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Orissa HC Refuses to Entertain Petition U/S 11(6) Of A&C Act 1966, Says It Does Not Have Territorial Jurisdiction

By VANDANA KOTHARI      14 October, 2020 08:14 PM      0 Comments
Orissa HC Refusesto Entertain Petition U/S 11(6) Of A&C Act 1966, Says It Does Not Have Territorial Jurisdiction

An application was filed in Orissa High Court, under section 11(6) of the Arbitration and Conciliation Act, 1966 by M/s. SJ Biz Solutions Pvt. Ltd (Petitioner) seeking appointment of an independent arbitrator to arbitrate the disputes between the petitioner and the M/s. Sany Heavy Industry India Pvt. Ltd. (Opposite party). 

On 1st October, Thursday, the court denied entertaining the petition stating that it does not have territorial jurisdiction. 


Background of the case

The petitioner approached the opposite party for a dealership in the State of Odisha. Accordingly, a dealership agreement was entered into between the parties in January 2014, initially for a period of one year and it was further renewed in the year 2014, 2015, and 2016, each time for a period of one year. Lastly, the contract was extended on 01.01.2017 for a period of one year till 31.12.2017. Pursuant to the agreement, the petitioner submitted Bank Guarantee for a sum of Rs.25,00,000/- (Rupees Twenty-five Lakh) drawn in the Bank of Baroda in favor of the opposite party. Even as the dealership agreement was subsisting, the opposite party without any rhyme or reason, and without any notice to that effect, illegally terminated the agreement on 04.09.2017, much prior to the expiry of the period.

The opposite party did not even pay the legitimate dues of the petitioner. The representatives of the petitioner met the opposite party to discuss the pending issues. The minutes of the meeting were drawn up for full and final settlement of dues for resolution of all the issues. The opposite party agreed to pay an amount of Rs.33,49,926/- to the petitioner in respect of the claims of FOC. The balance claim of Rs.4,44,879/- was subject to further reconciliation. The opposite party however did not make any payment till March 2018 in terms of the above-said settlement. The petitioner requested the opposite party for the release of the said amount as he had to settle the statutory dues of the Government. The opposite party vide its e-mail informed the petitioner about the amount receivable from him and requested the petitioner to get NOC from all customers in respect of the FOC amount.

Later, the petitioner received a letter dated 05.04.2018 from Bank of Baroda, Barbil Branch, wherein it was intimated to the petitioner that they have received a notice from the opposite party invoking Bank guarantee in order to make payment of Rs.25,00,000/-. In these circumstances, the petitioner filed an application under Section 9 of the Act, 1996 before the learned District Judge, Khurda at Bhubaneswar. The learned District Judge by his order dated 09.04.2018 issued a notice to the opposite party, directing it to maintain status quo as on the date in respect of encashment of the bank guarantee.

However, despite such direction of the learned District Judge, the Bank guarantee was encashed and the money remitted to the opposite party. The petitioner therefore by a letter submitted its claim to the opposite party, who by its e-mail acknowledged the receipt of the claim of the petitioner, but refuted all the claims of the petitioner. Disputes having thus arisen between the parties, the petitioner by its letter invoked the arbitration Clause 15.3 of the Dealership Agreement and requested the opposite party to appoint a sole Arbitrator. The said letter was received by the opposite party. Since the opposite party failed to appoint the arbitrator within a period of 30 days, the petitioner filed this petition under Section 11(6) of the Act, 1996.

Petitioner’s Arguments:

Mr. Avijit Pal, learned counsel for the petitioner submitted that even if the parties in clause 15 of the Dealership Agreement agreed that the place of arbitration shall be at 'Pune', the jurisdiction of this Court to entertain the present application filed under Section 11(6) of the Act, 1996 is not excluded as the cause of action, wholly, or at least in part, has arisen in the territory of the State of Orissa. It is contended that in view of Section 20(1) of the Act, 1996 the parties are free to choose the place of arbitration. The word 'place' in Section 20 has been used in the sense of the word 'Venue'. Even if the parties in the present case in clause 15.3 of the Dealership Agreement, agreed upon the place of arbitration at 'Pune', the word 'place' used therein only denotes the venue of arbitration proceedings, which can take place anywhere.

This becomes further clear from clause 16 (13.4) of the agreement which provides that “all disputes arising out of or in any way connected with these presents shall be subject to the jurisdiction of the Courts, having territorial jurisdiction.” Clause 17 of the agreement also clarifies this position by indicating the geographical areas of territory, would be the entire districts of Odisha. It is submitted that in view of the definition of the Court given in Section 2(1)(e) of the Act, 1996, the Courts at Bhubaneswar would have the jurisdiction to entertain the petition under Section 9 of the Act, 1996 and for the same reason, this Court would also have the territorial jurisdiction, especially in view of Section 11(11) of the Act, 1996 which provides that where the request has been made to more than one High Court, the High Court where the request has been made first in point of time, which in this case is Orissa High Court, would be competent to decide the application. In support of his arguments, the counsel relied upon the decision of the Supreme Court in the case of Mayavati Trading Private Limited vs. Pradyuat Deb Burman, (2019) 8 SCC 714.

Opposite Party’s Arguments:

Mr. A. Bhattacharya learned counsel for the opposite party argued that Section 20 of the Act, 1996 has given the freedom to the parties to decide the place of arbitration. If the parties in the agreement have chosen a particular place as the place of arbitration, only the High Court having territorial jurisdiction over that place would be competent to entertain and decide the application under section 11 for the appointment of the arbitrator. It is denied that the opposite party has illegally invoked the Bank guarantee and that the opposite party has forfeited the right to appoint the Arbitrator. In fact, the opposite party has already appointed Hon'ble Justice (Retd.) Mr. S.R. Sathe, Bombay High Court, residing at Pune, as the sole arbitrator. The present application ought to be therefore dismissed as infructuous. As regards the Bank Guarantee, it is submitted that notice on the petition filed by the petitioner under Section 9 of the Act, 1996 was issued by the learned District Judge, Khurda on 09.04.2018 to the opposite party. But in the meantime, the opposite party had already invoked the bank guarantee on 29.03.2018 by encashing the amount even before receiving such notice. Therefore, the petition under Section 9 was also rendered infructuous.

Learned counsel further submitted that this controversy has been set at rest by a catena of decisions of the Supreme Court. In support of his arguments he relied on the judgment of the Supreme Court in Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Private Ltd. &Ors., (2017) 7 SCC 678 and BGS SGS Soma JV vs. NHPC Limited, (2020)4 SCC 234. It is argued that the Supreme Court in Indus Mobile Distribution Pvt. Ltd., supra has reiterated the same law, as in Bharat Aluminium Company (BALCO) vs. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, as to the autonomy given to the parties to choose the place of arbitration under Section 20 of the Act 1996. 

Court’s decision: 

The bench of Chief Justice Mohammad Rafiq after taking into consideration all the point and arguments made by both the parties and after going through all the relied judgments said that “ In view of the above discussion, it must be held that this Court does not have the territorial jurisdiction to entertain the present petition filed under Section 11(6) of the Act, 1996, which is accordingly dismissed as not maintainable.

The court observed that The Supreme Court in a recently delivered decision in Brahmani River Pellets Limited vs. Kamachi Industries Ltd., (2020)5 SCC 462 considered whether the Madras High Court could exercise jurisdiction under Section 11(6) of the Act, 1996 to appoint the sole arbitrator at the instance of the respondent, despite the fact that the agreement contains the clause that venue of arbitration shall be Bhubaneswar. The appellant challenged the said order by questioning the jurisdiction of the Madras High Court on the ground that since the parties had agreed that the seat of arbitration shall be at Bhubaneswar, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. 

The court also said that “The Supreme Court in Mayavati Trading Private Limited, supra merely held that "existence" of "arbitration" agreement as referred to in sub-section (6A) of Section 11 inserted by the 2015 amendment w.e.f. 23.10.2015 has correctly been interpreted in earlier judgment in DuroFelguera, S.A. supra. The decision in the case of Mayavati Trading Private Limited, supra, therefore, does not in any manner help the petitioner as it does not deal with the question of territorial jurisdiction of the High Court.”

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