2009 (9) TMI 874 - SC - Indian Laws

Enforceability of Jurisdiction Clauses in Contracts

The Supreme Court held that despite the cause of action arising within the jurisdiction of the Bhavnagar Court, the agreement in the High Seas Sale ... Whether, notwithstanding the mutual agreement to make the High Seas Sale Agreement subject to Kolkata jurisdiction, it would be open to the Respondent-Company to contend that since a part of the cause of action purportedly arose within the jurisdiction of the Bhavnagar Court, the application filed under Section 9 of the Arbitration and Conciliation Act, 1996, before the Principal Civil Judge (Senior Division), Bhavnagar (Gujarat), would still be maintainable? Held that:- In the instant case, the parties had knowingly and voluntarily agreed that the contract arising out of the High Seas Sale Agreement would be subject to Kolkata jurisdiction and even if the courts in Gujarat also had jurisdiction to entertain any action arising out of the agreement, it has to be held that the agreement to have the disputes decided in Kolkata by an Arbitrator in Kolkata, West Bengal, was valid and the Respondent- Company had wrongly chosen to file its application under Section 9 of the Arbitration and Conciliation Act before the Bhavnagar Court (Gujarat) in violation of such agreement. Thus transfer petition should be allowed. Issues Involved:1. Jurisdiction of the Bhavnagar Court to entertain the application under Section 9 of the Arbitration and Conciliation Act, 1996.2. Validity of the jurisdiction clause in the High Seas Sale Agreement.3. Applicability of previous Supreme Court judgments regarding jurisdiction clauses in contracts.Issue-wise Detailed Analysis:1. Jurisdiction of the Bhavnagar Court:The petitioner argued that the Bhavnagar Court lacked jurisdiction to entertain the application under Section 9 of the Arbitration and Conciliation Act, 1996, because the High Seas Sale Agreement explicitly stated that the sale contract would be subject to Kolkata jurisdiction. The respondent, however, contended that since the cause of action arose within the jurisdiction of the Bhavnagar Court (as the goods were stored in the petitioner's godown in Bhavnagar), the Bhavnagar Court had jurisdiction to entertain the application.2. Validity of the Jurisdiction Clause:Clause 14 of the High Seas Sale Agreement specified that the sale contract would be subject to Kolkata jurisdiction. The petitioner argued that this clause should be respected, and all disputes should be referred to the courts in Kolkata. The respondent countered that the clause did not use exclusive terms like 'alone,' 'only,' or 'exclusive,' and therefore, it did not oust the jurisdiction of other competent courts, such as the Bhavnagar Court.3. Applicability of Previous Supreme Court Judgments:The petitioner cited the judgments in *Geo. Miller & Co. Ltd. Vs. United Bank of India & others*, *A.B.C. Laminart (P) Ltd. vs. A.P. Agencies*, and *Hakam Singh vs. Gammon (India) Ltd.* to support their argument that when parties agree to the jurisdiction of a particular court, that agreement should be respected. The petitioner emphasized that the agreement to have disputes decided in Kolkata was valid and binding. The respondent, however, argued that these judgments also allowed for jurisdiction where part of the cause of action arose, which in this case, was within the Bhavnagar Court's jurisdiction.Judgment Analysis:The Supreme Court considered whether the Bhavnagar Court could entertain the application under Section 9 despite the mutual agreement to make the High Seas Sale Agreement subject to Kolkata jurisdiction. The Court reiterated the principle from *Hakam Singh* and *A.B.C. Laminart (P) Ltd.*, stating that an agreement to vest jurisdiction in one of the competent courts is valid and not contrary to public policy or Section 28 of the Indian Contract Act, 1872. The Court emphasized that the parties had knowingly and voluntarily agreed to Kolkata jurisdiction.The Court concluded that the respondent had wrongly chosen to file its application under Section 9 before the Bhavnagar Court, violating the agreement. The Court held that the agreement to have disputes decided in Kolkata by an arbitrator in Kolkata was valid.Conclusion:The Supreme Court allowed the transfer petition, directing that Arbitration Application No.1 of 2008, titled *M/s Maa Bhagwati Coke (Guj) Pvt. Ltd. vs. Balaji Coke Industry Pvt. Ltd.*, pending in the Court of Principal Civil Judge (Senior Division), Bhavnagar (Gujarat), be transferred to the Calcutta High Court. The Court emphasized the importance of respecting jurisdiction clauses agreed upon by parties in their contracts. There was no order as to costs.