Case: Subhlaxmi Fabrics Pvt. Ltd Vs. Chand Mal Maradia

2. The first respondent Chand Mal Baradia filed Title Suit No.993 of 1999 in the City Civil Court at Calcutta for permanent injunction restraining the defendants from proceeding with the arbitration proceedings, which had been initiated by the appellant Shree Subhlaxmi Fabrics Pvt. Ltd. The case of the plaintiff (first respondent) in brief is that he was carrying on business under the name and style of M/s. Chand Mal Praksh Chand and Co. at Calcutta; that Shree Subhalaxmi Fabrics Pvt.Ltd., Mumbai (defendant No.1), which is a company registered under the Companies Act and sells cloth through its agent M/s. Naresh Enterprises, which has its office at Calcutta, under the terms and conditions as dictated by defendant No.1; that the plaintiff was getting supplies against the orders placed by him at Calcutta through the agent of defendant No.1; that all such supplies were made by the agent to the plaintiff at Calcutta at his premises No.160, Jamunalal Bajaj Street and all payments made by the plaintiff were collected by this agent on behalf of defendant No.1 at Calcutta; that the plaintiff was taking delivery of goods at Calcutta on the basis of Railway Receipts/Lorry Receipts and consignment notes from the said agent M/s. Naresh Enterprises. The case of the plaintiff further is that there was no arbitration agreement between the plaintiff and defendant No.1 any point of time for referring their disputes to any arbitrator; that he was not a member of defendant No.2 M/s. Hindustan Chambers of Commerce, having its office in Mumbai. As the plaintiff became seriously ill some time in early part of 1997, he could not look after his business and consequently there was some delay in making payments to defendant No.1; that the plaintiff paid more than Rs.4 lakhs of defendant No.1 and the last payment was made on 27.2.1999; that in April, 1999 the plaintiff received two notices from defendant No.2 intimating that the defendant No.1 had initiated arbitration proceedings and the plaintiff was asked to nominate an arbitrator and send a sum of Rs.200/- as arbitration fee; that the defendant No.2 had no jurisdiction or authority to act as an arbitrator and accordingly the plaintiff requested it not to proceed with the arbitration case. The case of the plaintiff further is that the defendant No.1 another arbitration proceeding bearing No.A/186 before defendant No.2 claiming that M/s. Chand Mal Prakash Chand and Co. was also the proprietor of Arihant Textiles; that the plaintiff informed by sending a letter to defendant No.2 on 18.5.1999 that he had never placed any order in the name of Arihant Textiles at any point of time and, therefore, the case be dropped. The plaintiff filed an application under Order 39 Rule 1 and 2 and Section 151 CPC for restraining the defendants from proceeding with the arbitration cases3. The appellant Shree Subhlaxmi Fabrics Pvt. Ltd. (defendant No.1) opposed the prayer for grant of injunction and also filed an application under Section 20 read with Section 151 CPC on the ground inter alia that the defendant No.1 is a cloth merchant, which is carrying on business all over India; that M/s. Naresh Enterprises having its office at Calcutta had been engaged as a middleman by the appellant, who procured a buyer namely Chand Mal Prakash Chand & Co. represented by Chand Mal Baradia and others at Calcutta; that M/s. Naresh Enterprises contacted defendant No.1 at Mumbai for supply of cloth upon which the defendant No.1 sent their indents through the said middleman to the said M/s. Chand Mal Prakash Chand & Co. (plaintiff), which was duly accepted by them; that the defendant No.1 supplied cloth valued at approximately Rs.20 lakhs in 1996-97 to the plaintiff; that in the indents (contracts) terms and conditions were mentioned and condition Nos.6 and 7 read as under:-Clause-6 Dispute under this contract shall be decided by the Court of Bombay and no other courtsClause-7 If any dispute arises about the transaction the same shall have to be referred to the Hindustan Chamber of Commerce, Bombay, for decision under its Arbitration RulesIt was further stated in the application filed by the appellant (defendant No.1) that in the indent/offer letter, which was prepared and sent by the middleman M/s. Naresh Enterprises, to the office of defendant No.1 a condition was mentioned regarding jurisdiction of courts, which reads as under:-UNDER JURISDICTION OF THE COURT FROM WHERE THE GOODS HAVE BEEN DESPATCHEDIn all the bills/invoices, which were sent to the plaintiff, it was specifically mentioned at the top subject to Mumbai jurisdiction and at the left hand side at the bottom the following was written:-In case of dispute arising out of the transaction between the vendors and the purchaser and the brokers or agent either for payment or any other dispute in relation to the transaction, the same shall be referred to the Hindustan Chamber of Commerce, Mumbai, for decision under its Arbitration Rules and the Award made thereunder shall be binding upon the partiesSince dispute arose between the parties regarding payment of the goods sold and delivered, the appellant referred the matter to the Hindustan Chamber of Commerce, Mumbai, for arbitration and appointed Shri Shikhar Chand Jain as its arbitrator. The Hindustan Chamber of Commerce (defendant No.2) had entered upon the reference and had served a notice upon the plaintiff by letter dated 31.3.1999 calling upon them to appoint one of their arbitrators from the panel/list sent by it and further to deposit Rs.200/- as arbitration fee. The said letter was duly replied by the plaintiff on 20.4.1999 along with a fee of Rs.200/-. A specific plea was thus raised by defendant No.1 that the court at Calcutta had no territorial jurisdiction to try the suit and further that in view of the arbitration agreement contained in the indent (contract) and also the fact that the plaintiff had already responded to the notice issued by the defendant No.2, there was no ground for granting any injunction order in their favour4. The City Civil Court at Calcutta, after a detailed consideration of the matter, held that the said court had no jurisdiction to try the suit and further that the arbitration proceedings having already commenced, the civil court should not interfere with the functioning of the arbitrator (defendant No.2). It was accordingly held that the plaintiff had no prima facie case to go for trial and the balance of convenience lies in favour of the defendants. It was further held that the plaintiff will not suffer any irreparable injury in the event of refusal of injunction. The application was accordingly dismissed by the order dated 22.2.2000

Court's reasoning:
are of the opinion that the view taken by the City Civil Court was just and proper and the High Court erred in granting an injunction in favour of the plaintiff and staying the proceedings before defendant No.221. In our opinion that approach of the High Court is not correct. The plea of the jurisdiction goes to the very root of the matter. The trial court having held that it had no territorial jurisdiction to try the suit, the High Court should have gone deeper into the matter and until a clear finding was recorded that the court had territorial jurisdiction to try the suit, no injunction could have been granted in favour of the plaintiff by making rather a general remark that the plaintiff has an arguable case that he did not consciously agree to the exclusion of the jurisdiction of the court22. On overall consideration of the matter, we are clearly of the opinion that on the facts and circumstances of the case the view taken by the trial court was perfectly correct and the High Court has erred in reversing its order and granting an injunction in favour of the plaintiff.