International Breweries Pvt. Ltd vs Mohan Meakins Ltd. & Anr
2008 Latest Caselaw 1533 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI


+                  I.A. No. 9781/2008 in OMP No. 337/2008



%                                    Date of decision : 04.09.2008

INTERNATIONAL BREWERIES PVT. LTD.....Petitioner
                                  Through:   Mr.     Pradeep      Dhingra,
                                             Advocate


                                   Versus



MOHAN MEAKINS LTD. & ANR.                           ....... Respondents
                                  Through:   Mr. Dinesh Agnani, Advocate
                                             for the Applicant/Respondent
                                             No. 1



CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may              Yes
      be allowed to see the judgment?

2.    To be referred to the reporter or not?             Yes

3.    Whether the judgment should be reported            Yes
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. The Respondent/Applicant seeks dismissal at the threshold of

the petition under Section 34 of the Arbitration and Conciliation Act,

1996, notice whereof was ordered to be issued to the Respondent on

23rd July, 2008.

2. The Respondent/Applicant in its application for such rejection

of the petition under Section 34 of the Act has stated that the

Agreement leading to the Arbitration contained a jurisdiction clause

that all the disputes or differences between the parties thereto shall

be subject to the jurisdiction of the courts of competent jurisdiction

in Ghaziabad; that the Arbitration proceedings were held at

Ghaziabad and the ex parte Award in favour of the

Respondent/Applicant and against the Petitioner was announced at

Ghaziabad; that no cause of action had arisen within the territorial

jurisdiction of this court and in any case in view of the jurisdiction

clause in the Agreement, the parties had agreed to the jurisdiction of

the courts at Ghaziabad.

3. The petition under Section 34 of the Arbitration Act had come

up for admission first on 4th July, 2008. Notice of the said petition

was on that date not issued and the Petitioner was asked to satisfy as

to how this court had the territorial jurisdiction to entertain the

petition under Section 34 of the Arbitration Act. The

Respondent/Applicant was also represented on that date and had

argued that it had applied for execution of the Award in this court

after first filing the Execution petition in the courts at Ghaziabad,

which alone had jurisdiction and after having the Execution

transferred to this court. However, on the next date, 23rd July, 2008

when the file of the Execution was called, it transpired that the

proceeding which had been filed by the Respondent/Applicant in this

court was not Execution of a transferred decree but an application

under Section 9 of the Act. Notice of the application under Section

34 of the Act was accordingly issued to the Respondent/Applicant,

the Petitioner having got over the impediment of territorial

jurisdiction owing to Section 42 of the Act.

4. The Respondent/Applicant has stated it had filed an appeal to

the Division Bench of this court against the order dated 23rd July,

2008 but which is stated to have been withdrawn by making a

statement that appropriate application will be moved in this court

with respect to territorial jurisdiction. Hence, the application under

adjudication.

5. The Respondent/Applicant has sought to get over Section 42 of

the Arbitration Act by stating that the Respondent/Applicant had in

fact, applied for execution of the Award by filing an Execution

petition in the courts at Ghaziabad for seeking the transfer of the

decree for Execution to this court. Copy of the Execution application

and the orders made thereon of issuance of transfer certificate to the

Petitioner have been filed alongwith the application. It is further

urged that the transferred decree was in fact, received by this court

but since till then the time before which the Execution could be

applied had not lapsed, application under Section 9 of the Act was

filed in this court for interim measures. The said application was

registered as OMP No. 332/2008 of this court. The counsel for the

Respondent/Applicant has argued that the OMP No. 332/2008 under

Section 9 of the Act was filed in pursuance to the transfer of the

Execution to Delhi and would thus, not come in the way of the

Respondent/Applicant contending that this court has no territorial

jurisdiction to entertain the petition under Section 34 of the Act. It

is urged that this court is not the court within the meaning of Section

2 (1) (e) of the Act. Reliance is also placed on Section 20 of the Code

of Civil Procedure to urge that no part of the cause of action accrued

within the jurisdiction of this court. It is argued that Section 42 of

the Act does not confer any jurisdiction on this court and in any case

since the Execution petition was first filed at Ghaziabad even prior to

preferring the application under Section 9 of the Act in this court, as

per the provisions of Section 42 of the Arbitration Act also it will be

the courts at Ghaziabad only which will have jurisdiction to entertain

the application under Section 34 of the Act. Reliance is placed in the

application itself on Union of India vs. S.R. Construction Co. and

Anr. 144 (2007) DLT 580 and Apparel Export Promotion Council

vs. Prabhati Patni, Proprietor Comfort Furnishers and Anr. 125

(2005) DLT 511.

6. The Petitioner has opposed the application and has contended

that this court has territorial jurisdiction and has referred to para 23

of the application under Section 34 of the Act invoking the territorial

jurisdiction of this court and has also referred to the Contract

Brewing Agreement dated 1st May, 2007 between the parties

referring to a letter dated 22nd July, 2006 of extension of Agreement

and which the Respondent/Applicant is claimed to have suppressed.

The counsel for the Petitioner has also stated that the merits of the

petition are relevant in as much as it is the case in the petition under

Section 34 of the Act that the Respondent/Applicant in collusion with

some ex-Directors of the Petitioner has committed a fraud and with

respect to which FIR No. 632/2007 since transferred to the Crime

Branch has also been lodged.

7. Though application under Section 9 of the Arbitration Act filed

by the Respondent/Applicant has since been disposed of but a copy

of the same was handed over during the course of hearing. It is the

case of the Respondent/Applicant in the said application under

Section 9 of the Act that monies were due to it from the Petitioner

under the Award; that since the time for the Petitioner herein to file

the objections under Section 34 of the Act had not expired till then,

the Respondent herein was applying for attachment of the bank

accounts of the Petitioner herein. The Respondent herein in

invoking the territorial jurisdiction of this court stated as under:

"23. That this Hon'ble Court has the territorial jurisdiction to entertain and hear the present petition as the respondents are carrying on its business within the jurisdiction of this Hon'ble Court. It is submitted that to avoid any technical objections the petitioner has also obtained the Transfer certificate, which has been sent/forwarded directly to this Hon'ble Court by the courts at Ghaziabad."

8. Section 42 of the Act contains a non-obstante clause and is

nothwithstanding anything contained elsewhere in that part of the

Arbitration Act or in any other law for the time being in force. The

said provision mandates that where with respect to an Arbitration

Agreement any application under Part I of the Act has been made in

a court, that court alone shall have jurisdiction over the Arbitral

proceedings and all subsequent applications arising out of that

Agreement and the Arbitral proceedings shall be made in that court.

The Section ends with a negative covenant/embargo that all

subsequent applications shall not be made in any other court.

9. It has neither been disputed nor can be disputed that, (i) both,

application under Section 9 of the Act as well as under Section 34 of

the Act fall in Part I of the Arbitration Act and are thus covered by

the ambit of Section 42 of the Act, (ii) that both the applications i.e.

OMP No. 332/2008 filed by the Respondent herein under Section 9

of the Act and the present petition filed by the Petitioner under

Section 34 of the Act arise out of the same Arbitration Agreement

and Arbitral proceedings.

10. The only question which remains to be considered is that even

if the pleas of the Respondent/Applicant that this court has no

jurisdiction at all is to be accepted, whether the same permits a

departure to be made from Section 42 of the Act. This is where the

non-obstante clause at the beginning and the negative covenant at

the end of Section 42 provides guidance. The Apex Court in Iridium

India Telecom Ltd v Motorola Inc AIR 2005 SC 514 has

reiterated that such a non obstante clause is appended to a section

with a view to give the enacting part of the section in the case of a

conflict an overriding effect. It is equivalent to saying that in spite

of law in force being to the contrary, the provision beginning with

the non obstante clause will have full operation and the law in force

will not be an impediment to the operation of the enactment.

11. The law in force today is that the parties by consent cannot

vest jurisdiction in a court. The apex court recently in Harshad

Chiman Lal Modi v DLF Universal Ltd (2005) 7 SCC 791 has

reiterated the said principle and also held that territorial jurisdiction

strikes at the root of the matter making the decree a nullity. Thus,

but for the non-obstante clause at the beginning of Section 42, even

if the Respondent/Applicant had initiated the proceedings in this

court, the same could have at best been treated as a consent to the

jurisdiction, which the Apex court in the judgment aforesaid has held

cannot confer jurisdiction on the court, if otherwise it did not have.

However, the Legislature made the provisions of Section 42

nothwithstanding any other law for the time being in force. Thus,

the law for the time being in force that the parties by consent cannot

vest jurisdiction in a court, has to be ignored as far as Section 42 is

concerned. For the same reason the reliance by the counsel for the

Respondent/Applicant on Section 20 of the CPC is also not relevant

as far as Section 42 of the Arbitration Act is concerned. Thus, even

if the court where a second application under Part I of the 1996 Act

is filed, is not the court within the meaning of Section 2(1)(e)of the

Act (and thus does not have territorial jurisdiction) the second

application will still lie in that court only, if an earlier application

under Part I of the Act has been filed in that court.

12. I also do not find force in the contention of the

Respondent/Applicant that because even prior to filing of application

under Section 9 of the Act, the Execution proceedings had been filed

in the courts at Ghaziabad, by virtue of Section 42 of the Act, the

courts at Ghaziabad alone will have jurisdiction. The filing of the

Execution petition by the Respondent/Applicant in the courts at

Ghaziabad is not the filing of an application under Part I of the

Arbitration Act. The Apex court in Rodemadan India Limited v.

International Trade Expo Centre Limited (2006) 11 SCC 651 has

held in para 8 that the power under Section 11 (6) of the Act is the

power of a designate referred to under the Section and not of the

court. It was further held in para 25 of the judgment that neither the

Chief Justice nor his designate under Section 11 (6) is a court as

contemplated under Section 2 (1) (e) and further that the power of

jurisdiction under Section 42 is only intended to apply to a court as

defined under Section 2 (1) (e) of the Act. The aforesaid judgment of

the Apex court was followed by this court in S.R. Construction Co.

supra.

13. The Apex Court in Pandey & Co Builders (P) Ltd v State of

Bihar and Another (2007) 1 SCC 467 has further held that Section

42 only applies to applications and not to appeals under Section 37

of the Act. In my view, the said principle equally applies to

Execution petitions. The Execution petition is not an arbitral

proceedings or an application under Part I of the Arbitration Act.

In fact, the arbitral proceedings have come to an end at the time of

filing the Execution Petition and the Execution petition is an

enforcement of the Award which takes the colour of the decree

under the CPC by virtue of the provisions of Section 36 of the Act.

Thus, in my view, the filing of the Execution application by the

Respondent/Applicant in the courts at Ghaziabad would not make it

incumbent for the application under Section 34 of the Act to be filed

in that court. I also have my doubt whether the Execution

application in the courts at Ghaziabad, which admittedly was made

prior to the expiry of the time for making an application to set aside

the Award under Section 34 of the Act was maintainable or not.

However, the adjudication of the same is not essential for the

present.

14. I also notice that it has been held in Shiva Carriers v Royal

Projects Ltd AIR 2000 Calcutta 138 that the provisions of Section

42 are mandatory and operate as ouster of jurisdiction of all other

courts. Similarly, it has been held in ITI Ltd v District Judge

Allahabad AIR 1998 Allahabad 313 that the Parliament intended to

make only one court whichever is approached earlier as the venue

for all the matters connected with Arbitration Agreement.

15. I may also notice that the present is not a case where the

Petitioner itself had earlier filed an application under Part I of the

Act before this court. In such a situation it may still be open to the

opposite party to contend that merely because the Petitioner had on

an earlier occasion wrongly invoked the jurisdiction of this court

would not entitle it to file subsequent applications in the same court,

nothwithstanding objection to the jurisdiction having not been taken

earlier in as much as there could be no waiver with respect to

territorial jurisdiction as held in Harshad Chiman Lal Modi supra.

Here the Respondent/Applicant itself first filed an application under

Part I of the Arbitration Act in this court by contending as aforesaid

that this court had territorial jurisdiction. The Respondent/Applicant

for the purposes of filing an application under Section 9 of the Act

was not required to have the decree transferred to this court and the

order was not made in execution but in exercise of powers under

Section 9 of the Act. It is also significant that the

Respondent/Applicant referred to having obtained the transfer of the

decree only to avoid technical objection. Thus, the argument of

having obtained the transfer of the decree prior to filing Section 9

application, in my opinion is misconceived. S.R. Construction Co.

and Apparel Export Promotion Council supra relied upon by the

Respondent/Applicant do not advance the case of the

Respondent/Applicant. In Apparel Export Promotion Council, the

question of jurisdiction had not been adjudicated. On the contrary in

the present case, the Respondent/Applicant has already availed

benefit of the order under Section 9 of the Act obtained from this

court and cannot now be permitted to object to the jurisdiction of

this court.

16. I may in this regard also notice judgment of this court in

Sasken Communication Technologies Ltd v Prime Telesystems

Ltd 99 (2002) DTL 640 holding that the bar of Section 42 arises only

when the earlier application is before a court of competent

jurisdiction. However, it further held that whether the earlier

application is before court of competent jurisdiction or not has to be

adjudicated by that court only and other courts cannot come into

picture and entertain subsequent applications till earlier court holds

that it has no jurisdiction. In the present case, the OMP 332/2008

filed by Respondent/applicant was pending till filing of present

petition by the Petitioner. The Respondent/applicant even then

pressed OMP 332/2008 and obtained relief therein. Not only so, the

Respondent/applicant is also stated to have filed appeal to Division

Bench of this court, arising from OMP 332/2008, contending that this

court has jurisdiction. The Respondent/applicant cannot be

permitted to approbate and reprobate and now contend that this

court has no jurisdiction.

17. Even otherwise, in my view, the procedure as adopted by the

Respondent/Applicant ought not be permitted. The

Respondent/Applicant instead of filing reply to the application under

Section 34 of the Act wants a piecemeal adjudication. It was put to

the counsel for the Respondent/Applicant on 29th August, 2008 that

he may file the reply to the objections but he refused to do so. The

Petitioner has, in the application under Section 34 of the Act invoked

the jurisdiction of this court by stating that a part of the cause of

action has arisen at Delhi and the Respondent/Applicant has its sales

office in Delhi and the orders to the Respondent/Applicant were

placed from Delhi and all the payments against the invoices were

made at Delhi and numerous communications were made between

the parties at Delhi. The Respondent/Applicant is as yet to reply to

the application. The record of the Arbitral proceedings has also not

been received by this court as yet and without the same, no view on

the respective contentions of the parties with respect to territorial

jurisdiction could be taken, leave apart the provisions of Section 42

of the Act.

18. The application of the Respondent/Applicant is dismissed with

costs of Rs 10,000/- to the Delhi Legal Services Authority.

RAJIV SAHAI ENDLAW (JUDGE)

September 4, 2008 smp