Tobu Enterprises Pvt Ltd v. Camco Industries Ltd

M.M. Dutt, J.

1. The appellant Tobu Enterprises Private Limited has preferred this appeal against the judgment and order dated Jan. 25, 1983 of a learned single Judge of this Court granting leave to the respondent, Camco Industries Limited, under Cl. 12 of the Letters Patent to file an application under S.20 of the Arbitration Act, 1940; the said application has since been registered as a suit being Special Suit No. 3A of 1983.

2. By an agreement in writing dated Nov. 1, 1980 entered into in Calcutta within the ordinary original jurisdiction of this Court between the appellant and the respondent, it was agreed that the appellant would appoint the respondent its distributor of Children Vehicles produced by it. In the said agreement, the appellant was the first party and the respondent was the second party. The agreement, inter alia, provides as follows :

"(1). The agreement can be terminated by a notice of three months in writing from either side.

(2). The First Party will give the Children Vehicles for the aforementioned areas to the Party of the Second Part only till this agreement is in force.

(3). Payment will be made in full advance for each supply by a crossed bank draft in favour of the First Party, payable at New Delhi.

(4). In the event of any dispute arising out of the contract the matter will be given to arbitrators appointed by both the parties failing which the jurisdiction of Delhi High Court will apply."

3. The agreement further provides that the distributorship of the respondent relates to the whole of West Bengal excluding Darjeeling and Jalpaiguri districts. Further, a sum of Rs. 1.00,000/- will be kept in deposit with the appellant by the respondent till the distributorship of the respondent continues. The to deposit amount will bear simple interest the rate of 12% per annum payable annually.

4. Disputes and differences arose between the parties in regard to the distributorship of the respondent which resulted in the filing of the application under S.20 of the Arbitration Act by the respondent in this Court. In the said application, the respondent prayed for leave under Cl. 12 of the Letters Patent alleging, inter alia, that a part of the cause of action arose within the ordinary original jurisdiction of this Court. the learned Judge, by the impugned order dated Jan. 25, 1983, granted leave under Cl. 12 of the Letters Patent enabling the respondent to file the application under S.20 of the Arbitration Act in this Court. Thereafter, the respondent made an application under S.41 of the Arbitration Act praying for an interim order in terms of prayers (a) and (b) of the application under S.41. The learned Judge passed an interim order dated Jan. 25, 1983 in terms of prayers (a) and (b), which are as follows:

"(a) An injunction do issue restraining the defendant, its servants or agents or representatives or officers, employees or assigns or otherwise whosoever in the State of West Bengal (excluding Darjeeling and Jalpaiguri districts) of its products (sic) except through the petitioner until disposal of the arbitration proceedings and/or until further orders his Honble Court.

(b). An injunction do issue restraining the defendant, its servants or agents or representatives or officers or employees or assigns or otherwise whosoever from making any deliveries of any goods or riving effect to any contract or order or agreement made by the defendant directly with any party other than your petitioner in respect of its products in he State of West Bengal (excluding Darjeeling and Jalpaiguri districts) until further orders of this Honble Court."

5. On Feb. 3, 1983, the said interim order was modified by the learned Judge to the following extent:

"I modify the interim order already passed by me to this extent that it will be confined to Children Vehicles manufactured by Tobu Enterprises (P) Ltd. The petitioner and the respondent must. However, abide by flip terms of the contract. The order is passed without prejudice to the rights and contentions of the parties."

6. The appellant being aggrieved by the said order dated Jan. 25, 1983 granting leave under Cl. 12 has preferred the instant appeal. The appellant has also preferred another appeal against the said interim order dated Jan. 25, 1983 as modified by the said order dated Feb. 3, 1983.

7. The present appeal, therefore, relates to the propriety of the order of the learned Judge granting leave under Cl. 12 of the Letters Patent. At the very outset, on behalf of the respondent, a preliminary objection has been taken as to the maintainability of the appeal. It is urged by the learned counsel for the respondent that in view of S.39 (1) of the Arbitration Act, no appeal lies against an order granting leave under Cl. 12 to file an application under S.20 of the Arbitration Act. Counsel submits that in any event, in view of S.31 (2) read with S.2 (c) of the Arbitration Act, no leave under Cl. 12 is necessary for the purpose of filing an application under S.20 of the Arbitration Act.

8. Section 39 (1) of the Arbitration Act provides that an appeal shall lie from certain orders as mentioned in that section from the orders "passed under this Act (and from no others)" to the Court authorised by law to hear appeals from original decrees of the court passing the order. Under S.39 (1), only certain orders which are specified in that section and passed under the Arbitration Act are appealable, and no appeal lies from any other order passed under the Arbitration Act. An order granting leave under Cl. 12 of the Letters Patent to file an application under S.20 of the Arbitration Act is not one of such orders as specified in S.39 (1).The question, however. is whether the order under Cl. 12 of the Letters Patent can be regarded as an order passed under the Arbitration Act. Prima facie, it must be said that an order under Cl. 12 is not an order under the Arbitration Act.

9. It is, however, urged on behalf of the respondent that in view of S.31 (2) read with S.2 (c) of the Arbitration Act, an order under Cl. 12 should be construed as an order under the Arbitration Act so as to bar an appeal against such an order granting leave. Section 2 (c) of the Arbitration Act defines "court" as follows:

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

Section 31 deals with jurisdiction. Sub-sections (1) and (2) of S.31 provide as follows:

"(1) Subject to the provisions of this Act an award may be filed in any Court having jurisdiction in the matter to which the reference relates.

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an sward or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by too other Court."

It is difficult for us to accept the contention of the respondent that an order under Cl. 12 of the Letters Patent is an order under the Arbitration Act. Neither S.31 nor S.2 (c) refers to Cl. 12 of the Letters Patent. The question of passing any order under the Arbitration Act will arise after leave under Cl. 12 is granted enabling a party to file an application under S.20 of the Arbitration Act. So long as the leave is not granted, there is no proceeding before the Court under the Arbitration Act and, as such, there can be no order tinder the Arbitration Act. The decision of the Supreme Court in Union of India v. Mohindra Supply Co., AIR 1962 SC 256 [LQ/SC/1961/304] strongly relied upon by the respondent has no manner of application to the instant case. In that case, the question before the Supreme Court was whether a second appeal was maintainable to the High Court under Cl. 10 of the Letters Patent of the Punjab High Court (Cl. 10 being similar to Cl. 12 of the Letters Patent of this Court) against the order of a single Judge of the High Court disposing of an appeal under S.39 (1) of the Arbitration Act. It was held that in view of S.39 (2) of the Arbitration Act, no further appeal lay under Cl. 10 of the Letters Patent against the order of a single Judge. Here we are concerned with a completely different question, namely, whether an order under Cl. 12 of the Letters Patent granting leave to file an application under S.20 of the Arbitration Act is an order passed under the said Act. In our opinion there can be no manner of doubt that an order tinder Cl. 12 of the Letters Patent is not and cannot be an order passed under the Arbitration Act and, accordingly, the question that such an order not being one of the orders as mentioned in S.39 (1) of the Arbitration Act, is not appealable, does not arise. The contention of the respondent against the maintainability of the present appeal, therefore, fails.

10. Section 31 (2) read with S.2 (c) of the Arbitration Act provides for the jurisdiction of the court to decide all question regarding validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them. Only that court in which an award under the agreement has been or may be, filed, is competent to decide all such questions and no other court, Under sub-sec. (1) of S.31, an award may be filed in any court having jurisdiction in the matter to which the reference relates. A court which has no jurisdiction in the matter to which the reference relates, an award cannot be filed in that court and, consequently, that Court, will not have jurisdiction to decide the questions as enumerated in sub-sec. (2) of S.31.

11. It is submitted on behalf of the respondent that the jurisdiction to entertain an application under S.20 of the Arbitration Act depends wholly upon the provisions of S.2 (c) and S.31 (2) of the Arbitration Act and not on Cl. 12 of the Letters Patent and accordingly, no leave under Cl. 12 is necessary. In support of this contention reliance has been placed by the learned counsel for the respondent on a Bench decision of this Court in Rebati Ranjan Chakravarti v. Suranjan Chakravarti, AIR 1963 Cal 692. In that case, two questions arose, namely, one relating to the maintainability of the appeal and the other relating to the question whether leave under Cl. 12 of the Letters Patent was at all necessary for filing an application in this Court under the Arbitration Act. Of the two learned Judges constituting the Bench D.N. Sinha, J. (as he then was) held that as the impugned order was not one as enumerated in S.39 (1) of the Arbitration Act, no appeal lay tinder Cl. 15 of the Letters Patent. In that view of the matter, Sinha, J. did not decide the other question as to whether leave under Cl. 12 was at all necessary or not. S. Datta, J., the other learned Judge, while agreeing with the conclusion arrived at by Sinha, J. decided the other question. It was observed by Datta, J. as follows (at p. 646) :

"S.2 (c) of the Arbitration Act points out the Court which can have jurisdiction over the subject-matter of a reference. It is that Court which could entertain a suit if the subject-matter of reference was the subject-matter of a suit. Section 31 lays down the conditions requisite for entertaining an Award and/or an application. In other words, Cl. 12 of the Letters Patent does not determine the jurisdiction of the Court but S.2 (c) read with S. 31 does it and in so doing S.2 (c) indirectly incorporates the provisions of the Letters Patent. To put it differently, Cl. 12 of the Letters Patent cannot determine the jurisdiction but for S.2 (c) read with S.31. Hence Jurisdiction of the Court to entertain an application including an application for appointment of Receiver and/or Award does not flow from the Letters Patent hilt springs from S. 31 read with S.2 (c) which by reference attracts Cl. 12 of the letters Patent.

Hence, the determination of the existice or non-existence of jurisdiction of Court to entertain an application under the Arbitration Act is conditioned by S.2 (c) and S.31 of the Arbitration Act and is consequently "under this Act" and therefore attracts S.39 (1) of the Arbitration Act.

In this view of the matter it is immaterial to consider whether it is necessary in order to found jurisdiction in the High Court that a part of the cause of action should arise within the local limits of jurisdiction and further in such a case leave should be taken before filing the plaint or it is sufficient if a part of the cause of action only arises within the local limits of the jurisdiction."

12. While it is true that S.2 (c) read with S.31 of the Arbitration Act determines the jurisdiction of the Court, most respectfully we beg to differ with the observation of the learned Judge that S.2 (c) indirectly incorporates the provisions of the Letters Patent or that it attracts Cl. 12 of the Letters Patent. Consequently, we are unable to subscribe to the view of the learned Judge that it is immaterial whether a part of the cause of action should arise within the jurisdiction of this Court or leave under Cl. 12 should be taken or not. It has been stated already that Sinha, J. has not decided the question as it has been held by His Lordship that no appeal lay against the impugned order in that case, the determination of the question by Datta, J. with which we differ cannot, therefore, be regarded as the decision of the Bench, but that of a single Judge not binding upon us. Had it been the decision of the Bench, we would have referred the question to a larger bench.

13. Let us consider the observations of Datta J. that S.2 (c) indirectly incorporates the provisions of the Letters Patent and attracts Cl. 12 thereof. Section 2 (c) defines Court, inter alia, as meaning a civil court having jurisdiction to decide the questions forming the subject-matter of a reference if the same had been the subject-matter of the suit. So, under S.2 (c), a court for the purpose of the Arbitration Act is a civil court having jurisdiction to decide the questions forming the subject-matter of a reference. The word `questions in S.2 (c) is significant to be noticed. S.2 (c) enjoins that the civil court should have jurisdiction to decide the `questions, that is to say, all the questions forming the subject-matter of a reference. It, therefore, follows that if, in a given case, the civil court has not the jurisdiction to decide all the questions, but only one or some of the questions forming the subject-matter of a reference, that particular civil court will not have jurisdiction in terms of S.2 (c). Similarly, under sub-sees. (1) and (2) of S.31 of the Arbitration Act, a Court not having jurisdiction in the matter to which the reference relates in a particular case, will have no jurisdiction to decide the questions referred to in sub-sec. (2). Here also the word matter in sub-sec. (1) refers to the entire matter and not part of it. In view, however, of the provisions of Ss.17, 19 and 20 of the Civil P. C., such a situation creates no difficulty in filing a suit in a civil court. Under S.17, suits for immovable property situate within the jurisdiction of different courts may be instituted in any court within the local limits of whose jurisdiction any portion of the property is situate. S.19 relates to suits for compensation for wrong done to person or movables. Such a suit may be instituted in the court within the local limits of whose jurisdiction the wrong was done or the defendant resides, or carries on business, or personally works for gain. S.20 deals with other suits and it provides inter alia, the filing of such a suit in a court within the local limits of whose jurisdiction the defendant or if there are more than one, any of the defendants resides, or carries on business etc., or the cause of action, wholly or in part, arises. Thus, a suit may be filed in a civil court where such court has jurisdiction in respect of a part and not the whole of the subject-matter. Further, no leave is required to be taken for the institution of such a suit. The civil court in such a case, will be competent to deal with the entire subject-matter of the suit and, consequently, it will be a court within the meaning of S.2 (c) or S.31 of the Arbitration Act having jurisdiction in the matter to which the reference relates.

14. But a chartered High Court, like this Court, stands on a different footing. The institution of a suit in the Original Side of this Court is governed by Cl. 12 of the Letters Patent which reads, inter alia, as follows:

"that the said High Court .. .. in the exercise of its Ordinary Original Civil Jurisdiction, shall be empowered to receive, try and determine suits of every description, if, in the case of suits for land or other immovable property, such land or immovable property shall be situated, or in all other cases if the cause of action shall have arisen, either wholly, or in case leave of the Court shall have been first obtained, in part, within the local limits of the Ordinary Original Jurisdiction of the said High Court or the defendant at the time of the commencement of the suit shall "

15. In the instant case, no land or immovable property is involved and, therefore, it falls within the expression in all other cases. So if a suit involving the same matter to which the reference relates has to be filed in the Original Side of this Court, if the cause of action does not arise wholly but in part only, within the local limits of the Ordinary Original Jurisdiction of this Court, such suit can only be filed after first obtaining the leave of this Court under Cl. 12 of the Letters Patent. In the present case before us, as because the agreement was entered into by and between the parties in Calcutta, within the Ordinary Original Jurisdiction of this Court, only a part of the cause of action has arisen within the said jurisdiction. Any suit involving the subject-matter of the instant case cannot be filed in this Court unless leave under Cl. 12 is first obtained. Therefore, so long as such leave is not obtained, this Court will not have jurisdiction to entertain or try the suit and, consequently in terms of S.2 (c) read with S.31 of the Arbitration Act, also an application under S.20 of the Arbitration Act. Neither S.2 (c) nor S.31 dispenses with the obtaining of leave under Cl. 12 of the Letters Patent. Indeed, no reference has been made to Cl. 12 of the Letters Patent in either of the said Ss.2 (c) and 31. In the circumstances, it is not possible to say that S.2 (c) indirectly incorporates or attracts the provision of Cl. 12 of the Letters Patent as observed by Datta J. If S.2 (c) indirectly incorporates or attracts Cl. 12, as observed by Datta J., that is more the reason why leave under Cl. 12 should be obtained. In our opinion, the proposition that in filing an application under S.20 of the Arbitration Act in this Court, no leave is required to be taken, even though the cause of action arises in part only within the Ordinary Original Jurisdiction of this Court, is wholly untenable.

16. In this connection, we are to deal with another decision of a learned single Judge of this Court in S. P. Consolidated Engineering Co. (P.) Ltd. v. Union of India. AIR 1966 Cal 259 [LQ/CalHC/1965/125] . In that case, the learned Judge observed (at p. 266):

"It seems to me that because of this that an application under S.20 of the Arbitration Act has never been treated as a suit within the meaning of Cl. 12 of the Letters Patent. No decision has been cited in which it has been held that leave is imperative in such suits, when only a part of the cause of action on which the suit is founded arises within the jurisdiction of this Court. In the absence of a compelling decision, I am unable to accept Mr. Sens contention that leave under Cl. 12 is imperative in the case of an application under S.20 of the even though such a proceeding may well be characterised as a suit."

17. There can be no doubt that a suit is not instituted by filing an application cinder S.20 of the Arbitration Act, although the application is numbered and registered as a suit. But the jurisdiction of the Court to entertain such application will depend upon as to whether if the questions involved in the application or the matter to which the reference relates had been the subject-matter of a suit, the Court has jurisdiction to entertain such questions or matter. In other word, if the application is treated as a suit, whether the Court has jurisdiction to entertain and try such a suit. It is true that the application under S.20 of the Arbitration Act is not a suit, but the jurisdiction of the Court will have to be decided on the basis that if it had been a suit, whether the Court would have jurisdiction to entertain and try the suit. This is manifestly clear from the provisions of Ss.2 (c) and 31 of the Arbitration Act. So far as Courts other than the chartered High Courts are concerned, the Civil P. C. governs the question of jurisdiction to entertain a suit and in the case of chartered High Courts the provisions of the Letters Patent. So we are unable to subscribe to the view of the learned Judge in the case of S. P. Consolidated Engineering Co. (P) Ltd. (AIR, 1966 Cal 259 [LQ/CalHC/1965/125] ) (supra) that because an application under S.20 of the Arbitration Act is never treated as a suit within the meaning of Cl. 12 of the Letters Patent, it is not imperative to obtain leave under Cl. 12, even though only a part of the cause of action arises within the ordinary original jurisdiction of this Court. To accept the above view of the learned Judge will be, in our opinion, contrary to the provisions of Ss. 2 (c) and 31 of the Arbitration Act. In Das Consultant Pvt. Ltd. v. N. M. D. Corporation, AIR 1981 Cal 202 [LQ/CalHC/1980/317] , the same view as in the case of S. P. Consolidated Engineering Co. (P) Ltd. (supra) has been expressed by another learned single Judge of this Court, and for the reasons as already given, we are unable to accept the same.

18. In the circumstances, we hold that where the cause of action arises in part only within the ordinary original jurisdiction of this Court, an application under S.20 of the Arbitration Act can only be filed in this Court after first obtaining leave under Cl. 12 of the Letters Patent. In other words, in such case, leave under Cl. 12 is imperative.

19. We may now consider the propriety of the granting of leave under Cl. 12 of the Letters Patent. It is submitted by Mr. Bhabra, learned counsel appearing on behalf of the appellants, that the learned Judge should not have granted leave as the parties have a reed by the arbitration clause that the reed High Court will have jurisdiction in the matter. Cl. 4 of the agreement set out above provides that "in the event of any dispute arising out of the contract, the matter will be given to arbitrators appointed by both parties, failing which the jurisdiction of the Delhi High Court will apply". It is not disputed that apart from the arbitration clause, both this Court (subject to leave under Cl. 12 of the Letters Patent) and the Delhi High Court have jurisdiction in the matter. So the parties have agreed that their forum will be the Delhi High Court. There is no illegality in such an agreement for Delhi High Court has jurisdiction to entertain an award in this matter to which the reference may relate. In Michael Golodetz v. Serajuddin, AIR 1983 SC 1044. the Supreme Court had to consider such a contract. Shah J. observed as follows (at p. 1046):

" ..The Court ordinarily requires the parties to resort for resolving disputes arising under a contract to the Tribunal contemplated by them at the time of the contract. That is not because the court regards itself bound to abdicate its jurisdiction in respect of disputes within its cognizance; it merely seeks to promote the sanctity of contracts x x x".

Now, the granting of leave under Cl. 12 of the Letters Patent is discretionary with the High Court and, when the parties have agreed to restrict their forurm to the Delhi High Court, the learned Judge, in our opinion, should not have granted leave under Cl. 12 of the Letters Patent enabling the respondent to file the application under S.20 of the Arbitration Act. It does not appeal that there is any special reason or circumstance justifying the grant of leave under Cl. 12 of the Letters Patent. Further, the arbitration agreement as contained in Cl. 4 appears to be vague.

20. In the circumstances, the impugned order of the learned Judge granting leave under Cl. 12 of the Letters Patent is set aside. All interim orders passed by the learned Judge are vacated.

As the application under S.20 of the Arbitration Act has already been filed pursuant to the impugned order, it may be returned to the respondent for being presented to the proper Court.

21. The appeal is allowed, but in the facts and circumstances of the case, there will be no order as to costs.

22. On behalf of the respondent a prayer has been made for a certificate for appeal to the Supreme Court of India tinder Art. 134A of the Constitution. In our opinion no question of law of general importance is involved in this case and accordingly, the prayer for a certificate is disallowed.

C.K. Banerji, J.

I agree.

Appeal allowed.