd. and Anr. v. A.P. Agencies, Salem where the Court held as under :-

"The making of the contract is part of the cause of action. A suit on a contract, therefore, can be filed at the place where it was made. The termination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have been performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else.

8. In light of the above principles enunciated by the Supreme Court read in conjunction with the undisputed facts of the present petition, it is difficult to hold that no cause of action or part thereof, had arisen within within the territorial jurisdiction of this Court. Letter of acceptance is certainly a very material act on the part of the parties, which was received by the petitioner at Delhi and consequential acts thereto were also performed at Delhi.

9. For the reasons afore-stated both the contentions raised on behalf of the respondent are without any merit and are rejected.

10. Consequently, the petition of the petitioner under Section 11 of the Arbitration Act succeeds.

The petition is allowed.

11. Mr. Justice P.N. Khanna (a retired Judge of this Court) is appointed as a Sole Arbitrator to adjudicate and decide the claims referred by the petitioner in this petition. Such a direction is necessary particularly when there is no dispute to the fact that arbitration clause exists, notice was received by the respondent and they have failed to appoint an Arbitrator in accordance with the methodology for appointment of Arbitrator provided under the contract between the parties.

12. The petition is accordingly disposed of while leaving the parties to bear their own costs.