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By Naming a Place of Jurisdiction in Agreement Parties Impliedly Exclude the Jurisdiction of Other Courts: Supreme Court

By Naming a Place of Jurisdiction in Agreement Parties Impliedly Exclude the Jurisdiction of Other Courts: Supreme Court
THE PRINCIPAL QUESTION

In Swastik Gases Ltd. vs. Indian Oil Corporation the Principal question before the three judge bench of Supreme Court was: Whether, in view of Jurisdiction Clause in the Agreement between the Calcutta High Court would have exclusive jurisdiction in respect of the application made by the appellant under Section 11 of the Arbitration and Conciliation Act? The bench comprised of Hon’ble Justices R.M Lodha, Kurian Joseph, Madan B. Lokur.

And in response to that question the Hon’ble Court held that: “…we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like ‘alone’, ‘only’, ‘exclusive’ or ‘exclusive jurisdiction’ have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties – by having clause 18 in the agreement – is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner.”

THE FACTS

The appellant, M/s. Swastik Gases Private Limited, having its registered office at Jaipur, entered into an agreement with IBP (now mergerd with Indian Oil Corp.), whereby, the appellant was appointed the company’s consignment agent for marketing lubricants at Jaipur.

THE GENESIS OF DISPUTE

In 2003 as huge quantity of stock of lubricants could not be sold by the appellant despite several meetings parties failed to resolve dispute amicably.

CLAIM NOTICE

On 16.07.2007, the appellant sent a notice to the company claiming a sum of Rs.18,72,332/- under diverse heads with a request to the company to make payment of the above amount failing which it was stated that the appellant would pursue appropriate legal action against the company.

NOTICE INVOKING ARBITRATION CLAUSE

Thereafter, on 25.08.2008 another notice was sent by the appellant to the company invoking arbitration clause wherein name of a retired Judge of the High Court was proposed as the appellant’s arbitrator. The company was requested to name their arbitrator within thirty days failing which it was stated that the appellant would have no option but to proceed under Section 11 of the 1996 Act.

FAILURE TO APPOINT ARBITRATOR, S. 11 APPLICATION FILED AT RAJASTHAN HC TO APPOINT ARBITRATOR

The defendant did not nominate its arbitrator within thirty days of receipt of the notice dated 25.08.2008 resultantly appellant applied under Section 11 of the 1996 Act in the Rajasthan High Court for the appointment of arbitrator in respect of the disputes arising out of the Agreement.

THE TWO CLAUSES AT THE HEART OF THE CONTROVERSY DEALING WITH ARBITRATION AND JURISDICTION
ARBITRATION CLAUSE

“17.0. Arbitration: If any dispute or difference(s) of any kind whatsoever shall arise between the parties hereto in connection with or arising out of this Agreement, the parties hereto shall in good faith negotiate with a view to arriving at an amicable resolution and settlement. In the event no settlement is reached within a period of 30 days from the date of arising of the dispute(s)/difference(s), such dispute(s)/difference(s) shall be referred to 2 (two) Arbitrators, appointed one each by the parties and the Arbitrators, so appointed shall be entitled to appoint a third Arbitrator who shall act as a presiding Arbitrator and the proceedings thereof shall be in accordance with the Arbitration and Conciliation Act, 1996 or any statutory modification or reenactment thereof in force. The existence of any dispute(s)/difference(s) or initiation/continuation of arbitration proceedings shall not permit the parties to postpone or delay the performance of or to abstain from performing their obligations pursuant to this Agreement.”

JURISDICTION CLAUSE

“18.0. Jurisdiction: The Agreement shall be subject to jurisdiction of the courts at Kolkata.”

ARGUMENTS AT SUPREME COURT
APPELLANT’S PRINCIPAL ARGUMENT
  • Since part of the cause of action has arisen within the jurisdiction of the courts at Jaipur and Jurisdiction clause does not expressly oust the jurisdiction of other courts, Rajasthan High Court had territorial jurisdiction to try and entertain the petition under Section 11 of the 1996 Act.
  • Jurisdiction clause of the agreement cannot be construed as an ouster clause because the words like, ‘alone’, ‘only’, ‘exclusive’ and ‘exclusive jurisdiction’ have not been used in the clause.

Facts stated for establishing that part of cause of action arose at Jaipur

  • The regional office of the respondent – company is situate at Jaipur;
  • the agreement was signed at Jaipur;
  • the consignment agency functioned from Jaipur;
  • all stock of lubricants was delivered by the company to the appellant at Jaipur;
  • all sales transactions took place at Jaipur;
  • the godown, showroom and office of the appellant were all situated in Jaipur;
  • various meetings were held between the parties at Jaipur;
  • the company agreed to lift the stock and make payment in lieu thereof at a meeting held at Jaipur and
  • The disputes arose at Jaipur.
DEFENDANT’S COUNTER ARGUMENT

The most important argument put forth by the Additional Solicitor General for the Defendant was that the view of the designate Judge that from clause 18 of the agreement, it was apparent that the parties intended to exclude jurisdiction of all courts other than the courts at Kolkata.

On the basis of maxim “expressio unius est exclusio alterius”(expression of one is the exclusion of another) and with reference to a catena of cases most importantly A.B.C. Laminart Pvt. Ltd. and Another v. A.P. Agencies, Salem, (1989) 2 SCC 163. The hon’ble court held that:

  • It is a fact that whilst providing for jurisdiction clause in the agreement the words like ‘alone’, ‘only’, ‘exclusive’ or ‘exclusive jurisdiction’ have not been used but this, in our view, is not decisive and does not make any material difference.
  • By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts.
  • Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts.

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