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Equivalent Citation: AIR1992Mad282, (1991)IIMLJ211

IN THE HIGH COURT OF MADRAS


IN THE HIGH COURT OF BOMBAY
Arbitration Petition No. 180 of 2007
Decided On: 29.10.2010
Appellants: Smt. Veena wd/o Naresh Seth and Suchit Naresh Seth by his mother and
natural guardian Smt. Veena wd/o Naresh Seth
Vs.
Respondent: Seth Industries Limited, a company which was incorporated under the
Companies Act, 1956 and Ors.
Hon'ble Judges:
S.J. Vazifdar, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Feredun De Vitre and Arif Bookwala, Sr. Coun
sels. and Farhan Dubash, Adv., i/b., Bharat Shah and Co.
For Respondents/Defendant: S.U. Kamdar and Dinyar D. Madon, Sr. Counsels and A.H
. Gokhale, Adv., i/b., Madhukar Harmawar, Adv. for Respondents Nos. 1, 2, 4A to
4C and 5
Subject: Arbitration
Catch Words
Mentioned IN
Acts/Rules/Orders:
Arbitration and Conciliation Act, 1996 - Sections 2(3), 4, 5, 11, 16, 16(2), 16(
3), 34 and 34(2); Presidency Small Cause Courts Act, 1882 - Sections 41, 41(1) a
nd 41(2); Easements Act - Section 52; Decrees and Orders Validating Act, 1936; S
uits Valuation Act - Section 11, 33, 75, 81; Civil Procedure Code (CPC) - Sectio
n 21
Cases Referred:
Indian Aluminium Cables Ltd. v. Haryana State Electricity Board and Ors. 1996 (5
) SCALE 768; State of Orissa v. Asis Ranjan Mohanty MANU/SC/1135/1999 : (1999) 9
SCC 249; Renusagar Power Co. Ltd. v. General Electric Co. MANU/SC/0001/1984 : (
1984) 4 SCC 679; Central Warehousing Corporation v. Fortpoint Automotive Pvt. Lt
d. 2010 (3) LJOFT 49 : (2001) 1 Bom.C.R. 562; Hira Lal Patni v. Kali Nath MANU/S
C/0041/1961 : (1962) 2 SCR 747; Ledyard v. Bull; Kiran Singh v. Chaman Paswan MA
NU/SC/0116/1954 : (1955) 1 SCR 117; Harshad Chiman Lal Modi v. DLF Universal Ltd
. MANU/SC/0710/2005 : (2005) 7 SCC 791; United Spirits Limited v. Paras Collins
Distilleries Private Limited and Ors. in Arbitration Petition 1072 of 2010; Gas
Authority of India Ltd. v. Keti Construction (I) Ltd. MANU/SC/7647/2007 : (2007)
5 SCC 38; Nirmal Chandra v. Vimal Chand MANU/SC/0288/2001 : AIR 2001 SC 2284; K
.S.R.T.C. v. M. Keshava Raju AIR 2004 Kar 109
Disposition:
Petition dismissed
JUDGMENT
S.J. Vazifdar, J.
1. This is a petition under Section 34 of the Arbitration & Conciliation Act, 19
96 to challenge an award dated 1st December, 2006.
The learned arbitrator declared that a mortgage deed of Rs. 10,45,000/-and inter
est thereon is fully satisfied and stood discharged as on 31st March, 1991, dire
cted the original Petitioner to reassign and deliver the mortgaged property to t
he Claimant i.e. Respondent No. 1, admeasuring about 2000 square feet on the sec
ond floor and the entire first floor of a building named Simplex House which was
part of the mortgaged property, latest by 31st January, 2007. The original Peti
tioner was also directed to return to Respondent No. 1 by 31st January, 2007, th
e original deed of mortgage as also the original deed of transfer of the mortgag
e and all like documents. The arbitrator also directed the original Petitioner t
o pay Respondent No. 1, a sum of Rs. 27,36,351/- with simple interest thereon at
eighteen per cent per annum from 1st September, 2000, till payment and compensa
tion at the rate of eighteen per cent per annum on Rs. 1,42,60,046/-, being the
value of the said first and second floor premises from 12th April, 2000, being t
he date of expiry of the notice period given by the first Respondent to the orig
inal Petitioner till reassignment thereof. The original Petitioner's counter-cla
im was dismissed as not pressed.
2. Respondent No. 1 was the Claimant before the arbitrator. The original Petitio
ner, Naresh Seth, Respondent No. 2 Shiv Prakash Seth, original Respondent No. 3
Janak Raj Seth and original Respondent No. 4, Ramesh Seth were brothers. After t
his petition was filed, the original Petitioner died and his heirs viz. his wido
w and his minor son were brought on record as Petitioners. After the petition wa
s filed, Respondent No. 4 Ramesh Seth died and his heirs have been brought on re
cord as Respondent Nos. 4(a) to 4(d). Respondent No. 3 Janak Raj Seth died befor
e the award was made. His heirs Respondent Nos. 3(a), (b) and (c) were brought o
n record by the arbitrator in the circumstances which have been challenged by th
e Petitioner. The original Petitioner alleged that the learned arbitrator brough
t them on record without even an application for the same. Respondent No. 5 Seth
Industries Private Limited is only the new name of Respondent No. 1. I will in
the judgment refer to it as Respondent No. 1.
3. A property admeasuring 800 square yards of land was leased in favour of one C
hunilal Shah for 999 years who assigned the same to one Sumanben Shah and Shanti
lal Shah. They, in turn, assigned the lease in favour of Respondent No. 2 Shiv P
rakash Seth as a Director and for and on behalf of the first Respondent. The fir
st Respondent paid the consideration for the same and constructed a building the
reon.
4. Respondent No. 1 executed an English mortgage in favour of one Ravi Madan Sha
h, his wife, their son and daughter as security for a loan availed of by Respond
ent No. 1 from them in the sum of Rs. 10,00,000/-. The repayment of the loan was
guaranteed by the original Petitioner, Respondent No. 2 and original Respondent
No. 3, who were the Directors of the first Respondent.
Respondent No. 1 was unable to repay the loan although the time for repayment wa
s extended. Ultimately, the mortgagees insisted upon the loan being repaid faili
ng which they threatened to enforce their rights under the mortgage.
5(a). The original Petitioner was in occupation of the premises on the second fl
oor admeasuring 2000 square feet as a Director of the first Respondent. At the r
equest of the first Respondent, the original Petitioner on 28th September 1984 p
aid the mortgagees a sum of Rs. 10,45,000/-of which Rs. 45,000/-was towards inte
rest. By a deed of transfer dated 28th September, 1984, the mortgagees transferr
ed the mortgage in favour of the original Petitioner. The transfer deed provided
that the sum of Rs. 10,45,000/-together with interest at eighteen per cent per
annum on the principal sum of Rs. 10,00,000/-would be paid to the original Petit
ioner by Respondent No. 1 on or before 1st September, 1985.
(b) The original Petitioner, by a letter dated 20th June, 1985, informed the par
ties herein and the mortgagees that he had taken over possession of the property
pursuant to the deed of transfer dated 28th September, 1984 and that he would a
uction the property in the event of the mortgagors and the guarantors committing
default in payment of the amounts there under. By a further letter dated 27th S
eptember, 1985, the original Petitioner stated that as there was a failure to pa
y the mortgage debt, he became entitled to recover his dues under the indenture
of mortgage dated 24th December, 1979 read with the deed of transfer dated 28th
September, 1984.
(c) Respondent No. 1 by a letter dated 22nd February, 1986, addressed to the ori
ginal Petitioner stated that he could sell the mortgaged properties and realise
his dues from the sale proceeds.
(d) The original Petitioner created a monthly tenancy in favour of one S. Agarwa
l with effect from 1st April, 1986, in respect of the ground floor of the said b
uilding. Thereafter, by a conveyance dated 30th June, 1986, he sold the ground f
loor premises to the said S. Agarwal for a sum of Rs. 11,00,000/-.
(e) Respondent No. 1 contended that as on 30th June, 1986, it owed the original
Petitioner a sum of Rs. 13,75,000/-, inclusive of interest and that after adjust
ing the amount of Rs. 11,74,000/-, a sum of only Rs. 2,01,220/-was due and payab
le by it to the original Petitioner. A sum of Rs. 74,00,000/-was alleged to be p
ayable by the original Petitioner for his occupation of the second floor of the
said building.
6. Original Respondent No. 3 filed Company Petition No. 158 of 1986 for winding
up the first Respondent. By an order dated 27th September, 1984, in interlocutor
y proceedings taken out by the parties, the Court Receiver was appointed as the
Receiver of the property. The original Petitioner was allowed to continue as the
agent of the Receiver in respect of the premises in his possession, subject to
payment of royalty which was fixed at Rs. 6,000/- per month.
7. The parties ultimately executed a Memorandum of Understanding dated 20th July
, 1995, Clause 12 whereof contains an arbitration agreement. The relevant clause
s of the Memorandum of Understanding are as under:
1. All the assets and properties of the said Seth Industries Ltd (Props: of Simp
lex Woollen Mills) and the said two firms viz: Messrs Shiv Prakash Janakraj and
M/s. Seth Textiles shall be sold at the price and on the terms to be expressly a
greed upon in writing by and between Shiv Prakash Seth, Janakraj Seth, Ramesh Ku
mar Seth and Naresh Seth as expeditiously as possible and the sale proceeds ther
eof shall be accumulated in a common pool. The parties hereto shall procure orde
rs/sanctions/ approvals, if any required for sale of the said assets and propert
ies....
7. All payments made since 1986 either by Shiv Prakash Seth, Janakraj Seth, Rame
sh Kumar Seth and Naresh Seth for and on behalf of the said Company and the said
two firms or personally relating thereto from his private and personal sources
shall be reimbursed out of the said common pool.
7-A. All the moneys received by the sale of properties under the Memorandum of U
nderstanding will be paid into a separately opened bank account in the name of S
eth Industries Ltd., which will be operated jointly by all the four parties, nam
ely Shiv Prakash Seth, Janakraj Seth, Ramesh Kumar Seth and Naresh Seth. Any par
ty desiring that any payment should be made from such account will give one week
's written notice to the remaining parties as far as possible unless all parties
agree in writing to waive such notice. It is agreed that for the day-to-day ope
rations a separate account including existing account may be used, as mutually a
greed, by transferring limited funds from the above common joint account to this
account.
8. The balance remaining in the said common pool after satisfying all the dues a
nd liabilities of the said Company and the said two firms including all taxes an
d other legal liabilities shall be distributed by the said Company as mutually a
greed, subject to payment of tax thereon according to law. This distribution mus
t be done within five years or if so agreed mutually by all parties within furth
er extended period of three more years.
9. The parties hereto and Shiv Prakash Seth, Janakraj Seth, Ramesh Kumar Seth an
d Naresh Kumar agree to withdraw all legal proceedings filed by one against the
other immediately after execution of this Memorandum of Understanding.
10. T%he parties agree to execute all documents/writings required for carrying o
ut and implementation of the terms of this Memorandum of Understanding.
11. The Memorandum of Understanding shall be binding upon the parties hereto and
Shiv Prakash Seth, Janakraj Seth, Ramesh Kumar Seth and Naresh Seth and their h
eirs, executors and administrators and share-holders of the said Company.
12. The parties agree to have all differences and disputes, if any, among them i
n relation to or in connection with this Memorandum of Understanding decided by
arbitration for which purpose, their Lordships, S.C. Pratap and failing him, P.B
. Sawant and failing him, B. Lentin, who are all retired Judges will be the sole
arbitrator, if possible.
8. By an order dated 20th December, 1996, this Court discharged the Receiver. Ac
cording to the first Respondent, the original Petitioner delivered to Respondent
No. 1, vacant and peaceful possession of the entire first floor of the said bui
lding which consisted of two flats one of which was given by the first Responden
t to a third party on leave and licence and the other is in its possession. The
first Respondent further contended that it requested the original Petitioner to
vacate the second floor to enable the sale thereof pursuant to the Memorandum of
Understanding but that he failed to do so. The Petitioners' case as to what tra
nspired thereafter, after the discharge of the Court Receiver is as follows:
The claimants also requested Naresh Seth (original Petitioner) to vacate the sec
ond floor so that the same could be sold pursuant to the Memorandum of Understan
ding. Naresh Seth requested the claimants to let him occupy the same for a perio
d of three years so that he could find alternative premises. Since he was one of
the former directors of the claimant company and a close relation of the Respon
dents being their brother, the claimants allowed him to occupy the premises on t
he second floor for a period of three years from 1st January 1997 to 31st Decemb
er 1999 on payment of compensation at the then prevailing market rate of Rs. 60,
000/-per month. Naresh Seth agreed. Even so, however, he consistently failed to
pay the agreed compensation and also failed to vacate the premises despite repea
ted demands. As on 29th February 2000 a sum of Rs. 27,36,351/-(less Rs. 3,25,139
/-received from the Court Receiver) fell due and payable by him to the claimants
towards compensation for use and occupation of second floor premises.
9. The first Respondent, by a notice dated 28th March, 2000, called upon the Pet
itioner to vacate the said premises stating that in default thereof, it would ad
opt legal proceedings. The original Petitioner, by his letters, dated 10th May,
2000 and 28th July, 2000 contended that he was the owner/tenant/mortgagee in pos
session of the second floor
10. In view thereof, the first Respondent invoked the arbitration agreement cont
ained in Clause 12 of the Memorandum of Understanding.
11.(A) Mr. DeVitre, the learned senior counsel appearing on behalf of the Petiti
oner challenged the award on the following grounds:
(I) The arbitrator had no jurisdiction to decide the claims.
The submission was based on the following grounds:
(a) The arbitrator wrongly granted the relief of reassignment of the property al
though the same was not prayed for.
(b) The arbitrator awarded claims sought in the statement of claim but not raise
d in the letter invoking the arbitration agreement.
(c) The Memorandum of Understanding deals only with the sale of the properties a
nd not with the inter-se disputes between the parties thereto.
(d) The arbitrator wrongly proceeded on the basis that the Claimant/Respondent N
o. 1 had sought specific performance of the Memorandum of Understanding.
(e) The arbitrator had no jurisdiction to decide the disputes arising in respect
of the licence allegedly created by Respondent No. 1 in favour of the original
Petitioner in view of the provisions of the Presidency Small Cause Courts Act, 1
882 and in particular Section 41 thereof.
(f) The disputes and claims did not fall within the arbitration agreement contai
ned in Clause 12 of the Memorandum of Understanding.
II A. Having come to the conclusion that he had no jurisdiction to consider the
issue of tenancy raised by the original Petitioner, the arbitrator could not hav
e made any observations in regard thereto.
II B. The arbitrator, therefore, was also not entitled to grant the monetary com
pensation.
(III) The award is contrary to the record and is, therefore patently absurd.
(IV) The arbitrator did not consider the relevant evidence.
(B) I have rejected submissions I(a) to (d). Submission I(e) is answered in the
Petitioner's favour resulting in the entire award being set aside in so far as i
t pertains to the second floor. Submission I(f) is answered in the Petitioner's
favour in so far as it pertains to the second floor in respect of the monetary a
mounts awarded furnishing an additional ground for setting aside the award in re
spect thereof.
I have answered submissions IIA and IIB against the Petitioners with the clarifi
cation that the enforceability of the award of monetary amounts would be depende
nt upon and subject to the findings/judgment of the appropriate court or tribuna
l regarding the Petitioner's claim of tenancy in respect of the property.
Submission III is answered in the Petitioner's favour in so far as it relates to
the grant of monetary compensation in respect of the first floor.
Submission IV is rejected.
In the result I have set aside the entire award.
Re: (I): The arbitrator had no jurisdiction to decide the claims.
12. Mr. De Vitre submitted that the arbitrator wrongly directed the original Pet
itioner to reassign the mortgaged property and to hand over and deliver the same
to the first Respondent as the first Respondent had not even prayed for the sam
e.
13. To accept the submission would be taking far too technical a view of the ple
ading in the statement of claim. The claim, in my view, was clearly made in the
statement of claim filed before the arbitrator. In prayer a(ii), the first Respo
ndent sought a declaration that the original Petitioner was bound and liable to
give vacant and peaceful possession of the said premises on the second floor adm
easuring 2000 square feet and the entire first floor of the said building. Praye
r a(ii) bases this declaration "in view of the redemption of the loan covered by
the agreement dated 28th September, 1984 i.e. the deed of transfer of the mortg
age from the original mortgagees to the original Petitioner." In prayer b(ii) of
the statement of claim, the first Respondent sought an award ordering and decre
eing the original Petitioner to give vacant possession of the said premises on t
he same basis viz. in view of the repayment of the loan covered by the deed of t
ransfer of mortgage dated 28th September, 1984
14. The submission that the award is bad for having granted the relief of reassi
gnment of the said property on the ground that the first Respondent had not pray
ed for the same is, therefore, rejected.
15. Mr. DeVitre submitted that the first Respondent's letter dated 26th July, 20
00, invoking arbitration restricted the disputes and the claim to possession of
the second floor. Despite the same in the statement of claim additional reliefs
were sought including declarations and decrees in respect of the first floor and
claims for monetary compensation as well. According to Mr. DeVitre an arbitrato
r is not entitled to consider any claims or reliefs other than those stated in t
he letter invoking arbitration. He submitted that the arbitrator having consider
ed and awarded the same, acted in excess of his jurisdiction.
16. In support of this submission, Mr. DeVitre relied upon a judgment of the Sup
reme Court in Indian Aluminium Cables Ltd. v. Haryana State Electricity Board an
d Ors. 1996 (5) SCALE 768.
The facts in this case were that the Respondent had served a notice in relation
to the purchase of material for Rs. 11,300/-as against the contractual rate of R
s. 4390/-. The difference in price was claimed by way of damages. The rate had i
ncreased from time to time during the period 31st March, 1974 to 26th May, 1975.
The Respondent had placed an order for purchasing the material with one M/s. In
dustrial Cables Limited. The differential amount claimed as damages was stated i
n the notice to be Rs. 37,61,465/-. (In paragraph 2 of he judgment, the figure i
s Rs. 87,81,465/-. This, as the report itself indicates, was a typographical err
or and the correct figure is stated later in paragraph 2 of the judgment itself
while quoting the arbitrator's award). However, in the statement of claim, the r
ate was stated to be Rs. 12,100/-. The party which supplied the material was sta
ted to be M/s. J.J.H Industries and the relevant date was stated to be 10th Febr
uary, 1976. The claim made in arbitration, therefore, was Rs. 63,56,737.42. The
arbitrator noticed the change, but observed that the question whether the Respon
dent was entitled to the rate claimed is a matter of evidence which could not be
decided "at this stage". The arbitrator observed that the effect of the inconsi
stency would have to be decided on merits and that the claim cannot be held to b
e unsustainable and beyond the scope of the arbitration clause or the reference
to arbitration so as to oust the jurisdiction of the arbitrators on account of s
uch inconsistency. The Supreme Court held as under:
...We are afraid this approach of the Arbitrators is not correct. If the claim m
ade by HSEB is outside the scope of the reference made to the Arbitrators, the A
rbitrators must confine themselves to the reference and cannot travel outside it
merely because under the terms of the contract the dispute in regard to this ma
tter would have been covered and could have been referred to arbitration. In the
instant case, since the reference is in relation to the item set out in the not
ice, the jurisdiction of the Arbitrators stands confined to those matters only a
nd cannot travel outside it. Therefore, there is no question of examining the cl
aim which is totally different from the one made in the notice which is the basi
s of the reference as to whether or not damages could be awarded on that claim.
Once the claim is outside the reference, it is outside the scope and ambit of th
e inquiry by the Arbitrators and, therefore, the Arbitrators cannot go into it.
Therefore, in our view, the claim made in the reference, which is inconsistent w
ith paragraph 6 of the notice, cannot be entertained by the Arbitrators.
17. I do not read the judgment to hold as an absolute proposition that the claim
made in arbitration must in every case be limited to the claim stated in the no
tice/letter invoking arbitration. Indeed in many, if not most cases, the letter/
notice of invocation of the arbitration agreement does not stipulate and crystal
lize the claims. The judgment does not set out the arbitration agreement that ap
plied between the parties therein. It does not indicate the nature of the arbitr
ation agreement. If Mr. DeVitre's submission is accepted, it would denude the ar
bitral tribunal of the power to even allow an amendment to a statement of claim.
Mr. DeVitre's submission would be valid only in those cases where the arbitratio
n agreement stipulates a demand for a reference of the disputes to the arbitral
tribunal to be preceded by a notice and further provides that the claim in the a
rbitration shall be limited to those raised in such notice. This is not an unusu
al provision in arbitration agreements. Such limitations are found in several ar
bitration agreements. Clause 12 of the Memorandum of Understanding which contain
s the arbitration agreement between the parties herein, does not place any such
limitation.
18. There is nothing in the Arbitration and Conciliation Act, 1996, or in princi
ple, which requires the notice invoking the arbitration to state the claims prop
osed to be made in the reference. A notice merely indicating the disputes or tha
t disputes have arisen and invoking the arbitration clause is sufficient unless
the arbitration agreement itself requires the invocation to be in a particular m
anner.
Mr. DeVitre's submission is, therefore, not well founded.
19. The reliance placed by Mr. Kamdar, the learned senior counsel appearing on b
ehalf of the Respondent Nos. 1, 2, 4A to 4C and 5, on the judgment of the Suprem
e Court in State of Orissa v. Asis Ranjan Mohanty MANU/SC/1135/1999 : (1999) 9 S
CC 249, in regard to this submission is well founded. The Supreme Court held tha
t the original statement of claim reserved the right to file additional claims.
This was not, however, the only ground upon which the submission that the additi
onal claims could not be raised before the second arbitrator was rejected. Indee
d if Mr. DeVitre's submission is correct, such a reservation in the statement of
claim would make no difference. One of the learned Judges was also a party to t
he judgment in Indian Aluminium Cables Limited.
20. Even on the facts of this case, the submission is not well founded.
(A) Firstly apart from the Memorandum of Understanding and the letter of invocat
ion dated 26th July 2000, the parties had even before the arbitrator expressly a
greed to all the disputes and differences being referred to arbitration in respe
ct of the entire property. This is clear from a "Recorded Note" dated 19th June,
2002, filed by counsel on behalf of all the parties. Before the arbitrator, the
counsel for all the parties filed the following statement describing it a Recor
ded Note:
Recorded Note
1 Advocate and parties on either side agree that this reference be considered as
related and restricted only to the disputes and differences concerning the prop
erty Simplex House (except ground floor thereof) at Juhu which is at item No. 5
in annexure "A" to the Memorandum of Understanding dated 20h July 1995.
2 Advocates and parties on either side further agree that all other disputes and
differences and all other claims and contentions constituting the subject matte
r of their respective pleadings (including the statement of claim and reply ther
eto as also the counterclaim and reply thereto) and/or arising out of the Memora
ndum of Understanding dated 20th July 1995 and/or otherwise, are not pressed in
this arbitration and should, therefore, not be considered in this arbitration. P
arties are, however, at liberty to raise and agitate the same in separate procee
dings including separate arbitration proceedings.
The parties had thus agreed that the reference be considered as related and rest
ricted only to the disputes and differences concerning the property Simplex Hous
e (except the ground floor thereof) which is at item 5 of Annexure A to the Memo
randum of Understanding dated 20th July, 1995. The first Respondent was, therefo
re, entitled to raise before the arbitrator, all claims in respect of Simplex Ho
use, except in respect of the ground floor thereof. There is no restriction as r
egards the first floor or any other part of the property, except the ground floo
r. In view of the Recorded Note also, the submission is rejected.
(B) Secondly, another notice also dated 26th July, 2000, was addressed by Respon
dent No. 1 to the original Petitioner wherein all the disputes with respect to t
he redemption of the mortgage of the entire property, including the claim for th
e surplus amount payable upon redemption, were referred to and raised. The claim
s were not restricted to the second floor, but to the entire property and includ
ed therein all the claims which were raised in the statement of claim. The notic
e refers "to the premises being Simplex House" in general and not merely to the
second floor.
21. Moreover, the original Petitioner did not, in reply to the notices both date
d 26th July, 2000, contend that the claims made therein were beyond the scope of
the reference and the arbitrator's jurisdiction, including on the ground that t
he claims raised before the arbitrator in the statement of claim were outside th
e scope/purview of the letters dated 26th July, 2000. It is, therefore, not open
to the Petitioners now to raise this contention.
22. The submission is, therefore, rejected both in law and on facts.
That the above findings are in the ultimate analysis of no avail to the Responde
nts qua the second floor on account of the license agreement pleaded by Responde
nt No. 1 is another matter. These findings are without taking into consideration
the said license agreement which I will deal with later.
23. Mr. DeVitre submitted that the arbitrator had no jurisdiction to consider th
e reliefs sought by the Respondents for possession of the premises, return of th
e mortgage property and the monetary amounts as the same do not fall within the
ambit of the arbitration clause of the Memorandum of Understanding. He contended
that the Memorandum of Understanding deals only with the sale of the properties
mentioned therein. It does not deal with the inter-se rights of any of the part
ies therein qua such properties. He submitted that the original Petitioner by en
tering into the Memorandum of Understanding did not agree to having the disputes
between himself and the others including the first Respondent being referred to
arbitration.
24. Considering the nature of the arbitration clause, this submission is not wel
l founded. I have set out the arbitration clause earlier. The parties had agreed
to have all differences and disputes, if any, among them 'in relation to or in
connection with' the Memorandum of Understanding decided by arbitration. The exp
ressions 'in relation to' and 'in connection with' are of wide amplitude. I need
go no further than to refer to the judgment of the Supreme Court in Renusagar P
ower Co. Ltd. v. General Electric Co. MANU/SC/0001/1984 : (1984) 4 SCC 679 where
the Supreme Court held:
25. Four propositions emerge very clearly from the authorities discussed above:
(1) Whether a given dispute inclusive of the arbitrator's jurisdiction comes wit
hin the scope or purview of an arbitration clause or not primarily depends upon
the terms of the clause itself; it is a question of what the parties intend to p
rovide and what language they employ.
(2) Expressions such as "arising out of" or "in respect of" or" in connection wi
th" or "in relation to" or "in consequence of" or "concerning" or "relating to"
the contract are of the widest amplitude and content and include even questions
as to the existence, validity and effect (scope) of the arbitration agreement.
(3) Ordinarily as a rule an arbitrator cannot clothe himself with power to decid
e the questions of his own jurisdiction (and twill be for the court to decide th
ose questions) but there is nothing to prevent the parties from investing him wi
th power to decide those questions, as for instance, by a collateral or separate
agreement which will be effective and operative.
(4) If, however, the arbitration clause, so widely worded as to include within i
ts scope questions of its existence, validity and effect (scope), is contained i
n the underlying commercial contract then decided cases have made a distinction
between questions as to the existence and or validity of the agreement on the on
e hand and its effect (scope) on the other and have held that in the case of for
mer those questions cannot be decided by the arbitrator, as by sheer logic the a
rbitration clause must fall along with underlying commercial contract which is e
ither non-existent or illegal while in the case of the latter it will ordinarily
be for the arbitrator to decide the effect or scope of the arbitration agreemen
t i.e. to decide the issue of arbitrability of the claims preferred before him.
25. If the property was in the possession of a third party, it would have been n
ecessary for the parties to the Memorandum of Understanding to take steps for ob
taining possession thereof as well as recovery of monetary compensation for the
use thereof if the same was illegal. Such third party not being a party to the M
emorandum of Understanding and the arbitration agreement contained therein, the
dispute could not be referred to arbitration. However, in the case of parties to
the Memorandum of Understanding, the situation would be different.
26. The Memorandum of Understanding contemplates the sale of the properties ment
ioned therein.
When some of the parties to the Memorandum of Understanding demand for the sale
of a property mentioned therein, they in effect state that the first Respondent
is entitled to do so being the owner thereof. One of the questions that would ar
ise is whether the parties to the Memorandum of Understanding inter-alia by havi
ng agreed to the properties mentioned therein being sold in the manner stated th
erein acknowledged the title of the first Respondent in respect thereof. Whether
the representation in the Memorandum of Understanding by the parties thereto ar
e evidence of clear title of the first Respondent in respect of such properties
is a question of fact. However, when one or more of the parties to the Memorandu
m of Understanding wishes that the properties mentioned therein be sold in terms
of the Memorandum of Understanding and another party thereto either denies the
first Respondent's title thereto or clear title thereto, an issue to this effect
arises. The property then can be sold only after an adjudication thereof. The p
roperty can be sold effectively only upon determining the title or the extent of
the title of the first Respondent to such property. This is a dispute between t
he parties to the Memorandum of Understanding and in respect of the subject matt
er of the Memorandum of Understanding. It is a dispute a decision in respect whe
reof precedes the grant of an award to sell the property as provided in the Memo
randum of Understanding. In other words, the award for the sale of the property
as per the Memorandum of Understanding is dependent upon the adjudication regard
ing the saleability thereof by the first Respondent. A dispute as to the first R
espondent's title is therefore certainly "in relation to" or "in connection with
" the Memorandum of Understanding.
27. The parties having agreed to the sale of the said properties, when one of th
em raises an objection as to the saleability of such property based on his title
, it is equally a question in connection with or in relation to the sale or sale
ability of the property. The question as to the parties title is only the other
side of the coin -the first Respondent's title. The title of one determines as a
consequence the question of the title of the other.
28. Clause 10 of the agreement supports the Respondents in this regard. While ef
fecting the sale of the property, the arbitrator would be entitled to call upon
the parties to the Memorandum of Understanding to execute all documents/writings
required for carrying out and implementing the terms thereof. Before the arbitr
ator can call upon the parties to execute any documents/writings contemplated in
Clause 10 of the agreement, it would of necessity require him to decide the riv
al contentions of the parties as regards the nature and details of such document
s/writings that he may call upon the parties to execute for carrying out and imp
lementing the terms of the Memorandum of Understanding one of which is the sale
of the property. It is implicit, therefore, if not explicit that the rival claim
s and contentions of the parties as regards the property mentioned in the Memora
ndum of Understanding can be decided by the arbitrator.
29. A dispute relating to the title of the parties in respect of the properties
mentioned in the Memorandum of Understanding therefore falls within the ambit of
the arbitration clause.
30. The arbitrator inter alia relied upon the fact that the parties having inclu
ded the property in the schedule to the Memorandum of Understanding admitted tha
t the first Respondent is the owner thereof. The learned arbitrator, therefore,
rejected the contention on behalf of the original Petitioner that he had become
the owner of the property on account of the first Respondent having failed to re
deem the mortgage. These are questions of fact which fall within the jurisdictio
n of the arbitrator and warrant no interference, even if I were to interpret and
analyse the facts differently.
31. Mr. DeVitre submitted that in any event the arbitrator would have no jurisdi
ction to decide the monetary claims granted by him for the same reason.
32. I do not agree. These claims for monetary compensation are inextricably link
ed to the issue of title and are attached to the property and are necessary inci
dents of ownership thereof. If the arbitrator has jurisdiction to adjudicate iss
ues relating to a mortgage, he would also have jurisdiction to adjudicate the cl
aims for the amounts due by a mortgagee for wrongful occupation of the mortgage
property after the mortgagees right to continue in possession thereof ceases. Th
e monetary claims would form part of and represent the rights of the parties in
the property itself. That the original Petitioner had not undertaken to or incur
red liability in or under the Memorandum of Understanding to vacate the premises
or to pay compensation for the use thereof is irrelevant.
33. In the circumstances, Mr. DeVitre's submission that the claims made before t
he arbitrator and the reliefs granted in the award did not fall within the ambit
of the arbitration agreement contained in Clause 12 of the Memorandum of Unders
tanding on the above grounds is rejected.
34. Mr. DeVitre challenged the basis on which the arbitrator answered issue Nos.
4 and 15. Issue Nos. 4 & 15 reads as under:
Issue No. 4: Is this reference to arbitration valid ?
Issue No. 15: Does the arbitrator have jurisdiction to decide the claimant's mon
etary claim against the Respondent Naresh Seth (original Petitioner) ?
35. The learned arbitrator answered these issues in the affirmative on the basis
that an arbitrator has jurisdiction to consider and grant the relief of specifi
c performance. He submitted that the claims made by first Respondent in effect a
re for specific performance of the Memorandum of Understanding.
36. Mr. DeVitre submitted that the first Respondent had not even claimed specifi
c performance. Nor had the first Respondent averred that it was ready and willin
g to perform the Memorandum of Understanding which indicates that even the first
Respondent did not considered its claim to be in the nature of specific perform
ance.
37. Although the basis on which issue Nos. 4 & 15 have been answered in the affi
rmative may not be accurate I would set not aside the award on that ground. For
the award read as a whole indicates that the arbitrator even otherwise came to t
he conclusion that the claims fall within the scope of the arbitration clause.
38. Mr. DeVitre submitted that the first Respondent had not even sought an order
for the sale of the said property. He submitted that it was therefore, clear th
at the reference claimed before the arbitrator was not in accordance with the Me
morandum of Understanding.
39. It was not necessary for any of the parties to have sought an order for the
sale of the property. It was sufficient for them to have raised the dispute to t
he limited extent that they did. The parties would or may proceed to sell the pr
operty in exercise of rights under the Memorandum of Understanding after the dis
pute as to the title is determined. The other parties are not obliged to proceed
on the basis that an award declaring the rights of the parties to the Memorandu
m of Understanding qua the property would not be honoured. The presumption is th
at the parties would abide by the orders and judgments of Courts, Tribunals and
other authorities. If however, the original Petitioner did not implement the Mem
orandum of Understanding on the basis of such a award, it would be open to the o
ther parties to adopt appropriate proceedings including making a further referen
ce for the sale thereof. Nothing prevented a limited reference as to the title a
nd consequential reliefs without also seeking a sale of the said property. The r
eference was necessitated in view of the original Petitioner having denied the f
irst Respondent's title.
40. Mr. Kamdar submitted that the record note establishes that the original Peti
tioner had agreed to refer the disputes regarding redemption to arbitration. I d
o not agree.
41. The record note by itself does not establish the same. It merely refers to t
he subject matter of the reference namely Simplex House except the ground floor
thereof. This was the reason for my holding earlier that the "Recorded Note" neg
ated Mr. DeVitre's submission that the arbitrator exceeded his jurisdiction by a
warding claims not raised in the letter invoking the arbitration. If however, th
e questions of redemption and payment of monetary compensation were not within t
he purview of the Memorandum of Understanding, the arbitrator would not have had
jurisdiction to decide the same merely in view of what is recorded in the note
dated 19th June 2002, which is extracted in paragraph 14 of the award.
42. The fact that the original Petitioner had made a counter-claim in respect of
the mortgage debt itself does not indicate that he had abandoned any objection
as to jurisdiction. The counter-claim was made expressly without prejudice to th
e original Petitioner's contentions as to jurisdiction as is evident from the wr
itten statement and counter-claim. Thus, the counter-claim having been made by i
tself would not confer jurisdiction upon the arbitrator to decide the issue if h
e otherwise did not have such jurisdiction.
43. Mr. DeVitre's next submission pertains only to the second floor . He submitt
ed that it is the case of the Respondents themselves that with effect from 1st J
anuary 1997, the first Respondent granted a licence in favour of the original Pe
titioner in respect of the premises on the second floor for a period of three ye
ars at the rate of Rs. 60,000/-per month. The submission is based inter-alia on
the following averments in the statement of claim:
21. After the aforesaid order dated 20.12.1996 was passed the Respondent gave va
cant and peaceful possession of the entire premises situate on the first floor o
f the said property to the Claimants. There are two flats situate on first floor
of the said property. The smaller of the said two flats thereafter was given by
the Claimants on Leave and License basis whereas the other flats is in possessi
on of the Claimants.
At that time, the Claimants requested the Respondent to also vacate the said sec
ond floor premises (more particularly described in Exhibit 'D' hereto) occupied
by the Respondent so that the same could be sold by the Claimants in pursuance o
f the Memorandum of Understanding, when the Respondent requested the Claimants t
o allow him to occupy the same for a period of three years so that in the meanti
me he would find alternative premises. Since the Respondent was one of the forme
r Directors of the Claimants and since the Respondent was the brother of one of
the Claimant's Directors, the Claimants allowed the Respondent to occupy the pre
mises situate on the second floor of the said property though the mortgage amoun
t alongwith interest thereon had stood repaid long back i.e., on or about 31.3.1
991 as is evident from statement annexed as Exhibit 'H' hereto.
O.P. Nos. 531 of 1987 and 337 of 1990
Decided On: 29.07.1991
Appellants: M/s. Sabson (India) Pvt. Ltd., Bangalore
Vs.
Respondent: Neyveli Lignite Corporation Ltd. and others
Hon'ble Judge:
Lakshmanan, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Mr. T.S. Rangarajan, Adv.
For Respondents/Defendant: Mr. R. Krishnaswami, Adv.
Subject: Arbitration
Catch Words
Mentioned IN
Acts/Rules/Orders:
Arbitration Act, 1940 - Sections 2, 14, 14(2), 17, 21, 30, 31, 33 and 40 ; Code
of Civil Procedure, 1906 - Section 16
Cases Referred:
Kumbha Mawji v. Dominion of India, AIR 1953 SC 313; Union of India v. P. Anantha
raman, (1991 (1) MLJ 286, 1991 TNLJ 69); Venkatasamiappa v. Srinidhi Ltd., (1950
) I MLJ 709; Sushil Ansal v. Union of India, (AIR 1980 Delhi 43); Virendra Saiga
l v. Sumatilal Jamnalal, AIR 1970 Delhi 14; M/s. Gulati Construction Co. v. Betw
a River Board, AIR 1984 Delhi 299; Kumud v. Fertilizer Corporation of India Ltd.
, AIR 1985 Cal 89; Electrical Mfg. Co. v. Crompton Engg. Co., AIR 1974 Mad 261
Citing Reference:

Kumbha Mawji v. Dominion of India, MANU/SC/0001/1953 Discussed


Union of India v. P. Anantharaman, Mentione
d
Venkatasamiappa v. Srinidhi Ltd., Mentione
d
Sushil Ansal v. Union of India, (AIR Discusse
d
Virendra Saigal v. Sumatilal Jamnalal, MANU/DE/0002/1970
Mentioned
M/s. Gulati Construction Co. v. Betwa River Board, MANU/DE/0113/1983 Discusse
d
Kumud v. Fertilizer Corporation of India Ltd., MANU/WB/0022/1985 Discusse
d
Electrical Mfg. Co. v. Crompton Engg. Co., MANU/TN/0197/1974 Discusse
d

Case Note:

Arbitration territorial jurisdiction Sections 2, 14, 14 (2), 17, 21, 30, 31, 33,
and 40 of Arbitration Act, 1940 and Section 16 of Code of Civil Procedure, 1908
matter related to jurisdiction in arbitration proceedings as per Section 31 (2)
and (3) Court in which award has been filed has jurisdiction to decide matter i
n case award has been filed in Court having no jurisdiction provision of said Se
ction would not apply.

ORDER
1. O.P. NO. 531 of 1987 was filed by Sabson (India) Pvt. Ltd., Bangalore against
Neyveli Lignite Corporation and Mr. Justice V. V. Raghavan and Mr. M. G. Balasu
bramaniam (arbitrators) under Sections 14(2) and 17 of the Arbitration Act, 1940
to direct the arbitrators (respondents 2 and 3 above,) to file the award in thi
s court and for passing a decree in terms of the award in favour of the petition
er with interest and costs.
2. The matter relates to the arbitration proceedings between the petitioner M/s.
Sabson (India) Pvt. Ltd., Bangalore and Neyveli Liginite Corporation regarding
certain disputes arising out of the agreement No. CE/TS/II/Civil/24/81-82 for th
e work of supplying, fabricating and erecting large diameter pipes for their cir
culating water system Group C for Second Thermal Power Station at Neyveli. Claus
e 84 of the General Conditions of Contract provides for arbi-tration which reads
as follows:
"Any dispute or difference at any time arising between the parties as to the con
struction, meaning or effect of this agreement or as to any clause, matter or th
ing herein contained or as to the rights and liabilities of the parties hereto s
hall be, if possible settled amicably. However if this is not achieved, contrary
to expectations the matter shall be settled in arbitration by two arbitrators o
ne to be appointed by each party, who shall appoint an Umpire before entering up
on the reference. The joint decision of the two arbitrators if they are able to
agree upon such decision, otherwise the decision of the Umpire shall be final an
d binding on both the parties hereto. The proceedings of arbitrations shall be i
n accordance with the provisions of the Indian Arbitration Act, 1940 or any stat
utory modifications or re-enactment thereto or thereof for the time being in for
ce. The venue of arbitration shall be Madras. Service under this Agreement shall
notwithstanding the existence of any dispute, controversy or question, continue
during arbitration proceedings and no payments due or payable by owner to the c
ontractor shall be withheld on account of such arbitration proceedings, unless s
uch payment is the direct subject matter or one of the subject matter thereof."
It is stated in Clause 84 that the venue of arbitration shall be at Madras. Acco
rdingly the petitioner and the first respondent each nominated their arbitrators
namely Mr. Justice V. V. Raghavan, retired Judge of this Court and Mr. M. G. Ba
lasubramaniam I. A. S. (retired) and the arbitrators entered upon (sic). They al
so nominated Mr. Justice P. Ramakrishnan, ICS, (retired) as umpire in this matte
r. The petitioner filed their claim for Rs. 28,51,084/- under various heads and
the first respondent denied the liability and preferred a counter claim. The arb
itrators made and signed the award on 24-8-1987 and intimated the parties to the
arbitration the making of their award. The intimation was received by the petit
ioner on 25-8-1987. The arbitrators disallowed the claims under certain heads an
d passed an award for Rs. 7,65,000.26 in favour of the petitioner providing for
the payment of interest by the first respondent on the amounts so awarded. The p
etitioner therefore filed this petition for directing issue of notice to the res
pondents to file the award in this court and for passing a decree in terms of th
e award in their favour with interest. Mr. Justice P. K. Sethuraman ordered noti
ce to the respondents 1 to 3 directing them to file award in this court on 7-3-1
988. When the matter came before me for hearing on 10-7-1990, I passed the follo
wing order. As it has some impact on the outcome of this petition it is reproduc
ed hereunder.
"In view of the Arbitrator filing his award in this court this original petition
is ordered accordingly. However, liberty is given to the first respondent Neyve
li Lignite Corporation Limited, to take appropriate proceedings in contesting th
e award already filed in accordance with law. Issue notice of the receipt of the
award to parties. Mr. R. Krishnaswamy takes notice for Neyveti Lignite. Corpora
tion."
3. On 30-7-1990, the Neyveli Lignite Corporation represented by its Secretary, t
he first respondent in O.P. No. 531/87 filed O.P. 337/90 under Section 33 r/w Se
ction 30 of the Arbitration Act, 1940 against the petitioner in O.P. 531/87 and
the arbitrator Mr. M. G. Balasubramaniam. It is useful to re-produce paras 6 and
7 of O.P. 337/90 filed by the Neyveli Lignite Corporation in this court:
"This petition is filed by the petitioner without prejudice to their right to ob
ject to the jurisdiction of this Hon'ble Court in receiving the award filed by t
he arbitrator. A few facts relating to the present proceedings have to be stated
. The arbitrators sent a copy of the award on 28-8-1987 to the petitioner and th
e petitioner did not receive any notice of the Award by the Joint Arbitrators. M
eanwhile the petitioner herein has filed a petition under Section 14(2) read wit
h Ss. 33 and 30 of the Arbitration Act on the file of the Subordinate Judge, Cud
dalore and the said petition has been numbered as O.P. 43/89 and the said petiti
on is pending adjudication. The petitioner states that the only cause of action
for the present petition including the calling of tenders, enquiries, submission
of tender by the first respondent execution of agreement for performance of the
work and the disputes arising out of it being arising within the jurisdiction o
f the Cuddalore Civil Court and no part of action has arisen within the meaning
of Section 2(c) of the Arbitration Act to invest jurisdiction of this Hon'ble Co
urt. The petition filed by the first respon-. dent under Section 14(2) of the Ac
t directing the arbitrator to file the award into court in O.P. 53) of 1987 is w
ithout jurisdiction. This Hon'ble Court originally directed notice in that to th
e Arbitrators. The matter was posted for orders on 10-7-1990, after notice to th
e petitioner. The petitioner objected to the jurisdiction of this Hon'ble Court
to entertain the petition and this court by its order dated 10-7-1990 allowed th
e petitioner herein to raise the question of jurisdiction in the proceedings to
be taken under Section 33 of the Act. During the course of those proceedings it
was brought to the notice of the petitioner that the award has been filed by the
arbitrators on 7-3-1988 into this Hon'ble Court. Though no notice has been rece
ived from this Hon'ble Court to avoid any technical objection later, this petiti
on is filed from the date of knowledge of the filing of the award by the Arbitra
tors namely 10-7-1990. The petitioner states that this Hon'ble court has no juri
sdiction to enquire into the matter and this has to be tried as a preliminary is
sue in regard to any further steps that can be taken together by the first respo
ndent to the Award.
7. The petitioner therefore states that the first respondent having entered appe
arance and conducting the proceedings in O.P. No. 43/89 cannot validly press int
o service his petition O.P. No. 531/87 which had become infructuous by reason of
the award having been filed into court. Without prejudice to the abovesaid cont
entions the petitioner raises the following grounds for setting aside the Arbitr
ation Award on the ground of misconduct."
4. Thus, according to the Neyveli Lignite Corporation, this court has no jurisdi
ction to entertain this O.P. since the petitioner (N.L.C.) has filed a petition
under S. 14(2) r/w Ss. 33 and 30 of the Arbitration Act on the file of Sub-Court
Cuddalore in O.P. No. 43/1989 and that the said petition is pending adjudicatio
n, that the cause of action for the present petition including the calling of te
nders, enquiries, submission of tender by the first respondent, execution of agr
eement for performance of the work and (he disputes arising out of it having ari
sen within the jurisdiction of the Cuddalore Civil Court, the petition filed by
the first respondent under S. 14(2) of the Act directing the arbitrators to file
the award in thia court in O.P. 531/87 is without jurisdiction. In fact while p
assing the order on 10-7-1990, in O.P. 531/87 this court has allowed the petitio
ner Neyveli Lignite Corporation to raise the question of jurisdiction in the pro
ceedings to be taken under Section 33 of the Act. Accordingly the question of ju
risdiction of this Court to enquire into this matter was tried as a preliminary
issue at the request and consent of both the parties. Hence I proceed to deal wi
th on the question of law in regard to the maintainability of the petition in th
is court. It is also stated by Neyveli Lignite Corporation that O.P. 337/90 is f
iled by them without prejudice to the rights of agitating the jurisdiction of th
is court in receiving the award filed by the arbitrator.
5. 1 have heard Mr. T.S. Rangarajan, . learned counsel for M/s. Sabson (India) L
td., the first respondent in O.P. No. 337/90 and Mr. R. Krishnaswami on behalf o
f the Neyveli Lignite Corporation, the petitioner in O.P. 337/90. Mr. T.S. Ranga
rajan has submitted that para 84 of the contract agreement enterted into between
the parties regarding arbitration provides that the venue of the arbitration sh
all be at Madras and that Mr. Justice V.V. Raghavan, retired judge of this court
was the arbitrator nominated by the respondents and Mr. M. G. Balasubra-maniam
was the arbitrator nominated by the Neyveli Lignite Corporation, and Mr. Justice
P. Ramakrishnan, ICS a retired judge of this court was nominated as umpire and
that the arbitrators held their sittings and enquiries at Madras and made their
award dated 24-8-1987 and intimated the same on 5-8-1987. According to the learn
ed counsel the venue of the arbitration being at Madras, as per clause 84, the f
irst respondent in O.P. 337/90 filed O.P. 531/87 in this court praying for the f
iling of the award into court and for passing a decree thereby and the other rel
iefs. The arbitrators have also filed on 7-3-1988 all the records relating to th
e arbitration proceed- ings under O.P. 531/87 in this court. It is further conte
nded by Mr. Rangarajan that the arbitration agreement specifically provides that
the venue of arbitration shall be at Madras and having acted upon it, the petit
ioner Neyveli Lignite Corporation cannot now contend that the venue for filing a
ward should be a different only namely the Sub-Court at Cadalore. It is further
contended that where two places have jurisdiction and when the award has been fi
led in a particular court, there is no question of insisting that the other cour
t has jurisdiction. It is further contended that the petitioner after learning t
hat the award has been filed in this court by the order dated 7-3-198S pursuant
to the directing of this court in O.P. No. 531/87 filed O.P. No. 43/89 at Sub-Co
urt. Cuddalore which is being contested by the respondent herein by filing their
counter therein stating that pursuant to O.P. 531/87 filed by them in this cour
t, the award has been filed by them in this court and proceedings would have to
go on only before this court and therefore the appearance of this respondent and
filing counter therein setting up the case would make O.P. 531/87 in this court
infructuous.
6. Mr. R. Krishnaswamy in his reply to the above argument of Mr. T. S. Rangaraja
n has invited my attention to clause 18 of the general conditions under "Notice
inviting tenders'. The said clause 18 is reproduced herein.
"The Civil Court having ordinary original civil jurisdiction over Neyveli shall
alone have exclusive jurisdiction in regard to all claims in respect of this con
tract of whatever nature."
7. The above clause in my opinion will go to show that the parties having agreed
and restricted to the form of action now cannot go behind that clause. There is
force in the contention of the learned counsel for the Neyveli Lignite Corporat
ion. In any event the parties having accepted to the exclusive jurisdiction of t
he Civil Court having jurisdiction over Neyveli cannot be now aksed to ignore th
at clause. The agreement as stated has a specific clause with regard to exclusiv
e jurisdiction to the Civil Court over Neyveli viz., at Cuddalore.
8. Mr. T. S. Rangarajan in support of his contention relied on Kumbha Mawji v. D
ominion of India MANU/SC/0001/1953 : [1953]4SCR878 and also relied on S. 31(4) o
f the Act. To appreciate the contention raised by Mr. T. S. Rangarajan in a prop
er perspective, it is useful to extract Sections 2(c) and 31 of the Act and also
to refer to the decision in Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR8
78 , which also refers to Section 31 of sub-clause 4 of the Act.
Sections 2(c) and 31 of the Act read as follows:
SECTION 2(c)
""Court" means a Civil Court having jurisdiction to decide the question -- formi
ng the subject matter of the reference if the same has been the subject matter o
f a suit but does not, except for the purpose of arbitration proceedings under S
ection 21, include a Small Cause Court.
SECTION 31
Jurisdiction
(1) Subject to the provisions of this Act, an award may be filed in any Court ha
ying jurisdiction in the matter to which the reference relates.
(2) Notwithstanding anything contained in any other law for the time being in fo
rce and save as otherwise provided in this Act, all questions regarding the vali
dity, effect or existence of an award or an arbitration agreement between the pa
rties to the agreement or persons claiming under the term shall be decided by th
e Court in which the award under rhe agreement has been, or may be filed and by
no other Court.
(3) All applications regarding the conduct of arbitration proceedings or otherwi
se arising out of such proceedings shall be made to the court where the award ha
s been or may be filed, and to no other Court.
(4) Notwithstanding anything contained elsewhere in this Act or in any other law
for the time being in force, where in any reference, any application under this
Act has been made in a Court competent to entertain it, that Court alone shall
have jurisdiction over the atbitralion proceedings and all subsequent applicatio
ns arising out of that reference and the arbitration proceedings shall be made i
n that Court and in no other Court.
9. According to the learned counsel, where an application has been filed in a Co
urt with reference to arbitration matter that Court alone have jurisdiction to p
roceed with any subsequent matters arising in arbitration. Therefore, applying t
he tests laid down in Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR878 , wh
ere an application for filing the award has been taken, out, that Court alone wi
ll deal with subsequent matters and not any other Court. Since the award has bee
n filed by the arbitrators in this Court as early as 1988, pursuant to the order
of this Court, which is the competent Court, according to Mr. Rangarajan, in Or
iginal Petition No. 531 of 1987 any subsequent application or proceedings could
be filed in this Court only.
10. In my opinion, Mr. Rangarajan is not correct in his above submission. Sectio
n 31 of the Act prescribes the territorial jurisdiction of the court in respect
of the arbitration and then confers exclusive jurisdiction on such Court in resp
ect of the arbitration agreement and the award. Section 31(2) read with S. 2(c)
of the Act provides for the jurisdiction of the Court to decide all questions re
garding validity, effect or existence of an award or an arbitration agreement be
tween the parties to the agreement or persons claiming under them. Only that Cou
rt in which an award under the agreement has been or may be filed is competent t
o decide all such questions and no other Court. (Underling is mine). Under sub-c
l. (I) of S. 31 of the Act, an award may be filed in any Court having jurisdicti
on in the matter to which the reference relates. A court which has no jurisdicti
on in the matter, to which the reference relates (as in the present case), an aw
ard cannot be filed in that Court and subsequently that Court will not have juri
sdiction to decide the question as enumerated in Section 31(2) of the Act. Let m
e now analyse the provisions coniained in sub-cls. (1),(2), (3) and (4) of S. 31
which clearly indicate that to the exclusion of all other Courts only one Court
will have jurisdiction to deal with the proceedings incidental to the reference
and the arbitration. Sub-section (2) clearly points out in this direction when
it provides that all applications regarding the conduct of arbitration proceedin
gs or otherwise arising out of such proceedings shall be made to the Court where
the award has been or may be filed and to no other Court. Then comes sub-sectio
n (4). It opens with a non obstante clause and is comprehensive in character. Th
e non obstante clauses exclude anything contained in the whole Act or in any oth
er law for the time being in force if it is contrary to or inconsistent with the
substantive provision contained in sub-sec. (4). To that extent it carves out a
n exception to the general question of jurisdiction of the Court in which award
may be filed elsewhere provided in the Act in respect of the proceedings referre
d to in sub-section (4) will have an overriding effect in relation to the filing
of the award, if the conditions therein prescribed are satisfied. If those cond
itions are satisfied the Court other than the one envisaged in Section 14(2) or
Section 31(1) will be the Court in which award will have to be filed. That is th
e effect of the non-obstantc clause in sub-sect ion (4) of Section 31 of the Act
. Thus, sub-section (4) of Section 31 envisages exclusive jurisdiction in the Co
urt, to which an application has been made in any reference and which that Court
is competent to entertain as the Court having jurisdiction over the arbitration
proceedings and all subsequent applications arising out of reference and the ar
bitration proceedings shall have to be made in that court and in no other Court.
Thus, sub-section (4) not only confers exclusive jurisdiction on the Court to w
hich an application is made in any reference but simultaneously ousts the jurisd
iction of any other Court which may as well have jurisdiction in this behalf. In
the present case this Court is not competent to have entertained the applicatio
n in original petit ion No. 531 of 1987 or to have received the award of the arb
itrators and hence Section 31(4) of the Act will not apply. The next argument of
Mr. Rangarajan is also not tenable for the following reasons:
An objection was raised by the Neyveli Lignite Corporation in this case that thi
s Court has no territorial jurisdiction to decide the disputes between them, as
no part of the cause of action arose within the territorial jurisdiction of this
Court and as such this Court has no jurisdiction to hear this matter.
On the other hand, the contention raised on . bahalf of the contractor is that t
he proceedings were taken place in Madras, that the award was made at Madras and
the same has been challenged in this Court and that it is only this Court which
has territorial jurisdiction, to try the present case. As per the definition pr
ovided in Section 2(c) of the Act, only a Civil Court will have jurisdiction to
decide the matter in which a civil suit with regard to the matter which was refe
rred to arbitration could be filed. Under Section 31(1) it is provided that an a
ward would be filed in any Court having jurisdiction in the matter to which the
reference relates. A reading of Sections 31(1) and 2(c) of the Act will go to sh
ow that in order to decide which is the Court which has jurisdiction in the matt
er to which a reference relates, what has to be ascertained is the Court within
which the suit could have been instituted for the claim which was raised in the
reference. From the facts of the present case, it is doubtless clear that no par
t of cause of action arose in Madras. In the calling of tender, enquiries submit
ted by the contractor, execution of the agreement for the purpose of the work an
d the disputes having arisen within the jurisdiction of the city Court at Cuddal
ore, no part of the cause of action has arisen within the meaning of Section 2(c
) of the Act. Merely because under Cl. 84 of the contract agreement, the arbitra
tors held their sittings and enquiries at Madras and made their award at Madras
on 24-8-1987 and intimated the same on 24-8-1987 and filed the award on 7-3-1988
with all the records relating to the arbitration proceedings in O.P. No. 531 of
1987 in this court, it would not be sufficient to grant territorial jurisdictio
n to this Court to try the present proceedings. It is relevant to notice that no
tice by the contractors in O.P. No. 531 of 1987 was taken to Neyveli Lignite Cor
poration to their Madras Office and that the same was returned by them stating t
hat the same might be sent to their Neyveli address and in fact notice was taken
to Neyveli address by the contractor in June, 1989. Furthermore, the factum of
the arbitration proceedings having been conducted at Madras and award being file
d here, is also not relevant for the purpose of deciding as to which is the Cour
t of competent jurisdiction. In order to decide as to which Court has competent
jurisdiction to entertain such petitions, reference has got to be made, as alrea
dy mentioned to Section 2(c) read with Section 31(1) of the Act. Merely because
the arbitrators choose to hold that proceedings at Madras, where admittedly no s
uit could be instituted and choose to make the award at Madras, it would not giv
e this Court the territorial jurisdiction to decide the matter arising under the
Act. It is no doubt that Sections 31(2) and 31(3) state that it is the Court in
which the award has been filed, which will have jurisdiction to decide the matt
er. In my opinion, if an award has been filed in a Court which has no jurisdicti
on (Madras in the present case), the provisions of sub-sections (2) and (3) of S
. 31 would have no application. It has to be seen that Section 31(1) enjoins upo
n the arbitrator to file his award in the Court having jurisdiction in the matte
r. If he chooses, in violation of the provisions of Section 31(1) to file the aw
ard at Madras, which has no territorial jurisdiction, then it cannot be argued t
hat the Original Side of this Court acquires territorial jurisdiction. It is now
well established that by agreement of the parties jurisdiction cannot be confer
red on Courts which have no territorial jurisdiction to decide the matter, where
as in the present case the parties have clearly agreed that under Clause 18 of t
he general conditions under notice inviting tenders, the Civil Court having ordi
nary original civil jurisdiction over Neyveli shall alone have exclusive jurisdi
ction in regard to all claims in respect of this contract of whatever nature.
11. In order to determine which is the Court having jurisdiction in the matter,
one should first of all ascertain what the questions are, which form the subject
matter of the reference to arbitration. On a combined reading of S. 2(c) and S.
31(1) of the Act, it must be held that the citus of cause of action alone was c
onferred with the jurisdiction of a court in the matter of arbitratin and since
no part of the cause of action arose within the jurisdiction of the Original Sid
e of ourt High Court, it could not entertain the present proceedings.
12. Section 2(c) of the Act defines 'Court' as meaning a Civil Court having juri
sdiction to decide all questions forming the subject-matter of the reference if
the same had been the subject matter of a suit, but does not, except for the pur
pose of arbitration proceedings under Section 21, include a Small Cause Court. T
he jurisdiction of the Small Cause Court is barred under S. 40 as well except as
regards arbitrations in suits before it. It will be seen that under Section 31
of the Act, an award is to be filed a Court which has jurisdiction in the matter
to which the reference relates and an award filed in a Court which has no juris
diction in the matter cannot be entertained and the Court cannot pass any judgme
nt or decree in terms of the award. In order to decide the jurisdiction of the C
ourt over the subject-matter of the award, it is necessary to consider the relie
fs grnated by the award and determine wheher the Court would have jurisdction to
try a regular suit between the parties in which the relief is claimed and wheth
er such relief could be granted by the Court. In order to determine the jurisdic
tion of the Court in matter, one will have to ascertain what the questions are a
nd if the question that has arisen is one which the Court would have jurisdictio
n to entertain, then that would be'a competent court to entertain the matter. Th
us, the Court of competent jurisdiction under S. 31 of the Act is not the Court
at the place in which the agreement was entered into or the parties reside, but
the Court which will exercise the jurisdiction provided the subject matter of th
e relief falls within the competence or jurisdiction. Sec. 16 of the Code of Civ
il Procedure gives the necessary guidance for the purpose of ascertaining the ju
risdiction of the Court and provides that for the determination of any right or
interest in immovable property the suit is to be instituted where the subject-ma
tter is situate.
13. The moot question to be decided in this case is as to whether this Court has
the competence to entertain an application under S. 14(2) of the Act. No doubt
parties have agreed under the general conditions of contract that the venue of a
rbitration shall be at Madras. The parties select the venue of arbitration only
to suit their 'convenience'. Merely because the venue of arbitration is at Madra
s it does not clothe this Court with jurisdiction to entertain the application u
nder the Act.
14. In the case of Union of India v. P, Anantharaman (1991 (1) MLJ 286 : 1991 TN
LJ 69), after elobarate discussion, it has been held by me that the citus of cau
se of action would alone confer jurisdiction on Court in matters of arbitration.
The venue of arbitration proceedings depends upon the volition of parties and t
heir convenience. It is open to the parties to select a place far away from the
place where the contract was executed because such place would be easily accessi
ble and convenient. Therefore, if no cause of action has arisen in the place, wh
ere, the parties choose to hold the arbitration proceedings, the Court within wh
ose jurisdiction the arbitration proceedings are conducted will not be a compete
nt court for the purpose of the provisions of the Act. It is beyond dispute that
the petitioner in Original Petition No, 531 of 1987 (M/s. Sabson (India) Pvt. L
td.), placed reliance on clause 84, where the parties agreed upon the venue of a
rbitration to contend that this Court has the competence to entertain the applic
ation under S. 14(2) of the Act.
15. As held by the Supreme Court, sub-s. (1) of S. 31 determines the jurisdictio
n of the Court in which the award can be tiled and sub-sees. (2), (3) and (4) of
the said section were intended to make that Section 'effective' in the followin
g three different ways:
1. By vesting in One Court the authority to deal with all questions regarding th
e validity, effect or existence of an award or an arbitration agreement;
2. By casting on the persons concerned the obligation to file all applications r
egarding the conduct of arbitration proceedings or otherwise arising out of such
proceedings in the court;
3. By vesting exclusive jurisdiction in one court in which the first application
relating to the matter was filed.
It is only the Court which has got the competence to entertain an application un
der the Act will have the exclusive jurisdiction under sub-sec. (4) of Section 3
1. Therefore, the prerequisite or the essential condition for the application of
S. 31(4) of the Act is that the Court which entertain condition for the applica
tion of S. 31(4) of the Act is that the Court which enertains the first applicat
ion should be a competent Court to entertain the same. From trie mere fact that
Original Petition No. 531 of 1987 was filed in this Court, it could not be said
that this Court has exclusive jurisdiction and that the subseqeunt application m
ade by Neyveli Lignite Corporation before Cuddalore Court is not maintainable. I
have already taken the view that this court has no competence to have entertain
ed Original Petition No, 531 of 1987 because no part of the cause of action has
arisen within the Original Side of this court and the place or venue of arbitrat
ion will not give rise to any cause of action. In this view of the matter, it ha
s to be held that Original Petition No. 531 of 1987 would not have been entertai
ned by this Court in view of the reasons given above.
16. Mr. Rangarajan placed strong reliance on the judgment of the Highest Court o
n the land reported in Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR878 . I
n that case, the appellant (Khumbha Mawji) entered into an agreement with the re
spondent, (the Dominion of India) (as it then was) to manufacture and supply to
the Bengal Assam Railway, stone boulders and ballast from Chutiapara quarry. The
agreement was entered into at Calcutta, though the work was to be carried out i
n Assam. Difference arose between parties and the matter was referred to two arb
itrators and on their disagreement, the matter was referred to an umpire, who ma
de two awards in favour of Kumbha Mawji, the appellant therein. The respondent,
Dominion of India filed an application under S. 14(2) of the Act before the Cour
t of the Subordinate Judge, Gauhati in Assam, where the work was to be carried o
ut, praying that the umpire may be directed to file both the awards in Court. No
tice was issued to the umpire to file the award into that Court and on receipt o
f the copies of the award, the Subordinate Judge of Gauhati in Assam made an ord
er, directing the applicant to file a copy of the award, on 3-9-1949. On the sai
d date, the respondent, Dominion of India filed the award. Further notices and f
iling of objections in the Court of the Subordinate Judge, Gauhati were ordered.
In the meanwhile on 17-8-1949, the respondent Dominion of India made its first
application in the Gauhati Court. The appellant's Solicitors, sent a letter to t
he Registrar of the High Court, Original Side, Calcutta enclosing therewith two
original awards and requesting the High Court to direct the office to file the s
aid awards and to issue notices in respect thereof expeditiously. The Deputy Reg
istrar informed the Solicitors that the award has been filed and asked the Solic
itors to take out from the Court and serve on the parties concerned the statutor
y notice fixing a date for judgment upon the side award by the commercial Judge
of the Court. Notice was thereupon issued to both parties, which was served on t
he respondent, Dominion of India on 2-9-1949. Thus, it is seen in respect of the
se awards, proceedings were initited purporting to be. under S. 14(2) of the Act
, Simultaneously both in the Court of the Subordinate Judge of Gauhati in Assam
as well as on the Original Side of the High Court at Calcutta. The appellant, Kh
umbha Mawji in answer to the notice issued by the Gauhati Court on 3-9-1949 issu
ed by the Gauhati Subordinate Court appeared before the Court and obtained adjou
rnments from time to time. In the meanwhile, the respondent, Dominion of India,
after receiving the notice issued to them by Calcutta High Court, filed an affid
avit stating their objections to the jurisdiction of Calcutta High Court and to
the validity of the awards. The matter was taken for consideration by the Commer
cial Judge of Calcutta High Court, who overruled the objections of the responden
t before the Supreme Court and passed Judgments on the two awards. On appeal by
the respondents, Dominion of India to the Division Bench, the learned Judges rev
ersed the Judgment of the learned single Judge and held that there had been no p
roper application under S. 14(2) of the Act before Calcutta High Court and conse
quently that Court had no jurisdiction to deal with the matter. It is seen from
the Judgment of the Supreme Court that the Division Bench of Calcutta High Court
reversed the Judgment of the learned single Judge on limited grounds. Hence app
eals were filed before the Supreme Court and three questions were raised for con
sideration by the Supreme Court. The third question raised before the Supreme Co
urt, with which we are concerned was whether sub-sec. (4) of S. 31 of the Act ap
plies only where the first application under the Act was made during the course
of pendency of a reference to arbitration or also to a case like the present one
, where such first application was made after the completion of the arbitration
and on the making of an award. The Supreme Court held that sub-sec. (4) of S. 31
was not meant to be confined to applications made during the pendency of an arb
itration and that the necessity for clothing a single Court with effective and e
xclusive jurisdiction and to bring about by the combined operation of these thre
e provisions the avoidance of conflict and scramble is equally essential whether
the question arises during the pendency of an arbitration or after the arbitrat
ion is completed or before the arbitration is commenced. The Supreme Court has a
lso considered the phrase 'in any reference' and the words 'reference' and 'refe
rence to arbitration' etc., and held that the phrase 'in a reference' is compreh
ensive enough to cover also an application first made after the arbitration is c
ompleted and a final award is made. The Supreme Court was therefore of the opini
on that Section 31(4) of the Act would vest exclusive jurisdiction in the Court
in which an application for the filing of an award has been made under Section 1
4 of the Act. The Supreme Court held that the application by the respondent Unio
n of India was made before the Gauhati Court on 10-8-1949 and the move by the ap
pellant before the Calcutta High Court was on 17-8-1949 and on these facts and o
n the view of the interpretation of S. 31(4) of the Act, the Supreme Court held
that the Gauhati Court only had got the jurisdiction and not the Calcutta High C
ourt as regards the present dispute.
17. Kumbha Mawji's case MANU/SC/0001/1953 : [1953]4SCR878 was a case, where two
Courts had competence to entertain applications under the Act, viz., in the city
of Calcutta, where the agreement was entered into and at Gauhati in Assam, wher
e the work was to be carried out. That is not so in the present case for the rea
sons mentioned supra. In my opinion the respondent cannot derive any sustenance
to his argument through that case cited supra. Hence, 1 am of the opinion that t
he argument raised on behalf of Neyveli Lignite Corporation that this Court has
no jurisdiction under Section 14(2) ofthe Act andSection 17 of the Act is well f
ounded.
18. The decisions cited by Mr. R. Krishnaswamy learned counsel appearing for the
respondents are considered as under:
The decisions reported in Venkatasami-appa v. Srinidhi Ltd., (1950) 1 MLJ 709; S
ushil Ansal v. Union of India AIR 1980 Delhi 43 have already been dealt with by
me in extenso in my Judgment in Union of India's case (1991) 1 MLJ 286: 1991 TNL
J1 69.
In the decision reported in Virendra Saigal v. Sumatilal Jamnalal MANU/DE/0002/1
970 : AIR1970Delhi14 , the Delhi High Court held as follows at page 15:
"Section 2 of the Artbitration Act defines 'Court' means a Civil Court having ju
risdiction to decide the questions forming the subject-matter of the reference i
f the same had been the subject matter of a suit. Therefore, a competent Court w
ithin the meaning of S. 31 of the Act must be a Court which could have entertain
ed a suit between the parties in which the controversies were the same- as are t
he subject matter of the arbitration."
In the decision reported in M/s. Gulati Construction Co. v. Betwa River Board MA
NU/DE/0113/1983 : AIR1984Delhi299 , the Delhi High Court held as follows at page
300:
"In order to decide as to which Court has jurisdiction to entertain petitions un
der Section 14, reference has to be made to S. 2(c) read with S. 31(1). Merely b
ecause the arbitrator chooses to hold the proceedings in a place, where admitted
ly no suit could be instituted, and chooses to make and publish an award at that
place, it would not give the Courts of that place territorial jurisdiction to d
ecide the matters arising under the Act.
In an award has been filed in a Court which has no jurisdiction, the provisions
of S. 31(2) and (3) would have no application. If an arbitrator chooses, in viol
ation of the provisions of S. 31(1) to file the award in a Court which has no te
rritorial jurisdiction, then it cannot be argued that the said Court acquires te
rritorial jurisdiction. It is now well established that by agreement of parties
jurisdicton cannot be conferred on Courts which have no territorial jurisdiction
to decide the matter."
In the decision reported in Kumud v. Fertilizer Corporation of India Ltd. MANU/W
B/0022/1985 : AIR1985Cal89 , the Calcutta High Court held as under:
"The contention of the petitioner that the ouster clause in the present case ind
icated that the parties contemplated that if any suit would have to be filed in
connection with the contracts, that should be filed in an appropriate court at G
orakhpur and that that clause would have nothing to do with the arbitration proc
eeding cannot be accepted. For the purpose of filing an application under the Ar
bitration Act, if one has to ascertain whether a particular Court has jurisdicti
on in (he matter or not, it has to be found out whether a suit could have been f
iled in that Court on the same cause of action. If the Court is competent to ent
ertain the suit then that court will also be competent Court to entertain the ap
plication under the Arbitration Act. Applying this test it is clear that the app
ropriate Court at Gorakhpur should be the competent Court to entertain the prese
nt application under the Arbitration Act. Application returned to the petitioner
for filing in the proper Court."
In the decision in Electrical Mfg. Co. v. Crompton Engg. Co. MANU/TN/0197/1974 :
AIR1974Mad261 , a Division Bench of our High Court, consisting of K. Veeraswami
, C.J., and Raghavan, J. held that the place of execution of the agreement at Ma
dras was inconsequential and the proper test was that of the subject-matter of t
he arbitration, which did not fall within the jurisdiciton of the Madras High Co
urt.
19. In my considered opinion S. 31(4) of the Act though has an overriding effect
is not an omnipotent Section to confer jurisdiction to any Court which does not
have any competence to entertain applications in relation to arbitration. The l
aw makers also could not have intended such a situation. Section 31(4) of the Ac
t only envisages a situation where a first application has been made to a compet
ent Court, Hence, if the court to which the first application has been made is n
ot a competent court, such a Court will not have jurisdiction to entertain all s
ubsequent applications in the matter since the essential prequisite of S. 31(4)
of the Act is not satisifed.
20. In the resuli, Original Petition No. 531 of 1987 is dismissed as not maintai
nable in this Court. In view of my opinion that this Court has no jurisdiction t
o have entertained the application filed under Sec. 14(2) of the Act, Original P
etition No. 337 of 1990 filed under Sections 33 and 30 of the Act by the Neyveli
Lignite Corporation is also dismissed as not maintainable in this Court. It is
stated that the Neyveli Lignite Corporation has filed a petition under Section 1
4(2) read with Sections 33 and 30 of the Act on the file of the Sub Court, Cudda
lore and that the said petition has also been numbered as Original Petition No.
43 of 1989 and that the said petition is pending adjudication. II is also stated
that the respondents in Original Petition No. 337 of 1990 (M/s. Sabson (India)
Pvt. Ltd.) have also entered appearance and contesting the proceedings in that C
ourl. The Original Side of this Court is directed forthwith to despatch the orig
inal award and other connected records and the proceedings filed in this Court b
y the arbitrators to the Sub Court, Cuddalore to enable the said Court to procee
d with the matter. I direct the Sub Court, Cuddalore on receipt of the award and
the proceedings to issue a notice of hearing to both parties and the further pr
oceedings to be held subsequently expcditiously. It is seen from this case that
the agreement was entered into between the parties in the year 198! and that the
award was passed by the arbitrators as early as on 24-8-1987. Since the matter
is pending for a very long time unnecessarily in this Court, the Sub Court at Cu
ddalore is directed to dispose of the Original Petition No. 43 of 1989 and other
connected proceedings filed by the contractor and the NLC within three months f
rom the date of receipt of the original award and other connected records from t
his court and send a report of such compliance to this Court. The Sub Court shal
l give proper and sufficient opportunity to both parties and hear their grievanc
e and pass orders on merits in accordance with law. As I am inclined to take the
view that this Court has no jurisdiction in the matter, the Neyveli Lignite Cor
poration must succeed in their effort, and I direct the original award and the d
ocuments etc., filed by the arbitrators to be taken off the record from this Cou
rt and forwarded to the Sub Court at Cuddalore forthwith. Likewise, the office i
s also direced to return the original petitions filed by the respective petition
ers (O.P. Nos. 531 of 1987 and 337 of 1990) along with the records counter, repl
y affidavits etc. filed by them to the respective parties to enable them to file
the same in the proper Court. Time for representation of both the original peti
tions is one month from today.
21. Thus, the preliminary issue raised by both parties is answered in favour of
Neyveli Lignite Corporation (Petitioner in O. P. No. 337 of 1990) and against M/
s. Sabson (India) Pvt. Ltd. (petitioner in O.P. No. 531 of 1987). However, there
will be no costs in both the original petitions.
22. Order accordingly.

IN THE SUPREME COURT OF INDIA


Decided On: 04.05.1961
Appellants: Seth Hiralal Patni
Vs.
Respondent: Sri Kali Nath

Acts/Rules/Orders:
Code of Civil Procedure, 1908 - Sections 47 and 151; Decrees and Orders Validati
ng Act, 1936
Citing Reference:
Ledgard v. Bull Mentioned
Case Note:
The case debated when would the objection to the territorial jurisdiction of the
Court granting decree be
raised in reference to the arbitration It was held that when the party had agree
d to refer the matter to
arbitration through Court he would be deemed to have waived the objection to the
territorial jurisdiction of
the Court raised by him in his written statement Further held that the correctne
ss of the procedure granting
leave as per Clause 12 of the Letters Patent or the waiver must be raised in the
proceedings before the High
Court and with no agitation in the execution proceedings

4. The only ground on which the decision of the High Court is challenged is that
the suit instituted on the original side
of the Bombay High Court was wholly incompetent for want of territorial jurisdic
tion and that, therefore, the award that
followed on the reference between the parties and the decree of Court, under exe
cution, were all null and void.
Strong reliance was placed upon the decision of the Privy Council in the case of
Ledgard v. Bull (1886) L.R. 13A.
134. In our opinion, there is no substance in this contention. There was no inhe
rent lack of jurisdiction in the Bombay
High Court where the suit was instituted by the plaintiff-decree holder. The pla
int had been filed after obtaining the
necessary leave of the High Court under clause 12 of the Letters Patent. Whether
the leave obtained had been rightly
obtained or wrongly obtained is not a matter which can be agitated at the execut
ion stage. The validity of a decree
can be challenged in execution proceedings only on the ground that the Court whi
ch passed the decree was lacking
in inherent jurisdiction in the sense that it could not have seizen of the case
because the subject matter was wholly
foreign to its jurisdiction or that the defendant was dead at the time the suit
had been instituted or decree passed, or
some such other ground which could have the effect of rendering the Court entire
ly lacking in jurisdiction in respect of
the subject matter of the suit or over the parties to it. But in the instant cas
e there was no such inherent lack of
jurisdiction. The decision of the Privy Council in the case of Ledgard vs. Bull
(1866) L.R. 13A. 134. is an authority for
the proposition that consent or waiver can cure defect of jurisdiction but canno
t cure inherent lack of jurisdiction. In
that case, the suit had been instituted in the Court of the Subordinate Judge, w
ho was incompetent to try it. By
consent of the parties, the case was transferred to the Court of the district Ju
dge for convenience of trial. It was laid
down by the Privy Council that as the Court in which the suit had been originall
y instituted was entirely lacking in
jurisdiction, in the sense that it was incompetent to try it, whatever happened
subsequently was null and void because
consent of parties could not operate to confer jurisdiction on a Court which was
incompetent to try the suit. That
decision has no relevance to a case like the present where there could be no que
stion of inherent lack of jurisdiction
in the sense that the Bombay High Court was incompetent to try a suit of that ki
nd. The objection to its territorial
jurisdiction is one which does not go to the competence of the Court and can, th
erefore, be waived. In the instant
case, when the plaintiff obtained the leave of the Bombay High Court on the orig
inal side, under clause 12 of the
Letters Patent, the correctness of the procedure or of the order granting the le
ave could be questioned by the
defendant or the objection could be waived by him. When he agreed to refer the m
atter to arbitration through Court,
he would be deemed to have waived his objection to the territorial jurisdiction
of the Court, raised by him in his written
statement. It is well settled that the objection as to local jurisdiction of a C
ourt does not stand on the same footing as
an objection to the competence of a Court to try a case. Competence of a Court t
o try a case goes to the very root of
the jurisdiction, and where it is lacking, it is a case of inherent lack of juri
sdiction. On the other hand, an objection as
to the local jurisdiction of a Court can be waived and this principle has been g
iven a statutory recognition by
enactments like s. 21 of the Code of Civil Procedure. Having consented to have t
he controversy between the parties
resolved by reference to arbitration through Court, the defendant deprived himse
lf of the right to question the
authority of the Court to refer the matter to arbitration or of the arbitrator t
o render the award. It is clear, therefore, that
the defendant is estopped from challenging the jurisdiction of the Bombay High C
ourt to entertain the suit and to
make the reference to the arbitrator. He is equally estopped from challenging th
e authority of the arbitrator to render
the award. In our opinion this conclusion is sufficient to dispose of the appeal
. It is not, therefore, necessary to
determine the other points in controversy, including the question whether The De
crees and Orders Validating Act,
1936 (Act V of 1936) had the effect of validating what otherwise may have been i
nvalid.

Equivalent Citation: AIR1953SC313, (1953)IMLJ841(SC), [1953]4SCR878


IN THE SUPREME COURT OF INDIA
Decided On: 16.04.1953
Appellants: Kumbha Mawji
Vs.
Respondent: Union of India (UOI)
Hon'ble Judges:
Mehr Chand Mahajan, Vivian Bose and Jagannadha Das, JJ.
Subject: Arbitration
Catch Words
Mentioned IN
Acts/Rules/Orders:
Arbitration Act, 1940 - Sections 14, 14(2), 31(3) and 31(4)
Authorities Referred:
Oxford English Dictionary
Case Note:
Indian Arbitration Act, ss. 14(2), 31(3) and (4) Award-filing Umpire handing over aw
ard to parties Party filing in Court Necessity of authorisation of arbitration or um
pire Filing of Award in two Courts Exclusive jurisdiction of the Court wherein the a
ward was filed earlier Completion of filing award after arbitration Applicability of
s.31(4) Meaning of in a reference .
JUDGMENT
Jagannadha Das, J.
1. On the 28th of January, 1948, the appellant, Khumba Mawji, entered into an ag
reement with the respondent, the Dominion of India (as it then was) to manufactu
re and supply, to the Bengal Assam Railway, stone boulders and ballast from Chut
iapara quarry. The agreement was entered into at Calcutta, though the work was t
o be carried out in Assam. It was a term of the agreement that if any difference
s arose between the parties, they were to be referred to the arbitration of two
persons, one to be nominated by each side, and that if the arbitrators were not
able to agree, the matter was to be decided by an umpire to be nominated by both
the arbitrators. Differences having, in fact, arisen, the dispute was referred
to two arbitrators and on their disagreement the matter went up to an umpire, on
e Mr. P. C. Chowdhury. The umpire made two awards on or about the 20th of July,
1949, in favour of the appellant. By one of them he directed a sum of Rs. 3,67,0
00 to paid by the respondent to the appellant on or before the 19th of August, 1
949, with interest thereafter at 6 per cent per annum in case of default. By the
other he directed a sum of Rs. 83,000 to be similarly paid by the respondent to
the appellant. He is said to have made over each of the two awards, in original
, to each of the parties. On the 10th of August, 1949, the respondent filed an a
pplication under section 14, sub-section (2), of the Indian Arbitration Act, 194
0, before the court of the Subordinate Judge of Gauhati in Assam praying that th
e umpire, Mr. Chowdhury, might be directed to file both the awards in court so t
hat the petitioner might get an opportunity for filing objections thereto. On th
is application notice was issued to the umpire to file the awards into that cour
t before the 24th of August 1949. The umpire sent a letter dated 18th August, 19
49, to the Subordinate Judge, which is as follows with copies of the awards :-
"Dear Sir,
With reference to your notice in money suit No. 63 of 1949 requiring me to submi
t the awards made by me in the above mentioned dispute on 20th July, 1949, I beg
to submit that the two awards were made and signed by me in the presence of the
parties and handed over to me on 20th July, 1949. As directed by you I am sendi
ng herewith copies of the same signed by me. On the back of each of these copies
occurs the receipt of the parties to the awards."
2. On receipt thereof, the Subordinate Judge made an order on 24th August, 1949,
in the following terms :-
"Notice on the umpire served. Seen his report forwarding copies of the award of
which the originals are said to have been made over to the parties. Applicant to
file his copy on 3rd September, 1949".
3. On the 3rd of September, 1949, the respondent filed the awards which were han
ded over to it by the umpire, and the matter was being proceeded with by issue o
f further notices and filing of objections in the court of the Subordinate Judge
, Gauhati.
4. Meanwhile on the 17th of August 1949, i.e., a week after the respondent made
its first application in the Gauhati court, the appellant's solicitors, Messrs.
Mukherjee and Biswas, sent a letter to the Registrar of the High Court, Original
Side, as follows :
"On behalf of our client Mr. Kumbha Mowjee we beg to enclose herewith two origin
al Awards duly stamped and both dated 20th July, 1949, for the respective sums o
f Rs. 3,67,000 and Rs. 83,000 duly signed by the Umpire Mr. P. C. Chaudhury for
filing.
Please therefore direct the office to file the said two Awards and to issue noti
ces in respect thereof expeditiously."
5. After some correspondence between the Deputy Registrar and the solicitors cal
ling for some further papers, the Deputy Registrar informed the solicitors by hi
s letter dated the 29th August, 1949, that the award had been filed and asked th
e solicitors to take out from the court and serve on the parties concerned the s
tatutory notice fixing a date for judgment upon the said award by the Commercial
Judge of the court. Notices were thereupon issued to both the parties in the fo
llowing terms :
"To
1. Kumbha Mawji.
2. The Dominion of India represented by the Assam Railway.
Take notice that the Award of the Umpire appointed in the matter of the above Ar
bitration Agreement had been filed on the 29th day of August, 1949, and that the
Court hearing the commercial causes will proceed to pronounce judgment on such
award on 7th day of November, 1949.
Dated the 29th day of August, 1949."
6. This notice was served on the respondent on the 2nd of September, 1949. Thus
in respect of these awards, proceedings were initiated purporting to be under se
ction 14(2) of the Indian Arbitration Act simultaneously both in the court of th
e Subordinate Judge of Gauhati in Assam as well as on the Original Side of the H
igh Court at Calcutta.
7. The appellant in answer to the notice issued by the Gauhati court on 3rd Sept
ember, 1949, appeared before that court on 28th October, 1949, and obtained adjo
urnments from time to time until 10th December, 1949. On that date the Gauhati c
ourt rejected his prayer for any further adjournment and fixed 20th January, 195
0, for an ex parte hearing. Meanwhile, the respondent after receiving the notice
issued to him by the Calcutta High Court filed, on the 24th of November, 1949,
an affidavit dated the 15th of November, 1949, stating his objections to the jur
isdiction of the Culcatta Court and to the validity of the awards. On the same d
ate a counter affidavit thereto dated the 19th of November, 1949, was filed on b
ehalf of the appellant. On these affidavits the matter was taken up for consider
ation by the Commercial Judge of the Calcutta High court on the 16th of December
, 1949. The learned Judge overruled the objections of the respondent, and passed
judgment on the two awards. On appeal therefrom by the respondent to the Divisi
on Bench, the learned Judges reversed the judgment of the single Judge. They hel
d that there had been no proper application under section 14(2) of the Indian Ar
bitration Act, before the High Court of Calcutta, and that consequently that Cou
rt had no jurisdiction to deal with the matter.
8. Before the learned single Judge of the High Court the main objection taken an
d set out in paragraph 14 of the respondent's affidavit dated the 15 of November
1949 was as follows :
"I submit further that inasmuch as the application of the Dominion of India unde
r section 14(2) of the Indian Arbitration Act was made as aforesaid to the said
Court at Gauhati before the award was filed in this Hon'ble Court by Kumbha Mawj
i, the Court at Gauhati alone has Jurisdiction."
9. Under section 31(1) of the Indian Arbitration Act an award may be filed in an
y court having jurisdiction in the matter to which the reference relates. The re
ference in this case arose out of a contract which, as already stated, was enter
ed into at Calcutta and had to be performed in Assam. Thus the Gauhati court as
well as the Calcutta High Court admittedly had jurisdiction over the subject-mat
ter of the reference. The point taken, however, on behalf of the respondent in t
heir objections was that, having regard to section 31, sub-sction (4) of the Act
and to the fact that an application under section 14, sub-section (2) for a dir
ection to the umpire to file the award was made to the Gauhati court as early as
the 10th August, that court was seized of the matter from that date, and that t
herefore any application under section 14 on a later date to another court, thou
gh otherwise competent, was barred under section 31, sub-section (4). This was t
he main question that was seriously pressed before the learned single Judge. But
the learned Judge was of the opinion that section 31(4) related only to applica
tions made during the pendency of a reference to arbitration and not to applicat
ions made subsequent to the making of an award. He thought that in respect of ap
plications for filing an award the exclusive jurisdiction was determined with re
ference to the question as to which was the competent court in which the award w
as, in fact, first filed under section 14, sub-section (2) (as distinct from whe
n the application for the filing of the award was first presented). In this view
, the learned Judge held on the facts that the award must be taken to have been
filed earlier in the Calcutta court and not in Gauhati court. He accordingly hel
d that the Calcutta High Court had exclusive jurisdiction having regard to secti
on 31(3), and hence proceeded to judgment on the award, the respondent not havin
g filed any objections before him in time.
10. On appeal, the learned Judges considered it unnecessary for them to dispose
of the case on either of the above grounds considered by the single Judge, and h
eld that on the facts it was quite clear that there had been no due filing of th
e award at all in the Calcutta court under section 14(2) inasmuch as the awards
which were claimed to have been duly filed were, in fact, not filed by the umpir
e; nor was it shown that they were filed under his authority. On this limited gr
ound they reversed the decision of the learned single Judge and vacated the judg
ment given in favour of the appellant on the basis of the two awards. Hence thes
e two appeals to us.
11. On the facts stated above three questions arise for consideration :
(1) Whether the appellant had the authority of the umpire to file the awards on
his behalf into court in terms of section 14(2) of the Arbitration Act;
(2) Whether in view of sub-section (3) of section 31 of the Act it can be said t
hat the awards were filed in the Calcutta High Court earlier than in the Gauhati
court; and
(3) Whether the scope of section 31, sub-section (4) of the Act is limited to ap
plications under the Act during the pendency of the arbitration proceedings only
.
12. As regards the first question, section 14, sub-section(2) provides that,
"the arbitrators or umpire shall, at the request of any party to the arbitration
agreement or any person claiming under such party or if so directed by the cour
t and upon payment of the fees and charges due in respect of the arbitration and
award and of the costs and charges of filing the award cause the award or a sig
ned copy of it, together with any depositions or documents which may have been t
aken and proved before them, to be filed in court, and the court shall thereupon
give notice to the parties of the filing of the award."
13. "This section clearly implies that where the award or a signed copy thereof
is in fact filed into court by a party he should have the authority of the umpir
e for doing so. This is, at any rate, the assumption on which the question has b
een dealt with in the High Court, and it has not been contended before us that t
he filing of the award into court by a party himself though without the authorit
y of the umpire to do so on his behalf, is sufficient compliance with the terms
of this section. The learned Judges of the High Court were of the opinion that t
he authority of the umpire empowering the appellant to file the original awards
into court on his behalf has not been made out on the evidence in the case. The
argument stressed before us is that in para 7 of the affidavit dated the 19th of
November, 1949, filed on behalf of the appellant in the High Court on the 24th
of November, 1949, it is stated that "On or about the 21st July, 1949, the said
Umpire made over the said original award to this deponent for filing." It is urg
ed that this is an averment of the requisite authority from the umpire, and it i
s pointed out that this assertion has not been contradicted on the other side by
any reply affidavit. It is contended therefore that the filing was valid. The l
earned Judges in coming to the contrary conclusion relied on two facts, namely,
that the umpire in his letter to the Gauhati court dated 18th August, 1949, when
sending copies of the awards in compliance with the notice issued to him by tha
t court merely stated that he handed over the awards to both the parties, but di
d not say that he authorised any of them to file the same into court on his beha
lf. The learned Judges were also of the opinion that the umpire as a person of c
ommonsense could not be supposed to have authorised both the parties to file the
awards into court on his behalf. We are inclined to agree with this reasoning.
Where, as in this case, the originals are said to have been handed over to both
the parties, it cannot be assumed that the mere handing over of the awards to th
e parties necessarily implies the authority of the umpire to file the same into
court on his behalf. That authority has to be specifically alleged and proved. I
n the present case the statement in the affidavit relied on by learned counsel b
efore us is no more than an assertion that the umpire handed over the original a
wards to the appellant for filing, but there is no allegation that they were so
handed over to him for filing on behalf of the umpire. The umpire may not have b
een aware that the awards should be filed into court only by himself or under hi
s authority.
14. Learned counsel for the appellant urged that the question of the authorisati
on of the umpire for the filing of the award by the appellant was one that was n
ot raised at all as an objection before the learned single Judge of the High Cou
rt, and that such an objection should not have been taken notice of for the firs
t time on appeal. It is no doubt true that neither the affidavit filed on behalf
of the respondent nor the judgment of the learned single Judge gives any indica
tion of this question having been raised in the first court. Indeed, the learned
Judges on appeal recognise it when they say towards the concluding portion of t
heir judgment as follows :
"It does not appear that the point on which the appeal succeeds was argued in th
e court below. But it is a point of law and no objection was taken before us by
the respondent to the appellant taking the point before us".
15. Though it is somewhat difficult to see how the question raised can be said t
o be a pure question of law, it is quite clear from the above extract that no ob
jection was taken by the respondent to the point being raised. It has not been s
uggested before us that this statement in the judgment was in any way erroneous.
Appellant's counsel argued that if the learned Judges on appeal felt inclined t
o dispose of the case on this point alone, they should have called upon the umpi
re to clarify whether or not the appellant had his authority, or given an opport
unity for production of his affidavit in support of the authority. Learned couns
el presses that an opportunity should now be allowed. It does not appear, howeve
r that it is either necessary or desirable at this stage and after this laps of
time to allow this matter to go back for that purpose. Because, apart from the q
uestion of mere want of proof of authority, it is clear that in a case of this k
ind and on the facts above stated, it was incumbent on the appellant to allege c
ategorically that, in terms of sub-section (2) of section 4, he had the requisit
e authority of the umpire. That allegation is wanting not only in the affidavit
dated the 19th of November, 1949, but what is more important is that when the aw
ards were filed into court on the 17th of August, 1949, by the solicitors on beh
alf of the appellant with a letter which might be treated as the initial applica
tion to the court, there is not a word to suggest that the awards were being fil
ed under the authority of the umpire. The letter contained only a bald statement
that the two original awards duly signed by the umpire were enclosed therewith
for filing, with a request to direct the office to file the two awards and to is
sue notices in respect thereof expeditiously. In those circumstances, there has
been clearly no sufficient compliance with the terms of section 14, sub-section
(2) of the Act to constitute the filing of the awards by the appellant's solicit
ors the filing thereof by the umpire.
16. As regards the second question, namely, as to whether with reference to the
terms of section 31, sub-section (3) the awards should be held to have been file
d earlier in the Calcutta court or in the Gauhati court, the view taken by the l
earned Commercial Judge was that the filing in the Calcutta court must be taken
to have been earlier. For the purpose of the consideration of this question it m
ay be assumed that filing was under the authority of the umpire. The learned Jud
ge was of the opinion that the filing of the awards in the Gauhati court must be
taken to have been made on the 3rd September when in pursuance of the prior ord
er of the Subordinate Judge dated 24th August, 1949, the present respondent file
d into court the original awards with him. In coming to this conclusion the lear
ned Judge ignored the fact that on 18th August, 1949, the umpire in response to
the notice previously issued to him forwarded to the court signed copies of the
awards and that the same were in that court on or before 24th August, 1949, This
seems, in terms, to be sufficient compliance with the provisions of section 14,
sub-section (2) which only requires that on the directions of the court the ori
ginal award or the copy thereof should be caused by the umpire to be filed into
it. The learned Judge stated that he was not aware whether the copies sent to th
e Subordinate Judge were signed copies or not. The learned Judge failed unfortun
ately to notice that the umpire himself in his letter dated 18th August, 1949, s
tated clearly as follows :
"As directed by you I am sending herewith copies of the same (awards) signed by
me".
17. The learned Judge was also inclined to think that the mere forwarding of the
awards does not amount to the filing of them. Here again, the learned Judge has
overlooked that under section 14, sub-section (2) the actual filing by the umpi
re is not essential, but that it is sufficient if the umpire causes the awards t
o be filed. It is not suggested that sending by post in compliance with the noti
ce is not such "causing".
18. It appears to us therefore clear that the filing of the awards in the Gauhat
i court must be taken to be on the 24th of August, 1949. So far as the Calcutta
court is concerned, though no doubt the awards were put into that court by the a
ppellant's solicitors on the 17th August, 1949, it appears clearly from the noti
ce issued by the Registrar dated the 30th of August, 1949, that the awards were
treated as filed only on the 29th day of August, 1949. Paragraphs 8 and 9 of the
respondent's affidavit filed in the Calcutta court on 24th of November, 1949, c
ontain categorical assertions that so far as the Gauhati court is concerned, the
copies of the awards were filed by the umpire on the 24th of August, 1949, whil
e as regards the Calcutta High Court the awards were filed on the 29th of August
, 1949. These assertions have not been contradicted on behalf of the appellant i
n the counter-affidavit filed on the same day. From these facts, it is clear tha
t the earlier filing for the purposes of section 31(3) is in the Gauhati court a
nd not in the Calcutta court as held by the learned single Judge under an errone
ous impression as to the facts, We may as well mention at this stage that it was
not suggested before us that for legal purposes the filing of the awards in the
Calcutta High Court (on the assumption of existence of authority in the appella
nt for such filing on behalf of the umpire) is not the 29th of August, 1949, but
only the 10th of August when the letter was sent by the solicitors to the Regis
trar enclosing the awards. We mention this because it appears from the judgment
of the Division Bench of the Calcutta High Court that some such point was raised
there, but before us the contrary was assumed. We are accordingly of the opinio
n that even if the authority of the umpire for the filing of the award into cour
t on his behalf by the appellant is to be taken for granted, it was in the Gauha
ti court that the awards must be taken to have been filed earlier. On this groun
d, therefore, we are inclined to hold that the Gauhati court alone has jurisdict
ion under section 31(3) of the Act.
19. The third question which remains for consideration is whether sub-section(4)
of section 31 of the Indian Arbitration Act of 1940 applies only where the firs
t application under the Act was made during the course of pendency of a referenc
e to arbitration or also to a case like the present one where such first applica
tion is made after the completion of the arbitration and on the making of an awa
rd. As already stated, the learned Judges on appeal did not deal with this quest
ion. The trial Judge, however, considered the matter, and held that the above pr
ovision related only to an application made during the pendency of a reference t
o arbitration. In the view of the learned Judge,
"In order to attract sub-section (4) an application must have been made during t
he pendency of the reference, and if such an application had been made, all othe
r applications arising out of that reference (whether made in the reference or n
ot) must be made in that court".
20. Apparently, the learned Judge construed the phrase "in a reference" in secti
on 31, sub-section (4), as meaning "in the course of a reference", and that is a
lso the contention before us of the counsel for the appellant, which requires cl
oser examination.
21. Section 31 of the Indian Arbitration Act of 1940 is in the following terms :
"(1) Subject to the provisions of this Act, an award may be filed in any Court h
aving jurisdiction in the matter to which the reference relates.
(2) Notwithstanding anything contained in any other law for the time being in fo
rce and save as otherwise provided in this Act, all questions regarding the vali
dity, effect or existence of an award or an arbitration agreement between the pa
rties to the agreement or persons claiming under them shall be decided by the Co
urt in which the award under the agreement has been, or may be, filed, and by no
other Court.
(3) All applications regarding the conduct of arbitration proceedings or otherwi
se arising out of such proceedings shall be made to the Court where the award ha
s been, or may be, filed, and to no other Court.
(4) Notwithstanding anything contained elsewhere in this Act or in any other law
for the time being in force, where in any reference an application under the Ac
t has been made in a Court competent to entertain it, that Court alone shall hav
e jurisdiction over the arbitration proceedings and all subsequent applications
arising out of that reference and the arbitration proceedings shall be made in t
hat Court and in no other Court".
22. Sub-section (1) relates to the question as to where a completed award has to
be filed, and prescribes the local jurisdiction for that purpose. Sub-section (
2) deals with the ambit of the exercise of that jurisdiction, and declares it to
be exclusive by saying that "all questions regarding the validity, effect or ex
istence of an award or arbitration agreement between the parties to the agreemen
t or persons claiming under them shall be decided by the Court in which the awar
d under the agreement has been, or may be, filed and by no other Court". Sub-sec
tion (3) is intended to provide that all applications regarding the conduct of a
rbitration proceedings or otherwise arising out of such proceedings are to be ma
de only in one court, and lays on the concerned party the obligation to do so. T
hen comes sub-section (4), the object of which apparently is to go further than
sub-section (3), that is, not merely casting on the party concerned an obligatio
n to file all applications in one court but vesting exclusive jurisdiction for s
uch applications in the court in which the first application had been already ma
de.
23. Thus it will be seen on a comprehensive view of section 31 that while the fi
rst sub-section determines the jurisdiction of the court in which an award can b
e filed, sub-sections (2), (3) and (4) are intended to make that jurisdiction ef
fective in three different ways, (1) by vesting in one court the authority to de
al with all questions regarding the validity, effect of existence of an award or
an arbitration agreement, (2) by casting on the persons concerned the obligatio
n to file all applications regarding the conduct of arbitration proceedings or o
therwise arising out of such proceedings in one court, and (3) by vesting exclus
ive jurisdiction in the court in which the first application relating to the mat
ter is filed. The context, therefore, of sub-section (4) would seem to indicate
that the sub-section was not meant to be confined to applications made during th
e pendency of an arbitration. The necessity for clothing a single court with eff
ective and exclusive jurisdiction, and to bring about by the combined operation
of these three provisions the avoidance of conflict and scramble is equally esse
ntial whether the question arises during the pendency of the arbitration or afte
r the arbitration is completed or before the arbitration is commenced. There is
no conceivable reason why the Legislature should have intended to confine the op
eration of sub-section (4) only to applications made during the pendency of an a
rbitration, if as is contended, the phrase "in any reference" is to be taken as
meaning "in the course of a reference".
24. It may be noticed that the Arbitration Act deals with arbitrations of three
different categories : (1) arbitration without intervention of the court, dealt
with in section 3 to 19 comprising Chapter II; (2) arbitration with the interven
tion of a court where there is no suit pending provided in section 20 which is a
separate Chapter III; and (3) arbitration in suits dealt with in sections 21 to
25 comprising Chapter IV. The jurisdiction as regards the latter two classes of
arbitrations in respect of certain matters is provided in the very provisions r
elating to those two classes of arbitrations, that is, section 20, sub-section (
1) and section 21. Sub-section (1) of section 31 appears to refer only to the fi
rst class. It may, therefore, have been, plausibly, suggested that sub-sections
(2), (3), and (4) refer only to this class. But no such position was taken up be
fore us. Indeed, having regard to the wide language employed in these sub-sectio
ns it has been assumed that sub-sections (2) and (3) cover all three classes in
all their stages. If so, is there any sufficient reason to think that sub-sectio
n (4) was meant to have a very restricted operation ? On the view of this sub-se
ction suggested for the appellant, not only would an application made after the
award was pronounced be excluded from sub-section (4) but also an application ma
de before the commencement of the arbitration, i.e., for the filing of an agreem
ent of reference and for a direction thereupon. It must be remembered that secti
on 31 is one of the group of sections headed "General" which by virtue of sectio
n 26 are applicable to all arbitration. Unless therefore the wording in sub-sect
ion (4) of section 31 is so compelling as to confine the scope thereof to applic
ations during the pendency of an arbitration, such a limited construction must b
e rejected.
25. As already stated, the entire basis of the limited construction is the meani
ng of the phrase "in any reference" used in sub-section (4) as meaning "in the c
ourse of any reference". But such a connotation thereof is not in any ordinary s
ense compelling. The preposition "in" is used in various contexts and is capable
of conveying various shades of meaning. In the Oxford English Dictionary one of
the shades of meaning of this preposition is
"Expressing reference or relation to something; in reference or regard to; in th
e case of, in the matter, affair, or province of.
Used especially with the sphere or department in relation or reference to which
an attribute or quality is predicated".
26. In the context of section 31, sub section (4), it is reasonable think that t
he phrase "in any reference" means "in the matter of a reference". The word "ref
erence" having been defined in the Act as "reference to arbitration", the phrase
"in a reference" would mean "in the matter of a reference to arbitration". The
phrase "in a reference" is, therefore, comprehensive enough to cover also an app
lication first made after the arbitration is completed and a final award is made
, and in our opinion that is the correct construction thereof in the context. We
are, therefore, of opinion that section 31(4) would vest exclusive jurisdiction
in the court in which an application for the filing of an award has been first
made under section 14 of the Act.
27. It is undisputed that the application by the respondent Union of India was m
ade before the Gauhati court on the 10th August, 1949, and the earliest move by
the appellant before the Calcutta court was on the 17th August, 1949. On these f
acts and on the view of the interpretation of section 31, sub-section (4), which
we are inclined to take, it is clear that the Gauhati court only has the jurisd
iction and not the Calcutta High Court as regards the present dispute.
28. In the result, the two appeals must be dismissed with costs.
29. Appeals dismissed.
Agent for the appellant : Sukumar Ghose.
Agent for the respondent : G. H. Rajadhyaksha.