IN THE SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION

TRANSFER PETITION (CIVIL) NO.78 OF 2009

Balaji Coke Industry Pvt. Ltd.  … Petitioner  Vs.

M/s Maa Bhagwati Coke (Guj) Pvt. Ltd.  …  Respondent

J U D G M E N T

ALTAMAS KABIR, J.

1. This Transfer Petition under Article 139A(2) of  

the Constitution of India read with the relevant  

provisions of the Supreme Court Rules and Section  

25 of the Code of Civil Procedure has been filed by  

Balaji Coke Industries Pvt. Ltd. for transfer of  

Arbitration Application No.1 of 2008, titled M/s  

Maa Bhagwati Coke (Guj) Pvt. Ltd. vs. Balaji Coke  

Industry Pvt. Ltd., pending in the Court of the

Principal Senior Civil Judge at Bhavnagar (Gujarat)  

to the Calcutta High Court.    

2. Briefly  stated,  the  facts  are  that  the  

Petitioner Company registered under the Companies  

Act and having its registered office at 12, Ho-Chi  

Minh  Sarani,  Flat  2B,  Second  Floor,  Kolkata,  is  

carrying on business in the trade of coking coal.  

The Respondent, which is engaged in the business of  

processing  coking  coal  into  hard  coke,  requires  

coking  coal  as  raw  material  to  be  used  in  its  

processing unit for transformation into met coke  

(hard coke).   On 29th April, 2005, the Petitioner  

Company  entered  into  an  agreement  with  the  

Respondent Company to supply 15,000 Metric Tonnes  

of coking coal of Indonesian Origin.  The agreement  

to sell provided that the cargo would be sold to  

the  Respondent  on  High  Seas  basis.   The  said  

agreement  was  executed  in  Kolkata  within  the  

jurisdiction of the Calcutta High Court.    

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3. Clause 11 of the aforesaid agreement contains  

an Arbitration Clause which reads as under :-

“In  case  of  any  dispute  or  difference  arising between the parties hereto or any  claim  or  thing  herein  contained  or  the  construction thereof or as to any matter  in any way connected with or arising out  of these presents or the operation thereof  or  the  rights,  duties  or  liabilities  of  either  party  thereof,  then  and  in  every  such  case  the  matter,  differences  in  disputes  shall  be  referred  to  an  arbitrator in Kolkata, West Bengal, India  in  accordance  with  and  subject  to  the  provisions  of  the  Arbitration  and  Conciliation  Act,  1996,  or  any  other  enactment  or  statutory  modifications  thereof for the time being in force.  The  place of arbitration shall be Kolkata.”

[Emphasis supplied]

Pursuant to the aforesaid agreement dated 29th  

April, 2005, the parties entered into a specific  

High Seas Sale Agreement on 7th May, 2005, wherein  

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it was specified that the contracted coal would be  

supplied to the Respondent from a vessel named MV  

Gulf Ranger.  The total sale consideration for the  

consignment  was  mentioned  as  Rs.8,11,80,000/-.  

Clause  14  of  the  said  High  Seas  Sale  Agreement  

provided that the sale contract would be subject to  

Kolkata jurisdiction.

4. Disputes having arisen between the parties, the  

Respondent herein by its letter dated 20th December,  

2008, invoked the arbitration clause and requested  

the Petitioner Company to confirm the appointment  

of  a  retired  Judge  of  the  Gujarat  High  Court,  

Hon’ble  Mr.  Justice  K.M.  Mehta,  to  be  the  Sole  

Arbitrator.  In  the  said  letter,  the  Respondent  

alleged that the Petitioner was in possession of  

Rs.3,43,73,485/- which belonged to the Respondent  

and was being enjoyed by the Petitioner instead of  

handing over the same to the Respondent.  It was  

also alleged that the Respondent was entitled to  

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receive 6,793 Metric Tonnes of material from the  

Petitioner on the basis of the aforesaid sum lying  

with  the  Petitioner.   It  was  alleged  that  the  

Petitioner  was  not  issuing  delivery  orders  in  

favour of the Respondent for release of the said  

material and that the same was currently lying in a  

plot owned by the Respondent, but under the control  

and supervision of the Petitioner in Gujarat within  

the jurisdiction of the Bhavnagar Civil Courts.   

5. The petitioner wrote back to the Respondent on  

9th January, 2009, denying all the allegations and  

in particular denying the fact that it had received  

any sum of money from the Respondent or that the  

Respondent was entitled to receive any material, as  

alleged.  A preliminary objection was also raised  

by the Petitioner to the appointment of Mr. Justice  

K.M.  Mehta  as  the  Sole  Arbitrator  in  terms  of  

Clause 11 of the Agreement dated 29th April, 2005,  

particularly when the said clause stipulates that  

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the disputes shall be referred to an Arbitrator in  

Kolkata, West Bengal, India, and Mr. Justice K.M.  

Mehta was based in Ahmedabad.  It was expressly  

stated by the Petitioner that the appointment of  

the  learned  Judge  as  Sole  Arbitrator  would  be  

wholly  contrary  to  the  express  terms  of  the  

arbitration clause.  

6. According to the Petitioner, it was surprised  

to receive summons issued by the Principal Senior  

Civil Judge, Bhavnagar (Gujarat) to appear before  

the said Court on 17th January, 2009, in Arbitration  

Application  No.1  of  2008  purported  to  have  been  

filed by the Respondent-Company under Section 9 of  

the Arbitration and Conciliation Act, 1996, praying  

for an injunction to restrain the Petitioner, his  

servants  and  agents  from  disposing,  selling,  

diverting or alienating the material in question or  

any  part  thereof  and  for  the  issuance  of  a  

direction  to  the  Petitioner  to  issue  delivery  

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orders for 6,793 MT of coking coal in favour of the  

Respondent.  

7. Appearing in support of the Transfer Petition,  

Mr. Gaurav Mitra, learned Advocate, submitted that  

the invocation of the jurisdiction of the Principal  

Senior  Civil  Judge  at  Bhavnagar,  Gujarat,  was  

contrary to the express terms of the High Seas Sale  

Agreement dated 7th May, 2005, wherein it had been  

expressly stated that the sale contract would be  

subject  to  Kolkata  jurisdiction.  Mr.  Mitra  

submitted  that  the  Respondent  had  deliberately,  

with  mala fide intention, failed to disclose the  

specific  High  Seas  Sale  Agreement  dated  7th May,  

2005, in the application under Section 9 of the  

aforesaid  Act,  since  it  contained  the  specific  

jurisdiction clause by which all disputes arising  

out  of  or  relating  to  the  arbitration  agreement  

were to be filed within the jurisdiction of the  

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Courts at Kolkata. What was disclosed was merely  

the agreement to sell dated 29th April, 2005.   

8. Mr. Mitra further submitted that when the venue  

for  arbitration  had  been  expressly  agreed  to  

between the parties to be Kolkata, West Bengal, and  

also having regard to the fact that the Arbitrator  

to  be  appointed  was  to  be  a  person  based  in  

Kolkata, it is only the Courts at Kolkata which had  

both  pecuniary  and  territorial  jurisdiction  to  

entertain all applications in connection with the  

High Seas Sale Agreement.  

9. Mr. Mitra submitted that the learned Principal  

Senior Civil Judge at Bhavnagar (Gujarat), neither  

has the territorial nor pecuniary jurisdiction to  

entertain  or  determine  any  dispute  between  the  

parties arising out of the agreement referred to  

hereinabove  and  the  jurisdiction  of  the  Gujarat  

Court has been invoked with  mala fide motive, in  

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violation of the terms of the agreement agreed to  

between the parties.   

10. In support of his aforesaid submissions, Mr.  

Mitra referred to and relied upon the judgment of a  

learned Single Judge of the Delhi High Court in the  

case of Geo. Miller & Co. Ltd. Vs. United Bank of  

India & others [69 (1997) Delhi Law Times 616],  

where  since  the  parties  had  agreed  to  the  

jurisdiction  of  a  particular  Court  to  entertain  

disputes arising out of an arbitration agreement  

between the parties, it was held that where two or  

more  Courts  have  jurisdiction  under  the  Code  of  

Civil Procedure to try a suit or proceeding, an  

agreement  between  the  parties  that  the  disputes  

between them shall be tried in one of such Courts  

is  not  contrary  to  public  policy  nor  does  it  

contravene  the  provisions  of  Section  28  of  the  

Indian Contract Act, 1872.  It was also observed  

that the choice of Forum agreed to and accepted by  

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the  parties  should  normally  be  respected.   Mr.  

Mitra  also  pointed  out  that  in  the  aforesaid  

decision,  the  learned  Judge  had  relied  upon  two  

decisions of this Court in (i) A.B.C. Laminart (P)  

Ltd. vs. A.P. Agencies [1989 (2) SCC 173]; and (ii)  

Hakam Singh vs.  Gammon (India) Ltd. [AIR 1971 SC  

740 = (1971) 1 SCC 286], wherein it was held that  

where there might be two or more competent Courts  

which can entertain a suit consequent upon a part  

of the cause of action having arisen therein, if  

the  parties  to  the  contract  agreed  to  vest  

jurisdiction  in  one  of  such  Courts  to  try  any  

dispute which might arise between themselves, the  

agreement would be valid.  It was also urged that  

if the purport of the agreement was to completely  

oust  the  jurisdiction  of  the  Court,  such  a  

condition would be unlawful and void being against  

public  policy  and  would,  therefore,  be  hit  by  

Section 28 of the Contract Act.  However, if it was  

found that the jurisdiction agreed to would also be  

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an appropriate jurisdiction in the matter of the  

contract, it could not be said that it ousted the  

jurisdiction of the Court.  

11. In addition to the above, Mr. Mitra submitted  

that even if the provisions of Section 20 of the  

Code of Civil Procedure were to be applied, no part  

of  the  cause  of  action  had  arisen  within  the  

jurisdiction of the Bhavnagar Court in Gujarat so  

as to enable it to assume jurisdiction in respect  

of the transaction arrived at in Kolkata and the  

parties had agreed under clause 14 of the agreement  

that the sale contract would be subject to Kolkata  

jurisdiction.  Mr. Mitra urged that it was in such  

circumstances and also having regard to clause 11  

of the aforesaid agreement, which provided for the  

place  of  arbitration  to  be  Kolkata,  that  the  

petitioner  was  impelled  to  file  the  transfer  

petition for transfer of the pending case in the  

Bhavnagar Court to the Calcutta High Court.   

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12. Responding  to  Mr.  Mitra’s  submissions,  Mr.  

Jitendra Malkan, learned Advocate, urged that since  

the cause of action for the Section 9 application  

had arisen within the jurisdiction of the Bhavnagar  

Court  in  Gujarat,  having  regard  to  even  the  

decisions cited by Mr. Mitra, the Bhavnagar Court  

had jurisdiction to entertain the said application.  

Mr. Malkan submitted that after discharge of the  

goods at port Pipavav in Gujarat, the same were  

stored in the godown of the Petitioner-Company at  

its  own  premises  within  the  jurisdiction  of  the  

Bhavnagar Court and since the relief prayed for by  

the Respondent-Company was for release of 6,793 MT  

of  coking  coal  from  the  said  consignment,  the  

application under Section 9 of the Arbitration and  

Conciliation  Act,  1996  had  been  rightly  filed  

before the learned Single Judge at Bhavnagar.

13. Mr. Malkan submitted that having regard to the  

provisions of Sections 16 and 20 of the Code of  

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Civil Procedure, the suit had been rightly filed  

before the Bhavnagar Court, inasmuch as, it related  

to the coal which was lying within the jurisdiction  

of the Bhavnagar Court.  Mr. Malkan submitted that  

even  taking  into  consideration  the  decisions  of  

this Court in A.B.C. Laminart (P) Ltd. (supra) and  

Hakam Singh (supra), it could not be contended that  

the  jurisdiction  of  the  Bhavnagar  Court  stood  

ousted by either Clause 11 or Clause 14 of the High  

Seas Sale Agreement, which had provided that the  

sale  contract  would  be  subject  to  Kolkata  

jurisdiction.   Mr.  Malkan  urged  that  there  was,  

therefore,  no  ground  to  allow  the  Petitioner’s  

prayer for transfer of the Arbitration Application  

No.1 of 2008, pending in the Court of Principal  

Civil Judge (Senior Division) at Bhavnagar to the  

Calcutta High Court.   

14. Mr. Malkan also submitted that neither Clause  

11 nor Clause 14 conferred exclusive jurisdiction  

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on the Courts in Kolkata.  Since the agreement did  

not  use  expressions  such  as  “alone”,  “only”  and  

“exclusive”,  which  could  be  construed  to  have  

completely ousted the jurisdiction of the Courts in  

Gujarat,  it  could  not  be  contended  that  the  

jurisdiction of the Court in Bhavnagar stood ousted  

from  entertaining  the  respondent’s  application  

under Section 9 of the Arbitration and Conciliation  

Act, 1996.

   15. The  only  question  which  falls  for  our  

consideration  is  whether,  notwithstanding  the  

mutual  agreement  to  make  the  High  Seas  Sale  

Agreement subject to Kolkata jurisdiction, it would  

be open to the Respondent-Company to contend that  

since a part of the cause of action purportedly  

arose  within  the  jurisdiction  of  the  Bhavnagar  

Court, the application filed under Section 9 of the  

Arbitration and Conciliation Act, 1996, before the  

Principal Civil Judge (Senior Division), Bhavnagar  

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(Gujarat),  would  still  be  maintainable.   The  

aforesaid question has often troubled the courts  

with one view being that since the parties to the  

agreement had agreed to a particular forum, they  

could no longer resile from the said position and  

claim that other courts, where a part of the cause  

of  action  may  have  arisen,  would  also  have  

jurisdiction  to  entertain  a  suit  or  other  

proceeding.  The other view has been that if by the  

said agreement the rightful jurisdiction of a court  

was sought to be ousted and a court was vested with  

the jurisdiction to entertain a suit, which it did  

not  have,  the  same  would  be  contrary  to  the  

provisions  of  Section  28  of  the  Indian  Contract  

Act, 1872, being contrary to public policy.

16. One of the earlier judgments on this dichotomy  

of  views  is  that  of  this  Court  in  Hakam  Singh  

(supra).  Faced with the question as to whether an  

agreement arrived at between two parties that one  

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of two courts having jurisdiction, would decide all  

disputes relating to such agreement, was hit by the  

provisions  of  Section  28  of  the  Indian  Contract  

Act, 1872, this Court held that where two courts or  

more have jurisdiction to try a suit or proceeding  

under  the  provisions  of  the  Code  of  Civil  

Procedure, an agreement between the parties that  

one  of  such  courts  would  have  jurisdiction  to  

decide  the  disputes  arising  between  the  parties  

from such agreement would not be contrary to public  

policy and would not, therefore, be contrary to the  

provisions  of  Section  28  of  the  Indian  Contract  

Act, 1872.

17. The said question once again arose in the case  

of  A.B.C.  Laminart  (P)  Ltd. (supra),  wherein  

following the decision in Hakam Singh (supra), but  

relying on the maxim ex dolo malo non oritur actio,  

this  Court  held  that  by  an  agreement  which  

absolutely  ousted  the  jurisdiction  of  a  court  

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having jurisdiction to decide the matter, would be  

unlawful and void, being contrary to public policy  

under Section 28 of the Indian Contract Act.  But  

so long as the parties to a contract do not oust  

the  jurisdiction  of  all  the  courts,  which  would  

otherwise have jurisdiction to decide the cause of  

action under the law, it could not be said that the  

parties  had  by  their  contract  ousted  the  

jurisdiction of the court.  This Court went on to  

observe  that  where  there  may  be  two  or  more  

competent  courts  which  can  entertain  a  suit  

consequent  upon  a  part  of  the  cause  of  action  

having arisen therewithin, if the parties to the  

contract  agree  to  vest  jurisdiction  in  one  such  

court to try the dispute which might arise between  

them, the agreement would be valid.  The question  

also arose in  R.S.D.V. Finance Co. Pvt. Ltd. vs.  

Shree Vallabh Glass Words Ltd., [(1993) 2 SCC 130],  

where an endorsement “Subject to Anand (Gujarat)  

jurisdiction”, was relied upon to contend that only  

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Courts  in  Anand  would  have  jurisdiction  to  

entertain any dispute relating to such jurisdiction  

and the suit filed in Bombay on the ground that the  

cause  of  action  arose  in  Bombay  was  not  

maintainable.  In the said case, this Court held  

that  since  apart  from  the  endorsement  on  the  

deposit  receipt,  there  was  no  formal  agreement  

between the parties, the said endorsement would not  

divest the courts in Bombay of their jurisdiction  

to entertain the suit.  As will be evident from the  

facts of the suit, the same stood on a different  

footing  and  does  not  advance  the  case  of  the  

respondent in any way.   

18. In the instant case, the parties had knowingly  

and voluntarily agreed that the contract arising  

out  of  the  High  Seas  Sale  Agreement  would  be  

subject  to  Kolkata  jurisdiction  and  even  if  the  

courts  in  Gujarat  also  had  jurisdiction  to  

entertain any action arising out of the agreement,  

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it has to be held that the agreement to have the  

disputes  decided  in  Kolkata  by  an  Arbitrator  in  

Kolkata, West Bengal, was valid and the Respondent-

Company had wrongly chosen to file its application  

under Section 9 of the Arbitration and Conciliation  

Act  before  the  Bhavnagar  Court  (Gujarat)  in  

violation of such agreement.  The decisions of this  

Court in A.B.C. Laminart (P) Ltd. (supra) as also  

Hakam Singh (supra) are very clear on the point.

19. Having regard to the above, we are inclined to  

accept  the  submissions  made  on  behalf  of  the  

petitioner and we are of the view that the transfer  

petition should be allowed.  We, accordingly, do so  

and  direct  that  Arbitration  Application  No.1  of  

2008 titled M/s Maa Bhagwati Coke (Guj) Pvt. Ltd.  

vs. Balaji Coke Industry Pvt. Ltd., pending in the  

Court of Principal Civil Judge (Senior Division),  

Bhavnagar (Gujarat), be transferred to the Calcutta  

High Court.

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20. There will, however, be no order as to costs.

…………………………………………J. (ALTAMAS KABIR)

……………………………………………J. (CYRIAC JOSEPH)

New Delhi Dated : 09.09.2009.

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