General Manager, N.T.P.C & Anr v. Lt. Col A.P.Singh (Retd) & Anr

JUDGMENT

¶1The petitioner is aggrieved by an order dated 4'n June 2008 passed by learned Additional District Judge whereby an application of the petitioners under Section B of Arbitration and Conciliation Act as well as under Section 151 of the CPC lvas dismissed. i\t l

¶2Brief facts relevant for the purpose of deciding this petition are that the petitioner had hired services of respondent No.1 herein for providing security guards for mining department at its mining project area at Kahalgon Super Thermal Power Project, District Bhagalpur, Bihar. The respondent No.1 and other persons who had contested bid were sponsored by the Directorate General of Re-settlement (DGR). The contract was awarded to respondent No.l on 18th July 2005 for a period of one CRPtot/zoo8GeneralManagerNTPC&Anr. us..Lt CoLA,P.Singh(retd.)&Anr. Page I Of I0 Certify that the digital file and physical file have been compared and the digital data is as per the physical file and no page is missing. t. year extendable for another period of one year. The respondent No.1 was awarded a fresh contract on 13th December 2006 for a period of one year. This contract was extendable only for a period of four months after its expiry in December 2007. The respondent No.1 filed a suit before the Court below for recovery of Rs.19,02,880/- and for mandatory and permanent injunction in April 2008 with a prayer that the petitioners be directed to clear the statutory dues like provident fund, government seruice pension to concerned departments as the petitioners had failed to clear these dues and the petitioners be restrained from terminating the contract of the respondent No.1 and engaging any new security agency without clearing the dues respondent No.1. Respondent No.1 claimed that he had to recover a sum of Rs.19,02,880/- from the petitioners. An ex pafte interim injunction waS granted by the court below restraining the petitioners from terminating the contract of seruice with respondents No.1 (plaintiff before the court below). After seruice of notice, the petitioners made an application for dismissal of the suit on the ground that there was an arbitration clause in the contract and the suit filed by the plaintiff was not maintainable. The petitioners drew attention of the trial Court to Clause 7 of the agreement between the parties vrherein it was provided that all disputes and differences arising out of the contract shall be decided by the process bf settlement and arbitration as specified in Clause 56 and 57 of the general conditions of the contract and amended provisions of Arbitration_Act, 1940 shall apply. The petitioners also drew attention of the Court to the fact that clause 7 provided that the Court at Bhagalpur alone shall have exclusive jurisdiction in all matters arising under the contract and the arbitrator shall give a reasoned award. The petitioners contention was that the suit was barred in view of the provisions of Arbitration and Conciliation Act, 1996 and the matter was to be governed only by the arbitration and the suit CRP tot/zoo8 GeneralMoinagerNTPC &Anr. us.Lt. Col, A.P. Singh (retd,) &Anr. {, filed by respondent No.1 was not maintainable. This application of the petitioners was dismissed by the impugned order of the trial court for six reasons. The learned trial court enumerated all these reasons in the impugned order.

¶3The first reason given by the trial court is that the arbitration agreement stipulates deciding of disputes as per the Arbitration Act, 1940. The petitioner was equipped with the Law officers and battery of Lawyers and despite knowing the enactment of 2006 and that the Arbitration Act 1940 stands reoealed, this Act has been mentioned as a governing Act in the agreement. The second reason given by ' the trial court is that the suit was filed for recovery of an arnount and prayer also included mandatory and permanent injunction. Some of the amount was for the period when there was no contract beiween the parties, hence the arbitration agreement between the parties has to be ignored. The third reason given by the trial court is that the instructions issued by DGR provided that in case of dispute, arbitration will be entertained at a request fronr both sides and it was DGR who had a right to enter into the .arbitration. These instructions supersede and override the contract betureen the pafties and the guidelines and instructions of DGR would be applicable between the parties as the ,u,n" were in the nature of tripartite agreement. The fourth reasons given by the trial court is that the respondent No.l had written to the petitioner that respondent No.1 would agree and abide by those terms, conditions and provisions of tender documents which were not violating the guidelines/instructions of the sponsor (DGR) and the fifth reason given was that there was an arbitration meeting held in the office of DGR on 9th April 2008 between the parties and it was instructed by DGR that fresh sponsorship shall be fonruarded by the office on receipt of existing security agency and since the petitioner had not CRPtot/zoo9GeneralDfoinagerNTPC&Anr, us..Lt Col.A.P.Singh(retil)&Anr. Page SCil tO t 1.ir I cleared the bills of the security agency, the fault was of the petitioner. The sixth reason given by the trial court is that there was no clear and unambiguous arbitration agreement between the parties to refer the dispute between the parties to arbitration.

¶4The learned ADJ also dealtwith the issue of jurisdiction and obserued thatthe respondent was having its office in Delhi. The headquarters of the petitioner was in Delhi and the office of the DGR was also in Delhi and, therefore, the Court had jurisdiction to try and decide the suit.

¶5The counsel for the petitioner submib that all the reasons given by the trial court do not stand the scrutiny of law neither the question of jurisdiction stancls scrutiny of law in view of specific provisions in the contract between the parties. Similarly the finding given by the trial court of non-existence of arbitration agreement does not stand the scrutiny of law. It is fufther submitted that neither the plaintiff/respondent No.1 had relied upon any tripartite agreement nor there was any written tripartite agreement between the parties. The DGR was not a necessary party either for recovery of money or for mandatory injunction sought by the I plaintiff. No relief had been sought against DGR and the DGR was only a peforma pafi made by the respondent just to create jurisdiction. .6. Counsel for the respondent, per contra, argued that the issue of jurisdiction cannot be raised by the petitioner before this Court since the petitioner by the impugned application under Section 8 of the Arbitration and Conciliation Act has submitted to the jurisdiction of the couft below and once the petitioner had CRP to1/2oo8 Genero.l Manager NTPC & Anr. us.It Col. A,P. Singh (retd..) & Anr. \J submitted to the jurisdiction of the couft below, he cannot raise the issue of jurisdiction. The other contention is thatthere was no inherent lack of jurisdiction in the court below and objection to the territorial jurisdiction can be waived and once an application under Section 8 of the Arbitration and Conciliation Act is made before the court below, the objection to jurisdiction stands waived. Counsel for the respondent relied upon 1962 SCR 747 Hiralal vs. Kalinath. The respondent also argued that since the subject matter of the suit was a composite subject matter, it was a suit for recovery of the unpaid bills and for mandatory injunction to abide by the terms of the contract, the subject matter of the suit was not squarely covered by the arbitration and, therefore, the trial court rightly dismissed the application.

¶7It is an undisputed fact that clause 7 of the agreement between the parties under which the respondent had started providing security seruices to the petitioner specifically provided that the Court at Bhagalpur shall have the jurisdiction. It is also an undisputed fact that the petitioners' office was situated at Bhagalpur. The contract was to be given effect at Bhagalpur. The seruices were to be provided at Bhagalpur. There is no doubt that the head office of petitioner is in Delhi but whether merely because the petitioner has head office at Delhi and rest of the cause of action arose in Bhagalpur, would Delhi Courts have jurisdiction to entertain the suit, even for recovery of the amount? Section 20 of Civil Procedure Code makes provisions qua corporations where the corporation has head office and branch offices. The Supreme Court had occasion to deal with the situation in New Monga Transport Company v. United Insurance Company 2004 (5) Scale 73. In this case, the consignment note specifically provided that the Court at Udaipur alone would have jurisdiction. The plaintiff had filed a suit at Barnala where the consignment was CRPtot/zooSGeneralllfanagerNTPC&Ann us..Lt CoI.A.P.Singh(retil.)&Anr. Page 5Of I0 \ \ v to be receMed and where factory of the plaintiff was situated. The Civil Couft held that the Court at Barnala would not have jurisdiction and the appropriate court having jurisdiction would be only a Court at Udaipur. However, the High Couft reversed the judgment of the Civil Court and held that the plaintiff was entitled to relief even at the Court at Barnala. The Supreme Court analyzed the provisions of Section 20 of the CPC and obserued that where two courts or more have jurisdiction under CPC to try the suit or proceedings, an agreement between the parties that dispute between them shall be tried in any one such couft is not contrary to the public policy and it in no way in contravention to Section 28 of the Indian Contract Act which reads as under: 28, Agreements in restrain of tegal proceedings, void Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or. in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to the extent. Exception 1 : Saving of contract to refer to arbitration dispute that may arise,This section shall not render illegal contract, by which two or more persons agree that any dispute which may arise between them in respect of any subiect or class of subject shall be referred to arbitration, and that only and amount awarded in such arbitration shall be recoverable in respect of the dispute so referred. Exception 2: Saving of contract to refer question that CRPtot/zoo8GeneralManagerNTPC&Ann us..Lt CoI.A,P.Singh(retd.)&Anr. Page 6Of l0 ) I \i have already arisen - Nor shatl. this section render illegal any contract in writing, by which two or more persons agree to refer to arbitration any question between them which has already arisen, or affect any provision of any law in force for the time being as to reference to a rbitration.

¶8A perusal of the judgment indicates that where a corporation has a subordinate office at the place where cause of action arises, it cannot be heard to say that it cannot be sued there because of its having head office at different places. Paragraph 10 of the above judgment t eads as under: "10. On a plain reading of the Evplanation to Section 20 CPC it is clear that Euplanation consists of two pdtu, (i) before the ,. word "or" appearing between the words 'bffice in India" and . the word "in respect of' and the other thereafter. The Explanation applies to a defendant which is a Corporation which term would include even a company. The frrst paft of the Expianation applies only to such Corporation which has its sole or principal office at a particular place. In that event, the Court within whose jurisdiction the sole or principal offtce of the company is situate will also have jurisdidion inasmuch as even if the defendant may not actually be carrying on business at that place, it will be deemed to carry on business at that place because of the frction created by the Evplanation. ' The latter part of the fuplanation takes care of a case where the defendant does not have a sole offrce but has a principal office at one place and has also a subordinate office at another place. The expression 'bt such place" appearing in the Explanation and the word 'br" which is disiunctive clearly suogest that if the case falls within the latter part of the CRP tot/zoo| General Manager NTPC & Anr. us..Lt Cot. A.P. Singh (retil.) & Anr. Page 7 Of I0 "\ -v I -\{- Euplanation it is not the Court within whose jurisdiction the principal office of the defendant is situate but the Court within. whose-iurisdiction it has a subordinate office which alone have the jurisdidion "in respect of anv cause of action arising at any place where it has also a subordinate office". (emphasis added)

¶9Thus it is clear that where the cause of action takes place within the jurisdiction of the subordinate office, it is only the Court situated at that place where the suit can be brought. I, therefore, consider that the trial court wrongly cadre to conclusion that the Court at Delhi had jurisdiction. In the instance case, it was specifically provided in the Contract that the Court at Bhagalpur would have the jurisdiction. The entire cause of action had taken place within Bhagalpur.

¶10The reasoning given by the trial court about non existence of the arbitration agreement also does not stand scrutiny of law. If in an agreement there is a mention of Arbitration Act, 1940 which stood repealed at the time agreement between the parties was entered into, it was only an omission and the existing Arbitration & Conciliation Act,1996 would be applicabls. -fhe arbitration clause cannot be rejected merely on the ground that the parties mentioned Arbitration Act of 1940. The trial couft itself mentioned about an Act of 2006, never enacted by the Parliament. There is no dispute that there was an arbitration clause between the parties and the plaintiff had sought relief during the existence of the contract, which was sought to be terminated by the petitioner. Therefore, the trial court could not have come to conclusion that there was no valid arbitration clause. CRPtot/zooSGeneralManagerNTPC&Anr. us.trt Col.A.P,Singh(retd..)&Anr. Page 8Of It) @ I (

¶11In punjab State v. Dina Nath 2007(7) Scale 443, clause 4 of the contract, between the parties,read as yltlgt,:. " Clause 4: 'Any dispute arising between the department and the contractor/society shall be refeffed to the superintending Engineer, Anandpur Sahi\ Hydel Construction Circle No'I, Chandigarh for orders and his decision will be final and acceptable/binding on both pafties. The Supreme Court held that the above clause amounted to an arbitration,clause and the arbitration agreement was not required to be in any pafticular form. what was required to be ascertained was whether the parties had agreed that if any dispute arises between them in respect of the subject matter of the contract, such a dispute shall be referred to the arbitrator. This agreement was clearly visible in the contract between the Pafties. tZ. The conclusion arrived at by the trial court that there was no arbitration clause was contrary to the material placed on record. I also consider that making an application before the trial court uncler Section 8 of the Arbitration and Conciliation Act does not amount to submission.to its territorial jurisdiction. Where a defendant makes an application that the Court should dismiss the suit and it reproduces the arbitration clause as signed between the parties, the applicant does not submit to the jurisdiction but in fact challenges the jurisdiction of the court to try the suit. In my view, this contention of the respondent must fail. The respondent's contention that the territorial jurisdiction of .the trial court was not assailed is also belied from the fact that the trial court specifically dealt with this issue and had negatived it. CRp tot/zoog Gener61lMgLncLger NTPC &Anr. us.f,t Col.A.P,Singh(retil.) &Anr. Page 9 Of I0 \i @ t \J

¶13Even if it is considered that the suit filed by the respondent was a composite suit and it was for the recovery of amount for a period during which there was no contract, it was primarily for reliefs arising out of the contract and the couft below had no jurisdiction to entertain the suit. The recovery suit would'lie in accordance with the cause of iction only at the Court of Bhagalpur since the security seruices were provided at Bhagalpur, the amount became due at Bhagalpur, the petitioner's office was at Bhagalpur and the place of project was also at Bhagalpur and in view of clause 20, only the Couft at Bhagalpur was an appropriate court. The subject matter being covered by the arbitration agreement, even disputes only could be referred to an arbitrator at Bhagalpur. L4. In view of the foregoing discussion, in my view the trial court wrongly assumed jurisdiction in this case. The trial court had no jurisdiction to entertain the suit and the matter at the most should have been referred to the arbitrator. The petition is allowed. The application of the petitioner under Section 8 of the Arbitration and Conciliation Act regarding referring the matter to the Arbitrator in respect of the existing contract is liable to be allowed. It is ordered accordingly. Further, since the existing contract, r,vhich is in dispute, would come to an end on 16th December 2008 and the petitioner is already in the process of inviting fresh tenders, I consider that the existing arrangement regarding providing seruices up to 16th December 2008 be not disturbed" The suit for recovery can only be filed at *r'lv Bhagalpur. The plaint of the p!.aintiff is liable to accordingly. be returned. It is 4) December 15, 2008 rd SHIV NA CRPtot/zooSGeneralManagerNTPC&Anr. us..Lt Col.A.P,Singh(retd.)&Anr. Page I0Of I0

IN THE HIGH COURT OF DELHI AT NEW DELHI + c.R.P. 101/2008 olo General Manager N.T.P.C. & Anr. Lt. Col. A.P. Singh (retd.) & Anr. Through: Mr. O.P. Sharma, Advocate JUSTICE SHIV NARAYAN DHINGRA Date of Reserue: November t4,2008 Date of Order: December 15, 2008 15.12.2008 ...Petitioners ...Respondents Through: Mr. S.K. Dhingra with Ms. Shefali Dhingra, Advocates Versus 1. 2. 3. iu,, Whether repofters of local papers may be allowed to see the judgmentZ la\ To be referred to the reporter or not? \8" . Whether judgment should be reported in Digest?