AP No. 633 of 2008

AP No. 634 of 2008

AP No. 635 of 2008

IN THE HIGH COURT AT CALCUTTA

ORDINARY ORIGINAL CIVIL JURISDICTION

HDFC BANK LIMITED

-Versus-

BHAGWANDAS AUTO FINANCE LIMITED & ANOTHER

For the Petitioner: Mr Pratap Chatterjee, Sr. Adv., Mr Utpal Bose, Adv.,

Mr Samrat Sen, Adv.,

Mr Mainak Bose, Adv.,

Mr Paritosh Sinha, Adv.,

Mr S.N. Pandey, Adv.

For the Respondents: Mr Debanshu Basak, Adv.,

Mr Satarup Banerjee, Adv.,

Mr Tirthankar Das, Adv.

Hearing concluded on: December 14, 2009.

BEFORE

The Hon'ble Justice

SANJIB BANERJEE

Date: December 17, 2009.

SANJIB BANERJEE, J. : -

The three petitions involve identical questions and the parties agree that a decision on one will equally govern the other two matters. The papers relating to AP No. 633 of 2008 have been taken up, though an affidavit-in-reply used by the petitioner in AP No. 635 of 2008 has also been referred to herein.

Under three several agreements, of identical import, the petitioner financed several vehicles or equipment to the respondents. Following disputes and differences having arisen in respect of the subject matter of the three agreements, the petitioner has invoked the arbitration agreement in each case and has brought the present proceedings under Section 9 of the Arbitration and Conciliation Act, 1996. There is an interim order subsisting in each case.

The respondents have canvassed identical grounds for dismissal of the three petitions. They say that since the petitioner is a bank which is governed by the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in respect of its claims against its constituents, it is only such Act that may be invoked for the furtherance of any claim of the petitioner bank under any of the subject agreements. They suggest that a combined reading of Sections 17, 18 and 34 of the 1993 Act would preclude any arbitration reference being made in respect of the transaction covered by the agreements.

In the alternative and without prejudice to their substantive attack that cuts at the very foundation of this Court's authority to receive the petitions, the respondents submit that there is a forum selection clause found in each of the three agreements which should govern the situs of any action thereunder. The forum selection clauses, according to the respondents, mandate that proceedings arising out of the agreements would necessarily have to be filed in the Court within whose territorial jurisdiction the effective office of the bank is situated. In the further alternative, the respondents argue, that nothing in the petitions confers any authority on this Court to receive the same and, without going into the merits of the matters, the three petitions should be dismissed for want of territorial jurisdiction.

In support of their first contention that the subject matter of the agreements is incapable of adjudication outside the appropriate Debts Recovery Tribunal, the respondents rely on the Allahabad Bank v. Canara Bank judgment reported at (2000) 4 SCC 406. The respondents refer to the first issue recorded under paragraph 13 of the report and place paragraphs 19 to 25 thereof in support of their contention that upon the 1993 Act coming into effect, the Debts Recovery Tribunal is the sole repository of all bank claims in excess of Rs.10 lakh. The relevant passages of the judgment record as follows:

"13. From the aforesaid contentions, the following points arise for consideration:

(1) Whether in respect of proceedings under the RDB Act at the stage of adjudication for the money due to the banks or financial institutions and at the stage of execution for recovery of monies under the RDB Act, the Tribunal and the Recovery Officers are conferred exclusive jurisdiction in their respective spheres?

..."

"Exclusive Jurisdiction of the Tribunal under Sections 17, 18 and 25 of the RDB Act: (i) adjudication, (ii) execution

"19. The initial question is as to the jurisdiction of the Tribunal under Sections 17 and 18 of the RDB Act in the matter passing the order of adjudication and to what extent it is exclusive. The next question will be whether the jurisdiction of the Recovery Officer is also exclusive for purposes of execution of the adjudication order passed by the Tribunal.

"(i) Adjudication by Tribunal: does the Tribunal have exclusive jurisdiction "20. We shall refer to Sections 17 and 18 in Chapter III of the RDB Act which deal with adjudication of the debt:

(Sections 17 and 18 quoted)

It is clear from Section 17 of the Act that the Tribunal is to decide the applications of the banks and financial institutions for recovery of debts due to them. We have already referred to the definition of "debt" in Section 2(g) as amended by Ordinance 1 of 2000. It includes "claims" by banks and financial institutions and includes the liability incurred and also liability under a decree or otherwise. In this context Section 31 of the Act is also relevant. That section deals with transfer of pending suits or proceedings to the Tribunal. In our view, the word "proceedings" in Section 31 includes "execution proceedings" pending before a civil court before the commencement of the Act. The suits and proceedings so pending on the date of the Act stand transferred to the Tribunal and have to be disposed of "in the same manner" as applications under Section 19.

"21. In our opinion, the jurisdiction of the Tribunal in regard to adjudication is exclusive. The RDB Act requires the Tribunal alone to decide applications for recovery of debts due to banks or financial institutions. Once the Tribunal passes an order that the debt is due, the Tribunal has to issue a certificate under Section 19(22) [formerly under Section 19(7)] to the Recovery Officer for recovery of the debt specified in the certificate. The question arises as to the meaning of the word "recovery" in Section 17 of the Act. It appears to us that basically the Tribunal is to adjudicate the liability of the defendant and then it has to issue a certificate under Section 19(22). Under Section 18, the jurisdiction of any other court or authority which would otherwise have had jurisdiction but for the provisions of the Act, is ousted and the power to adjudicate upon the liability is exclusively vested in the Tribunal. (This exclusion does not however apply to the jurisdiction of the Supreme Court or of a High Court exercising power under Articles 226 or 227 of the Constitution.) This is the effect of Sections 17 and 18 of the Act.

"22. We hold that the provisions of Sections 17 and 18 of the RDB Act are exclusive so far as the question of adjudication of the liability of the defendant to the appellant Bank is concerned.

"(ii) Execution of certificate by Recovery Officer: is his jurisdiction exclusive

"23. Even in regard to "execution", the jurisdiction of the Recovery Officer is exclusive. Now a procedure has been laid down in the Act for recovery of the debt as per the certificate issued by the Tribunal and this procedure is contained in Chapter V of the Act and is covered by Sections 25 to 30. It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the banks/financial institutions should go to the civil court or the Company Court or some other authority outside the Act for the actual realisation of the amount. The certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. No dual jurisdictions at different stages are contemplated. Further, Section 34 of the Act gives overriding effect to the provisions of the RDB Act. That section reads as follows: (Section 34 is quoted)

The provisions of Section 34(1) clearly state that the RDB Act overrides other laws to the extent of "inconsistency". In our opinion, the prescription of an exclusive Tribunal both for adjudication and execution is a procedure clearly inconsistent with realisation of these debts in any other manner.

"24. There is one more reason as to why it must be held that the jurisdiction of the Recovery Officer is exclusive. The Tiwari Committee which recommended the constitution of a Special Tribunal in 1981 for recovery of debts due to banks and financial institutions stated in its report that the exclusive jurisdiction of the Tribunal must relate not only in regard to the adjudication of the liability but also in regard to the execution proceedings. It stated in Annexure XI of its report that all "execution proceedings" must be taken up only by the Special Tribunal under the Act. In our opinion, in view of the special procedure for recovery prescribed in Chapter V of the Act, and Section 34, execution of the certificate is also within the exclusive jurisdiction of the Recovery Officer.

"25. Thus, the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other court or authority much less the civil court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Point 1 is decided accordingly."

The respondents have also brought a judgment reported at (2008) 8 SCC 148 (Bank of India v. Ketan Parekh) where conflicting non-obstante clauses conferring overriding authority to two enactments were considered and it was held at paragraph 28 of the report that since a non-obstante clause had been introduced by amending an earlier Act at a point of time which was subsequent to the coming into effect of the later Act, the non-obstante clause introduced in later point of time would prevail. It is the respondents' argument that the Ketan Parekh judgment considered a case where the overriding provisions in two Acts were found to be in apparent conflict. The respondents contend that there is no relevant overriding provision in the Arbitration and Conciliation Act, 1996 and Section 34 of the 1993 Act would preclude a claim covered by the 1993 Act being carried before any forum other than a Debts Recovery Tribunal.

Sections 17, 18 and 34 of the 1993 Act need now to be seen in their entirety:

"17. Jurisdiction, powers and authority of Tribunals.--(1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions.

(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.

"18. Bar of Jurisdiction.--On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17."

"34. Act to have over-riding effect.--(1) Save as provided under sub- section (2), the provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law other than this Act.

(2) The provisions of this Act or the rules made thereunder shall be in addition to, and no in derogation of, the Industrial Finance Corporation Act, 1948 (15 of 1948), the State Financial Corporations Act, 1951 (63 of 1951), the Unit Trust of India Act, 1963 (52 of 1963), the Industrial Reconstruction Bank of India Act, 1984 (62 of 1984), the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and the Small Industries Development Bank of India Act, 1989 (39 of 1989)."

Prior to the said Act of 1993, claims of banks and financial institutions now covered thereby were taken up by civil courts guided by considerations as to the pecuniary and territorial jurisdiction exercised by such civil courts. The said Act required claims of banks and financial institutions specified therein to be removed before the appropriate Debts Recovery Tribunal. Section 1(4) of the Act made the statute applicable to debts due of not less than Rs.10 lakh in value. Claims of banks and financial institutions lodged prior to the said Act (or the Ordinance that preceded it) coming into effect were not to continue in courts if the debts due therein were of value of at least Rs. 10 lakh and only subsequent claims for debts not exceeding Rs.10 lakh could be filed before regular civil courts. The respondents submit that where the jurisdiction of civil courts, both in respect of pending and future claims, has been taken away by the said Act of 1993 and the power to adjudicate the claims has been solely conferred on the tribunals named in the 1993 Act, no question arises of such claim being carried by way of an arbitral reference.

There is no merit in the respondents' assertion on such score. Nothing in the 1993 Act precludes an arbitral reference being carried by a bank or a financial institution in respect of a matter that is capable of being brought as a claim under Section 19 of the 1993 Act. The exclusivity that is conferred on the Debts Recovery Tribunal, subject to the pecuniary floor-limit of Rs.10 lakh, is qua the civil court. Historically, in the early 1980s banks and financial institutions found it suffocating to operate as funds and secured assets remained blocked in protracted litigation, whether they were recovery proceedings filed in regular courts by them or genuine or frivolous actions instituted by the constituents. Banking business was then almost completely State-controlled and the worry was in public funds remaining entangled in time-consuming and ruinous court proceedings. There was a Tiwari Committee set up which recommended setting up independent tribunals for recovering debts of banks and financial institutions. The Narasimham Committee report thereafter culminated in first an ordinance and then the said Act of 1993.

The bar under Section 18 of the 1993 Act is not on a claimant, but on a "court or other authority." The issue is as to whether an arbitrator would fall within the expression "other authority" used in Section 18. In administrative law, an authority is a body having jurisdiction in certain matters of a public nature. For a person or body to be an authority there must be an ability conferred by law to alter or ascertain, subject to the command of the relevant law, the rights, duties, liabilities or other legal relations, either of the authority or of other persons. The "authority" which is referred to in Section 18 has to be read in context and seen to imply the exercise of a sovereign power or duty. Section 28 of the Contract Act provides that agreements in restraint of legal proceedings would be void but carves out an exception in respect of arbitration agreements. The first limb of Section 28(a) renders void every agreement by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals. In addition to an arbitration agreement, for which an exception has been specifically made in the section, a forum selection clause is also considered to be legal and valid, subject to the rider that a part of the cause of action must have arisen within the jurisdiction of the forum exclusively chosen.

The fundamental purpose of the 1993 Act was to remove claims of banks and financial institutions from the ordinary fora to specialised tribunals. The avowed purpose of the statute was to ensure the speedy disposal of claims of banks and financial institutions intended to be governed by it. The 1993 Act confers a benefit on banks and financial institutions in respect of the matters covered thereby. In principle, nothing in the Act prevents a bank or a financial institution to not avail of such advantage.

The position may be viewed, not from the banks' perspective but from the constituents'. A constituent may not bring an action before a Debts Recovery Tribunal unless there is a bank claim covered by the 1993 Act already pending in respect of the transaction. Now, if a constituent could bypass the jurisdiction of a civil court to receive its complaint in respect of a transaction with a bank by virtue of its agreement with the bank to refer the disputes to arbitration, there may not be any juridical impropriety for a bank to voluntarily give up its right to approach a Debts Recovery Tribunal pursuant to an arbitration agreement covering the same subject. If the jurisdiction of the Court can be ousted by consensus (actually, the jurisdiction is not ousted; the Court receiving the action holds the parties to their bargain by specifically enforcing the arbitration agreement), there is no reason to doubt that a similar pre-arranged consensual forum can be substituted for the Debts Recovery Tribunal. A party to an arbitration agreement may waive its right thereunder, but if the agreement is sought to be specifically enforced the judicial authority in seisin of the action would ordinarily enforce the agreement. There is no reason to suspect that if the petitioner bank carried a claim referable to arbitration to a Debts Recovery Tribunal, the respondents could not successfully enforce the arbitration agreement by way of an application under Section 8 of the Arbitration and Conciliation Act, 1996.

If the provisions of a statute have to be construed not as theorems of Euclid but the words need to be read with some imagination of the purpose which lie behind them, the 1993 Act cannot be understood to imply that an arbitration agreement covering the subject matter of a claim that can be carried to a Debts Recovery Tribunal cannot be enforced by reason of the bar under Section 18 thereof. Such an interpretation would produce an undesirable result and would do violence to the intent and purpose of the statute. The 1993 Act has an aim, it seeks to obviate the malady of bank claims getting stuck in the perceived clogging in the Court system; it seeks to redress a supposed inadequacy (whether or not it has succeeded, is an entirely different matter) by creating a tribunal to take over a class of actions from civil courts and like fora. The bar under Section 18 has, per force, to be restricted to civil courts and like authorities of public nature; and not extended to include a forum chosen by a bank and its constituent. The expression "other authority" has to be seen as a statutory forum which a bank or a financial institution had to approach, if the 1993 statute was not there. The petitioner has aptly relied on the following passage from Russel on Arbitration (20th ed.) quoted as part of submission in the judgment reported at (2006) 13 SCC 322 (Paramjeet Singh Patheja v. ICDS Ltd.):

"Arbitration has at its centre the stone that builders of the courts rejected. You can choose your own judge."

The passages from Allahabad Bank that the respondents rely on, if read out of context, are capable of conveying the exclusivity of the Debts Recovery Tribunals over matters covered by the 1993 Act that the respondents canvass here. But the judgment was rendered by juxtaposing the provisions of the 1993 Act against the Companies Act, or in particular, Section 446 thereof. The core issue was as to whether banks or financial institutions could launch proceedings under the 1993 Act before a Debts Recovery Tribunal against a company in liquidation or if Debts Recovery Tribunals could continue with matters where the constituent had gone into liquidation without obtaining leave of the relevant Company Court. The judgment was not required to consider, nor did it dwell on, the question of banks and financial institutions being prohibited from referring their disputes with their constituents to arbitration by virtue of the 1993 Act. A decision which is not express and is not founded on reasons or if it does not consider an issue cannot be deemed to be binding, whatever may be the hierarchy of the Court rendering such decision. That which escapes in a judgment without any occasion is not the ratio decidendi therein. Any declaration or conclusion arrived at without application of mind cannot be deemed to be a declaration of law or authority of a general nature binding as a precedent. For a declaration of law there must be a speech or a speaking order. The doctrine of precedents is limited to the decision itself and as to what is necessarily involved in it; it may not be extended to a related issue which did not arise or which was not deliberated upon.

The respondents have also placed a Special Bench judgment of this Court reported at 2009 (1) Cal LJ 199 (Chainrup Sampatram v. Punjab & Sind Bank). The matter in issue before the Special Bench was the consideration that would weigh upon a constituent invoking the territorial jurisdiction of a Court in respect of a defendant bank. It was held that different branches of a bank would be deemed to be different entities and the jurisdiction of a Court could not be founded on the basis of the situs of a branch or a regional office that had no nexus with the plaintiff constituent's cause of action or the relevant transaction.

There is one final aspect that appears to be germane in the context but has not been referred to by the parties. There is an indication in the Act that an arbitral reference in respect of a matter capable of adjudication before a Debts Recovery Tribunal in terms of the said Act is not precluded thereby. Section 31(1) of the Act, which may have already become dead wood by now, provides for transfer of certain matters pending immediately before the establishment of a tribunal under the Act to such tribunal. It is necessary that the provision is minutely studied:

"31. Transfer of pending cases.--(1) Every suit or other proceeding pending before any court immediately before the date of establishment of a Tribunal under this Act, being a suit or proceeding the cause of action where on it is based is such that it would have been, if it had arisen after such establishment, within the jurisdiction of such Tribunal, shall stand transferred on that date to such Tribunal:

Provided that nothing in this sub-section shall apply to any appeal pending as aforesaid before any court.

..."

If the bar under Section 18 of the said Act were to be understood to apply to arbitral proceedings covering the subject matter of a claim that can be adjudicated under the provisions of the Act, there would be no logic in matters being transferred only from Courts to the tribunals without the relevant provision referring to the transfer of arbitration references to the tribunals. The expression in Section 31(1) of the Act is "every suit or other proceeding pending before any court." A reference before an arbitral tribunal is certainly not a suit or other proceeding pending before any Court. Apart from the common sense logic that an enactment for the benefit of a class of claimants may not be easily interpreted to bar such claimants from referring their claims to arbitration unless expressly excluded, Section 31(1) of the Act is significantly instructive in showing that the said Act does not rule out a claim capable of adjudication under the Act to be taken before an arbitral tribunal by the consensus of the relevant parties.

The respondents' first contention that the subject matter of the petitioner's claim is not arbitrable is rejected. The respondents have made some murmurs as to the jurisdiction of the Court to incidentally deal with a matter of the present kind despite the clear bar under Section 18 of the 1993 Act. In proceedings under Section 9 of the Arbitration and Conciliation Act, the Court acts as a surrogate where the real authority is with the arbitral tribunal. Under Section 9 of the 1996 Act, the Court does not finally adjudicate upon any matter capable of being assessed by the arbitral tribunal; it merely provides for an interim arrangement. If it is possible for a claim which can otherwise be carried to a Debts Recovery Tribunal to be made by a bank or a financial institution to an arbitral tribunal, the power conferred under Section 9 is incidental to it and if the bar under Section 18 of the 1993 Act does not operate against an arbitral tribunal, such bar does not pass through to a Court exercising authority under Section 9 of the 1996 Act. The expression "no court or other authority" can be dissected. An action can either be before a Court or before any other authority. An action directly before a Court in relation to matters specified in Section 17 of the 1993 Act cannot be received. But if an arbitral tribunal is not covered by the expression "other authority", a Court under Section 9 of the 1996 Act would not be exercising its jurisdiction as a Court within the meaning of the expression "no court or other authority" but it would derive its power from the arbitration agreement which appears to fall outside the scope of the bar under Section 18.

Before the second limb of the respondents' challenge based on the forum selection clause is taken up, the relevant terms of the three nearly-identical agreements that have been referred to by the parties may be seen. The respondents refer to the third recital in the agreements that describes the petitioner. They say that it is only the lending office of the petitioner bank which is relevant under the agreements. They rely on clauses 3.3, 24.1 and 29.4 of the agreements, in addition to the forum selection clause found in clause 27 to suggest that the averments in the petitions for invoking the jurisdiction of this Court are extraneous to the agreement and utterly irrelevant. The schedules to the agreements record the place of the agreement to be "Kolkata" and the bank's concerned branch (lending office) to be HDFC Bank Ltd., BA3, Sector I, Salt Lake City, Kolkata - 64. The other clauses of the agreements that have been placed are set out in the order that they appear in the agreements: "3. HDFC BANK Ltd., a corporate body having its registered office at 'HDFC Bank House', Senapati Bapat Marg, Lower Parel-(west), Mumbai- 400 013 and a branch office in India at the address mentioned in item no. 5 of the Schedule hereunder written hereinafter referred to as "The Bank" (which expression shall, unless repugnant to the context or meaning thereof, shall be deemed to mean and include its successors and assigns) of the Third Part."

"1 DEFINITIONS

...

(ix) "Lending Office" in relation to the Bank shall mean the branch office of the Bank specified at item no. 5 of the Schedule hereunder written, from where the loan is sanctioned and/or disbursed."

"3 REPAYMENT

...

3.3. Each of the above Post-Dated Repayment Cheques shall be deemed to have been drawn on the date that shall appear on each of such cheques. Such PDCs shall be drawn from a scheduled bank situated in a town or city where such Lending office of the Bank is located."

"24. COMMUNICATION ...

24.1 Notice, Payment and/or other communication provide for in this Agreement shall be in writing and shall be transmitted

a) by postage prepaid, registered airmail or by internationally recognized courier service or (b) telex, cable or facsimile transmission to the parties as follows, as elected by the party giving such notice.

(i) In the case of notice or payments to the Bank, to the Banks Lending Office Address as per the schedule with a caption "Manager-Commercial Vehicle Finance".

(ii) In the case of notice or payments to the Borrower, to the Borrower address as per Schedule.

(iii) In case of notices to Guarantor(s), to the Guarantor(s) address as per Schedule."

"27. JURISDICTION

The parties hereto expressly agree that all disputes arising out of and/or relating to this Agreement including any Collateral document shall be subject to the exclusive jurisdiction of a competent court in the city where the Lending office of the Bank is situate alone."

"29. ACCEPTANCE

...

29.4. The Borrower agrees that this Agreement shall be deemed to commence and become legally binding on the date when the authorized office of the Bank signs this Agreement at the city where the Lending Office of the Bank is situate. It shall be in force till all the monies due and payable to the Bank under this Agreement as well as all other Agreements, document(s) that may be subsisting/ executed between the Borrower and/or the Guarantor(s), are fully paid."

On the forum selection clause it is the respondents' argument that only such Court within whose jurisdiction the lending office of the bank is situate would have authority to receive this petition. The point is taken by the respondents in their relevant affidavit-in-opposition. They have asserted at paragraph 3(v) of such affidavit that no part of the petitioner's alleged cause of action had taken place within the jurisdiction of this Court; at paragraph 3(vi) of the affidavit that no transaction took place at the 8, Netaji Subhas Road office of the petitioner nor was the agreement entered into or any payment tendered thereat; and, at the following sub-paragraph that the "purported agreement is forged."

The respondents have not indicated at the hearing as to whether they were electing not to press their allegation of the agreement being forged, without prejudice to their contention in such regard elsewhere. A charge of the agreement being forged would completely demolish the right to assert the forum selection clause contained in the same agreement. But it is not necessary to condemn the respondents' contention on their pleadings. The exclusive jurisdiction that the forum selection clause confers is on "a competent court in the city" where the lending office of the petitioner bank is situate. To accept the respondents' argument that the jurisdiction clause confers exclusivity on only such Court that exercises jurisdiction over the area where the lending office is situated, would amount to adding words to the clause.

The law is that if the parties to a contract agree to vest jurisdiction in a particular Court, such agreement would be valid and the Court would specifically enforce the same provided a part of the cause of action has arisen within the jurisdiction of the nominated Court. A clause vesting jurisdiction on a Court which otherwise would not have jurisdiction to decide the matter, would be void as being against public policy. A forum selection clause does not oust the authority of any other Court capable of receiving the action, but Courts have specifically enforced jurisdiction clauses to hold the parties to their bargain and not to encourage the breach of an agreement.

A forum selection clause has to be clear and unambiguous. If a suitor has the right, under the general law of the land, to approach a forum, such forum would not easily shoo him away unless it found that such suitor had clearly covenanted to litigate in respect of the same subject-matter before a different forum which would otherwise have the authority to receive the action. In the present case the expression "the exclusive jurisdiction of a competent court in the city where the Lending office of the Bank is situate alone" would imply that the Court had to be in the city where the lending office of the bank is situate and the Court had to be otherwise competent to receive the proceedings. The clause does not emphasise on the situs of the lending office but stresses on "a competent court in the city" where the bank's lending office is situated. It is an altogether vague clause in its application in the present case. Since the lending office of the bank is in Calcutta, the clause would show that any competent Court in Calcutta would be appropriate thereunder. This would rob the clause of the exclusivity that is essential for a forum selection clause to be effective.

There is another aspect that the petitioner has harped on to resist the present proceedings being removed from this Court. The petitioner says that the invocation of a forum selection clause that confers exclusivity on a particular Court implies a prayer for specific performance of the relevant term in the agreement. The petitioner says that to claim specific performance there is an element of readiness and willingness that has to be demonstrated, if not averred and proved. The petitioner refers to a series of proceedings launched by the first respondent in the Alipore Court covering the subject-matter of the agreements. The petitioner contends that the institution of such petitions runs counter to the respondents' plea of enforcing the forum selection clause by asserting that only the Court exercising jurisdiction over the territory within which the lending office is situate would have the power to receive any petition under Section 9 of the 1996 Act in relation to the agreements. The lending office of the petitioner bank is in Salt Lake which is not within the jurisdiction of the Alipore Court. Though the respondents claim that they had no copy of the agreement at the time that the Alipore proceedings were launched, there is neither any attempt to withdraw the Alipore petitions nor any undertaking given herein that they would be immediately withdrawn.

Apart from the fact that the forum selection clause cited is vague and incapable of being enforced in the manner sought by the respondents, the respondents' conduct would disentitle them from furthering such plea.

The jurisdiction of this Court has been invoked on the basis of a statement at paragraph 12 that the notice of termination was issued by the petitioner from within jurisdiction and on the strength of the averments at paragraph 43 of the petition. Paragraph 43 of the petition reads thus,

"43. The amount lent and advanced was disbursed from the Salt Lake Branch of the petitioner bank. However, the agreement between the parties was executed and concluded at the office of the petitioner at 8, Netaji Subhas Road, Kolkata - 700 001, within the aforesaid jurisdiction. The said agreement was to be performed and part payments have been made by the respondent at the aforesaid office of your petitioner within the aforesaid jurisdiction. The respondent failed to perform the agreement or comply with the requisitions of the said notice from within the jurisdiction. The subject matter of reference is for an amount in excess of Rs.10,00,000/- and as such this Hon'ble High Court has and the City Civil Court at Calcutta does not have jurisdiction to receive, try and determine this petition. This Hon'ble Court has jurisdiction to decide the question forming the subject matter of arbitration as if the same had been the subject matter of the suit."

Though the respondents have denied the material averments at paragraph 43 of the petition, they have not denied that the agreement was rescinded and the demand to pay up was made by a notice issued from within jurisdiction. It is also of some significance that the 8, Netaji Subhas Road address of the petitioner herein has been indicated in the cause title to the petitions brought by the respondents before the Alipore Court. That would imply the respondents' understanding that such office of the petitioner had some nexus with the transaction. This may have a bearing in the ultimate analysis here.

The challenge to the authority of a Court to receive an action is ordinarily assessed in a suit on whether the averments in the plaint are good enough to allow the suit to progress to trial. The normal rule is that a point of demurer is evaluated at the interlocutory stage in a suit by merely referring to the averments in the plaint which have to be assumed to be correct at any stage prior to the trial. A possible exception could be where the assumption of the correctness would amount to an absurdity. If a defendant questions the authority of a Court to receive a suit by denying any statement in the plaint that is the basis for invoking the territorial jurisdiction, the immediate challenge to the jurisdiction fails and the defendant is left to renew the same at the trial where the facts asserted and denied can be adjudicated upon evidence in such regard being received. There is no such luxury which is afforded to a Court in proceedings under Section 9 of the 1996 Act where the adjudication on jurisdiction cannot be postponed to a trial since the Court is an adjunct to the arbitral tribunal and ordinarily Section 9 petitions are decided on affidavits. There is nothing that precludes a Court from trying a Section 9 petition on evidence, but that is a long- drawn process that a docket-fatigued Court would be loath to adopt in proceedings which are, by their very nature, interim in the sense that they are only in aid of the arbitral reference. In a given case and depending on the extent of the inconvenience that is likely to be occasioned to the respondents by the invocation of a jurisdiction on seemingly specious grounds by a petitioner, the Court may not accept the averments in the petition at face value. The Court's receipt of a Section 9 petition and its repelling a challenge to its jurisdiction may have serious ramifications in a particular case. Section 42 of the 1996 Act commands that all subsequent applications relating to the arbitral proceedings would only be made to a Court that has received a previous application relating thereto. Though the inconvenience of the respondents that is relevant in considering whether a suit should continue in a Court is qualitatively different from the inconvenience that may be cited by the respondents to proceedings under Section 9 of the 1996 Act (since there is no trial or documentary evidence and witness being produced), the balance of convenience has to be regarded more seriously if a petition under Section 9 is brought in a Court in Kohima when the respondents insist that it should have been filed in Kozhikode than when the fight is over two Courts within a short distance of each other.

On the basis of the averments in the petitions, this Court had the jurisdiction to receive the same. The averments may be altogether false, but if they are not demonstrably false and require a deeper probe as in a trial, the Court would rather accept the petition version in proceedings under Section 9 of the 1996 Act than the bare denial thereof by the respondents where the inconvenience likely to be caused to the respondents is marginal. This should generally be the approach in proceedings under Section 9 of the 1996 Act when the authority of the court to receive the petition is questioned, since lack of territorial jurisdiction does not amount to inherent lack of jurisdiction. There is no juridical or pecuniary disadvantage that the respondents here refer to for the petitioner being asked to institute the proceedings elsewhere. If the respondents' invocation of the Alipore jurisdiction is taken to be proper - albeit their assertion of their lack of knowledge of these petitions having previously brought to this Court - it would show that the Netaji Subhas Road office of the petitioner had some connection with the transactions and, thus, detract from their denial in the present proceedings of the petitioner's statement that a part of its cause of action had arisen at the Netaji Subhas Road office within jurisdiction.

The respondents' challenge to the authority of this Court to entertain these proceedings on the three distinct grounds fails.

The respondents have not addressed on the merits of the petitioner's claims at the final hearing. The petitions speak of huge sums remaining due from the respondents on account of vehicles financed by the petitioner. There is no effective defence that is indicated save that the agreements were forged or they were ante-dated. There will be an order directing the receiver appointed by the order dated February 18, 2009 to take possession of the vehicles being the subject matter of the agreements covered by the three petitions. Till such time that the receiver takes possession of the vehicles, the respondents will remain restrained from dealing with or disposing of or alienating or encumbering or parting with possession of any of the vehicles or parts thereof in favour of any other person. The receiver will be paid a remuneration of 300 GM in each petition by the petitioner, subject to the petitioner being entitled to claim such amount in the relevant reference. The receiver will keep the vehicles at a place to be provided by the petitioner, but the petitioner will not be entitled to use of the vehicles without the previous leave of the arbitral tribunal. The petitioner may apply before the arbitral tribunal for sale of the vehicles, if necessary.

AP No. 633 of 2008, AP No. 634 of 2008 and AP No. 635 of 2008 are allowed as above. In addition to the petitioner being entitled to claim all the remuneration paid to the receiver in the relevant reference, the petitioner will also be entitled to claim in the relevant reference the costs of each petition assessed at 500 GM.

Since the parties report that the respondents have taken steps to apply under Section 16 of the 1996 Act before the arbitral tribunal, nothing in this order should be deemed to prejudice the respondents' contention in those applications.

Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.

(Sanjib Banerjee, J.)

Later:

The respondents pray for a stay of operation of the order which is declined.

(Sanjib Banerjee, J.)