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Entertainment Networks (India) Ltd. v/s Union of India & ors.


    Decided On, 21 March 2003

    At, High Court of Judicature at Bombay


    Mr. Janak Dwarkadas , Senior Counsel with Mr. Rahul Narichania and Mr. Pradeep Sancheti i/b. Mulla & Mulla for the Petitioner. Mr. S.M. Shah with Mr. Suresh Kumar for Respondent Nos. 1 and 2.

Judgment Text


The Respondent No.3 though served, not represented.

2.This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 taken out by the petitioners. Relief sought is that the respondents should be restrained from invoking the bank guarantee. It is not necessary for me to go into the factual aspects as apart from two contentions raised which will have to be answered other contentions are same or similar which were before this Court in other related matters and answered by an order passed in Arbitration Petition No.78 of 2002 between Entertainment Networks (India) Ltd. vs. Union of India which was disposed of on 26th November, 2002. The issue before this Court was whether the respondents were entitled to invoke the bank guarantee in a case where license had not been issued in their favour. That issue was considered in para.5 of the order. This Court has taken a view that in the absence of license being issued there was no question of the respondents invoking the bank guarantee. In so far as those contentions are concerned, for the reasons given in the order dated 26th November, 2002 in Arbitration Petition No.75 of 2002 the said contentions are disposed of in the terms of the reasons already given.

3.That leaves us with the two other contentions raised in addition to those which were taken in Arbitration Petition No.75 of 2002. It is firstly contended that there is a deemed licence and in these circumstances the guarantee could not have been invoked. The learned Counsel took me through some of the clauses. I do not find that in the agreement or any condition attached to the agreement any provision for a deemed license. The clauses relied upon atleast do not support the said contention. The agreement contemplates that after fulfillment of the requirements a licence would be issued. That license has not been issued. In the light of that, the said contention must be rejected.

4.That leaves us only with the other contention raised as to the jurisdiction of this Court to hear and decide the present petition under Section 9 of the Act of 1996 on the ground that this is not the Court within the meaning of section 2(e) of the Act of 1996. That contention is based on clause 4 of the tender document. It reads as under:-

"I understand that all mattes relating to the application or licence if granted to me will be subject to jurisdiction of courts in Delhi only."

Relying on the said clause on behalf of the petitioners their learned Counsel contends that the perusal of the clause would show that it is restricted to the application and the licence to be issued. It does not apply in so far as agreement which was entered into. The guarantee was given after the agreement was entered into and, therefore, there would be no ouster of jurisdiction of this Court as the guarantee was issued by a bank at Mumbai. The petitioners have their office at Mumbai. The respondent can be sued on the said contract at Mumbai as they have also an office at Mumbai.

On the other hand on behalf of the respondents their learned Counsel contends that clause 4 must be read to include all matters relating to the application. Once it is so understood it would include arbitration agreement culminating into a license. It is contended that if the argument advanced on behalf of the petitioner is accepted it would leave a vacuum in so far as the agreement is concerned. That could not be the intention of Clause 4. Therefore, clause 4 if read would include the agreement also as a part of the application. In these circumstances the petitioners having agreed to confer jurisdiction to the Court at Delhi this Court will have no jurisdiction to hear and decide the matter.

The issue of jurisdiction of the court or ouster of jurisdiction of the Court is no longer res integra as the Apex Court has answered it in Hakam Singh Vs. M/s. Gammon (India) Ltd., AIR 1971 SC 740. In the instant case considering that the parties are carrying on business they could have been sued both in Courts at Mumbai and Courts at New Delhi having jurisdiction. However, considering clause 4 the parties have agreed to one of the Courts having jurisdiction it would be Courts in Delhi, if the agreement falls within the jurisdiction clause. The only question, therefore, is whether the clause 4 would embrace the dispute as now raised. The following facts may be material for consideration. The tender document is at Exh.A to the petition. The last date for receiving the complete tender was 11th November, 1999. Clause 8 of tender document provided for payment of license fee, auction process and licence period. Under clause 9 it is set out as part of tender document that successful applicant shall be required to furnish a bank guarantee valid for the entire licence period equivalent to an amount of the first year licence fee as arrived at vide clause 7 above. The bank guarantee can be encashed by the Government in either of the conditions as set out therein. The tender document, therefore, contains a clause whereby a successful applicant had to give a bank guarantee. The petitioners were successful and accordingly a license agreement was entered into on 18th October, 2000. The agreement contained a clause for arbitration which reads as follows:-

"In case any question, dispute or difference arises in relation to or out of the terms of this Agreement or in connection thereof, the same shall be referred to the sole arbitration of Joint Secretary (Broadcasting) Ministry of Information and Broadcasting. The Arbitration and Conciliation Act, 1996 the rules made there under and any modification thereof for the time being in force, shall be deemed to apply to the Arbitration proceedings. The venue of the Arbitration shall be New Delhi. The Arbitration proceedings shall be conducted in English language."

There is no clause in the agreement specifically providing for ouster of jurisdiction of this Court. However, clause 1 of the agreement reads as under:-

"1. Unless otherwise mentioned in the subject or context appearing hereinafter all the Schedules i.e. A B C & D annexed hereto including the Tender documents, Letter of Intent and the guidelines issued/or to be issued from time to time by the licensor and the wireless Operational licence to be issued by the Wireless Planning & Coordination Wing in the Ministry of Communications, Government of India shall form part and parcel of this Licence Agreement. Provided, however, in case of conflict between the corresponding provisions of the aforesaid schedules and this agreement, the terms set out in the main body of this Agreement shall prevail. In this Agreement, words and expressions shall have the same meaning as is respectively assigned to them in the Schedule A."

Therefore, a reading of this clause apart from the terms of this clause by incorporation the terms in the tender document are also made the part of the said agreement. As earlier referred to, the tender documents contain an Annexure the certificate to be signed by the applicant agreeing to confer jurisdiction of the Courts in Delhi only. Therefore, even if the agreement did not provide for exclusion of this Court by virtue of incorporation clause 4 would form a part of the agreement.

5.Having considered the above, the question, therefore, would be whether this Court will have jurisdiction, considering clause 4 by incorporation in the agreement. For that purpose two things will be necessary; (i) whether the agreement falls within the meaning of the word "application" or license (ii) whether invocation of the bank guarantee and/or relief against invocation of bank guarantee be covered by the expression application or license or would be independent of both.

On behalf of the respondents Parviz Cooper, Programme Executive has filed his affidavit In the said affidavit in para.3 it has been contended that the contract of bank guarantee is an independent contract with the bank and the petitioners has no right to restrain the respondents from invoking the bank guarantee. It is no doubt true the guarantee would be a contract between the bank on the one hand and the respondent in whose favour the guarantee is given. The guarantee, however, was given at the instance of the petitioners herein. In the normal course in so far as the petitioner and the bank there is no arbitral clause and, therefore, Section 9 of the Act would not be attracted. It is in terms of the agreement that the petitioners had furnished the guarantee. Therefore, the invocation of bank guarantee would be a dispute arising out of the agreement between the parties and which could be the subject matter of reference to arbitration and, therefore, Section 9 could be invoked. The real question is whether on the reading of clause 4 and the terms of the tender bearing incorporated in the agreement it can be said that the 'agreement' falls within the expression 'application.' It is only in that event that the ouster clause would be attracted.

We are reading a term in the contract of a commercial transaction. If the clause by itself is considered it uses only two expressions, an application on the one hand and the licence on the other. The application to be made is an application in terms of the tender document. Once an agreement is entered into there is no longer an application, but an independent document governing the rights of the parties. The application is something prior to the agreement. The dispute contemplated under the arbitral clause is in respect of the agreement or in connection thereof. We are not construing the provisions of a social legislation where the Court can extend the meaning of words and try to give effect to the intent of the legislation. We are only considering a contractual term under which the jurisdiction of one Court having jurisdiction is ousted and the jurisdiction is conferred on the Court having also jurisdiction. In my opinion terms of "Agreement" would not fall in the ouster clause as provided in the tender document even if incorporated in the agreement as the ouster clause is only in respect the disputes arising from the tender or on a license being granted if that clause becomes a part of the license. Once in the terms agreed between the parties there is no provision for exclusion of the court's jurisdiction in so far as the agreement is concerned and as guarantee has been given in terms of the agreement it will be difficult to hold that the clause relied upon by the respondents to contend that the Cour

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ts in Delhi alone would have jurisdiction, is devoid of merit. Considering the above and considering that this is a commercial transaction between the parties and so that the rights of the parties are not defeated it is not possible to accept the contention raised on behalf of the respondents that the agreement also be included within the expression "application". Once having so held that contention must be rejected. 6.The contention having been rejected a similar order as passed by this Court in Arbitration Petition No.75 of 2002 will have to follow. In the light of that the following order:- (i) Petition made absolute in terms of prayer clause (a) subject to the condition that the petitioners keep alive the bank guarantee until passing of the award and for a period of 12 weeks months thereafter. On failure to keep the bank guarantee alive the respondent No.3 would be bound to pay to respondent No.1 the amounts due and payable under the bank guarantee. Parties to act on an ordinary copy of this order duly authenticated by the Associate/Personal Secretary of this Court. Certified copy expedited.