THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.83 of 2011 (Dated : 30-11-2011) Between: M/s. Gloabal Infra Villas (P) Ltd., Rep. by its Managing Director Mr.Shaik Shamshuddin GF-3 Cresents Majestic Complex, Ramakrishnapuram, Secunderabad-06 ...Applicant A n d M/s. Godrej & Boyce Manufacturing Co. Ltd., Rep. by its Dy. General Manager 201 & 202, Lala-1, Land Mark, Mahatma Gandhi Road, Secunderabad- 500 003. ....Respondent THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Arbitration Application No.83 of 2011 ORDER: This arbitration application has been taken out by M/s. Global Infra Villas (P) Ltd., under Section 11 of the Arbitration & Conciliation Act, 1996 (“the Act”, for brevity) read with Clauses 2 and 3 of the Scheme for Appointment of Arbitrator, 1996, for resolution of the disputes relatable to Work Order dated 27-02-2010/15-04-2010. 2. The applicant- M/s. Global Infra Villas (P) Limited is an approved vendor of the respondent company-M/s. Godrej & Boyce Manufacturing Company Limited, vide Code No. FG 018 T. The respondent issued a Work Order dated 27-02- 2010/ 15-4-2010 to the applicant to carry out civil, interior and HVAC work at Q-city, 6th ﬂoor, Gachibowli, Hyderabad. The value of the work is Rs.71,91,293/-. The work commenced on 29-3-2010 and completed on 15- 10-2010. The respondent paid Rs.36,67,144/- against the work order of Rs.71,91,293/-. In spite of several requests made by the applicant to clear the bills, the respondent has not responded properly. As per Clause 32 of the Work Order, the disputes between the parties are required to be resolved as per the provisions of the Act. The petitioner invoked arbitration clause in the work order and issued notice dated 16-8-2011 requesting the respondent to appoint an arbitrator to resolve the disputes. The respondent under reply dated 27-8-2011 disputed its liability. Hence this application by M/s. Global Infra Villas (P) Ltd. seeking the relief stated supra. 2. The respondent ﬁled counter. It is stated in the counter that this Court has no jurisdiction to entertain the application for the reason that the parties mutually agreed to the exclusive jurisdiction of High Court of Mumbai only, as per Clause (32) of the Work Order, dated 15-4-2010. 3. Heard learned counsel appearing for the applicant and learned counsel appearing for the respondent. 4. Learned counsel appearing for the applicant submits that no cause of action has arisen within the jurisdiction of Mumbai High Court and therefore, the clause in the Work Order conferring jurisdiction on Mumbai High Court cannot be made applicable to the present proceedings. In support of his submission, reliance has been placed on the decision of this Court in Vijay Electricals Limited v. Mohan Exports (India) Pvt. Ltd. [1], wherein a learned Single Judge of this Court has held that application for appointment of arbitrator is entertainable by other courts where part of cause of action has arisen. 5. Per contra; learned counsel appearing for the respondent submits that since the parties by mutual consent conferred jurisdiction on Mumbai High Court only, the present application moved before this Court by the applicant seeking appointment of arbitrator is not maintainable. He placed reliance on the judgment of Supreme Court in M/s. Hanil Era Textiles Ltd. v. M/s. Puromatic Filters (P) Ltd.[2] Much emphasis has been laid on paragraph (7) of the cited judgment, which reads as hereunder:- “7 The eﬀect of Clause 17 of the Purchase Order which mentions - any legal proceedings arising out of the order shall be subject to the jurisdiction of the Courts in Mumbai, has to be examined in the aforesaid background. Under sub-sections (a) and (b) of Section 20, the place of residence of the defendant or where he carries on business or works for gain is determinative of the local limits of jurisdiction of the Court in which the suit is to be instituted. Sub-section (c) of Section 20 provides that the suit shall be instituted in a Court within the local limits of whose jurisdiction the cause of action, wholly or in part, accrues. As shown above, in the present case, a part of cause of action had accrued in both the places, viz., Delhi and Bombay. In Hakam Singh v. Gammon (India) Ltd. 1971 (1) SCC 286, it was held that it is not open to the parties to confer by their agreement jurisdiction on a Court which it does not possess under the Code. But where two Courts or more have under the Code of Civil Procedure jurisdiction to try a suit or a proceeding, an agreement between the parties that the dispute between them shall be tried in one of such Courts is not contrary to public policy. It was also held that such an agreement does not contravene Section 28 of the Contract Act.” 6. The issue that calls for adjudication in this application is: Whether any cause of action has arisen within the jurisdiction of Mumbai High Court, so as to press into service Clause 33 of the Work Order? 7. POINT: Clause 33 of the Work Order reads as hereunder:- “ 33.APPLICABILIT Y OF LAWS The parties expressly agree that only the competent courts of jurisdiction at Mumbai shall have exclusive jurisdiction in all matters arising hereunder and the cause of action shall be deemed to have arisen in Mumbai”. 8. Admittedly, the Work Order has been issued to the applicant at Hyderabad. The applicant carried out the work at Hyderabad and part payment was made by the respondent to the applicant at Hyderabad. No part of cause of action has arisen within the jurisdiction of Mumbai High Court. It is well settled that the parties by way of mutual consent cannot confer jurisdiction on a Court within whose jurisdiction no cause of action has arisen. Where two or more courts have jurisdiction under the Code, it is permissible to have an agreement between the parties restricting the place of suing to any one of them and if such restriction is placed in the agreement, the same cannot be said to be contrary to public policy and does not contravene Section 28 of the Contract Act. But, such restriction cannot be made and the parties cannot by agreement confer jurisdiction on a Court, which otherwise does not possess under the code. 9. Coming to the facts of the case on hand, no part of cause of action has arisen within the jurisdiction of Mumbai High Court. Therefore, clause (33) of the Work Order cannot be pressed into service. Since whole of cause of action has arisen at Hyderabad, this Court is competent to entertain the application for appointment of arbitrator. 10. The claim of the applicant has been disputed by the respondent. The disputes between the parties are required to be settled by way of arbitration. The applicant invoked arbitration clause and requested the respondent to appoint an arbitrator to resolve the disputes under a notice dated 16-8-2011. Para (3) of the notice dated 16-8-2011 need to be noted and it reads thus:- “ That is sum of Rs.36,67,144/- (Rupees Thirty Six Lakhs sixty seven thousand one hundred and forty four only) was paid against the work order of Rs.72,00,000/- (Seventy two Lakhs only) which is just 50%. As per the terms of the contract you were required to pay 35% of the contract value. My client states that they had made several requests to clear the bills, you have not been responding properly. Further, by e-mail dated 23-07-2011 you informed my client that the issue is not going to be resolved so easily and you gave a option to my client to reduce Rs.10 lakhs from the ﬁnal bill which is totally arbitrary and illegal. My client is not prepared to forgo Rs.10 Lakhs to which he is legally entitled. Having got the work completed at the cost of my client and having realized the money from the client namely Q-City, Gachibowli, Hyderabad and after your customer had also put the premises to use, it is not proper on your part to refuse the outstanding bill of my client amounting to almost Rs.16 Lakhs, which I call upon you to pay to my client within 15 days from the date of receipt of this notice. If you desire to drive my innocent client to Arbitration as per clause 32 of the Work Order dated 5-4-2010 you may appoint an Arbitrator to resolve the dispute if any within 15 days or else, my client will be constrained to take recourse to law and in such an event you alone, will be held responsible for the costs and consequences incidental thereto”. 11. The respondent issued a reply dated 27-8-2011 making a counter claim against the applicant on the ground of defective workmanship and abnormal delay in execution of the work. 12. A reading of notice and reply notice exchanged between the parties indicates that there exists a dispute relatable to the Work Order dated 15-4-2010. The dispute is required to be resolved by way of arbitration, as per Clause 32 of the Work Order. In that view of the matter, the applicant made out valid ground for appointment of arbitrator. 13. Accordingly, the Arbitration Application is allowed appointing Sri Justice A.Hanumanthu, a retired High Court Judge, as an Arbitrator for resolution of the disputes between the parties relatable to the Work Order dated 15- 4-2010. The learned Arbitrator is at liberty to ﬁx his own fee. _____________________ B.SESHASAYANA REDDY, J Dt.30-11-2011 RAR [1] 2008(2) ALT 449 [2] AIR 2004 SUPREME COURT 2432