Judgement Briefs

Civil Procedure Law

Swastik Gases Pvt. Ltd. v. Indian Oil Corporation Ltd.

(2013) 9 SCC 32

Citation
(2013) 9 SCC 32
Court
Supreme Court of India
Date
3 July 2013
Bench
R.M. Lodha, Madan B. Lokur and Kurian Joseph, JJ.

Facts

  • Swastik Gases Pvt. Ltd., based in Jaipur, was appointed as a consignment agent for petroleum and lubricant products under an agreement with a company that later merged into Indian Oil Corporation.
  • The agency operated at Jaipur.
  • Stocks were delivered there, sales took place there, meetings occurred there and the dispute arose there.
  • The agreement contained:
  • An arbitration clause; and
  • Clause 18, which stated:
  • “The Agreement shall be subject to jurisdiction of the courts at Kolkata.”
  • After disputes concerning unsold stock and payment arose, Swastik invoked arbitration.
  • It applied before the Rajasthan High Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.
  • Indian Oil objected that, because of Clause 18, only the Kolkata courts had jurisdiction.
  • Swastik argued that Jaipur courts also possessed jurisdiction because part of the cause of action arose there.
  • It further argued that Clause 18 was not exclusive because it did not contain words such as:
  • “Alone”;
  • “Only”; or
  • “Exclusive.”
  • The Rajasthan High Court rejected the application on jurisdiction.
  • Swastik appealed to the Supreme Court.

Issues

  • Whether the Rajasthan High Court independently possessed territorial jurisdiction because part of the cause of action arose in Jaipur.
  • Whether Clause 18 excluded Jaipur jurisdiction despite not using express exclusionary words.
  • How a contractual jurisdiction clause should be construed where more than one court is otherwise competent.

Rule

  • For a domestic arbitration application under Section 11, the competent High Court is identified with reference to the court that could decide the subject matter as a civil suit.
  • Section 20 CPC therefore remains relevant:
  • Jurisdiction may arise where the defendant carries on business; or
  • Where the cause of action wholly or partly arises.
  • Parties cannot select a court that has no jurisdiction under law.
  • Where two or more courts are competent, the parties may bind themselves to one forum and exclude the others.
  • Use of words such as “alone,” “only” or “exclusive” is helpful but not essential.
  • The court must identify the parties’ intention from the clause as a whole.
  • Where the contract expressly makes itself subject to the jurisdiction of courts at one place, and those courts are otherwise competent, exclusion of other courts may be implied unless the contract indicates otherwise.

Application

  • The Supreme Court accepted that Jaipur had a substantial connection with the dispute.
  • The agency functioned there, goods were delivered there and the dispute arose there.
  • Accordingly, without Clause 18, the Rajasthan High Court would have possessed jurisdiction under the arbitration statute read with Section 20(c) CPC.
  • Kolkata was also accepted as a competent forum because part of the cause of action was connected with it.
  • The clause therefore selected one among courts already possessing jurisdiction; it did not create jurisdiction in an unrelated court.
  • The central question was the meaning of the phrase “subject to jurisdiction of the courts at Kolkata.”
  • The Court reasoned that treating the clause as merely confirming Kolkata jurisdiction would give it little practical purpose.
  • The deliberate identification of Kolkata indicated that the parties intended disputes to be brought there.
  • The absence of “alone,” “only” or “exclusive” did not defeat that intention.
  • Applying the principle that express mention of one may imply exclusion of others, the Court held that the clause implicitly excluded Jaipur.
  • Justice Lokur agreed separately, stressing that the natural meaning of an exclusion clause should not be defeated merely because standard exclusionary words were omitted.
  • The Court distinguished the outcome in A.B.C. Laminart on its facts.
  • That case did not establish that absence of the word “only” always preserves other forums.
  • It required careful construction of the particular clause and surrounding circumstances.

Held

  • The Supreme Court dismissed the appeal and upheld rejection of the Rajasthan application.
  • Although Jaipur would otherwise have possessed jurisdiction, the parties had validly agreed that Kolkata courts would exclusively exercise jurisdiction.
  • Swastik remained free to pursue its Section 11 remedy before the Calcutta High Court.
  • The decision clarified that an exclusive-jurisdiction clause need not use the words “alone,” “only” or “exclusive” if the parties’ intention to select one competent forum is otherwise clear.
  • Use this case for: Naming one competent court in a jurisdiction clause may impliedly exclude all other competent courts even without express exclusionary words.