Rajasthan State Electricity Board vs M/S. Universal Petro Chemicals Ltd

2. The appellant Board which is having its base and operation at Jaipur placed an order for supply of 50 kiloliter of transformer oil with the respondent Company which is having its registered office and manufacturing unit at Calcutta vide purchase order No. RSEB/SE/Proc.I/TN-1261/U/Petrochemical/937 dated 23.9.1985 for an amount of Rs. 6,09,144/-. In terms of clause 5 of the said purchase order, the respondent was required to deposit security in the form of bank guarantee for an amount equivalent to 2 per cent of the contract value. In addition, the respondent was also required to furnish a performance guarantee equivalent to 5 per cent of the contract value for satisfactory performance and due execution of the said contract. Subsequent to the aforesaid purchase order, an agreement was also entered into between the parties on 16.10.1985 at Jaipur.

3. Subsequently the appellant Board placed another purchase order vide No. RSEB/SE/Proc.I/TN-1312/202 dated 02.12.1987 for supply of 150 kiloliter of transformer oil for an amount of Rs. 19,50,000/-. Similar to the previous purchase order, in the present purchase order also the respondent was required to furnish the bank guarantee equivalent to 2 per cent of the contract value Page 2 of 23 towards security deposit and equivalent to 5 per cent of the contract value towards performance guarantee. Accordingly an agreement was also entered into between the parties on 16.12.1987 at Jaipur.

6. Somehow the disputes arose between the parties. The appellant alleged that the respondent has failed to perform his part of the contract inasmuch as the respondent has supplied defective Page 5 of 23 transformer oil and as such on receipt of such supply, the same was rejected by the Board requiring the respondent to replace the same. Thereafter the appellant took steps for invocation of the bank guarantees in view of the fact that the respondent has failed to adhere to the aforesaid requirement and also neglected to replace the defective transformer oil.

7. The respondent being aggrieved by the actions taken by the appellant filed a petition under Section 20 of The Arbitration Act, 1940 (for short the "Act") in the nature of a suit in the High Court at Calcutta being Special Suit No. 70 of 1990. In the said suit, the respondent also moved an application under Section 41 of the Act seeking interim reliefs. The appellant herein contested the aforesaid suit. By an Order dated 06.03.1991, the learned Single Judge of the High Court dismissed the petition and also vacated the interim order which was passed earlier.

12.According to the appellant, the Calcutta High Court would have no jurisdiction to entertain and decide the aforesaid petition under Section 20 of the Act and that it is only the Court at Jaipur which would have territorial jurisdiction to entertain and decide any such petition filed by any of the party, in view of the specific intention of the parties as disclosed from the stipulations in the purchase order and agreements entered into between the parties.

(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.

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29.In view of the aforesaid findings and conclusions arrived at by us holding that it is only the Court at Jaipur which will have jurisdiction to try and decide the arbitration proceedings between the parties and also entertain a petition of the aforesaid nature i.e. Page 21 of 23 Section 20 of the Act, we set aside and quash the judgment and order of the Division Bench of the Calcutta High Court. Both the appeals are allowed to the aforesaid extent. The Registry of the Calcutta High Court is directed to transfer the petition filed by the respondent under Section 20 of the Act alongwith all the records to the District Judge, Jaipur, as expeditiously as possible but not latter than four weeks from the date of receipt of this order. The District Judge, Jaipur on receipt of the said petition alongwith the transmitted records shall allocate it to the competent and appropriate Court, which would thereafter issue Notice to both the parties. The concerned Court shall thereafter deal with the matter in accordance with law.