Rites Limited vs Ramjee Power Construction ...
2009 Latest Caselaw 3289 Del

*          HIGH COURT OF DELHI AT NEW DELHI

+                 OMP No.116/2006

                  Judgment delivered on: August 21, 2009


#     RITES LIMITED                     ..... Petitioner
!         Through : Mr. Anil Airi, Advocate
                    Ms. Sadhna Sharma, Advocate


                         Versus


$     RAMJEE POWER CONSTRUCTION LIMITED
                                    .....Respondent
^         Through : Mr. Raman Kapur, Advocate
                    Ms. Nidhi Jain, Advocate

%
      CORAM:
      HON'BLE MS. JUSTICE ARUNA SURESH

     (1) Whether reporters of local paper may be
         allowed to see the judgment?

     (2) To be referred to the reporter or not?        Yes

     (3) Whether the judgment should be reported
         in the Digest ?                               Yes

                       JUDGMENT

ARUNA SURESH, J.

OMP No.116/2006 & IA No. 4585/2006 (objections)

1. This is a petition filed under Section 9 of the

Arbitration and Conciliation Act, 1996 (hereinafter

referred to as Act).

2. Petitioner was awarded work of construction of 11

KV/Line/LT Line/D/S/S on 200 kg. working load

PSC Poles including supply of all related materials

on turnkey basis for electrification of 4923 villages.

Petitioner entered into an agreement with M/s.

Jharkhand State Electricity Board (JSEB) for the

execution of the said work. Petitioner thereafter

entered into a sub-contract with respondent

Ramjee Construction Ltd. on 25th September, 2004

for the execution of the work. As per the petition,

this sub-contract was entered with the consent of

the client i.e. JSEB. The said agreement entered

into between the parties contained an arbitration

clause which has been invoked by the parties as a

dispute has arisen between them within the

meaning of the contract. Petitioner came to know

that 27 bank guarantees furnished by the

respondent to the petitioner as original bank

guarantees were in fact not original but were

forged bank guarantees. Some of these bank

guarantees were towards mobilisation advance and

others by way of bank guarantee/security deposit.

As per the petition letters from the bank also

indicate that the bank guarantees which were in

the possession of the petitioner as supplied by the

respondent were not original bank guarantees. As

a matter of fact 22 out of 27 bank guarantees had

been cancelled by the bank upon request being

made by the respondent, whereas petitioner

remained under the impression that the original

bank guarantees were with it and could be invoked

whenever the necessity and exigency arose. This

conduct of the respondent indicated that it retained

the original bank guarantees with it and handed

over the forged copies to the petitioner, claiming

them to be the originals though they are nothing

but, worthless piece of papers. Since petitioner felt

that his rights under the contract were in jeopardy,

he has filed the present petition seeking interim

measures for protecting its rights under the

contract which, otherwise would have been

protected by the genuine bank guarantees.

3. Respondent contested this petition on various

grounds, contended inter alia, that the petition is

not maintainable as this court at Delhi has no

territorial jurisdiction to entertain the petition. The

pleadings in the petition do not disclose any cause

of action or the events which happened within the

territorial jurisdiction of Delhi. The memorandum

of understanding dated 15.4.2002 for participation

in tender invited by JSEB for rural electrification

work was executed in Ranchi and bears the stamp

of Ranchi treasury. This MoU was further amended

on 17.6.2005 which also bears the stamp of Ranchi

treasury. It is further averred that agreement was

entered into between the parties for rural

electrification work in the State of Jharkhand on

25.9.2004 which was signed and executed at

Ranchi by petitioner's Additional General Manager,

Electric, Ranchi bearing Ranchi's treasury stamp.

The said agreement is signed by witnesses at

Ranchi. It is further averred that work of rural

electrification was monitored by the petitioner's

office at Ranchi where it has its subordinate office

and the respondent is solely Ranchi based company

which does not reside or carry out business in

Delhi. The entire correspondence between the

parties was carried out from Ranchi and Gurgaon.

It is also averred that the bank guarantees were

also issued from Ranchi, the bills were submitted at

Ranchi, payments were made at Ranchi, the

materials were supplied and stored in Jharkhand

and the work was executed in Jharkhand.

Therefore, this Court has no jurisdiction to

entertain this petition.

4. Mr. Anil Airi, learned counsel for the petitioner, has

submitted that before the filing of this petition

petitioner had appointed arbitrator but it was

respondent who failed to do the needful and since

petitioner is having its office at Delhi, courts at

Delhi have jurisdiction to entertain the present

petition. It is also argued that as per article 11 of

the agreement dated 25.9.2004, executed between

the parties, any dispute arising out of the contract

is subject to the jurisdiction of court located at New

Delhi. It is emphasised that in view of this

agreement between the parties, this Court has the

jurisdiction to entertain the present petition.

5. Mr. Raman Kapur, learned counsel for the

respondent, has submitted that the agreement

between the petitioner and JSEB was executed at

Ranchi, the work of electrification was to be

carried out in the State of Jharkhand in different

districts, the respondent has its office and is

working for gain at Ranchi and petitioner has also

its subordinate office at Ranchi. The dispute if any

within the meaning of agreement has arisen in the

State of Jharkhand and by consent even if the

jurisdiction has been vested by the parties in this

Court, this Court has no jurisdiction because no

part of cause of action arose at Delhi for the filing

of the present petition. He has submitted that the

petition is liable to be rejected for want of

jurisdiction.

6. The petition came up for hearing before this Court

on 27.3.2006. On that day an ex-parte ad-interim

order was passed in favour of the petitioner as

regards prayer contained in paragraph 34 (b), (c)

and (d) of the petition which are as follows:

―(b) respondent is further liable to be restrained from selling, alienating, transferring all its moveable and immovable assets pending arbitration proceedings.

(c) bank accounts of the respondent bearing No. 131010200003360 with UTI Bank, DLF, Gurgaon and bank account with Bank of India, Clubside Branch, Main Road, Ranchi-834 001, Bank of Baroda, 715, Mahatma Gandhi Marg, Kataruka House, 1st Floor, Ranchi- 834 001 be attached.

(d) M/s Jharkhand State Electricity Board, Engineering Bhawan HEC Township, Dhurwa, Ranchi, Jharkhand, be directed to deposit all amounts held by them pertaining to the respondent in this Hon'ble Court.

7. Subsequently, an application was filed by the

respondent being IA No.5833/2006 seeking

clarification of order dated 27.3.2006 in view of the

interim orders granted in favour of the petitioner in

terms of para 34 (b), (c) and (d) of the petition.

This application was considered and disposed of by

this Court on 18.5.2006. It was made clear that the

interim order/protection granted to the petitioner

was in relation to the contract in question and not

pertaining to unconnected and unrelated works as

the OMP filed is under Section 9 of the Act which

can only refer to interim measures/protection in

relation to dispute in question.

8. The only issue to be considered by this Court is

whether this Court has the territorial jurisdiction to

entertain the present petition. As per Section 2(E)

of the Act, a Court means the principal Civil Court

of original jurisdiction in a State and includes the

High Court in exercise of its ordinary original

jurisdiction having jurisdiction to decide the

questions forming the subject matter of the

arbitration if the same had been the subject matter

of a suit. Section 42 of the Act speaks of

jurisdiction of a Court to entertain petition under

the Act. As per this section, where in an arbitration

agreement any application has been made in a

court, that court alone has the jurisdiction over the

arbitral proceedings and all subsequent

applications arising out of that agreement and the

arbitral proceedings have to be made in that court

and in no other court. Therefore, Section 20 of the

Civil Procedure Code (hereinafter referred to as

CPC) regulates the jurisdiction and consequent

proceedings of a Court under the Act. Section 20

CPC so far as is relevant for the purposes of this

petition reads as under:

―S. 20. Other suits to be instituted where defendants reside or cause of action arises.--Subject to the limitations aforesaid, every suit shall be instituted in a court within the local limits of whose jurisdiction--

(a)....

(b)....

(c) the cause of action, wholly or in part, arises.

Explanation.-- A corporation shall be deemed to carry on business at its sole or principal office in India or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place.‖

9. ‗Cause of action' means the circumstances forming

the infraction of the right or the immediate

occasions for the action. In wider sense it means

the necessary conditions for the maintenance of the

suit, including not only the infraction of the right,

but the infraction coupled with the right itself.

Cause of action consists of bundle of facts which

give cause to enforce the legal injury for redress in

a court of law. It means every fact which if

traversed, would be necessary for the plaintiff to

prove in order to support his right to a judgment.

An application for appointment of an arbitrator in

matter of dispute arising out of breach of contract

is maintainable in Court where a part of cause of

action arises even though the contract between the

parties was executed outside the jurisdiction of the

Court. In suits on contract where two courts have

jurisdiction, choice of forum is with the plaintiff.

10. There are numerous decisions of the Supreme

Court wherein it has been specifically held that

where may be two or more competent Courts which

can entertain a suit consequent upon a part of the

cause of action having arisen therein, if the parties

to the contract agree to vest jurisdiction in one

Court to try the dispute which might arise as

between themselves such an agreement ousting the

jurisdiction of the other court is valid and binding

on the parties. However, parties by a consent

cannot confer jurisdiction by way of an agreement

on a Court which otherwise does not possess such

jurisdiction under the Act. Parties to arbitration

agreement, therefore by consent cannot confer

jurisdiction on a Court where no part of cause of

action accrued.

11. In A.B.C. Laminart (P) Ltd. v. A.P. Agencies -

MANU/SC/0001/1989, the Supreme Court

observed:

―21. From the foregoing decisions it can be reasonably deduced that where such 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 notions of contract would bind 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, ―only‖, ―exclusive‖ and the like have been used there may be no difficulty. Even without such words in appropriate cases the maxim ―expressio unius est exclusio alterius‖

- expression of one is the exclusion of another - may be applied. What is an 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 an intention to exclude all others from its operation may in such cases be inferred. It has therefore to be properly construed.‖

12. In Harshad Chiman Lal Modi v. DLF Universal

& Anr. - (2005) 7 SCC 791, it was held that if a

particular Court does not have jurisdiction to deal

with the matter and no part of cause of action has

arisen within the jurisdiction of that court, the

parties of their own cannot vest jurisdiction in the

said Court. Therefore, a clause vesting jurisdiction

on a Court which otherwise does not have

jurisdiction to decide the matter would be void as

against the public policy.

13. Reference is also to made to S.B.P. & Co. v. Patel

Engineering Ltd. - (2005) 8 SCC 618, Patel

Roadways Limited Bombay v. M/s Prasad

Trading Company - (1991) 4 SCC 270, Oil &

Natural Gas Commission v. Utpal Kumar Basu

and others - (1994) 4 SCC 711, South East

Asia Shipping Co. Ltd. v. Nav Bharat

Enterprises Pvt. Ltd. - (1996) 3 SCC 443,

Escorts Ltd. v. M/s G.K. Automobile - 2006

DLT 127-559, Sri Ganesh Research Institute v.

Union of India an Ors - 2004-AD (Del) - 7-327,

Jitendra Nath Banerjee & Ors. v. Union of

India & Ors. - 2006-DLT-129-1.

14. Thus, it is clear that emphasis has been given to

the place where the cause of action has

substantially arisen. The principle of law

enunciated by the Supreme Court while

interpreting clause (c) of Section 20 of CPC has

been repeatedly followed by this Court in various

judgments.

15. The relevant articles of the agreement dated

25.9.2004 need consideration in the light of the

above said principles which govern the jurisdiction

of a Court to entertain this petition. It is not in

dispute that there is an arbitration article no.10

contained in the Schedule III, General Conditions of

Contract executed inter se the parties. Article 11

contained in the agreement dated 25.9.2004 read

as under:

―Jurisdiction of Court‖ Dispute arising out of the contract if any will be subject to the jurisdiction of court located at New Delhi.

16. Thus, by agreement parties conferred jurisdiction

on Delhi Court to entertain this petition. It is be

seen, if any part of cause of action arose in Delhi so

as to vest jurisdiction in this Court. Cause of action

is a prerequisite to confer jurisdiction in a Court to

ouster the jurisdiction of other Courts which may

also have jurisdiction to entertain the dispute inter

se the parties.

17. Agreement which is the subject matter of the

dispute dated 25.9.2004 admittedly was executed

at Ranchi. It was signed by the parties at Ranchi

and was witnessed at Ranchi only. The work to be

executed by the respondent by virtue of this sub-

contract was electrification of villages in the State

of Jharkhand only. The agreement between the

petitioner and Jharkhand State Electricity Board

was also executed at Ranchi. It is pertinent that

the bank guarantees provided by the respondent to

the petitioner were also of various banks at Ranchi

only. Respondent is a company which has its roots

at Ranchi and has no office at Delhi whereas

petitioner has its subordinate office at Ranchi.

18. On 15.4.2002 the parties to the petition had

entered into MoU for participation in the tender

invited by JSEB at Ranchi. This memorandum of

understanding was amended on 17.6.2005 at

Ranchi. Petitioner had been monitoring the work

of rural electrification through Ranchi office. The

dispute inter se the parties arose at Ranchi only.

Therefore, no part of cause of action arose inter se

the parties at Delhi.

19. On the day when this petition was filed petitioner

also filed a petition being AA No.202/2006 under

Section 11 of the Act for appointment of an

arbitrator. Before the petitioner filed these two

petitions in this Court respondent had already filed

a petition under Section 11 of the Act in the High

Court of Jharkhand on 20.3.2006. In its petition

AA No.202/2006 petitioner did plead ―both the

parties have appointed their nominee (Mr. S.M.

Singla by petitioner and Mr. R.K. Sarkar by

respondents) and the said arbitrators so appointed

have failed to agree on a common name for the

third Arbitrator‖. Order dated 27.3.2006 of this

Court whereby interim protection was granted to

the petitioner also finds mention that arbitration

clause has already been invoked by the parties in

respect of the dispute which arose between them.

20. Arbitration Application No. AA No.9/2006 was filed

by the respondent, Ramjee Power Construction Ltd.

in the Ranchi High Court. Parties mutually agreed

to give the name of the umpire and sought short

adjournment. The relevant order dated 16.6.2006

in the said petition reads as follows:

―Heard the counsel for the parties at length.

After some arguments, both the counsels have finally agreed to give the name of a third person to act as umpire and for that purpose they jointly seek a short adjournment.

As jointly, agreed, put up this case under the same heading on 29 th June, 2006.‖

21. The question of jurisdiction also arose in the said

petition when respondent; RITES Ltd. pointed out

that it had filed a petition before this court under

Section 11 of the Act for appointment of arbitrator

which was still pending adjudication and had

alleged that Court at Delhi had the jurisdiction as

memorandum of understanding was not executed

at Ranchi though, stamp papers were purchased by

the respondent; RITES Ltd. (petitioner herein) at

Ranchi. Perusal of the order of the High Court of

Jharkhand indicate that Ramjee Power

Construction Ltd. in its rejoinder dated 4.7.2006

filed in the said Court had categorically stated that

respondent RITES Ltd. had admitted before the

Delhi High Court on affidavit that contract (memo

of understanding) was executed at Ranchi. The

relevant observations of M.Y. Eqbal, J. of the High

Court of Jharkhand in his order dated 13.7.2006

read as follows:

―9. It transpires from the record that petitioner appeared in Delhi High Court and took specific stand that no cause of action, either wholly or partly arose within the jurisdiction of the Delhi High Court. Although this fact was not denied by the respondent but in the counter affidavit filed in the instant case, it is stated in paragraph 7 that in C.M.No.12810/05 it was categorically admitted that no part of cause of action arose within the jurisdiction of Delhi High Court. The petitioner in the rejoinder dated 4.7.2006 has very categorically stated that respondents have admitted before the Delhi High Court on affidavit that the Contract

(M.O.U.) was executed at Ranchi.‖

22. Thus, it is clear that petitioner RITES Ltd. itself

disputed the jurisdiction of this Court in the writ

petition CWP(C)No.16350/2005. In the said reply

to CM No.12810/2005 petitioner herein specifically

pleaded that no cause of action or even a part of

cause of action had arisen in Delhi in the ten

contracts awarded by the respondent RITES Ltd. to

Ramjee Power Construction Ltd. for rural

electrification of villages in Jharkhand State. The

contracts were signed at Gurgaon and not in Delhi.

23. Respondent Ramjee Power Construction Ltd. had

filed the petition under Section 11 of the Act in the

Jharkhand High Court on 20.3.2006. The petitioner

RITES Ltd. was informed about filing of the said

petition and report was duly received and

acknowledged by the petitioner. Despite this

knowledge petitioner filed the arbitration

application no.202/2006 under Section 11 of the

Act and OMP No.116/2006 under Section 9 of the

Act in this Court on 25.3.2006. Ramjee Power

Construction Ltd. has also filed objections under

Section 42 of the Act challenging the territorial

jurisdiction of this Court. Since more than one

request had been made to the Chief Justice of

different High Courts, the Chief Justice or his

designate to whom the request has been made

under relevant sub sections (4), (5) and (6) of

Section 11 first, alone is competent to decide the

request petition. Consequently, the said Court

appointed third arbitrator or umpire with directions

to him to enter into reference and give his award

within a period of six months. It is pertinent that

petitioner agreed to give name of the third person

to act as third arbitrator or umpire.

24. Undisputedly, the arbitrator has entered into

reference and the parties have filed their claims

and counter claims. Fate of the arbitration

proceedings is not known despite the fact that

petitioner took time to file certain documents

received by him from Jharkhand High Court and

were relevant for the proper adjudication of this

petition by this Court. No such documents were

placed on record. It is pertinent that the said order

of the Jharkhand High Court was challenged by the

petitioner in appeal. However, petitioner withdrew

the appeal with a view to file an application before

the Jharkhand High Court for modification/

clarification of the order dated 13.7.2006.

25. Since no part of cause of action arose in favour of

the petitioner and against the respondent at Delhi,

this Court has no jurisdiction to entertain this

petition seeking interim relief under Section 9 of

the Act even if the parties by consent vested

jurisdiction in this Court to entertain a dispute

which arose within the meaning of the contract. In

the order dated 3.9.2007 it was observed that since

dispute in the present OMP is the same which has

been referred by Jharkhand High Court to the

arbitrator, present application on the face of it had

become infructuous.

26. In view of the aforesaid findings, since this Court

has no jurisdiction to entertain the present petition,

the same is hereby rejected.

27. The interim order dated 27.3.2006 stands vacated.

ARUNA SURESH (JUDGE) AUGUST 21, 2009 jk