INDIAN OXYGEN LIMITED Vs. NATIONAL OXYGEN LTD

JUDGEMENT

(1.) THE Court : THEre are two applications, first application by the plaintiff under section 20 of the Arbitration Act and the other by the defendant for taking the petition off the file on the ground that this court has no jurisdiction to entertain the application under section 20 of the Arbitration Act. THE facts inter alia leading to the said applications are that on or about July 8, 1985 pursuant to an invitation for quotation for supply and instalation of one number 1553 HR Liquid gaseous Oxygen Plant with high purity nytrogen production facility by the defendant company M/s. National Oxygen Limited, the plaintiff submitted detailed proposal for the said supply and erection of liquid gaseous Oxygen Plant under Quotation No. PD/DMM/P836/802 dated 8.7.85 to the defendant No.1 giving the terms, conditions, prices, period of delivery, terms of payment technical details etc. with further terms about supply of requisite materials in certain cases by the defendant which do not fall within the scope of work of the plaintiff. THE said proposal also contained inter alia an arbitration clause which is set out hereinbelow.

(2.) BY letter dated 19th October, 1985 the defendant National Oxygen Ltd. accepted the said quotation and placed an order for the said plant and subsequently on 19th May, 1986, three separate agreements and/or contracts were entered into by the parties being contract Nos. 204,0, 2041 and 2042. It was also agreed by the plaintiff and the defendant No.1 that out of the total contract price in respect of the said contract of Rs. 69.25 lakhs the last balance instalment of 5% of the said amount i.e. Rs. 3,46,250/- only shall be paid by National Oxygen Limited, the defendant against bank guarantee for the equivalent amount to be executed by the banker of the plaintiff valid upto the guarantee period as stipulated in terms, of the proposal of Indian Oxygen Ltd. made by the letter dated 8th July, 1985. The plaintiff company duly furnished the said guarantee for Rs. 3,46,250/- through its banker Grindlays Bank PLC, 19, Netaji Subhas Road, Calcutta on 28th February, 1987. It is the case of the plaintiff that the said guarantee is a conditional guarantee and imposes several obligations for its enforcement. It has also been alleged on behalf of the plaintiff that the plaintiff performed its obligation under the aforesaid three agreements and inspite of various defaults, breaches and hindrance on the part of the defendant No.1, the plaintiff in the interest of its reputation and goodwill completed all the works covered under the said three agreements including erection, installation and commissioning of the said plant. It has also been alleged that the plant was commissioned on 27th August, 1987 and the plant gave very satisfactory performance and have been in commercial production for last seven months starting from 28th August, 1987. It has been further alleged by the plaintiff in the application under section 20 that although the plant was working satisfactorily and was running for commercial production for more than seven months the defendant No.1 for some ulterior motive refused to sign the commissioning certificate though it is signed by the plaintiff's authorised representative after commissioning plant on 27.10.87. Thereafter defendant No.1 by letter dated 10th November, 1987 raised various disputes regarding (a) erectioning, (b) period of test, (c) commissioner and the delay in commissioning etc. It has been alleged that the plaintiff from time to time asserted and proved that such allegations and/or disputes have no basis and by inspection through other agency it has proved that such allegations are false. On or about 18th January, the defendant No.1 gave a notice received by the plaintiff on 21st January, 1988 alleging therein that the plaintiff had not carried out the obligations and performance as per the contract and hence the guarantee by Grindlays Bank PLC, Calcutta for Rs. 3,46,250/- was to be enacted. A copy of such letter was also sent to Grindlays Bank PLC, Calcutta the plaintiff has alleged that although the plaintiff has carried out its obligation under the said several agreements and has successfully commissioned the said plant, the defendant No.1 has committed several breaches. According to the plaintiff several disputes have arisen in the implementation the said agreement which have been specifically alleged in paragraph of the said application. It has peen alleged by the plaintiff that since arbitration agreement inter alia contains clause that in the event o dispute or difference arising or occuring between the plaintiff and the defendant No. 1 in relation to anything or any matter arising out of the terms and conditions of sale, the same shall be referred to the arbitration of Bengal Chamber of Commerce and Industry and such arbitration shall be governed by the provisions of the Arbitration Act, 1940, hence the award of such Arbitration can only be filed before this court and as such court is only court which has jurisdiction to entertain this application. It has also been alleged that a part of cause of action has arisen at Bengal Chamber of Commerce, Calcutta on 27th October, 1987 which is within the jurisdiction and also thereafter on all subsequent dates. It has further been alleged that on 18th January, 1988 the cause of action also arose 18th January, 1988 when the defendant No.1 served a notice upto plaintiff's banker Grindlays Bank PLC at 19, Netaji Subhas Road , the jurisdiction for remitting Rs. 3,46,250/- arising out of the contract and on all subsequent dates specially on 7th March, 1988 when the defendant No.1 through its Advocate served a notice asking the plaintiff's said banker to remit the money covered under the said guarantee. Accordingly it has been claimed that apart of cause of action arose within the jurisdiction of this court.

(3.) IT has been contended on behalf of the defendant No.1 National Oxygen Limited that section 20 application can be filed in a court where a suit could have been filed by the parties. In this connection the learned Advocates referred to section 2 (c), 20 and 31 of the Arbitration Act. Mr. P. K. Mallick and Mr. Amitava Lala, Advocates for the said applicant further submitted that the cause of action in a suit can only arise under 'the facts and circumstances of this particular case in a place where the contract was made; the place where the contract was to be performed or performance thereof was to be completed; the place where in performance of contract any money to the suit relates was expressly or impliedly payable. IT has been argued that the place of business of the plaintiff and the defendant in this particular place are outside the jurisdiction of this court. The plaintiff's business is at Taratala and the defendant's place of businesses is at Madras. In the instant case quotation was given by the plaintiff from Taratala office outside the jurisdiction and agreement was executed by and between the parties at 21, Armenian Street, Madras outside the jurisdiction. All works under the contract were carried out at Pondichery outside the jurisdiction and all moneys paid by the defendant No.1 and accepted by the plaintiff at 21, Armenian Street, Madras outside the jurisdiction. Therefore, no part of cause of action arose within the jurisdiction of this court and this court has no jurisdiction to, entertain, try and decide this proceeding under section 20 and 31 of the Arbitration Act and filed in this Court Learned Advocates referred to section 2 (c) of the Arbitration Act and submitted that the Court means a Civil Court having jurisdiction to decide the question forming the subject matter of reference if the same had been subject matter of a suit. Under section 20 one can apply to a court having jurisdiction in the matter to which the agreement relates and the agreement can be filed in such court. Under section 31 court means court having jurisdiction in the matter to which the reference relates. IT has been contended that the reference in respect of the disputes which have arisen in the instant case has nothing to do with this court since none of the disputes have arisen or can be said to be forming subject matter of a reference on the basis of which this court can exercise jurisdiction. In support of their contention the learned Advocates referred to the judgment and decision in the case of M/s. Gulati Construction Company, Jhansi, Betwa River Board and another reported in AIR 1984 Delhi 299. In that case it was held that in order to decide as to which court has jut to entertain petitions under section 14, reference has to be made section 2 (c) read with section 31 (1). Merely because the arbitrator chooses to hold the proceedings in a place, where admittedly no suit could be constituted and chooses to make and publish an award at that place, it would not give the court of that place territorial jurisdiction to decide the matter arising under the Act. If an award has been filed in a court which has no jurisdiction, the provision of section 31 (2) and (3) would have no application. If an arbitrator chooses in violation of the provision of 31(1) to file the award in a court which has no territorial jurisdiction it cannot be said that the said court acquires thereby territorial jurisdiction. IT is now well established that by agreement of the parties jurisdiction cannot be conferred on courts which have no territorial jurisdiction to decide the matter. Accordingly it has been submitted relying upon this aforesaid decision that although the venue of this Arbitration is of Bengal Chamber of Commerce and Industries is within the jurisdiction of this court the same cannot confer jurisdiction on this court. IT has been submitted that parties cannot by agreement confer jurisdiction to the court which the court does not possess. But when both the courts have no jurisdiction to decide the matter the parties can by agreement confer jurisdiction to one such court to the exclusion of the other.