Jammu & Kashmir and Ladakh High Court: Tashi Rabstan, J., while addressing the syllogistic issue of ‘venue and ‘seat’ of arbitration dismissed the appeal challenging the dismissal order of District Court refusing to entertain a petition under Section 9 of Arbitration and Conciliation Act, 1996. The Bench opined that,
Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts.
The instant appeal had been preferred by the petitioner under Section 37 of the Act, 1996 against the order of the Additional District Judge, whereby the court below without touching the merits of the case dismissed the petition of appellant filed under Section 9 of the Act on the ground that it lacked jurisdiction to adjudicate upon the matter. The petitioner-appellant was seeking to grant temporary prohibitory injunction restraining the respondents from appointing a new Master Franchisee of DRS-Kids for the UT of J&K in place of petitioner-appellant as well as from interfering in petitioner’s functioning as Master Franchisee of DRS-Kids for whole of erstwhile State of J&K.
The facts-in-brief were that an agreement of franchisee dated 06-12-2007 was entered into between the petitioner and the DRS Vidya Samiti, a society, whereby, the appellant agreed to be appointed as franchisee of the DRS Vidya Samiti to establish and operate pre-school under the brand name “DRS Kids” within 3 kms radius of Trikuta Nagar, Jammu. Thereafter, the petitioner-appellant was appointed as the Master Franchisee by DRS Education Pvt. Ltd. vide contract dated 13-12-2008 vesting in petitioner the rights to identify potential areas for establishing new DRS Kids pre-schools within the whole erstwhile State of J&K. As per the agreement, the life of the master franchisee was fixed for 10 years from the date of agreement which was extendable for a further period on mutually agreed terms and conditions.
The petitioner-appellant submitted that on realizing that the appellant was able to open up 14 franchisee schools in Jammu alone, respondent 2 turned greedy and started devising ways to oust the appellant from the aforesaid agreement by replacing her. In anticipation of that, the appellant secured an interim relief from the court of Additional Munsiff, Jammu in suit titled Supinder Kour v. MDN Edify Education Pvt. Ltd., whereby the respondents were restrained from advertising, admitting children/students, opening and operating a pre-school in six km area from the border of Trikuta Nagar, Jammu. The suit was subsequently withdrawn by the appellant pursuant to a compromise arrived at between the parties.
The petitioner-appellant argued that the dismissal of the application under Section 9 of the Act on the point of jurisdiction was not sustainable as the Master Franchisee Agreement was executed in Jammu; the appellant’s area to act as Master Franchisee was in Jammu; the franchisee schools were operating in Jammu; the dispute with respect to the Master Franchisee agreement arose in Jammu; the post-dispute reconciliation proceedings/meetings were conducted in Jammu; the earlier litigation between the parties was in Jammu Court; the cause of action accrued to the appellant at Jammu and the subject-matter situate within the jurisdiction of the principal Civil Court of original jurisdiction.
It was further argued by the petitioner-appellant that section 20 of the Act classifies two places viz., ‘seat of arbitration’ and ‘venue of arbitration’, whereas the arbitration clause only refers the venue of arbitration to be at Hyderabad. She, thus, argued that where only the venue had been specified and seat of arbitration not determined, it is indisputably the cause of action/subject matter which would determine the jurisdiction of the courts as referred to in section 9 of the Act. Therefore, it was argued that the respondents could not oust the jurisdiction of the courts at Jammu with respect to cause of action and the situation of the subject matter.
Analysis and Opinion
In terms of Clause-27 of the agreement dated 06-12-2007, any dispute or differences arising out of or in connection with this agreement shall be finally settled in arbitration proceedings to be conducted at Hyderabad in accordance with the Arbitration and Conciliation Act, 1996. Further, in the said clause it had been specifically provided that the Courts at Hyderabad in Andhra Pradesh shall have exclusive jurisdiction under this agreement. Similarly, Clause 13 of Master Franchise Agreement dated 13-12-2008 stated the following:
“13. GOVERNING LAW AND DISPUTE RESOLUTION
13.1 This agreement is made under and shall be governed by and construed for all purposes in accordance with the laws of India and subject to arbitration. However, the courts at Hyderabad shall have exclusive jurisdiction.
13.2 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination or invalidity hereof, shall be settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996 (or any statutory amendment thereof) as in force as at that date before a sole arbitrator appointed by the Franchisor. The venue of arbitration shall be Hyderabad.”
Civil Appeal No.5850/2019 decided on 25.07.2019 (supra):
Reliance was placed by the Court on the similarly placed decision of the Supreme Court in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., wherein appellant challenged the jurisdiction of the Madras High Court on the ground that the parties had agreed that Seat of arbitration be Bhubaneswar and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. The Madras High Court vide impugned order appointed a former judge of the Madras High Court as the sole arbitrator by holding that mere designation of “Seat” by parties does not oust the jurisdiction of other courts other than at the Seat of arbitration. The High Court held that in absence of any express clause excluding jurisdiction of other courts, both the Madras High Court and the Orissa High Court will have jurisdiction over the arbitration proceedings. Resolving the dispute, the Supreme Court held that,
“Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the “venue” of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts…
When the parties have agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the Act, the impugned order is liable to be set aside.”
In the view of the above, the Bench opined that perusal of Clause-27 of the agreement and clauses 13.1 and 13.2 of Master Franchise Agreement specifically provided that the courts at Hyderabad shall have exclusive jurisdiction for all purposes in accordance with the laws of India and subject to arbitration, which belied the claim of the petitioner-appellant that the court’s jurisdiction had not been determined in the agreement. Not only this, but the arbitration clause also referred the venue of arbitration proceedings to be at Hyderabad.
Thus, opining that the decision of Supreme Court clearly clinches the issue, the Bench held that the impugned order did not require any interference. Accordingly, the appeal was dismissed.[Supinder Kour v. MDN Edify Education Pvt. Ltd., 2021 SCC OnLine J&K 594, decided on 20-08-2021]
Kamini Sharma, Editorial Assistant has reported this brief.
For the Appellant: Sr. Advocate Vikram Sharma with Advocate Sachin Dev Singh
For the Respondents: Advocate Rajesh Ranjan