IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
TRANSFER PETITION (CIVIL) NO.78 OF 2009
Balaji Coke Industry Pvt. Ltd. ... Petitioner
Vs.
M/s Maa Bhagwati Coke (Guj) Pvt. Ltd. ... Respondent
J U D G M E N T
ALTAMAS KABIR, J.
1. This Transfer Petition under Article 139A(2) of
the Constitution of India read with the relevant
provisions of the Supreme Court Rules and Section
25 of the Code of Civil Procedure has been filed by
Balaji Coke Industries Pvt. Ltd. for transfer of
Arbitration Application No.1 of 2008, titled M/s
Maa Bhagwati Coke (Guj) Pvt. Ltd. vs. Balaji Coke
Industry Pvt. Ltd., pending in the Court of the
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Principal Senior Civil Judge at Bhavnagar (Gujarat)
to the Calcutta High Court.
2. Briefly stated, the facts are that the
Petitioner Company registered under the Companies
Act and having its registered office at 12, Ho-Chi
Minh Sarani, Flat 2B, Second Floor, Kolkata, is
carrying on business in the trade of coking coal.
The Respondent, which is engaged in the business of
processing coking coal into hard coke, requires
coking coal as raw material to be used in its
processing unit for transformation into met coke
(hard coke). On 29th April, 2005, the Petitioner
Company entered into an agreement with the
Respondent Company to supply 15,000 Metric Tonnes
of coking coal of Indonesian Origin. The agreement
to sell provided that the cargo would be sold to
the Respondent on High Seas basis. The said
agreement was executed in Kolkata within the
jurisdiction of the Calcutta High Court.
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3. Clause 11 of the aforesaid agreement contains
an Arbitration Clause which reads as under :-
“In case of any dispute or difference
arising between the parties hereto or any
claim or thing herein contained or the
construction thereof or as to any matter
in any way connected with or arising out
of these presents or the operation thereof
or the rights, duties or liabilities of
either party thereof, then and in every
such case the matter, differences in
disputes shall be referred to an
arbitrator in Kolkata, West Bengal, India
in accordance with and subject to the
provisions of the Arbitration and
Conciliation Act, 1996, or any other
enactment or statutory modifications
thereof for the time being in force. The
place of arbitration shall be Kolkata.”
[Emphasis supplied]
Pursuant to the aforesaid agreement dated 29th
April, 2005, the parties entered into a specific
High Seas Sale Agreement on 7th May, 2005, wherein
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it was specified that the contracted coal would be
supplied to the Respondent from a vessel named MV
Gulf Ranger. The total sale consideration for the
consignment was mentioned as Rs.8,11,80,000/-.
Clause 14 of the said High Seas Sale Agreement
provided that the sale contract would be subject to
Kolkata jurisdiction.
4. Disputes having arisen between the parties, the
Respondent herein by its letter dated 20th December,
2008, invoked the arbitration clause and requested
the Petitioner Company to confirm the appointment
of a retired Judge of the Gujarat High Court,
Hon’ble Mr. Justice K.M. Mehta, to be the Sole
Arbitrator. In the said letter, the Respondent
alleged that the Petitioner was in possession of
Rs.3,43,73,485/- which belonged to the Respondent
and was being enjoyed by the Petitioner instead of
handing over the same to the Respondent. It was
also alleged that the Respondent was entitled to
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receive 6,793 Metric Tonnes of material from the
Petitioner on the basis of the aforesaid sum lying
with the Petitioner. It was alleged that the
Petitioner was not issuing delivery orders in
favour of the Respondent for release of the said
material and that the same was currently lying in a
plot owned by the Respondent, but under the control
and supervision of the Petitioner in Gujarat within
the jurisdiction of the Bhavnagar Civil Courts.
5. The petitioner wrote back to the Respondent on
9th January, 2009, denying all the allegations and
in particular denying the fact that it had received
any sum of money from the Respondent or that the
Respondent was entitled to receive any material, as
alleged. A preliminary objection was also raised
by the Petitioner to the appointment of Mr. Justice
K.M. Mehta as the Sole Arbitrator in terms of
Clause 11 of the Agreement dated 29th April, 2005,
particularly when the said clause stipulates that
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the disputes shall be referred to an Arbitrator in
Kolkata, West Bengal, India, and Mr. Justice K.M.
Mehta was based in Ahmedabad. It was expressly
stated by the Petitioner that the appointment of
the learned Judge as Sole Arbitrator would be
wholly contrary to the express terms of the
arbitration clause.
6. According to the Petitioner, it was surprised
to receive summons issued by the Principal Senior
Civil Judge, Bhavnagar (Gujarat) to appear before
the said Court on 17th January, 2009, in Arbitration
Application No.1 of 2008 purported to have been
filed by the Respondent-Company under Section 9 of
the Arbitration and Conciliation Act, 1996, praying
for an injunction to restrain the Petitioner, his
servants and agents from disposing, selling,
diverting or alienating the material in question or
any part thereof and for the issuance of a
direction to the Petitioner to issue delivery
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orders for 6,793 MT of coking coal in favour of the
Respondent.
7. Appearing in support of the Transfer Petition,
Mr. Gaurav Mitra, learned Advocate, submitted that
the invocation of the jurisdiction of the Principal
Senior Civil Judge at Bhavnagar, Gujarat, was
contrary to the express terms of the High Seas Sale
Agreement dated 7th May, 2005, wherein it had been
expressly stated that the sale contract would be
subject to Kolkata jurisdiction. Mr. Mitra
submitted that the Respondent had deliberately,
with mala fide intention, failed to disclose the
specific High Seas Sale Agreement dated 7th May,
2005, in the application under Section 9 of the
aforesaid Act, since it contained the specific
jurisdiction clause by which all disputes arising
out of or relating to the arbitration agreement
were to be filed within the jurisdiction of the
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Courts at Kolkata. What was disclosed was merely
the agreement to sell dated 29th April, 2005.
8. Mr. Mitra further submitted that when the venue
for arbitration had been expressly agreed to
between the parties to be Kolkata, West Bengal, and
also having regard to the fact that the Arbitrator
to be appointed was to be a person based in
Kolkata, it is only the Courts at Kolkata which had
both pecuniary and territorial jurisdiction to
entertain all applications in connection with the
High Seas Sale Agreement.
9. Mr. Mitra submitted that the learned Principal
Senior Civil Judge at Bhavnagar (Gujarat), neither
has the territorial nor pecuniary jurisdiction to
entertain or determine any dispute between the
parties arising out of the agreement referred to
hereinabove and the jurisdiction of the Gujarat
Court has been invoked with mala fide motive, in
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violation of the terms of the agreement agreed to
between the parties.
10. In support of his aforesaid submissions, Mr.
Mitra referred to and relied upon the judgment of a
learned Single Judge of the Delhi High Court in the
case of Geo. Miller & Co. Ltd. Vs. United Bank of
India & others [69 (1997) Delhi Law Times 616],
where since the parties had agreed to the
jurisdiction of a particular Court to entertain
disputes arising out of an arbitration agreement
between the parties, it was held that where two or
more Courts have jurisdiction under the Code of
Civil Procedure to try a suit or proceeding, an
agreement between the parties that the disputes
between them shall be tried in one of such Courts
is not contrary to public policy nor does it
contravene the provisions of Section 28 of the
Indian Contract Act, 1872. It was also observed
that the choice of Forum agreed to and accepted by
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the parties should normally be respected. Mr.
Mitra also pointed out that in the aforesaid
decision, the learned Judge had relied upon two
decisions of this Court in (i) A.B.C. Laminart (P)
Ltd. vs. A.P. Agencies [1989 (2) SCC 173]; and (ii)
Hakam Singh vs. Gammon (India) Ltd. [AIR 1971 SC
740 = (1971) 1 SCC 286], wherein it was held that
where there might 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 agreed to vest
jurisdiction in one of such Courts to try any
dispute which might arise between themselves, the
agreement would be valid. It was also urged that
if the purport of the agreement was to completely
oust the jurisdiction of the Court, such a
condition would be unlawful and void being against
public policy and would, therefore, be hit by
Section 28 of the Contract Act. However, if it was
found that the jurisdiction agreed to would also be
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an appropriate jurisdiction in the matter of the
contract, it could not be said that it ousted the
jurisdiction of the Court.
11. In addition to the above, Mr. Mitra submitted
that even if the provisions of Section 20 of the
Code of Civil Procedure were to be applied, no part
of the cause of action had arisen within the
jurisdiction of the Bhavnagar Court in Gujarat so
as to enable it to assume jurisdiction in respect
of the transaction arrived at in Kolkata and the
parties had agreed under clause 14 of the agreement
that the sale contract would be subject to Kolkata
jurisdiction. Mr. Mitra urged that it was in such
circumstances and also having regard to clause 11
of the aforesaid agreement, which provided for the
place of arbitration to be Kolkata, that the
petitioner was impelled to file the transfer
petition for transfer of the pending case in the
Bhavnagar Court to the Calcutta High Court.
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12. Responding to Mr. Mitra’s submissions, Mr.
Jitendra Malkan, learned Advocate, urged that since
the cause of action for the Section 9 application
had arisen within the jurisdiction of the Bhavnagar
Court in Gujarat, having regard to even the
decisions cited by Mr. Mitra, the Bhavnagar Court
had jurisdiction to entertain the said application.
Mr. Malkan submitted that after discharge of the
goods at port Pipavav in Gujarat, the same were
stored in the godown of the Petitioner-Company at
its own premises within the jurisdiction of the
Bhavnagar Court and since the relief prayed for by
the Respondent-Company was for release of 6,793 MT
of coking coal from the said consignment, the
application under Section 9 of the Arbitration and
Conciliation Act, 1996 had been rightly filed
before the learned Single Judge at Bhavnagar.
13. Mr. Malkan submitted that having regard to the
provisions of Sections 16 and 20 of the Code of
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Civil Procedure, the suit had been rightly filed
before the Bhavnagar Court, inasmuch as, it related
to the coal which was lying within the jurisdiction
of the Bhavnagar Court. Mr. Malkan submitted that
even taking into consideration the decisions of
this Court in A.B.C. Laminart (P) Ltd. (supra) and
Hakam Singh (supra), it could not be contended that
the jurisdiction of the Bhavnagar Court stood
ousted by either Clause 11 or Clause 14 of the High
Seas Sale Agreement, which had provided that the
sale contract would be subject to Kolkata
jurisdiction. Mr. Malkan urged that there was,
therefore, no ground to allow the Petitioner’s
prayer for transfer of the Arbitration Application
No.1 of 2008, pending in the Court of Principal
Civil Judge (Senior Division) at Bhavnagar to the
Calcutta High Court.
14. Mr. Malkan also submitted that neither Clause
11 nor Clause 14 conferred exclusive jurisdiction
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on the Courts in Kolkata. Since the agreement did
not use expressions such as “alone”, “only” and
“exclusive”, which could be construed to have
completely ousted the jurisdiction of the Courts in
Gujarat, it could not be contended that the
jurisdiction of the Court in Bhavnagar stood ousted
from entertaining the respondent’s application
under Section 9 of the Arbitration and Conciliation
Act, 1996.
15. The only question which falls for our
consideration is whether, notwithstanding the
mutual agreement to make the High Seas Sale
Agreement subject to Kolkata jurisdiction, it would
be open to the Respondent-Company to contend that
since a part of the cause of action purportedly
arose within the jurisdiction of the Bhavnagar
Court, the application filed under Section 9 of the
Arbitration and Conciliation Act, 1996, before the
Principal Civil Judge (Senior Division), Bhavnagar
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(Gujarat), would still be maintainable. The
aforesaid question has often troubled the courts
with one view being that since the parties to the
agreement had agreed to a particular forum, they
could no longer resile from the said position and
claim that other courts, where a part of the cause
of action may have arisen, would also have
jurisdiction to entertain a suit or other
proceeding. The other view has been that if by the
said agreement the rightful jurisdiction of a court
was sought to be ousted and a court was vested with
the jurisdiction to entertain a suit, which it did
not have, the same would be contrary to the
provisions of Section 28 of the Indian Contract
Act, 1872, being contrary to public policy.
16. One of the earlier judgments on this dichotomy
of views is that of this Court in Hakam Singh
(supra). Faced with the question as to whether an
agreement arrived at between two parties that one
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of two courts having jurisdiction, would decide all
disputes relating to such agreement, was hit by the
provisions of Section 28 of the Indian Contract
Act, 1872, this Court held that where two courts or
more have jurisdiction to try a suit or proceeding
under the provisions of the Code of Civil
Procedure, an agreement between the parties that
one of such courts would have jurisdiction to
decide the disputes arising between the parties
from such agreement would not be contrary to public
policy and would not, therefore, be contrary to the
provisions of Section 28 of the Indian Contract
Act, 1872.
17. The said question once again arose in the case
of A.B.C. Laminart (P) Ltd. (supra), wherein
following the decision in Hakam Singh (supra), but
relying on the maxim ex dolo malo non oritur actio,
this Court held that by an agreement which
absolutely ousted the jurisdiction of a court
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having jurisdiction to decide the matter, would be
unlawful and void, being contrary to public policy
under Section 28 of the Indian Contract Act. But
so long as the parties to a contract do not oust
the jurisdiction of all the courts, which would
otherwise have jurisdiction to decide the cause of
action under the law, it could not be said that the
parties had by their contract ousted the
jurisdiction of the court. This Court went on to
observe that where there may be two or more
competent courts which can entertain a suit
consequent upon a part of the cause of action
having arisen therewithin, if the parties to the
contract agree to vest jurisdiction in one such
court to try the dispute which might arise between
them, the agreement would be valid. The question
also arose in R.S.D.V. Finance Co. Pvt. Ltd. vs.
Shree Vallabh Glass Words Ltd., [(1993) 2 SCC 130],
where an endorsement “Subject to Anand (Gujarat)
jurisdiction”, was relied upon to contend that only
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Courts in Anand would have jurisdiction to
entertain any dispute relating to such jurisdiction
and the suit filed in Bombay on the ground that the
cause of action arose in Bombay was not
maintainable. In the said case, this Court held
that since apart from the endorsement on the
deposit receipt, there was no formal agreement
between the parties, the said endorsement would not
divest the courts in Bombay of their jurisdiction
to entertain the suit. As will be evident from the
facts of the suit, the same stood on a different
footing and does not advance the case of the
respondent in any way.
18. In the instant case, the parties had knowingly
and voluntarily agreed that the contract arising
out of the High Seas Sale Agreement would be
subject to Kolkata jurisdiction and even if the
courts in Gujarat also had jurisdiction to
entertain any action arising out of the agreement,
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it has to be held that the agreement to have the
disputes decided in Kolkata by an Arbitrator in
Kolkata, West Bengal, was valid and the Respondent-
Company had wrongly chosen to file its application
under Section 9 of the Arbitration and Conciliation
Act before the Bhavnagar Court (Gujarat) in
violation of such agreement. The decisions of this
Court in A.B.C. Laminart (P) Ltd. (supra) as also
Hakam Singh (supra) are very clear on the point.
19. Having regard to the above, we are inclined to
accept the submissions made on behalf of the
petitioner and we are of the view that the transfer
petition should be allowed. We, accordingly, do so
and direct that Arbitration Application No.1 of
2008 titled M/s Maa Bhagwati Coke (Guj) Pvt. Ltd.
vs. Balaji Coke Industry Pvt. Ltd., pending in the
Court of Principal Civil Judge (Senior Division),
Bhavnagar (Gujarat), be transferred to the Calcutta
High Court.
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20. There will, however, be no order as to costs.
…………………………………………J.
(ALTAMAS KABIR)
……………………………………………J.
(CYRIAC JOSEPH)
New Delhi
Dated : 09.09.2009.