SYKO BAG INDUSTRIES BANGLORE Vs. ICDS LTD

JUDGEMENT

(1.) THE order impugned in this Appeal passed by the District Judge, Udupi dated 27-11-2002 in AS. No. 98/2002, on the question of jurisdiction of the said Court after interpretation of Section 2 (1) (e) of the Arbitration and Conciliation Act, 1996 (hereinafter called as 'the Act' in short) made by the learned Judge, has returned the petition to the appellants herein for presenting the same before the jurisdictional court by granting time till 12-12-2002 to facilitate the Appellants to name the Court to which they propose to present the same is questioned before this Court inter alia contending that the learned District Judge has wrongly applied Section 16 (c) of CPC ignoring the relevant fact of dispute between the parties involved in the arbitration proceedings, which is in relation to the loan transaction and not a suit for foreclosure of the immovable property of the first appellant which is furnished as collateral security to the respondent. The sale or redemption of mortgage was charged upon the immovable property namely, 'b' schedule property furnished by the first appellant as collateral security to the first respondent. Therefore, the learned counsel Sri n. A. Satish Chandra for appellants contends that the learned District Judge has made observation in the order impugned stating that the said Court had no jurisdiction to entertain the petition of the appellants by accepting the plea taken by the first respondent with regard to the territorial jurisdiction of Prl. District judge Court after referring to the decision of the Supreme Court reported in 2002 (1) SCC 475 : (AIR 2002 SC 204), wherein the Supreme Court has held that the question relating to territorial jurisdiction of the Court is an important aspect, the same shall be taken and decided as a preliminary issue and it goes to the root of the matter, which finding of the learned District Judge is erroneous in law, as he has not taken into consideration the dispute between the parties in relation to money recovery in respect of the machineries supplied by the first respondent to the first appellant for which Schedule-'b' immovable property was furnished by it as collateral security to the first respondent. Therefore the claim of the first respondent before the Arbitrator in the Arbitral Proceedings is not in relation to subject-matter of the above immovable property. The relief granted by the Arbitrator for sale of 'b' Schedule property in the event of money awarded in the Award in favour of the first respondent cannot be recovered. Therefore, the reliance placed upon by the learned district Judge under Section 16 (c), CPC in support of his conclusion that the District court has no territorial jurisdiction to entertain the petition filed by the appellants ignoring the definition of the Civil Court under the act, wherein it has been specifically stated that the District Court and the High Court in exercise of its ordinary civil jurisdiction to decide the questions "forming the subject-matter of the arbitration, if the same had been the subject-matter of a suit. " The subject-matter of the arbitration between the parties before the Arbitrator was for recovery of money due from the first appellant to the first respondent for having supplied the machineries to it. There was a dispute in this regard between the parties and the second respondent was appointed as an Arbitrator and dispute was referred to him for adjudication, he has passed the Award directing the appellants to pay in all a sum of Rs. 23,33,595/- with interest at: 18% p. a. on Rs. 12,70,336/- from 11-11-1999 till realisation and also pay a sum of Rs. 7,750/-as the cost of arbitral proceedings. Aggrieved by the Award the petition was filed before the prl. District Judge, Udupi by the appellants and the same was numbered as A. S. No. 98/2002. The learned principal District Judge has accepted the submission made on behalf of the first respondent after interpreting Section 2 (1) (e) of the Act and Section 16 (c) of CPC and passed the impugned order holding that court has no territorial jurisdiction, further the petition was ordered to be returned to the appellants for presenting: it before proper Court. The learned counsel Mr. T. N. Raghupathy for the first respondent has sought to justify the same placing reliance upon Section 16 (c)CPC and decision of this Court reported in 2002 (3) Kar LJ 265 : (2002 AIR - Kant hcr 1160) (Shree Shanthi Homes Private limited, Bangalore v. Chief Finance Limited, calcutta ).

(2.) AFTER careful perusal of the findings and reasons recorded by the learned District Judge in the impugned order and the reference order made to the second respondent for adjudication of the dispute between the parties as extracted at paragraph 2 on the basis of the hire-Purchase agreement dated 10-3-1997 for supply of equipments mentio ned in 'a' schedule properties of machinerie is supplied to the first appellant, the first appellant has executed an equitable mortgage by way of deposit of title deeds in respect of 'b' schedule property and the same was furnished a is collateral security to the first respondent, the relief sought in the claim petition by him against appellants is not directly in relation to 'b' schedule property referred to in the arbitration Award, but only the amount due from the first Appellant for having supplied 'a' schedule machineries to it by first respondent. The learned Prl. District Judge has misconstrued the provisions of Section 2 (1) (e) of the Act and interpreted the same erroneously by placing reliance upon section 16 (c) of CPC and held that the District Court had no jurisdiction to examine the case in view of the fact that the subject-matter of the dispute is only for recovery of money from appellanits for supply of machineries mentioned in the 'a schedule to the first appellant and 'b' schedule immovable property was not the subject-matter of Arbitration between the parties before the second respondent. The agreement entered between the parties for supply of machineries to first appellant is at Bangalore, the second respondent arbitrator is at Udupi, arbitration proceedings were referred to him at Udupi as per the terms of the Hire Purchase agreement between the parties. Therefore, the Prl. District Judge, udupi has got territorial jurisdiction to examine the correctness of the award passed by the second respondent. Therefore, it is contended by the learned counsel for the appellants that the order impugned is liable to be set aside, accordingly the order is set aside. The matter is remitted back to the Principal District Judge, udipi to examine the case on merits and pass order within 3 months from the date of receipt of this order. ORDERS ON 'for. BEING SPOKEN TO'

(3.) VGGJ and CRKSJ : 27-11-2006. This matter is listed 'for being spoken to' at the request of Sri T. N. Raghupathy, learned counsel for the first respondent placing reliance upon certain decisions of the Apex Court and various High Courts with regard to applicability of the provision of Sec. 16 (c) of CPC to the Arbitral suit proceedings before the Prl. District Judge in the arbitration. The alternative prayer made in the claim petition by the first respondent for recovery of money that may be awarded in its favour by the Arbitrator against appellants after accepting its claim to sell 'b' schedule immovable property which was furnished as collateral security by first appellant is also, the subject-matter of arbitration proceedings. Therefore, the Prl. District's Judge, Court Udupi is the Court in terms of Sec. 2 (e) of the Act for the purpose of examining correctness of the award passed by the Arbitrator and therefore it has got territorial jurisdiction to entertain the claim of the appellants in view of Sec. 16 (c) of CPC, which provision of the code states that if, the 'b' Schedule property upon which charge is created is within the jurisdiction of Kerala state, the sale of the said immovable property if the loan amount advanced to the first appellant is not recovered, the Civil Court having jurisdiction to decide the question "forming the subject-matter of reference has got jurisdiction to attach the immovable property and sell it for recovery of money due to the first respondent". Therefore, the learned counsel for first respo ndent submits that the order of the learned Prl. District Judge, Udupi is legal and valid and therefore he has requested to recall the order dated 8-11-2006 as this Court has set aside the impugned order passed by the learned Judge of the District court for its consideration on merits after hearing the parties stating that it has got jurisdiction to entertain the petition of the appellant. In support of his legal submissions he has placed reliance upon the following decisions. 1. AIR 1988 SC 1347 2. AIR 1971 SC 740 3. AIR 2003 SC 1177 AIR 1965 Mysore 316 AIR 2001 Kar 364 AIR 2002 Kar 252 AIR 1985 AP 62 AIR 1917 Bom 10 AIR 1979 Del 201 AIR 1963 HP 9