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Section 9 in The Arbitration Act, 1940
Section 2 in The Arbitration Act, 1940
The Arbitration Act, 1940
Section 16 in The Arbitration Act, 1940
Section 20 in The Arbitration Act, 1940
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Karnataka High Court
Globe Congeneration Power ... vs Sri Hiranyakeshi Sahakari ... on 16 March, 2004
Equivalent citations: AIR 2005 Kant 94, 2005 (1) ARBLR 502 Kar, ILR 2004 KAR 2045, 2004 (7) KarLJ 124
Author: S Nayak
Bench: S Nayak, R M Reddy

JUDGMENT S.R. Nayak, J.

1. This appeal preferred under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996, for short, 'the Act' by the Globe Co-generation Power Limited, Mumbai which is a public limited Company incorporated under the provisions of the Company's Act, 1956 and having its registered office at 201, T.V. Industrial Estate, Worli, Mumbai-400 025, is directed against the order dated 25.08.2003 in Arbitration Application No. 40 of 2003 on the file of the Court of the VI Additional City Civil Judge, Bangalore, (for short, Bangalore Court) dismissing the application filed by the appellant herein under Section 9 of the Act on the ground that it has no jurisdiction to grant the relief sought in AA No. 40 of 2003.

2. The case of the appellant is as follows:

(i) The appellant is engaged in developing, designing implementing and operating Cogeneration Power Projects. Sri Hiranyakeshi Sahakari Karkhane Niyamit, Sankeshwar Taluka, Hukkeri, Belgaum District, which is registered under the Bombay Cooperative Societies Act, 1925 and having its registered sugar Factory at Sankeshwar, Hukkeri Taluk, Belgaum District, Karnataka, which is the respondents in this appeal, is engaged in the business of sugarcane crushing and manufacturing of sugar.

(ii) The Respondent was desirous of implementing a bagasse fired co-generation facility of about 45 MW capacity at its Sugar Mill Complex located at Sankeshwar, Dist. Belgaum, Karnataka State with the Appellant as Project Developer on an exclusive BOOT (Build Own Operate and Transfer) basis. Accordingly by a Deed of Project Development Agreement (hereinafter referred to as "PDA") executed between the Appellant and the Respondent on 18th October, 2000 the Appellant agreed and undertook to develop electric generating facility, i.e., Co-generation Power Project, to be located at the Respondent's Sugar Mill at Sankeshwar, Belgaum against which the Respondent agreed to procure power and steam for such facility for captive purposes. Clause 7 of the said PDA provides that the Co-generation Power Project shall remain in force for a period of 20 years from the date of its commercial operation.

(iii) The Respondent, as per the requirement of the PDA were to execute a Land Lease Agreement to enable the Appellant to carry out the project work on their site. The Respondent however executed the Land Lease Agreement after enormous delay of about 13 months without any justification on 3rd December 2001. By virtue of the said Land Lease Agreement (LLA), the Appellant became the Lessees of a non-agricultural land admeasuring 40 acres, more specifically described in Schedule "A" to the said LLA for a period of 22 years. Till date the Appellant is in possession of the leased land.

(iv) As per the PDA, the construction of Co-generation Project Work was to commence within 18 months from the date of execution of the PDA. However, due to lapses on the part of the Respondent in signing the LLA, the Appellant could not commence the project work within the aforesaid period. Therefore, an agreement came to be executed between the Appellant and the Respondent on 11.02.2002 whereunder the Respondent agreed to extend the time for a period of 3 months. Even after the execution of the agreement dated 11.02.2002, the Appellant could not commence the project work due to delay in signing of the power Purchase Agreement with KPTCL. Thereafter, the period for commencing the project work was sought to be further extended by the Respondent for second time and pursuant thereto a second agreement dated 16.07.2002 was executed between the Appellant and the Respondent whereunder, the Appellant were given 24 months time to commence the Co-generation Power Plant Work.

(v) Pursuant to the extension of time granted by the Respondent to the Appellant, the Appellant commenced the work of Phase 1, which includes Mill Modernisation, which is a part of the Co-generation power Project as per terms of the PDA. The said work was commenced on 19.09.2002, i.e., within the extended period of the PDA. The mill modernization work (Phase 1) was to be completed by 31st October 2002. The Appellant, however, could not complete the said work within the stipulated time because of the preponement of the Sugarcane Crushing Season activities started by the Respondent in their Sugar Mill. The Appellant was compelled to stop the Phase-I work with effect from 14.10.2002 as per the instruction of the Respondent.

(vi) After the stoppage of the work in the Sugar Mill premises of the Respondent, the Appellant had number of meetings with the Officials of the Respondents for allowing the Appellant to carry out the remaining work of Phase-I and commence the work of Phase-II of Mill Modernisation and Cogeneration Project work. The Appellant also addressed number of letters to the Respondents in that regard. Instead of allowing the Appellant to perform their obligations under the PDA, the Respondent in bad faith, made false allegations of non-completion of work and further, in the meeting dated 14th February 2003, the Respondent made an unlawful demand, outside the scope of the PDA, for an amount of Rs. 6.00 crores to be deposited by the Appellant as a security. Later on, vide their letter dated 05.05.2003 the Respondent while repeating their demand for Rs. 6 crores deposit, alleged that the PDA has already lapsed.

(vii) The Appellant has reason to believe that the Respondent is attempting to enter into agreements with 3rd parties and are likely to dispossess the Appellant from the land which is in their lawful possession.

(viii) The project Development Agreement provided for disputes to be settled by means of Arbitration in Bangalore and also provided that the Courts of Bangalore have jurisdiction to entertain disputes under the agreement.

3. The appellant alleging that the respondent had acted arbitrarily and was not amenable to peaceful negotiations, preferred an application under Section 9 of the Act before the Court of City Civil and Session Judge, Bangalore for interim measures to restrain the Respondent from entering into a fresh PDA third parties, creating third party rights on the land leased to them and also for appointment of Court Receiver for the leased land.

4. The office of the Court below raised objection with regard to the maintainability of the petition under Section 9 of the Act filed by the appellant pointing out that the Court below has no jurisdiction to entertain the application and that the objection raised by the office was placed before the Court below for its consideration and decision. The Court below by the impugned order has held that it has no jurisdiction to entertain the petition.

5. We have heard Sri D.L.N. Rao learned Counsel for the appellant and Sri Srinivas Raghavan, learned Counsel for the respondent. Sri D.L.N. Rao, would contend that the Court below in holding that it has no jurisdiction to entertain the petition under Section 9 of the Act, has not taken into consideration Sub-clause (9) of Clause-14 of the Project Development Agreement executed between the parties as per which parties have agreed that the Bangalore Court will have jurisdiction. Sri D.L.N. Rao would contend that having regard to the laudable objectives of the Act, the parties to an agreement are free to choose the forum of law for settlement of dispute. Sri D.L.N. Rao would point out that Clause 10-V of the Project Development Agreement provides for settlement of disputes by way of arbitration in Bangalore only and that Clause, if read with Section 2(1)(e) of the Act, makes it very clear that Bangalore Court has jurisdiction to entertain any dispute under the said agreement. Sri D.L.N. Rao would also point out that since under Section 20 of the Act, the parties are free to choose the place of arbitration and that a plain reading of the Project Development Agreement would reflect that the parties have agreed that the Bangalore be the place for adjudication of all disputes arising out of the agreement, the Court below committed an error of law in not upholding such intent of the parties.

6. Sri Srinivas Raghavan, learned Counsel for the respondent, per contra, would support the impugned order of the Court below. Sri Srinivas Raghavan would contend that under Section 9 of the Act, the party may apply to a Court for the interim reliefs, but that Court should be a Court as defined under Section 2(1)(e) of the Act. He would contend that the questions raised by the appellant in the petition filed under Section 9 of the Act are undeniably the questions forming the subject matter of the Project Development Agreement and, therefore, Bangalore Court does not have jurisdiction to entertain the petition and only the Court of Principal District Judge, Belgaum district which has territorial jurisdiction over the area in which the immovable property of the respondent is situate has jurisdiction to entertain the application of the appellant filed under Section 9 of the Act. Sri Srinivas Raghavan would point out that the parties to the Project Development Agreement are not in Bangalore; contract was not entered into between the parties in Bangalore; lease deed was not executed in Bangalore; property is not situated in Bangalore; performance of the Contract is also not in Bangalore. Sri Srinivas Raghavan would next contend that in terms of arbitration agreement, it is true arbitration can take place in Bangalore as agreed to by the parties, but, the parties cannot by their agreement confer jurisdiction on a Court.

7. Having heard the learned Counsel for the parties, the only point that arises for decision is whether the Court of Principal City Civil and Sessions Court at Bangalore has jurisdiction to entertain the petition filed by the appellant under Section 9 of the Act.

8. Section 9 of the Act reads as follows:

"9. Interim measures etc. by Court - A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a Court:-

(i) for the appointment of a guardian for a minor or a person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter or the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it."

9. This section is substitute for the Second schedule of the Arbitration Act, 1940. Under Section 41(b) of the Arbitration Act 1940, the Court had power to grant interim reliefs, for the purpose of, and in relation to arbitration proceedings. Section 41(b) was interpreted to mean that the Court could grant interim relief if the arbitration proceedings were pending before the arbitrator or before the Court. Pendency of any proceedings in the Court in relation to the arbitration was a precondition for the exercise of power by the Court to grant interim relief under Section 41(b) of the Arbitration Act, 1940. Under Section 9 of the new Act, the Court may, on application by a party, grant interim relief "before or during arbitral proceedings or at any time after making of the arbitral award but before it is enforced". Thus, under Section 9 of the Act, a party can make application for grant of interim reliefs of protection as provided therein not only during the arbitral proceedings but even before commencement of arbitral proceedings, and the Court shall have the same power for making orders as it has the purpose of, and in relation to, any proceedings before it.

10. Under Section 9 of the new Act, a party has to make an application to a "Court" for grant of interim reliefs. The word "Court" is not defined in the Code of Civil Procedure, 1908, for short, 'the CPC', not even in the General Clauses Act. The word "Court" is, however, defined both in the Arbitration Act, 1940 and the Arbitration Act, 1996. Section 2(1)(e) of the new Act defines the word "Court" thus:

"Court" means the Principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil Court of a grade inferior to such Principal Civil Court, or any Court of Small Causes;"

11. Section 2(1)(c) of the Arbitration Act, 1940 also defined the word "Court" thus:

"Court" means a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, but does not, except for the purpose of arbitration proceedings under Section 21, include a Small Cause Court;"

12. Like in the Arbitration Act, 1940, in the Arbitration Act, 1996 too, the definition of "Court" is more to define "jurisdiction" than to define "Court". The word "Court" is used in a limited sense in Section 9,27,34,37, 47 and 56. These Courts are "Courts of law" established by Government as a part of "judiciary" wing of the State. Other judicial authorities may be set up for specific purposes and may not be a part of the judiciary wing.

13. Section 2(1)(e) defines which is the proper Court for purposes of the aforementioned Sections. The definition of "Court" in Section 2(1)(e) lays down the principles to determine jurisdiction of Courts of law. Although intervention of Courts in arbitral proceedings is minimized by the Arbitration Act, 1996, the Courts still have some powers and functions. The parties and the Arbitral Tribunal may seek their assistance or intervention under the new Act as envisaged under Sections 9, 14(2), 27 and 34 which include reference to Sections 13(5), 16(6) and 36. Section 2(1)(e) defines which is the proper Court for the purposes of the aforementioned various Sections. In terms of the definition of the word "Court" under Section 2(1)(e), the proper Court is the Principal Civil Court of original jurisdiction in a district to cover complete pecuniary jurisdiction and it must be the Court having subject-matter jurisdiction or jurisdiction in personam in the same way as determined in any Civil Suit i.e, under Sections 15 to 20 of CPC. The word "Court" within the meaning of the definition under Section 2(1)(e) means the Court which is competent under the law to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit as under Sections 15 to 20 of CPC in case of law suits, but, the Court for purpose of Arbitration Act would not include a Court inferior to Principal Civil Court in a district.

14. The definition of the word "Court" in Section 2(1)(e) of the Arbitration Act, 1996 is narrower than the definition contained in Section 2(1)(c) of the Arbitration Act, 1940. As per the definition under the Arbitration Act, 1940, the word "Court" meant any Civil Court except the Court of Small Causes whereas as per the definition under Section 2(1)(e) of Arbitration Act, 1996, "Court" means Principal Civil Court of original jurisdiction in a district and includes the "High Court in exercise of its ordinary original civil jurisdiction", having jurisdiction to decide the questions forming subject-matter of the arbitration if the same had been the subject matter of a suit, but does not include any Civil Court of a grade inferior to such Principal Civil Court, or any Small Causes Court. The definition of the word "Court" in the Arbitration Act, 1996 has thus restricted the expression "Court" for the purposes in Part I of the Arbitration Act, 1996 to mean and include only the District Court and the High Court exercising its ordinary original Civil jurisdiction.

15. The definition of "Court" in Clause l(e) of Section 2 of Arbitration Act, 1996, defines the Court to mean the Principal Civil Court of original jurisdiction in a district. The definition is both inclusive and exclusive. It specifically includes High Court in exercise of its ordinary original civil jurisdiction within the ambit of the definition of : "Court' and excludes Civil Courts of a grade inferior to such Principal Civil Court" and Courts of Small Causes. The definition of the word "Court" has thus been narrowed down to mean and include the District Court and the High Court in exercise of its ordinary original civil jurisdiction. The only condition is that it should have jurisdiction to decide the questions forming subject-matter of the arbitration if the same would have been a subject matter of the suit. By using the words "means", "includes" and "does not include", in Clause (e) of Sub-sections (1), of Section 2 of the Arbitration Act, 1996, the Parliament has exhaustively explained the meaning of the term "Court" in that the word "means" is a term of restriction, while the word "includes" is a term of enlargement and when both the words "means" and "includes" are used together to define a thing, the intendment of the legislature is to supply restricted meaning to the terms. There is no reference in Section 2(1)(e) to the place where the parties reside, dwell or carry on business. The jurisdiction of the Court is made dependent not on any of these factors, but solely on the subject-matter. The omission of reference to residence is presumably because in filing the award, there is no plaintiff and no defendant. It is only when the subject-matter of the dispute itself makes the jurisdiction to depend on residence that the place of residence becomes relevant. The emphasis is not on residence but on the subject-matter of the reference.

16. In the premise of the definition of the word "Court" in Section 2(1)(e) of the Act and since a party has to make an application to a "Court" under Section 9 of the Act for interim reliefs, in order to decide the question whether the petition filed by the appellant herein under Section 9 of the Act before the Bangalore Court is maintainable or not and whether the Bangalore Court has jurisdiction to entertain that petition or not, it becomes necessary for the Court to first decide whether the Bangalore Court is having jurisdiction to decide the questions forming the subject-matter of the arbitration, if the same had arisen in a suit. This question need not detain the Court for long. The dispute brought before the Bangalore Court relates to and arises out of an arbitration agreement entered into between the parties. It needs to be noticed that in the present case, the parties to the agreement are not in Bangalore; contract was not made in Bangalore; lease deed was not executed in Bangalore; the property in respect of which interim relief is sought under Section 9 of the Act is not situated in Bangalore and even the work under the contract is required to be performed not in Bangalore. If these are admitted facts, the simple question for the Court to decide is whether the Bangalore Court would have jurisdiction to entertain a suit filed under Section 9 of the CPC in terms of Sections 15 to 20. thereof. The straightforward answer to the question is that Bangalore Court has no jurisdiction to entertain such suit. If that is the answer, the same answer is the answer to the question whether the petition filed by the appellant herein under Section 9 of the Arbitration Act, 1996, before the Bangalore Court is maintainable.

17. According to Section 2(1)(e) of the Arbitration Act, 1996, the word "Court" for purposes of that Act means, "the Principal Civil Court of original jurisdiction in a district, having jurisdiction to decide the questions forming the subject-matter of the arbitration, if the same was the subject-matter of the suit." Therefore, it has become necessary for us to ascertain what are the questions forming the subject matter of arbitration which arise for decision in the application filed by the appellant herein under Section 9 of the Act. After ascertaining those questions, we have to find out which Court is the competent Court to decide a suit involving such questions. The Court competent to decide such questions in the suit is also the competent Court to decide the application filed by the appellant under Section 9 of the Act in terms of the definition of "Court" in Clause (1)(e) of Section 2 of the Arbitration Act, 1996.

18. In the application filed by the appellant under Section 9 of the Act before the Bangalore Court, while seeking interim reliefs of appointment of Receiver for the non-agricultural land admeasuring 40 acres, and injunction restraining the respondents, their officers, servants and/or agents from in any manner disposing of, alienating, encumbering, parting with possession and/or creating any third party rights, tide and/ or interest in respect of the said non-agricultural land, what is essentially alleged is breach of contract and not allowing the appellant from carrying out the work and termination of the contract arbitrarily in breach of the terms of contract.

19. In this case, the contract between the parties was entered in Sankeshwar; lease-deed was executed in pursuance of the contract in Hukkeri Belgaum district; the work envisaged under the contract was required to be performed in Belgaum district and the parties to contract are not the residents of Bangalore. In the premise of these undisputed facts, rather admitted facts, we have to decide whether the Bangalore Court has jurisdiction to entertain the application filed by the appellant under Section 9 of the Act or only the Principal Civil Court of original jurisdiction in Belgaum district, that is to say, Principal District and Session Judge, Belgaum district, has the jurisdiction to entertain that application.

20. Sections 16 to 29 CPC deal with jurisdiction of Civil Court to entertain suits envisaged under Section 9 CPC. Section 16 requires that a suit has to be instituted where the subject matter of the suit is situate. In the application filed by the appellant under Section 9 of the Act, what arises for determination is right and interest of the parties, in the immovable property situated in Sankeshwar in Belgaum district. Section 16, among other things, provides that subject to the pecuniary or other limitations prescribed by any law, suits for determination of any other right or interest in immovable property shall be instituted in the Court within the local limits of whose jurisdiction the property is situate. Appointment of Receiver and injunction sought in the application filed under Section 9 of the Act before the Bangalore Court are with regard to 40 acres of non-agricultural property situated in Sankeshwar and, undeniably, Sankeshwar falls within the territorial jurisdiction of the Court of Principal District and Session Judge, Belgaum district. Section 17 CPC deals with suits for immovable property situate within jurisdiction of different Courts. Section 18 deals with place of institution of suit where local limits of jurisdiction of Courts are uncertain and Section 19 deals with suits for compensation for wrongs to person or movables. Therefore, Sections 17 to 19 CPC have no application to the facts of this case. Section 20 CPC deals with suits not covered by Sections 16 to 19. Since Section 16(d) applies to the facts of this case, Section 20 has no application.

21. Now, let us have a look at the case law which has bearings on decision-making in this case. The Supreme Court in the case of A.B.C.LAMINART PVT. LTD. AND ANR. v. A.P. AGENCIES, SALEM, dealing with the jurisdiction of the Court in matter of a contract, in paras 11 and 12 held:

"11. The jurisdiction of the Court in matter of a contract will depend on the situs of the contract and the cause of action arising through connecting factors.

12. A cause of action means every fact, which if, traversed, it would be necessary for the plaintiff to prove in order to support his right to a judgment of the Court. In other words, it is a bundle of facts which taken with the law applicable to them gives the plaintiff a right to relief against the defendant. It must include some act done by the defendant since in the absence of such an act no cause of action can possibly accrue. It is not limited to the actual infringement of the right sued on but includes all the material facts on which it is founded. It does not comprise evidence necessary to prove such facts, but every fact necessary for the plaintiff to prove to enable him to obtain a decree. Everything which if not proved would give the defendant a right to immediate judgment must be part of the cause of action. But it has no relation whatever to the defence which may be set up by the defendant nor does it depend upon the character of the relief prayed for by the plaintiff.

22. In the case of THE ELECTRICAL CO. LTD., CALCUTTA AND ANR. v. THE CROMPTON ENGINEERING CO. (MADRAS) LTD. MADRAS, an application under Section 20 of the Arbitration Act, 1940 was filed before the Madras High Court and the circumstances were that but for the execution of agreement at Madras all other activities, i.e., the subject-matter in respect of which arbitration was called for were within the jurisdiction of the Calcutta High Court. The subject- matter of dispute under reference was applicant's claim for return of steel supplied to respondents at Calcutta for fabrication purposes or in the alternative for compensation thereof. The applicant's contention that execution of agreement being part of the subject-matter, the Madras High Court had jurisdiction to entertain the application, was rejected by the Madras High Court by observing that-

"The place of execution of agreement was inconsequential and the proper test was that of the subject-matter of arbitration which did not fall within the jurisdiction of Madras High Court."

23. In SUSHIL ANSAL v. UNION OF INDIA AND ANR., AIR 1980 Del 43, the petitioner therein entered into contract with the Union of India at Lucknow for carrying out flooring in certain buildings at Kanpur. Certain disputes arose between the parties and a Sole Arbitrator was appointed to adjudicate upon the various disputes between the parties. The Arbitrator made his award on 7th March, 1979. Petitioner filed petition under Sections 14 and 17 of the Arbitration Act, 1940 in Delhi High Court for filing of the Award and proceedings in the Court by the Arbitrator and for making the same a rule of the Court. The jurisdiction of the Delhi High Court was claimed on the basis that the Arbitrator was appointed and he made the award at Delhi and that the Union of India has its headquarters at Delhi. The Delhi High Court, while rejecting the above claim of the petitioner and holding that Delhi High Court has no jurisdiction, observed thus:

"The contract in question relates to the provision of flooring in certain buildings at Kanpur. The construction of the work under the contract is not the business of the Union of India. This is only an executive function to be performed by the officers. The Union of India no doubt has its office at Delhi but the Court does not exercise its jurisdiction against the Union of India simply because it has its office at Delhi. The Union of India is not a natural person. The expression 'voluntarily resides' in Section 20 of the Code of Civil Procedure does not refer to legal entity but to natural persons. Similarly, the expression 'carries on business or personally works for gain' does not refer to functions carried on by the Union of India in discharge of its executive powers as held by the Division Bench of this Court in Binani Bros, (P) Ltd. v. Union of India, . The present case thus is not covered either under Clause (a) or Clause (b) of Section 20 of the Code of Civil Procedure. The case is also not covered under Clause (c) of Section 20 of the Code of Civil Procedure. No part of the cause of action arose at Delhi and, therefore, this Court has no jurisdiction".

24. In GOPICHAND v. KHAZAN CHAND AND ORS., AIR 1938 Lahore 226 a case which arose under the Arbitration Act, 1899, where mortgage property was involved in the award is situate at Sialkot, the Court while holding that the Court of the District Judge at Amritsar has no jurisdiction to make an order filing the award, observed thus:

"By Section 16, Civil P.C., any suit for foreclosure, sale or redemption in the case of a mortgage of or charge upon immovable property can only be instituted in the Court within the local limits of whose jurisdiction the property is situate, and though Section 2, Arbitration Act, does not expressly refer to this provision of the law, the implication is obvious when it states where the suit could be instituted. The immovable property which was involved in the award was admittedly situated at Sialkot and any suit enforcing any encumbrance against it could only be instituted in Sialkot and not anywhere else. Consequently by Section 2, Arbitration Act, the Court of the District Judge at Amritsar had no jurisdiction to make an order filing the award, inasmuch as if the subject matter submitted to arbitration were the subject of a suit, the suit could not be instituted at Amritsar. There was thus a lack of inherent jurisdiction in the Court ordering the filing of the award as the award was incompetent under the Arbitration Act and was altogether void."

25. In FIRM ASSANDAS PURSUMAL v. AILDAS MADHAVDAS AND ORS., AIR 1934 Sind 183(2) where, on 6th June 1932, Mr. Chandiram, an Advocate of Sind High Court, filed an award made by him on a reference under the Indian Arbitration Act, 1899 executed in his favour by Respondents 1 and 2 therein. In the Award, Respondent No. 2 had to pay Respondent No. 1 a sum of Rs. 11,970/- with interest thereon at 9% per annum from February 1932 by certain instalments, the last of which is payable on 1st January, 1937. Interest was made payable on each instalment as it fell due and it was provided that in default of payment of any two instalments with interest, the whole amount then remaining due together with interest shall be recoverable by respondent No. 1. For the "due fulfillment, discharge, satisfaction and payment of the decretal amount due under this award", respondent 1 has been given a mortgage lien upon a number of immovable properties all of which are situated in the district of Larkhana. The award further provided as follows:

"On default of payment of the instalments with interest on the due dates as mentioned above and the decretal amount becoming payable at once as mentioned above the parties of the first part shall be entitled to recover the amount due to them under this award decree either by sale of the mortgage properties mentioned above in execution of this award decree or by execution proceedings against the persons or other properties both movable and immovable of all the parties of the second part."

26. In the context of that case, the Sind High Court while holding that it has no jurisdiction to entertain the application, speaking for the Court, LOBO A.J.C., held thus:

"What was referred to arbitration is clear from the reference and has already been set out above. A suit for the reliefs covered above. A suit for the reliefs covered by the disputes submitted to arbitration would be a suit involving the determination of a right to or interest in immovable properties situated outside the jurisdiction of this Court. Under Section 16(d), Civil P.C., this Court would have no jurisdiction to entertain such a suit. It follows by reason of Section 2, Arbitration Act, that this Court would have no jurisdiction to file the award in the present case."

27. The case law noticed above uniformly hold that if a suit for the reliefs covered by the disputes submitted to arbitration would be a suit involving the determination of a right to or interest in immovable properties situated outside the jurisdiction of a particular Court, that Court would have no jurisdiction to entertain such suit. If that ratio is applied to the facts of this case, we should unhesitatingly hold that the Court of Principal City Civil and Session Judge, Bangalore, has no jurisdiction to entertain the application filed by the appellant under Section 9 of the Act in as much as the disputes raised in the said application involve the determination of rights of the parties to the agreement with regard to their right to or interest in immovable properties situated within the exclusive territorial jurisdiction of the Principal District and Session Judge, Belgaum. In other words, the application filed by the appellant under Section 9 of the Arbitration Act does not involve determination of any right to or interest in any immovable property situate within the territorial jurisdiction of Bangalore Court.

28. Sri D.L.N. Rao, learned Counsel for the appellant, would, however, submit that having regard to the fact that the Act permits the parties to resolve the disputes between them by way of arbitration at a chosen place with minimal intervention of the Courts and since the parties in this case have agreed to settle the disputes between them in Bangalore, we should interpret the provisions of Section 2(1)(e) in such a way as to hold that the Bangalore Court has jurisdiction to entertain the application filed by the appellant under Section 9 of the Act. Sri D.L.N. Rao would contend that such interpretation is justified because of Sub-clause (9) of Clause 14 of the PDA entered into between the parties, which clause, in unmistakable terms reflects the intention of the parties that the Bangalore Court alone has jurisdiction to entertain the disputes between them. In other words, what Sri D.L.N. Rao submits is that we should adopt rule of 'purposive interpretation' while construing the definition of "Court" in Section 2(1)(e) of the Act.

29. Clause 10-V of the PDA reads as follows:

"Language and place of Arbitration The Language of arbitration shall be English and the place of arbitration shall be Bangalore".

30. Clause 14(9) of the PDA reads as follows:

"Governing Law/Jurisdiction This agreement shall be governed by and construed in accordance with the Indian Law. The jurisdiction will be Bangalore and the settlement of disputes will be in accordance of the Indian Arbitration Act, 1996.

Any disputes concerning the scope, meaning, construction, application etc. shall be settled by the Indian Arbitration and Conciliation Act, 1996 in English Language."

31. The place chosen by the parties for arbitration and incorporated in Clause 10-V of the PDA is in accordance with the liberty granted to the parties under Section 20 of the Act. Section 20 of the Act provides that the parties are free to agree on the place of arbitration. In this case, we are not called upon to decide on the place of arbitration in terms of Clause 10-V of PDA, but on the question whether the Bangalore Court is a "Court" within the meaning of Section 2(1)(e) of the Act. Simply because the parties to the PDA have chosen Bangalore as the place of arbitration, it cannot be said that the Bangalore Court is the "Court" for the purpose of Section 9 or Sections 27, 34, 37, 47 and 56 of the Act regardless of the fact whether the Bangalore Court is a "Court within the meaning of Section 2(1)(e) of the Act in the facts and circumstances of this case.

32. Clause 14(9) of the BDA, amongst other things, provides that "the jurisdiction will be Bangalore and the settlement of disputes will be in accordance of the Indian Arbitration Act, 1996". Firstly, the phrase "the jurisdiction will be Bangalore" is not intelligible and does not make any sense. Secondly, even assuming that the parties to the PDA by using the above phrase intended to confer jurisdiction on the Bangalore Court, the Bangalore Court will not acquire jurisdiction to entertain the application filed under Section 9 of the Act if it does not satisfy the definition of "Court" under Section 2(1)(e) of the Act.

33. It is a well-recognised principle of interpretation of statutes that if the language used in a statute is capable of bearing more than one construction, in selecting the true meaning regard must be had to the consequences resulting from adopting the alternative constructions. A construction that results in hardship, serious inconvenience, injustice, absurdity or anomaly or which leads to inconsistency or uncertainty and friction in the system which the statute purports to regulate has to be rejected and preference should be given to that construction which avoids such results. However, this rule has no application when the words are susceptible to only one meaning and no alternative construction is reasonably open. When the material words in a statute are capable of bearing two or more constructions, the rule laid down in HEYDEN's case, (1584) 3 Co. Rep. 7a : 76 ER 637, which has now attained the status of a classic, can be applied for construction of such words. The rule laid down in Heyden's case (supra) is also known as "purposive construction" or "mischief rule". The rule of purposive construction or mischief rule enables consideration of four matters in construing a statute: (i) what was the law before enacting the statute concerned; (ii) what was the mischief or defect for which the law did not provide; (iii) what is the remedy that the statute has provided, and (iv) what is the reason of the remedy. The mischief rule then directs that the Court must adopt that construction which shall suppress the mischief, that is to say that the Courts should identify the "mischief which existed before passing of the statute and then if more than one construction is possible, favour that which will eliminate the mischief so identified.

34. The Supreme Court in CIT, M.P. & BHOPAL v. SODRA DEVI, expressed the view that the, rule in HEYDEN's case (supra) is applicable only when the language of the statute is ambiguous and the words thereto are reasonably capable of more than one meaning. In KANAILAL SUR v. PARAMNIDHI SABHUKHAN, GAJENDRAGADKAR, J. speaking for the Supreme Court has stated that the recourse to object and policy of the statute or consideration of the mischief and defect which the statute purports to remedy is only permissible when the language is capable of two constructions.

35. There is absolutely no scope for the Court to apply the rule of "purposive construction". Firstly, the provisions of Section 2(1)(e) of the Act are quite plain, unambiguous and they are not capable of bearing more than one construction. Secondly, if the construction suggested by Sri D.L.N. Rao is not accepted, it will not result in any hardship, serious inconvenience, injury or anomaly. Thirdly, we also do not find any absurdity that may entail by interpreting the provisions of Section 2(1)(e) of the Act by applying rule of literal interpretation or popularly known as 'Golden rule'. Fourthly, simply because the parties have agreed to resolve the disputes between them at Bangalore, by way of arbitration, only on that ground we cannot hold that the Bangalore Court is the "Court" within the meaning of Section 2(1)(e) of the Act and that it has jurisdiction to entertain the application filed under Section 9 of the Act. The question whether a particular Court established under a statute has jurisdiction or not to entertain a dispute is of vital importance and fundamental consideration for the State as well as its citizens in the domain of administration of justice, and therefore, where that question has been settled by the lawmaker by exercising the power vested in it by the Constitution by enacting a law, the parties who are governed by that law cannot confer jurisdiction on an incompetent Court contrary to or in breach of such enacted law to decide the disputes between them by their consent or agreement. It is well settled that the parties by consent cannot confer jurisdiction on a Court to decide disputes if such Court has no jurisdiction to entertain such disputes in terms of law.

36. In VISSAMSETH CHANDRA NARASIMHAM v. RAMDAYAL RAMESHWARALAL AND ORS., the Andhra Pradesh High Court, while dealing with filing of an Award under the Arbitration Act, 1940, held that award can be filed only in a Court in which suit would lie with regard to the subject matter of reference and that an agreement between the parties to file it in a different Court is against the Statute and cannot be given effect to. The mere fact there is such an agreement and that the parties had also acted upon it cannot be of no avail since there can be no estoppel against statute. In para 14 of the Judgment, the Andhra Pradesh High Court held thus:

"The intendment of this provision is explicit and is consistent with the definitions heretofore stated. That is to say, an award has to be filed in the Court in which a suit would lie with regard to the subject matter of reference. This is a statutory requirement and cannot possibly be circumvented by any agreement between the parties. In other words, if there was an agreement that would be against the statute and cannot be given effect to. So, the plea that the parties had an agreement stipulated for the award being filed before the High Court of Calcutta would not avail. The circumstance that in fact the agreement had been acted upon would not also avail, as there cannot be an estoppel against statute".

37. The Supreme Court, in the case of MODI ENTERTAINMENT NETWORK AND ANR. v. W.S.G. CRICKET PTE.LTD., dealing with the question whether the parties can confer jurisdiction on a Court by agreement, held thus:

"In regard to jurisdiction of Courts under the Code of Civil Procedure (CPC) over a subject matter one or more Courts may have jurisdiction to deal with it having regard to the location of immovable property, place of residence or work of a defendant or place where cause of action has arisen. Where only one Court has jurisdiction it is said to have exclusive jurisdiction; where more Courts than one have jurisdiction over a subject matter, they are called Courts of available or natural jurisdiction. The growing global commercial activities gave rise to the practice of the parties to a contract agreeing before hand to approach for resolution of their disputes thereunder, to either any of the available Courts of natural jurisdiction and thereby create an exclusive or non-exclusive jurisdiction in one of the available forum or to have the disputes resolved by a foreign Court of their choice as a neutral forum according to the law applicable to that Court. It is a well settled principle that by agreement the parties cannot confer jurisdiction, where none exists, on a Court to which CPC applies, but this principle does not apply when the parties agree to submit to the exclusive or non-exclusive jurisdiction of a foreign Court, indeed in such cases the English Courts to permit invoking their jurisdiction. Thus, it is clear that the parties to a contract may agree to have their disputes resolved by a foreign Court termed its a "Neutral Court' or 'Court of Choice' creating exclusive or non-exclusive jurisdiction in it.

38. In the light of the case-law noticed above, it is quite clear that if a Court of law does not have jurisdiction to entertain a suit or an application or a petition within the framework of law prescribed under the Statute, neither such Court can assume jurisdiction nor the parties to the dispute can confer jurisdiction on such Court to entertain such suit or application or petition by agreement or consent. Therefore, the submission made by Sri D.L.N. Rao, learned Counsel for the appellant does not merit our acceptance.

39. In conclusion, we hold that the Court of Principal City Civil and Session Judge, Bangalore, has no jurisdiction to entertain the appellant's application filed under Section 9 of the Act and that the impugned order made by that Court is in accordance with law.

40. In the result, the appeal is dismissed, however, with no order as to costs.