Case Briefs
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Hemang Resources Ltd. Through Mr. … Vs Bank Of India On 3 November, 2020

 


Author: Surya, 3rd Year student at RNB Global University, Bikaner.


Citation:  N/A

Date of Decision: 3 November, 2020

Bench: S.C. Sharma & Shailendra Shukla

Original Copy:  N/A

Statutes involved:  Commercial Court Act, 2015, Code of Civil Procedure, 1908, Indian Arbitration and Conciliation Act, 1996

 

Issue in question

  • Whether an arbitration clause can be invoked in the case of a dispute under a superseded contract?
  • Whether the Civil Suit was maintainable as the territorial jurisdiction lies at Nagpur?

Background:

                 ο A company which was registered under Companies Act was aggrieved by an order dated 8.8.2020 that’s why the company filed an appeal under Section 13 (1-A) of the Commercial Court Act, 2015 r/w Order XLIII of the Code of Civil Procedure, 1908.

    • Appellant entered into a contract with Respondent No.3 for consignment of washed coal and the agreement was reduced in the form of work order dated 29 Sep.2015.
    • Only because of this order the appellant has furnished a bank guarantee, from Bank of India, Indore Branch dated 07.10.2015, of Rs. 5,00,00,000/- in favour of respondent No.3. 
    • The order was cancelled on 07, Nov.2017.
  • Appellant stated that the respondent had made a request through its banker to encash the bank guarantee and a civil suit was preferred and on 12 Dec. 2017 the Commercial Court granted interim protection against the encashment of bank guarantee.
    • Respondent No. 3 moved a petition under Article 227 and challenged the order of commercial court and the petition was dismissed with a liberty to the petitioner to prefer appropriate application for impleadment.
  • The appellant argued that the impugned order passed by court on 8 Oct. 2020 is irrational and liable to be set aside. It was also submitted that the terms related to the resolution of disputes has also come to an end with the mutual termination of the work order. Thus, it was argued that there was no arbitration agreement between the parties.
  •  The respondent replied that the agreement was executed between parties on 29.09.2015 and Clause – 10 and 11 of the agreement talks about arbitration. It was stated that the appellant had committed mischief by not involving respondent no. 3 as defendant in a civil suit, which was filed in 2017. The bank guarantee had arisen out of the agreement made between the appellant and respondent no.3 thus respondent no.3 should have been implemented as defendant.
  • The appellant contended that the agreement was cancelled on 07 Nov. 2017 and he filed civil suit in 2017 when the bank guarantee was encashed and did not make respondent no. 3 as defendant in the miscellaneous petition.
  • The trial Court, while passing the impugned order, held that the Court at Indore is not having jurisdiction keeping in view the specific clause as contained under the agreement and the suit has been returned as per provisions of Order VII Rule X of the Code of Civil Procedure, 1908.
  • The appellant relied on the judgment given in Union of India v/s Kishorilal Gupta that the arbitration clause mentioned in the contract also perished as the contract was extinguished by a substituted agreement. But in the present case there is only one agreement out of which dispute has arisen between the parties.

Judgment:

  • The agreement was executed at Nagpur, the appellant / Company has its registered office at Chennai, the respondent No.3 / Company had its registered office at Nagpur, the work was to be executed at Karnataka, merely because the bank guarantee was prepared at Indore, it will not give rise to cause of action at Indore.
  • It was held that the territorial jurisdiction, according to agreement executed between the parties on 29, Sep.2015, lies at Nagpur, the Commercial Court was certainly justified in returning the plaint to present the same before the Court having jurisdiction in the matter.
  • The Court does not find any reason to interfere with the order passed by the Commercial Court therefore it dismissed the present Miscellaneous Appeal.

Critical Analysis:

  • In this case there was a question of jurisdiction arises because the agreement was executed at Nagpur, the appellant Company’s registered office was at Chennai, the respondent No.3 / Company had its registered office at Nagpur, the work was to be executed at Karnataka and there was an exclusive clause in the contract relating to the jurisdiction and merely because the bank guarantee was prepared at Indore, it will not give rise to cause of action at Indore. 
  • Thus, the court has rightly held that according to the terms and conditions mentioned in the contract the territorial jurisdiction lies at Nagpur. 

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