M/S Jay Polyehem (India) Ltd. vs Kotak Mahindra Bank Ltd.
2009 Latest Caselaw 1068 Del

*           IN THE HIGH COURT OF DELHI AT NEW DELHI


                                                   Date of Reserve: March 26, 2009
                                                      Date of Order: March 31, 2009

+ OMP 80/2009
%                                                            31.03.2009
    M/s Jay Polyehem (India) Ltd.                     ...Petitioner
    Through: Arun Bhardwaj, Sr. Adv. with Mr. Vineet Malhotra, Advocates

       Versus

       Kotak Mahindra Bank Ltd.                         ...Respondent
       Through: Mr. Rajiv Nayyar, Sr. Adv. with Mr. Arjun Pant, Advocates



       JUSTICE SHIV NARAYAN DHINGRA

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

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

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


       JUDGMENT

1. By this application under Section 9 of the Arbitration & Conciliation Act,

1996 (for short, "the Act") the petitioner has sought the relief that this Court

should restrain the respondent from proceeding further under notice dated

16th October 2008 and a letter dated 2nd February 2009, either itself or

through committee constituted by it.

2. Vide letter dated 16th October 2008, the respondent, through its head

office in Mumbai, informed the petitioner that the petitioner was in willful and

deliberate default in making payment of the dues of respondent bank despite

having adequate cash flow and capacity to pay. The respondent, therefore,

proposed to classify the petitioner as a „willful defaulter‟ under the Scheme of

"Disclosure of Information on Defaulting Borrowers of Bank and Financial

OMP 80/2009 M/s Jay Polyche (India) Ltd. v. Kotak Mahindra Bank Ltd. Page 1 Of 6 Institutions" introduced by the Reserve Bank of India vide circular dated 23rd

April 1994, as amended from time to time. A show cause notice was given to

the petitioner as to why the respondent company should not classify the

petitioner as a willful defaulter. The petitioner was given an opportunity to

make submissions before the „committee for willful defaults‟. The committee

after considering the submissions made by the petitioner was to take a

decision. The petitioner was asked to give its reply/ submissions within 15

days of the receipt of the show cause notice at the Mumbai address of the

respondent in the office of Mr. Prakash Jyodakar.

3. Vide letter dated 2nd February 2009,the petitioner was informed by the

respondent that his reply dated 30th October 2008 to the show cause notice

had been received in the office and the same has been forwarded to the

„Grievance Redressal Committee‟ of the Bank and he should appear before

the Grievance Redressal Committee on 19th February 2009 at Mumbai.

4. Notice of this application under Section 9 of the Arbitration &

Conciliation Act, 1996 was accepted by the respondent on the very first day

and the respondent raised objections about the territorial jurisdiction of this

Court. The respondent filed its response by filing counter affidavit and some

documents along with it.

5. Learned counsel for the petitioner vehemently argued that the contract

between the parties, out of which dispute arose, was executed in Delhi and it

was the Delhi Court which was the Court of appropriate jurisdiction. It is

submitted by counsel for the petitioner that the respondent had lured and

coerced the petitioner to enter into contract on 23rd July 2007 and nothing

OMP 80/2009 M/s Jay Polyche (India) Ltd. v. Kotak Mahindra Bank Ltd. Page 2 Of 6 was due towards the bank. The petitioner was prepared to deposit Rs.1.5

crore with the Registrar of this Court to show his bonafide but the respondent

was unnecessarily dragging the petitioner to Mumbai Courts whereas the

appropriate Court would be the Court of Delhi.

6. The petitioner also contended that the agreement as arrived at

between the parties though contained a clause that only Court in Mumbai

shall have exclusive jurisdiction but this clause was void being contrary to the

settled proposition of law that the parties cannot by mutual consent confer

jurisdiction on the Court which actually does not have it. The parties can only

agree to exclude the jurisdiction of one Court where more than one Court

have jurisdiction. On the other hand, counsel for the respondent argued that

the contract relied upon by the petitioner specifically provides that only

Courts at Mumbai shall have jurisdiction. The head office of the respondent

was at Mumbai. The contract provides that all actions of branch office of the

respondent shall be considered to be the actions of the head office of the

respondent situated at Mumbai. The cause of action also had arisen at

Mumbai, therefore, only Courts at Mumbai shall have the jurisdiction.

7. Section 9 of the Arbitration & Conciliation Act, 1996 gives powers to the

Courts to entertain the application seeking interim measures of protection in

respect of the matters provided therein. Section 2(1) (e) of the said Act

defines the Court as under:-

"Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having, jurisdiction to decide the questions forming the subject-matter of the arbitration if the

OMP 80/2009 M/s Jay Polyche (India) Ltd. v. Kotak Mahindra Bank Ltd. Page 3 Of 6 same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

8. It is apparent that an application under Section 9 of the Act can be

entertained by a principal civil Court of original jurisdiction (including High

Courts) which would have the jurisdiction to decide the question forming the

subject matter if the same had been the subject matter of a suit. One has to

ask if the petitioner had filed the suit claiming relief which he claimed in the

petition under Section 9 of the said Act, would this Court have territorial

jurisdiction to entertain the suit?

9. In the application made by the petitioner, the petitioner had

categorically stated that the cause of action arose when the respondent

issued notice dated 16th October 2008 and then issued letter dated 2nd

February 2009 fixing date of hearing before the Committee on 19th February

2009. The respondent was situated at Mumbai and the respondent had issued

letters/ notice asking for show cause as to why the petitioner be not declared

a „willful defaulter‟ and his name be not sent by the respondent to RBI from

its head office at Mumbai. Thus the cause of action arose in Mumbai and not

in Delhi. Hence the Court at Mumbai would be appropriate Court despite the

fact that the letter/ notice was received by the petitioner in Delhi because the

petitioner had specifically agreed in the contract dated 23rd July 2007 that

only Court in Mumbai shall have the jurisdiction. The jurisdiction clause and

the arbitration clause as provided in the contract read as under:

"(i) Governing Law, Jurisdiction and Arbitration Sub-clause (a), Sub-Clause (c) of Section 13 of the Agreement are hereby deleted in their entirety and

OMP 80/2009 M/s Jay Polyche (India) Ltd. v. Kotak Mahindra Bank Ltd. Page 4 Of 6 substituted by the following new Sub-Clause (a), Sub- Clause (b) and Sub-clause (c) of Section 13:

(a) Governing Law. This Agreement will be governed by and constructed in accordance with the laws of India.

(b) Dispute Resolution.

(i) If any difference, dispute or question shall arise between the parties as to the interpretation, meaning or effect of this agreement or as to the rights and liabilities of the parties arising hereunder or as to any other matter or things relating to this agreement or arising out of or in connection herewith either during the continuance of this agreement or after any termination or purported termination hereof, the same shall be referred to a Sole Arbitrator who shall be appointed by Party „X‟ and whose decision shall be governed by the provisions of Arbitration & Conciliation Act, 1996 or any statutory modification or reenactment thereof and the venue of the Arbitration shall be at Mumbai.

(ii) The language of the arbitration shall be English and (all) the arbitrator shall be fluent in English.

(iii) The Tribunal shall state the reason for its decisions in writing and shall not make such decisions on the basis of the principle of ex acquo et bono or as amiable compositeur;

(iv) Subject to the provisions of Sub-clause (b) above, the courts of competent jurisdiction at Mumbai shall have exclusive jurisdiction with respect to any suit, action or any other proceedings relating to this Agreement including in relation to any arbitration award."

10. It is also to be noted that the respondent had already filed a claim

before the Debt Recovery Tribunal - III at Mumbai where the petitioner filed

OMP 80/2009 M/s Jay Polyche (India) Ltd. v. Kotak Mahindra Bank Ltd. Page 5 Of 6 an application challenging the jurisdiction of Mumbai Tribunal and the Debt

Recovery Tribunal at Mumbai by an order dated 6th February 2009 dismissed

the application observing inter alia that Mumbai Court as well as Delhi Court

both would have jurisdiction to try the case.

11. Looking into the agreement between the parties and the specific

clause wherein parties had agreed that the Mumbai Court will have the

jurisdiction, I consider that this Court, has no territorial jurisdiction to

entertain the instant petition. The petition is hereby dismissed. No costs.

March 31, 2009                                        SHIV NARAYAN DHINGRA J.
rd

OMP 80/2009 M/s Jay Polyche (India) Ltd. v. Kotak Mahindra Bank Ltd. Page 6 Of 6