IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10..01..2008 CORAM THE HON'BLE MR.AJIT PRAKASH SHAH, CHIEF JUSTICE and THE HON'BLE MR.JUSTICE F.M.IBRAHIM KALIFULLA O.S.A.Nos.356 to 358 of 2006 & M.P.Nos.1+1+1 of 2006 M/s.Dynasty Developers Private Limited, A company incorporated and existing in accordance with the laws of India, with its registered office at 150 Embassy Point, 150, Infantry Road, Bangalore - 560 001. Rep. by its Director Mr.K.Y.Gopikrishnan. ..Appellant in all the appeals. Vs. 1. Jumbo World Holdings Limited, A company incorporated and existing in accordance with the laws of British Virgin Islands, with its registered office at Sea Meadow House, Blackburne Highway, Road Town, British Virgin Islands. 2. Dandvati Investments and Trading Company Pvt. Ltd., A company incorporated and existing in accordance with the laws of India, with its registered office at 5th Floor, "The International", 16 New Marine Lines, Cross Road No.1, Churchgate, Mumbai - 400 020. 3. Jerom Trading and Investment Limited, A company incorporated and existing in accordance with the laws of India, with its registered office at 5th Floor, "The International", 16 New Marine Lines, Cross Road No.1, Churchgate, Mumbai - 400 020. https://hcservices.ecourts.gov.in/hcservices/ 4. Gordon Woodrroffe Limited, Now known as GWL Properties Limited, A company incorporated and existing in accordance with the laws of India, with its registered office at No.36, Rajaji Salai, Chennai - 600 001. ..Respondents in all the appeals. PRAYER: Appeals filed under Order XXXVI Rule 9 of the O.S.Rules read with Clause 15 of the Letters Patent against the common order of the learned single Judge passed in O.A.Nos.452 to 454 of 2006 & A.Nos.2329 to 2332 of 2006. For Appellant :: Mr.Vinod Bobde, Senior Counsel & Mr.P.S.Raman, Senior Counsel for Mr.Satish Parasaran For Respondent - 1to 3 :: Mr.A.L.Somayaji, Senior Counsel for Mr.R.Subramanian For Respondents - 4 :: Mr.T.R.Rajagopalan, Senior Counsel for Mr.M.Venkatachalam J U D G M E N T (Judgment of the Court was delivered by The Hon'ble The Chief Justice) These are appeals from an order passed by S.Rajeswaran, J. The question at issue is whether leave under Clause 12 of the Letters Patent was at all necessary for filing an application before this Court under Section 9 of the Arbitration and Conciliation Act, 1996, hereinafter for brevity's sake referred as to as the "Act", where a part of the cause of action has arisen within the jurisdiction of this Court, but the rest has arisen outside. 2. The facts are that respondents 1 to 3 are the majority shareholders of the fourth respondent-M/s. Gordon Woodrroffe Limited. The fourth respondent is the absolute owner of several immovable properties including the properties situate at Chennai. The fourth respondent, of which respondents 1 to 3 are https://hcservices.ecourts.gov.in/hcservices/ the majority shareholders, being desirous of disposing of its immovable properties, floated a proposal in the form of an Information Memorandum in September, 2005 wherein the modality adopted for such disposal was by way of sale of shareholding of respondents 1 to 3 who held 93.47% shares in the fourth respondent. The appellant-M/s.Dynasty Developers Private Limited agreed to purchase the shares of the fourth respondent and the terms of the agreement were reduced into writing under a Share Purchase Agreement dated 21.12.2005. As per the Share Purchase Agreement, the total consideration to be paid was a sum of Rs.238.05 crores. The appellant paid an advance of Rs.34 crores which includes a sum of Rs.9 crores for the non-competing clause executed by the second respondent. The agreement contains an arbitration clause that the disputes between the appellant and respondents 1 to 3 arising out of the contract would be decided by arbitration. Disputes arose between the parties and a reference has been made to the arbitral tribunal in accordance with the agreement. 3. Apprehending that the respondents would act contrary to the Share Purchase Agreement and either deal with or alienate shares and/or properties of the fourth respondent, the appellant preferred three separate applications being O.A. Nos. 452, 453 & 454 of 2006 under Section 9 of the Act for various interim injunctions. The appellant has invoked the jurisdiction of this Court on the ground that the fourth respondent is registered within the jurisdiction of this Court and the shares of the fourth respondent having situs within the jurisdiction of this Court. In short, the appellant alleged that the contract was to be concluded within the jurisdiction of this Court and as such, part of cause of action arose within the local limits of this Court. The respondents 1 to 3 raised a two fold objection to the jurisdiction of this Court. First, on the ground that none of the respondents has a place of business within the local limits of this Court and since the agreement itself was entered into at Bangalore no cause of action arose in Chennai, and therefore, this Court has no jurisdiction to entertain the applications filed against them. Secondly, it was contended that the jurisdiction of this Court has been invoked on the ground that part of cause of action has arisen within the jurisdiction of this Court and the rest has arisen outside. Therefore, these applications could not have made in this Court without obtaining the leave under Clause 12 of the Letters Patent and as such, https://hcservices.ecourts.gov.in/hcservices/ these applications must be rejected in limine. The fourth respondent, who challenged the maintainability of the applications on the ground that it was not a party to the arbitration clause also raised a preliminary objection of absence of leave under Clause-12 of the Letters Patent. 4. The applications under Section 9 of the Act were decided by S.Rajeswaran, J, and he agreed with the appellant that a part of the cause of action arose within the jurisdiction of this Court. But he proceeded to hold that in order to maintain the applications, it was a pre-condition that leave under Clause-12 of the Letters Patent should have been obtained. As it had not been obtained, the learned Judge held that he had no jurisdiction to entertain the applications and accordingly dismissed them. Briefly speaking, the reasoning of the learned Judge was that an application for interim relief under Section 9 of the Act could only be made in a Court, which would have jurisdiction if the arbitration proceedings were to be considered as a suit and if such a suit lay in the Court. The learned Judge held that the jurisdiction to file such a suit could only be obtained in this High Court, if leave under Clause-12 of the Letters Patent was given. According to the learned Judge, no relief could be granted in an application under Section 9 of the Act, unless such prior leave has been obtained. 5. The point that arises for our consideration is of some importance. Leave under Clause-12 of the Letters Patent can only be given in the case of a suit. The Madras High Court Original Side rules prescribe the procedure for filing of application and obtaining of leave to institute a suit vide Order III Rule 1, the rules governing the proceedings under the Arbitration Act namely, Order XLIII does not require filing of any application for leave, but only an affidavit inter alia showing that this Court has jurisdiction to try the application. In so far as the practice of this Court is concerned, leave under Clause-12 of the Letters Patent was never insisted upon for application under the Arbitration Act, 1940, and thereafter, under the Arbitration and Conciliation Act, 1996. This position stood reaffirmed by the fact that the applications filed by the appellant seeking leave under Clause-12 of the Letters Patent to move fresh applications under Section 9 of the Act were returned by the Registry with an endorsement to the effect that Clause-12 was https://hcservices.ecourts.gov.in/hcservices/ inapplicable to the said applications. Therefore, it requires careful consideration as to whether such leave need be granted at all in the case of an application, where no suit has in fact been filed. 6. It is necessary to set out the following provisions of the Act in order to deal with this issue. Section 2(1)(e) of the Act which defines the term 'Court' runs as follows: "Sec - 2(1)(e) - 'Court' means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such principal civil Court, or any Court of Small Causes." Section 42 of the Act reads as follows: - "Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent application arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court." 7. Clause 12 of the Letters Patent deals expressly with the jurisdiction of the High Court in its ordinary Original Jurisdiction or Original Side to receive, try and determine suits and suits only, for it states inter alia: - "12. Original Jurisdiction as to Suits - .... that the said High Court of Judicature at Madras, in exercise of its ordinary original civil jurisdiction, shall be empowered to receive, try, and determine suits of every description if, in the case of suits for land or other immovable property, https://hcservices.ecourts.gov.in/hcservices/ such land or property shall be situated, or, in all other cases, if the cause of action shall have arisen, either wholly, or, in case the leave of the Court shall have been first obtained, in part, within the local limits of the ordinary original jurisdiction of the said High Court: or if the defendant at the time of the commencement of the suit shall....." 8. Section 2(1)(e) of the Act defines court to mean the principal civil court of original jurisdiction in a district. The definition is both inclusive and exclusive. It specifically includes the High Court in exercise of its ordinary original civil jurisdiction within the ambit of the definition of "court" and excludes "civil courts of a grade inferior to such principal civil court" and Court of Small Causes. This definition includes High Court wherever the High Court exercises original jurisdiction. The definition of court has thus been narrowed down to mean and include the district court and the High Court in exercise of its ordinary original civil jurisdiction. The only condition is that it should have jurisdiction to decide the questions forming the subject matter of the arbitration if the same would have been the subject matter of a suit. Further, on a conjoint reading of Section 2(1)(e) and 42 of the Act, it is seen that the Parliament intended to make only one court - the principal civil court of original jurisdiction, or as the case may be, the High Court in exercise of its ordinary original jurisdiction, whichever court is approached earlier, as the venue for all matters connected with an arbitration agreement and award and all arbitral proceedings. Admittedly, the principal civil court of original jurisdiction for Chennai is the High Court of Judicature at Madras and not the City Civil Court. Undoubtedly, obtaining of leave under Clause 12 of the Letters Patent is a condition precedent to the entertaining by this Court of a suit in which the cause of action has arisen, in part, outside the jurisdiction of this Court. The question is whether the condition of obtaining of leave which is applicable to a suit will also apply to an application under the Arbitration Act. The submission of Mr.Vinod Bobde and Mr.P.S.Raman, learned Senior Counsel appearing for the appellant is that the analogy of a 'suit' given under Section 2(1)(e) of the Act is only for a limited purpose to find out the right court. According to them, the procedure for obtaining leave https://hcservices.ecourts.gov.in/hcservices/ would apply only to a suit and not to an application under the Arbitration Act. On the other hand Mr.A.L.Somayaji and Mr.T.R.Rajagopalan, learned counsel appearing for the respondents would contend that the condition of obtaining of leave under Clause 12 of the Letters Patent is a condition precedent going to the root of the jurisdiction of the court and not a mere matter of procedure, and if the leave is not obtained, this Court cannot assume jurisdiction where a part of cause of action has arisen outside its local limits, and therefore, the condition would also govern an application under the Arbitration Act. Both sides referred to a large number of reported decisions. 9. Learned counsel appearing for the appellant placed strong reliance on a Division Bench decision of the Calcutta High Court in Rebati Ranjan Chakravarti Vs. Suranjan Chakravarti, AIR 1963 Calcutta 642. In that case two questions arose before the Division Bench, namely., one relating to the maintainability of the appeal and the other relating to the question whether leave under clause 12 of the Letters Patent was at all necessary for filing an application before the Court under Section 20 of the Arbitration Act, 1940. Of the two learned Judges constituting the Bench D.N.Sinha, J. (as he then was) held that, as the impugned order was not one as enumerated in Section 39(1) of the Arbitration Act, 1940, no appeal lay under clause 15 of the Letters Patent. In that view of the matter D.N.Sinha, J. did not decide the other question as to whether leave under clause - 12 was at all necessary or not. S.Datta, J., the other learned Judge, while agreeing with the conclusion arrived at by D.N.Sinha, J., decided the other question. It was observed by S.Datta, J. as follows - "21. Section 2(c) of the Arbitration Act points out the Court which can have jurisdiction over the subject matter of a reference. It is that Court which could entertain a suit if the subject matter of reference was the subject matter of a suit. Section 31 lays down the conditions requisite for entertaining an Award and/or an application. In other words, Clause 12 of the Letters Patent does not determine the jurisdiction of the Court but Section 2(c) read with Section 31 does it and in so doing Section 2(c) indirectly incorporates the https://hcservices.ecourts.gov.in/hcservices/ provisions of the Letters Patent. To put it differently, Clause 12 of the Letters Patent cannot determine the jurisdiction but for Section 2(c) read with Section 3. Hence jurisdiction of the Court to entertain an application including an application for appointment of Receiver and/or an Award does not flow from the Letters Patent but springs from Section 31 read with Section 2(c) which by reference attracts Clause 12 of the Letters Patent. 22. Hence the determination of the existence or non-existence of jurisdiction of a Court to entertain an application under the Arbitration Act is conditioned by Section 2(c) and Section 31 of the Arbitration Act and is consequently 'under this Act', and therefore attracts Section 39(1) of the Arbitration Act." 23. In this view of the matter, it is immaterial to consider whether it is necessary in order to found jurisdiction in the High Court that a part of the cause of action should arise within the local limits of jurisdiction and further in such a case leave should be taken before filing the plaint or it is sufficient if a part of the cause of action only arises within the local limits of the jurisdiction." 10. Our attention was also drawn by the learned counsel for the appellant to a decision in S.P.C.Engineering Co. Vs. Union of India, AIR 1966 Calcutta 259, in which P.C.Mallick, J. rejected the argument that application under Section 20 of the Indian Arbitration Act, 1940 is a 'suit' within the meaning of Clause 12 of the Letters Patent and unless the whole of the cause of action arises within the jurisdiction of the Court, the Court is not competent to entertain a suit unless leave is previously obtained. Learned Judge at paragraph -12 of the judgment observed as follows: "There is substance in the contention of Mr.Sen that the two kinds of suits referred to above should also be considered as suit even though it is not initiated by the presentation of the plaint. But the https://hcservices.ecourts.gov.in/hcservices/ question is not whether the proceeding under Section 20 is or is not a suit, but the question is whether it is a suit within the meaning of clause 12 of the Letters Patent. In my judgment the test to be applied for determining whether a proceeding is a suit within the meaning of clause 12 of the Letters Patent is not whether it is initiated by presentation of plaint, or by summons or by notice. The test is whether the proceeding is intended to terminate in a final adjudication of the rights of the parties by a decree in that proceeding. An order passed by a Judge in an originating summons suit is required to be drawn up under Chapter XIII, Rule 20 as 'a decree of the Court' apparently because the rights of the parties are finally adjudicated by the judgment or order. Because of this O.S. suits are treated as suits within the meaning of clause 12 of the Letters Patent. In the case of an application under Section 20, however, all that the court is required to do is to pass an order filing the agreement and making an order of reference. The proceedings comes to an end by the passing of the said order. The wording of Section 20(2) is the 'application shall be numbered and registered as a suit', does suggest that it is not a suit in the fullest sense of the term. It seems to me that because of this that an application under Section 20 of the Arbitration Act has never been treated as a suit within the meaning of clause 12 of the Letters Patent." 11. The above decision of P.C.Mallick, J was followed by the Bombay High Court in Standard Batteries Limited v. Casings (India) Pvt.Ltd., 1979 (81) Bom.L.R.33. In that case, Bharucha, J (as His Lordship then was) while dealing with this very issue held that the phraseology of Section 20 of the Arbitration Act, 1940 makes it clear that an application for filing of an arbitration agreement in Court is required to be numbered and registered as a suit, not that such application is a suit or even that is to be by way of a suit. The requirements that such application should be numbered and registered as a suit is procedural. Therefore, the application or "suit" under Section 20 of the Arbitration Act, 1940 is not a suit within the meaning https://hcservices.ecourts.gov.in/hcservices/ of Clause 12 of the Letters Patent. Consequently, leave under Clause-12 cannot be granted in an application or "suit" filed under Section 20of the Arbitration Act, 1940. 12. Same was the view taken by another single Judge of the Bombay High Court namely, S.M.Jhunjhunuwala, J in Harishankar Singhania v. Dr.Gaur Hari Singhania, 1997 (1) M.H.L.J. 9. 13. Learned counsel appearing for the respondents, however, contended that the view taken by the Division Bench of the Calcutta High Court in AIR 1963 Calcutta 642 and that of P.C.Mallick, J. in AIR 1966 Calcutta 259 is no longer good law in view of a subsequent Division Bench judgment of the Calcutta High Court in Tobu Enterprises Pvt. Ltd. Vs. Camco Industries Ltd., AIR 1984 Cal 24. The facts of that case were that the learned single Judge granted leave under Clause 12 of the Letters Patent to the respondents to make an application under Section 20 of the Arbitration Act, 1940. The said application was registered as Special Suit No.3A of 1983. Tobu Enterprises preferred an appeal against the order granting leave under Clause-12 of the Letters Patent. The respondent in the appeal raised an objection that the appeal was not maintainable under Section 39(1) of the Arbitration Act, 1940, as the order granting leave under Clause-12 of the Letters Patent must be treated as an order passed under the Arbitration Act on account of the provisions of Section 2(c) and 31(2) of the Act. The Bench rejected the contention of the respondent that the order was passed under the Arbitration Act and held that so long as the leave is not granted there is no proceeding before the Court under the Arbitration Act and as such there can be no order under the Arbitration Act. It was, further, argued on behalf of the respondents in that case that the jurisdiction of the High Court to entertain an application under the Arbitration Act depended wholly on the provisions of Section 2(c) and Section 31 (1) and (2) of the Arbitration Act and not on Clause 12 of the Letters Patent and as such no leave is necessary to make an application under the Arbitration Act on the ground that only a part of the cause of action arose within the jurisdiction. In support of this contention, the respondents' counsel relied upon the observation of Dutta, J in Rebati Ranjan Chakravarti Vs. Suranjan Chakravarti (supra). Dealing with Dutta, J's observations the Bench observed in para 12 as follows: https://hcservices.ecourts.gov.in/hcservices/ "While it is true that Section 2(c) read with Section 31 of the Arbitration Act determines the jurisdiction of the Court, most respectfully we beg to differ with the observation of the learned Judge that Section 2(c) indirectly incorporates the provisions of the Letters Patent or that it attracts Clause 12 of the Letters Patent. Consequently, we are unable to subscribe to the view of the learned Judge that it is immaterial whether a part of the cause of action should arise within the jurisdiction of this Court or leave under Clause 12 should be taken or not ." 14. The Division Bench also gave its reasons for differing with the view taken by Dutta, J by analyzing the scope and effect of Sections 2 (c) and 31 (1) and (2) of the Arbitration Act in the manner stated in para 13 of the report. The reasonings are as follows: - "13. Let us consider the observations of Datta, J. that Section 2(c) indirectly incorporates the provisions of the Letters Patent and attracts Clause 12 thereof. Section 2(c) defines Court, inter alia, as mentioning a civil court having jurisdiction to decide the questions forming the subject-matter of a reference if the same had been the subject-matter of the suit. So, under Section 2 (c), a court for the purpose of the Arbitration Act is a civil court having jurisdiction to decide the questions forming the subject-matter of a reference. The word 'questions' in Section 2(c) is significant to be noticed. Section 2(c) enjoins that the civil court should have jurisdiction to decide the 'questions', that is to say, all the questions forming the subject-matter of a reference. It, therefore, follows that if, in a given case, the civil court has not the jurisdiction to decide all the questions, but only one or some of the questions forming the subject- matter of a reference, that particular civil court will not have jurisdiction in terms of Section 2 (c). Similarly, under sub-sections (1) and (2) of https://hcservices.ecourts.gov.in/hcservices/ Section 31 of the Arbitration Act, a Court not having jurisdiction in the matter to which the reference relates in a particular case, will have no jurisdiction to decide the questions referred to in sub-section (2). Here also the word 'matter' in sub-section (1) refers to the entire matter and not part of it. In view, however, of the provisions of Sections 17, 19 and 20 of the Civil Procedure Code, such a situation creates no difficulty in filing a suit in a civil court. Under Section 17, suits for immovable property situate within the jurisdiction of different courts may be instituted in any