AIR 2007 SC 1401
(Section 16 of CPC vis-à-vis Section 20 of CPC)
In this case, an agreement was entered into by the Developer with one Jatinder Nath (Appellant), residing at Faridabad at that time. Subsequently the appellant had shifted his residence from Faridabad to Saket in New Delhi. Under the above agreement, the Developer agreed to construct a housing complex in New Delhi and finance the construction from its own resources. Clauses 11, 20 and 21 of the said agreement read as follows:
“11. In case of any dispute arising between the parties in this respect, the matter shall be referred to the Sole Arbitrator for his valuable decision and his decision shall be final and binding on both the parties.
- That in case of any dispute arising between the parties in respect of these presents, the same shall be referred for arbitration to the sole Arbitrator. Shri Damodar Sharma, 5-N/35, NIT Faridabad shall be the sole Arbitrator and the decision shall be binding on both the parties.
- The agreement has been entered into between the parties at Faridabad and the Faridabad Courts only shall have the jurisdiction in case of any dispute between the parties to the said agreement.”
The Developer later on filed an application under Section 14 of the Arbitration Act for filing the Award in the court of Additional Civil Judge (Sr. Div.), Faridabad (“the trial court”). The Appellant objected to the jurisdiction of the trial court. According to him, the suit land stood located in Saket, New Delhi and, therefore, the trial court had no jurisdiction to pass the decree in terms of the said Award. On the other hand, the Developer contended that the agreement was entered into between the parties at Faridabad and that the Faridabad court alone had the jurisdiction to decide the above dispute. The Developer also contended that the subject matter of the reference was the contract between the parties which provided that the dispute, if any, was to be referred for arbitration in Faridabad One of the key issues in this case was, whether the trial court of Faridabad had territorial jurisdiction to entertain the matter.
The significance of this judgment is that it clarifies the jurisdiction issue in case of immovable property and lays down the precise scope of Section 16 and 20 of CPC in such cases.
Held (Supreme Court)
The Hon’ble Supreme Court in this case observed–
“On our examining the terms and conditions of Ex. P-1 along with the surrounding circumstances thereto, we are of the view that Ex. P-1 was a pure Development Agreement. The agreement is merely an agreement whereby a party agrees to develop certain property for a certain consideration.
On the facts of this case, therefore, it cannot be said that the trial court at Faridabad had no jurisdiction to make the Award the rule of the court under Section 14 of the Act. Section 31(1) of the Act provides that an Award may be filed in any court having jurisdiction in the matter to which the reference relates. Under that section, the Award can be filed in the court within whose jurisdiction the property in dispute lies. Parties cannot give jurisdiction to a court under Section 14 by consent if that court does not has jurisdiction. If an award refers to an immovable property, the court having jurisdiction in respect of the same will entertain an application under Section 14. In order to decide as to which court has jurisdiction to entertain a petition under Section 14, reference has to be made to Section 2(c) read with Section 31(1) of the Act. Merely because the arbitrator chooses to hold the proceedings in a place where no suit could be instituted, and chooses to make an award at that place, it would not give the court of that place territorial jurisdiction to decide the matter under the Act. Section 30 refers to ground for setting aside an award. Section 30 is to be read with Section 33. The idea behind the entire scheme of the Arbitration Act appears to be that an application by a party challenging the validity of correctness of the award on whatever ground has to be made under Section 33. Section 33 is the only section under which a party is given the right to apply to the court to challenge either the agreement or the award. Under the Act, therefore, after the Award has been filed a party is permitted to make an application under Section 33 to bring all kinds of defects to the notice of the court and the court will give reliefs either under Section 15 or Section 16 or even under Section 30 of the Act. In an arbitration without the intervention of the court, an award can be filed in any court having jurisdiction in the matter to which the reference relates. The award can be filed only in the court which would have jurisdiction in respect of the subject matter of the dispute. In order to decide the jurisdiction of the court, it is necessary to decide whether the court would have jurisdiction to try a regular suit between the parties in which the relief is claimed. Section 33 does not prescribe the court before which an application under this section may be filed, but Section 31 makes such provision. Section 31(2) provides that all questions regarding the validity, effect or existence of an award or an arbitration agreement shall be decided by the court in which the award has been filed or may be filed. Section 2(c) lays down the forum. The application has to be moved in the court within, whose jurisdiction the opposite party resides or carries on business or within whose jurisdiction any part of the cause of action arises. Residence or carrying on business of a party, apart from the place of accrual of a cause of action is relevant for determining the territorial jurisdiction of the court in arbitration cases, if the question so arises in connection with the subject matter of the dispute.”
The Apex Court in this landmark judgment, further observed that in the subsequent paragraph that:
“Applying the above tests to the facts of the present case, we are of the view that at the relevant time the appellant resided at Faridabad. He resided at Faridabad when the contract was made. Under the contract, the parties agreed to refer all disputes to the Faridabad court. Apart from the residence, we are also concerned with the place of accrual of the cause of action. In the present case, a bare reading of the agreement indicates that it is an agreement to develop. The appellant remains the owner, the Developer remains the contractor. The Developer is the financer. The appellant is the owner of an asset. The contractor/ Developer agrees to exploit that asset on behalf of the owner. The Developer funds the scheme. The building plans remained in the name of the owner. The D.D.A. informs the owner regarding revocation of the building plan. The owner files the writ petition challenging the revocation. The contractor is paid consideration in terms of a part of the property. In the circumstances, it cannot be said that this case is similar to a suit for land. One cannot look at para 16 alone in isolation. On the other hand, with open eyes, the parties had entered into the contract, they had agreed to refer all disputes to an arbitrator at Faridabad and they had agreed that the Faridabad court alone shall have jurisdiction. In a matter of this kind, it cannot be said that the claim is similar to a suit for land. A housing complex has to be constructed at the site. When dispute arises, it will not be confined only to immovable property. Such disputes also require accounts to be maintained. The disputes also involve rendition of accounts. In the circumstances, in our view, Section 20 CPC alone is attracted. Therefore, in our view, the High Court was right in holding that the Faridabad court had jurisdiction to make the Award the rule of the court”.
Author: Vivek Verma, Associate @ Majmudar & Partners. You can direct your queries to the author at email@example.com
 Ibid. para 12
 Ibid. para 13