Calcutta High Court
M/S Electronica Finance Limited vs Quality Offset Printers & Ors on 30 April, 2026
Author: Shampa Sarkar
Bench: Shampa Sarkar
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IN THE HIGH COURT AT CALCUTTA
COMMERCIAL DIVISION
ORIGINAL SIDE
BEFORE :-
THE HON'BLE JUSTICE SHAMPA SARKAR
A.P.COM No. 614 of 2025
M/s Electronica Finance Limited
vs.
Quality Offset Printers & Ors.
For the Petitioner : Mr. Sakya Sen, Sr. Adv.
Mr. Sayan Ganguly, Adv.
Mr. Sormi Dutta, Adv.
Mr. Sumeet Chowdhury, Adv.
For the Respondents : Mr. Satadru Chakraborty, Sr. Adv.
Mr. Bhaskar Dwivedi, Adv.
Ms. Jyoti Rauth, Adv.
Mr. Hareram Singh, Adv.
Mr. Saptarshi Raja Chaterjee, Adv.
Reserved on : 16.04.2026
Judgment pronounced on : 30.04.2026
Judgement uploaded on : 30.04.2026
Shampa Sarkar, J.
1. This is an application under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the said Act”). The
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application has been filed by the lender, which is a Non-Banking Financial
Company. The petitioner is engaged in the business of asset finance and
provides loan for assets, equipments and vehicles on lease, on hire purchase
and hypothecation basis. The registered office of the petitioner is in Pune
and the branch office is at 16, Strand Road, Diamond Heritage Building, 5th
Floor, Room No. 525, P.S – Hare Street, Kolkata – 700001, which is within
the ordinary original jurisdiction of this court.
2. It has been averred in the application that, the respondent no. 2 as
the proprietor of the respondent no. 1 sometime in October 2023
approached the petitioner for a loan of Rs. 51,29,000/- for expansion of the
business of the respondent no. 1. The respondent nos. 2 and 3 stood as
guarantors of the said loan.
3. According to the case run by the lender/petitioner, all discussions and
deliberations with regard to the said loan took place at the Branch Office at
16, Strand Road, Diamond Heritage Building, 5th Floor, Room No. 525, P.S –
Hare Street, Kolkata – 700001. The petitioner agreed to provide a loan of Rs.
51,29,000/- and accordingly a Business Loan Agreement (hereinafter
referred to as the said agreement) bearing number APPL00148697 dated
October 13, 2023 was executed between the parties. It has been specifically
averred that the agreement was signed, sealed and concluded by the
petitioner at its Branch Office within the jurisdiction of this court. For the
purpose of securing the loan, the respondents hypothecated a machine. The
machine was installed in the premises of the respondent no. 1 at New Delhi.
As per the terms and conditions of the agreement, the respondents were
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required to repay the loan along with the applicable interest and other
charges incidental thereto, in monthly instalments. The lender/petitioner
claimed to have a first charge on the machine which was the secured asset.
That apart, under the said agreement, the lender/petitioner also claimed the
right to repossess the machine in the event of default committed by the
respondents. Allegedly, the respondent no. 1 paid some of the instalments,
namely, first to the thirteenth and thereafter failed and neglected to pay
further instalments. The last payment made by the respondent no. 1 was for
an amount of Rs. 17,817/- on December 25, 2024. On March 1, 2025, the
petitioner had already issued demand notice to the respondents through a
learned Advocate, demanding the outstanding dues with interest, amounting
to Rs. 3,05,034/-. The notice was issued from the office of the petitioner
situated at 16, Strand Road, Diamond Heritage Building, 5th Floor, Room
No. 525, P.S – Hare Street, Kolkata – 700001. The petitioner claimed to be
also entitled to terminate the agreement upon occurrence of any breach or
any default. When the notice dated March 1, 2025 went unheeded and the
petitioner was aggrieved by the breach of obligations emanating from the
said agreement, an application under Section 9 of the said Act being Misc.
Case No. 2953 of 2025 was filed before the learned Chief Judge of the City
Civil Court, Calcutta, inter alia, praying for appointment of a receiver in
order to take possession of the secured asset. By an order dated April 22,
2025, the learned 13th Judge, City Civil Court, Calcutta, inter alia, was
pleased to appoint a learned Advocate as the receiver for the purpose of
taking over possession of the secured asset. The receiver failed to take
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possession of the asset and accordingly filed a report. Being aggrieved by the
order of the learned Judge, an appeal was preferred by the respondents
being F.M.A.T (ARB) No. 28 of 2025, which was disposed of by the Division
Bench, inter alia, remanding the matter to the learned 13th Judge, City Civil
Court at Calcutta for further hearing.
4. In view of the failure of the respondents to make payments and on the
allegation that the respondents had committed breach of the agreement, the
lender was of the view that disputes had arisen between the parties which
should be referable to arbitration in terms of the arbitration clause,
incorporated in the said agreement. Accordingly, the petitioner issued a
notice dated June, 17, 2025 under Section 21 of the said Act, thereby
invoking the arbitration clause and calling upon the respondents for
reference of the dispute to arbitration. The notice indicated that the claim of
the petitioner on the date of issuance of the notice was Rs. 39,34,202/- and
paragraph 16 of the application indicates that after deductions under
various heads, the net outstanding on July 16, 2025 was Rs. 24,47,181/-.
The petitioner proposed the names of three persons. The notice mentioned
that a sum of Rs. 39,34,202/- had fallen due upon termination of the
agreement. The notice was received by the respondents. The respondents
did not react to the said notice.
5. Mr. Sakya Sen, Learned senior Advocate for the petitioner relied on
clause 11.4 of the agreement which provided that disputes or differences
arising between the parties with regard to the interpretation of the
agreement or in connection with the agreement or any covenant or condition
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thereto, as also dispute as regards the rights, duties and liabilities of any
party thereunder and performance or non-performance of any of the said
rights, liabilities would be referred to a sole arbitrator, to be appointed by
the petitioner/lender in accordance with the provisions of the said Act and
Rules framed thereunder. The language of the arbitration would be English.
The cost of arbitration including the learned arbitrator’s fees, advocates’
fees, travelling cost and other miscellaneous costs would be borne equally
by the parties. The venue of arbitration shall be Pune or such other place as
the lender in its sole discretion may determine and the courts at Pune or
such other place shall be exclusive jurisdiction.
6. According to Mr. Sen, the notice invoking arbitration clearly indicated
that the lender had determined the venue of the arbitral proceeding and the
jurisdiction of courts at Kolkata for all purpose and events. It was
specifically provided that the juridical seat of arbitration shall be Kolkata,
India. An option was given to the respondents to appear before the
concerned tribunal through online or offline mode. The respondents were
requested to expressly record in writing within seven days from the receipt
of the invocation notice about any objection as to the choice of arbitrator,
the venue and juridical seat, at Kolkata.
7. As no response was received from the respondents despite service of
the notice invoking arbitration, the said application was filed.
8. Mr. Shatadru Chakraborty, learned senior Advocate appearing on
behalf of the respondents raised a question of maintainability of the said
application before this Court. The question raised by Mr. Chakraborty was,
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whether the petitioner, at its own discretion, could unilaterally decide or
shift the venue or seat from Pune to Kolkata and whether the selection of
the venue at Kolkata could be imposed upon the respondents in the absence
of any consent from the respondents. Such action was contrary to the
doctrine of party autonomy.
9. According to Mr. Chakraborty, clause 11.4 of the said agreement had
two parts. The first specified that, the venue would be either Pune or such
other place that the lender may in the sole discretion determine and the
second part provided that the courts in Pune or such other place that the
lender may in its sole discretion determine, would have jurisdiction.
10. Mr. Chakraborty referred to Section 20 of the said Act which
mandated party autonomy also on the choice of venue or seat. One of the
parties to the dispute could not unilaterally lay down the terms and impose
them on the other. The very expression “or such place that the lender may
in its sole discretion determine” conferred upon the petitioner the unilateral
discretion to choose or shift the venue of the arbitration without any
approval or consent of the respondents. Such clause in the agreement was
contrary to the principle of party autonomy and as such, unenforceable in
law. He prayed for dismissal of the application, inter alia, on the ground that
the clause was not only contrary to the provisions of Section 20 of the said
Act, but also antithetic to Article 14 of the Constitution of India. Each and
every party had an equal right not only of participation in the arbitral
process, but also in the choice of arbitrators, the venue or seat and
jurisdiction. The fact that the venue of arbitration shall be Pune and the
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courts at Pune shall have jurisdiction was specifically provided for in the
agreement. The parties had intended to anchor the arbitral proceedings to a
particular place, i.e. Pune, thereby placing Pune as the seat of the arbitral
proceedings. As seat was not mentioned, venue should be read as seat and
as such, the second part of clause 11.4 that the lender/petitioner could also
at its discretion choose a venue apart from Pune should be ignored as the
same was redundant. He relied on B.G.S. Soma JV vs NHPC Limited
reported in (2020) 4 SCC 234.
11. He referred to the documents on record in order to substantiate that
the respondents carried on their business in New Delhi. The machine or the
secured asset was installed at New Delhi. The respondents signed the
agreement at New Delhi and no part of the cause of action had arisen within
Kolkata. The address of the respondents in the agreement was also that of
New Delhi. He further referred to the Term Loan Cum Hypothecation
Schedule- I to substantiate that the document was executed at Ghaziabad.
12. Reliance was placed on the following decisions in support of his
contention that the lender could not unilaterally choose a venue and the
second part of the clause should be ignored as it was contrary to law :-
i. L & T Finance Ltd. vs. Manoj Pathak and Another reported in 2020
SCC OnLine Bom 177.
ii. Cholamandalam Investment and Finance Company Limited vs.
Uma Earth Mover and Another reported in 2024 SCC OnLine Cal
1922.
13. Heard the parties and considered their submissions. The specific
averments in paragraph 1 and 3 of the petition indicates that the petitioner
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has a Branch Office at 16, Strand Road, Diamond Heritage Building, 5th
Floor, Room No. 525, P.S – Hare Street, Kolkata – 700001and the petitioner
signed, sealed and concluded the agreement within the jurisdiction of this
court. The clause 11.4 of the said agreement provides, that the venue of the
arbitration shall be either Pune or such other place that the lender may in
its sole discretion determine and the courts at Pune or such other place
would have exclusive jurisdiction. The argument of Mr. Chakraborty that
Pune is the seat cannot be accepted as there is a contrary indication that
the venue shall be either Pune or the lender may at its sole discretion
determine the venue of arbitration and jurisdiction of the court in respect of
disputes arising out of the subject agreement. This clause was agreed to by
the parties meaning thereby, the respondents had agreed that the venue will
be either Pune or the lender would have exclusive right to choose the venue
and the jurisdiction of the court. The use of the expression “or such other
place”, demonstrates a contrary indication, insofar as, the selection of venue
is concerned. Secondly, the demand notice was issued from Kolkata by the
lender through its advocate having its office at Kolkata. The notice of March
1, 2025 not only indicated the amount due but also indicated that on
account of dishonour of cheques, an ECS proceeding under Section 138 of
the Negotiable Instruments Act would be initiated. In the said notice it was
clearly mentioned that for the purpose of settlement of the loan along with
interest and pending charges, the respondents were required to contact the
Branch Office. The last paragraph of the notice indicated that, as per the
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agreement, the venue of arbitration shall be Pune or such other place the
lender may in its sole discretion determine.
14. Accordingly, the respondents were informed that the venue of the
arbitration shall be Kolkata and the courts at Kolkata would have
jurisdiction in the matter. The relevant clause and the last paragraph of the
notice dated March 1, 2025 are quoted below :-
“Please note that as per the said agreement the venue of Arbitration
shall be Pune or such other place that the lender may in the sole
discretion determine and courts in Pune or such other place shall have
exclusive jurisdiction. Under the instruction of our client, we hereby
intimate you that the venue of Arbitration shall be at Kolkata and
therefore jurisdiction of the court is also confined to the Courts in, of
and at Kolkata.”
15. The relevant clause in the notice dated June 17, 2025 is quoted
below:-
“6. That we state that pursuant to our rights as per clause 11.4 to
determine the venue of the arbitral proceedings and all other
jurisdiction of Courts, we determine the same to be in Kolkata for all
purposes and events.
7. That, pursuant to the above and with a view to ensure a fair and
impartial process arid to provide each party full opportunity to
present its case, fairly and conveniently, we hereby propose following
list of neutral Arbitrator for your perusal, for selecting an arbitrator of
your choice from the given list along with the consent of the
Guarantor/Co-Borrowers. For the purpose of convenience the
Juridical Seat of Arbitration shall be at Kolkata, India. Your may opt
to appear before the concerned Arbitral Tribunal through online mode
and/or offline mode. The Arbitral Award shall be final and binding
upon the Parties.
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Sr. No. Name
Souma Bhattacharya (Advocate), 5, K.S.
1.
Roy Road, 3rd Floor, Kolkata – 700 001Avijit Ghoshal (Advocate), 7C, Kiran
2.
Sankar Roy Road, Hastings Chamber,
Unit BL, Room No. – 12, Basement,
Kolkata – 700 001.
Joyjit Roy Choudhury (Advocate), Delta
3.
House, 4 Govt Place (N), 9th Floor, Room
No. 918, Kolkata – 700 001
8. Please note that a copy of this Notice will be served upon you
through Postal Services as well as, through Hand Delivery, wherever
possible and since it is mandatory to either accept or reject the above
proposal of appointment of Arbitral Tribunal, you may expressly
intimate us in writing within a period of 7 days from the date of receipt
of this letter, about your objections and/or choice of arbitrator whose
Judicial Seat shall be in Kolkata, India, IF any, failing which we shall
proceed with proper actions as stated hereinabove and under.
Needless to say that we shall be at liberty to appoint any of the
abovementioned arbitrator for adjudication of the dispute arisen
between us due to the non-payment of the outstanding amount without
any further notice and communication in the event that we do not hear
from you about your choice of Arbitral Tribunal/Arbitrator as stated
hereinabove.”
16. The arbitration clause is quoted below:-
“11.4 ARBITRATION AND JURISDICTION
Any disputes or differences arising between the Parties hereto as to the
interpretation of this Agreement or in connection with this Agreement or
any covenants or conditions thereof or as to the rights, duties, or
liabilities of any Party hereunder or as to any act, performance or non-
performance of any act, deed or thing as agreed under this Agreement
or matter or thing arising out of or relating to or under this Agreement
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(even though the Agreement may have been terminated), the same shall
be referred to a sole Arbitrator to be appointed by the Lender, according
to the provisions of Arbitration and Conciliation Act 1996, and rules
there under and any amendment thereto from time to time. The
Language of arbitration shall be English. All cost of arbitration including
the arbitrator’s fees, advocate fees, travailing cost other miscellaneous
expenses shall be borne equally by the Parties hereto. The award of the
arbitrator shall be a speaking award and shall be final, conclusive and
binding on all the Parties whether on question of law or of fact. In the
event of death, refusal, negligence, inability, incapability of the persons
so appointed to act as a sole arbitrator, a new arbitrator shall be
appointed by the Lender. The venue ef arbitration shall be Pune or such
other place that the Lender may in the sole discretion determine and
Courts in Pune or such other place, shall have exclusive jurisdiction.
This Agreement shall be governed by and construed in all respects with
Indian laws and the Parties hereto agree that any matter or issues
arising hereunder or any disputes hereunder shall, at the discretion of
the Lender be subject to the exclusive jurisdiction of the courts of the
city of Pune or such other place as the Lender may deem fit. This shall
not however limit the rights of the Lender to take proceedings in any
other Court of competent jurisdictions.”
17. The respondents did not raise any objection with regard to the
selection of the venue by the petitioner. Moreover, the petitioner approached
the City Civil Court at Kolkata by filing an application under Section 9 of the
said Act for interim protection and by order dated April 22, 2025, a learned
Advocate was appointed as a receiver. The relevant portion of the order is
quoted below :-
“Accordingly, Puja Mandal [Enrollment No. F/1771/1557/2021,
Mob No. 8927731284], Ld. Advocate and the Member of City
Civil Court Bar Association, be appointed as Receiver for the
purpose of taking possession of 1 no. of machine being 1.
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Heidelberg SBBZ, 2. Kugler Auto Punching Machine,
Manufacturer being Kuglar Womako and Dealer being Brizlaxmi
paper products Private Limited, 3. Perfecta Cutting Machine
with Jogar, Manufacturer being Brizlaxmi paper products
private limited, 4. Perfecta Cutting Machine, Manufacturer
being Perfecta Schneidmaschinenwerk GMBH and Dealer being
Brizlaxmi Paper Products Private Limited and 5. Aster Swing
Machine, Manufacturer being Meccanotecnica Aster and Dealer
being Brizlaxmi Paper Products Pvt. Ltd.
The Receiver is authorized to take all necessary steps in accordance
with law, including appointment of agent. The Police authority of the
nearby Police Stations or the Superintendent of Police, under the
jurisdiction of whom the machine in question is intercepted, would
render assistance as is required lawfully by the Receiver, if at all
necessary, who shall submit the Report before this Court.
So long the machine in question shall remain in the custody of the
Receiver or her authorised agent and she shall remain responsible for
any loss and damage, if any, caused to the said machine in question.
The fee of the Receiver is fixed at Rs. 6,000/-.
The Petitioner is directed to make payment to the Receiver directly and
submit the receipt with the Court.
Issue writ accordingly on payment of the Receiver’s fee.
The Petitioner is directed to submit papers by the next date fixed,
showing that the Arbitration proceeding has commenced, in default,
the above Order shall stand vacated.
Issue notice upon the Respondents, to show cause within 15 (fifteen)
days from the date of receipt thereof.
Let a copy of this Order along with Writ be handed over to the Ld.
Receiver for information and necessary compliance.
The Office is directed to acquire signature of the Ld. Receiver at the
time of receiving the Writ and the Order sheet.
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Fix 12.08.2025 for S/R and submission of the report by the Receiver.
Requisites at once. Petitioner is given strict direction to comply with the
order.”
18. The order dated April 22, 2025, was challenged by filing an appeal
before the High Court at Calcutta bearing No. F.M.A.T (ARBAWARD) 28 of
2025. By consent of the parties, the appeal and the application were taken
up together by the Division Bench. The Division Bench recorded the
submissions of the respective parties and relegated the respondents to the
learned City Civil Court, to ventilate all grievances. The order is quoted
below :-
1. By consent of the parties, the appeal and the connected
application are taken up together for hearing.
2. This appeal is directed against an order dated April 22,
2025, passed by the learned 13th Bench, City Civil Court,
Calcutta, on an application under Section 9 of the Arbitration
and Conciliation Act, filed by the respondent herein being
Misc. Case No. 2952 of 2025.
3. It appears that the appellant herein obtained financial
accommodation in connection with a hire purchase agreement
for purchase of certain equipment. Apparently, instalments
fell in arrear. Accordingly, the respondent/finance
company approached the learned Trial Court under Section 9 of
the 1996 Act in view of there being an arbitration clause in the
hire purchase agreement for resolution of disputes and
differences between the parties.
4. The learned Trial Judge noting the submission made on
behalf of the finance company that the appellant herein is
trying to create third party interest in respect of the subject
equipment/machines, appointed a learned advocate of the
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City Civil Court as receiver and passed the following direction
:
“The Receiver is authorized to take all necessary
steps in accordance with law, including
appointment of agent. The Police authority of the
nearby Police Stations or the Superintendent of
Police, under the jurisdiction of whom the
machines in question is intercepted, would
render assistance as is required lawfully by the
Receiver, if at all necessary, who shall submit
the Report before this Court.
So long the machines in question shall remain in
the custody of the Receiver or her authorized
agent and she shall remain responsible for any
loss and damage, if any, caused to the said
machines in question.
The fee of the Receiver is fixed at
Rs.6,000/-.
The Petitioner is directed to make payment to the
Receiver directly and submit the receipt with the
Court.
Issue writ accordingly on payment of the
Receiver's fee.
The Petitioner is directed to submit papers by the
next date fixed, showing that the Arbitration
proceeding has commenced, in default, the
above Order shall stand vacated.
Issue notice upon the Respondents, to show
cause within 15 (fifteen) days from the date of
receipt thereof.
Let a copy of this Order along with Writ be
handed over to the Ld. Receiver for information
and necessary compliance.”
5. Being aggrieved, the respondent in the Section 9
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application is before us by way of this appeal.
6. Mr. Tiwari, learned advocate representing the appellant
says that the receiver, with police force has taken actual
physical possession of the concerned equipment which has
stopped the appellant’s business altogether. He also says
that the receiver has taken possession of other machines
which were not financed by the respondent. The finance
company is in the process of selling the
equipment/machinery of which possession has been
taken by the receiver. This will cause irreparable prejudice
to the appellant. Though there was some default in payment
of instalment in the months of January and February, 2025,
thereafter substantial sums have been paid by the appellant
to the respondent.
7. Mr. Sen, learned senior counsel representing the
respondent/finance company says that the receiver could not
locate many of the equipment/machinery which she was
directed to take possession of and the appellant extended no
co-operation in that regard.
8. Submission made on behalf of the respective parties are
disputed by the respective opposite parties.
9. We are of the view that the appellant should approach the
learned Single Jude and ventilate his grievance. However, till
the appellant gets such an opportunity, we direct the
respondent not to sell or create third party interest in respect
of the subject machinery/equipment. This interim protection
granted to the appellant will continue for a period of one
month from date and will be subject to any further order that
may be passed by the learned Trial Court.
10. Likewise the appellant shall also not deal with or create
third party interest in respect of the machinery and equipment
which have been financed by the respondent company till
further orders of the learned Trial Court.
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11. If the appellant asks for a copy of the minutes of the
meeting at which the receiver took possession of the
concerned machinery, copy of such minutes will be forthwith
supplied to the appellant.
12. FMAT (ARBAWARD) 28 of 2025 is disposed of along with
the application being I.A. No. CAN 1 of 2025.
13. Urgent certified photostat copy of this order, if applied for,
shall be given to the parties as expeditiously as possible on
compliance with all the necessary formalities.”
19. From the order of the Division Bench, it is clear that all the parties
accepted the jurisdiction of the City Civil Court. The fact that the City Civil
Court was treated by the parties as the principal civil court under Section
2(1)(e) of the said Act attained finality, when the Division Bench, upon
disposal of the appeal filed by the respondents, relegated the matter to the
City Civil Court at Calcutta. Section 2(1)(e) is quoted below :-
“2. Definitions.–(1) In this Part, unless the context otherwise
requires,–
[(e) “Court” means–
(i) in the case of an arbitration other than international commercial
arbitration, 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;
(ii) in the case of international commercial arbitration, the High
Court in exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter of the
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arbitration if the same had been the subject-matter of a suit, and in
other cases, a High Court having jurisdiction to hear appeals from
decrees of courts subordinate to that High Court;]”
20. The submissions of the learned Advocate for the respondents as
recorded by Their Lordships, do not indicate that any question of
jurisdiction was raised in the appeal, which means that the respondents did
not have any objection with regard to the choice of venue of the arbitration
being Kolkata and jurisdiction of the courts at Kolkata over the subject
matter of the dispute. The notice invoking arbitration clearly mentioned in
paragraphs 6, 7 and 8 that the lender had chosen Kolkata as the venue of
the arbitral proceedings and the courts at Kolkata to have jurisdiction over
the said agreement. In the factual matrix of this case, consent of the
respondents to anchor the arbitral proceeding at Kolkata is available from
the conduct. The issue of jurisdiction was not raised in the appeal from the
order of the City Civil Court. The appeal was disposed of with a direction
upon the respondents to ventilate their grievances before the learned City
Civil Court.
21. In such view of the matter, the decision of Cholamandalam
Investment and Finance Company Limited (supra) will not be applicable.
The application which was adjudicated upon by Her Lordship, had been filed
under Section 9 of the said Act, seeking appointment of a receiver in respect
of an asset which was financed by the petitioner. The question which fell for
decision was whether, the High Court at Calcutta was the court as defined
under Section 2(1)(e) of the said Act. The relevant clauses of the loan
agreement which fell for decision before Her Lordship are quoted below :-
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“29. Arbitration :
………………
The venue of arbitration proceedings shall be at Channai or such
place/location/city which the company at its discretion may decide
from time to time.
30. Jurisdiction : Subject to the arbitration clause contained herein, the
Courts in Chennai alone shall have exclusive jurisdiction over any
matter arising out of or concerning this Agreement. However, the
parties hereby agree, confirm and undertake that the Company has a
right to file its claim in relation to any amount payable by the Borrower
and or Guarantors or any other connect matter/s as mentioned in this
Agreement in any other competent Court in India at its sole discretion. ”
22. Under clause 29 above, a similar clause as in the subject agreement
had been incorporated i.e. the venue of arbitration shall be at Chennai or
such place/location/seat which the Company at its discretion may decide
from time to time. Her Lordship was of the view that the lender could not
unilaterally decide the venue of arbitration. The clause was arbitrary. Such
decision was taken on the premise that the lender had approached the City
Civil Court at Calcutta and then withdrawn the proceedings on the ground
that the City Civil Court did not have any jurisdiction to entertain the
matter. Thereafter, the lender approached the High Court on the self-same
cause of action with the self-same reliefs as were before the City Civil Court.
Her Lordship observed that venue must be chosen by both the parties.
23. In the case in hand, the lender exercised the option to choose the
venue of arbitration as Kolkata with a further choice that the courts at
Kolkata would be exclusive jurisdiction. This option / choice was informed
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to the respondents by the first notice of demand and also by the second
notice under Section 21 of the said Act. The paragraphs which have been
quoted hereinabove clearly indicate that the petitioner had invited opinion of
the respondents with regard to not only the choice of the arbitrators, but
also choice of the venue and the jurisdiction of the court, but the
respondents remained silent.
24. The petitioner approached the City Civil Court at Calcutta under
Section 9 of the said Act treating the said court to be the principal civil court
as defined under Section 2(1)(e) of the said Act. The respondents approached
the High Court in appeal against the order appointing a Receiver. The High
Court remanded the matter to the City Civil Court and the respondents
accepted such order and went back to contest the matter before the City
Civil Court. The order of the Division Bench of the High Court does not
indicate, at all, that at any point of time, the respondents were aggrieved by
the exercise of option on the part of the petitioner, treating the City Civil
Court at Calcutta to have exclusive jurisdiction over the disputes arising out
of the subject agreement.
25. The other decision cited by Mr. Chakraborty i.e. LNT Finance Ltd.
(supra) also does not apply to the facts of the case inasmuch as, the High
Court of Bombay came to the conclusion that unless there was a contrary
indication, venue would be treated as a seat. Paragraphs 24, 25 and 29 of
the said decision are quoted below :-
“24. But this only answers the first portion of the argument. Mr. Rebello’s
construct proceeds on the footing that the whole of the selection of the seat
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(or venue=seat) provision is rendered bad because of the discretion
impermissibly conferred on L&T Finance to choose some other place in its
sole discretion. That is not so. All that this means is that L&T Finance
cannot pick any venue other than New Delhi, and that the stated venue,
New Delhi, will be the seat (since there is nothing to indicate that it is a
‘mere venue’, a meeting place of convenience). Mr. Rebello may have been
correct had the clause simply said the venue of the arbitration will be at
such place as L&T Finance may in its sole discretion decide. That would
have rendered the entire clause void, and then there would be no
designated venue/seat at all. Instead, in its current form, the clause does
name a venue. It does not say it is merely a venue or meeting place of
convenience. This venue, New Delhi, is therefore the seat. It then goes on to
give L&T Finance additional discretion to unilaterally select some other
venue/seat. What is bad and would be unacceptable is L&T Finance
exercising its choice to pick any other venue. This would not dislodge the
consensus arrived at between the parties designating New Delhi as the
chosen venue.
25. Once we see it like this, and once we have the settled law that in
domestic arbitrations where a venue is specified it connotes the seat
unless there is a specific indication to the contrary, then obviously no
question of any other cause of action jurisdiction can survive for the
purposes of selecting the competent Court.
29. There emerges the following trifecta of propositions in regard to a
domestic arbitration:
(a) A stated venue is the seat of the arbitration unless there are clear
indicators that the place named is a mere venue, a meeting place of
convenience, and not the seat;
(b) Where there is an unqualified nomination of a seat (i.e. without
specifying the place as a mere venue), it is courts where that seat is
situated that would have exclusive jurisdiction; and
(c) It is only where no venue/seat is named (or where it is clear that the
named place is merely a place of convenience for meetings) that any other
consideration of jurisdiction may arise, such as cause of action.”
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26. In the present case, there is a contrary indication that the venue of
arbitration would be either Pune or such other place as per the choice of the
lender. This does not demonstrate consensus of the parties to anchor the
arbitration proceedings exclusively at Pune. Moreover, the specific conduct
of the respondents in the proceedings before the City Civil Court and the
High Court would indicate that the choice of venue as Kolkata and the
jurisdiction of the court at Kolkata, made by the lender had been accepted
by the respondents and objection, if any, with regard to such option was
waived. The respondents derogated from the provisions of Section 20 of the
said Act in this particular case. The respondents, though called upon to
convey their objections, if any, with regard to the choice of Kolkata as the
venue and jurisdictional seat, did not raise any objection. No such objection
with regard to the jurisdiction of the City civil court at Kolkata was urged in
the appeal before the Division Bench.
27. Under such circumstances, the application is allowed. All other issues
with regard to admissibility of the claim, quantification of the claim,
limitation etc. are kept open, to be decided by the learned arbitrator.
28. Mr. Pourush Bandopadhyay, learned Advocate Bar Library Club,
Mobile No. 8777593009 is appointed as the sole arbitrator to arbitrate upon
the disputes between the parties. The learned arbitrator shall comply with
the provisions of Section 12 of the said Act. The learned Arbitrator shall be
at liberty to fix his remuneration as per the schedule of the said Act.
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29. Urgent Photostat certified copies of this judgment, if applied for, be
supplied to the parties upon fulfilment of requisite formalities.
(Shampa Sarkar, J.)