CIVIL

Seat of Arbitration under Arbitration and Conciliation Act

It is well settled that where more than one court has jurisdiction, it is open for the parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. [Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., (2013) 9 SCC 32 : (2013) 4 SCC (Civ) 157] This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd. [B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd., (2015) 12 SCC 225 : (2016) 1 SCC (Civ) 427] Having regard to the above, it is clear that Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment [Datawind Innovations (P) Ltd. v. Indus Mobile Distribution (P) Ltd., 2016 SCC OnLine Del 3744] is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps under Section 9 in the Mumbai Court. The appeals are disposed of accordingly.”

In Mankastu Impex Private Limited , the Supreme Court has considered the issue of seat of arbitration, in a proceeding under Section 11(6) of the Act of 1996, in respect of an international arbitration. It has held as follows :-

“19. The seat of arbitration is a vital aspect of any arbitration proceedings. Significance of the seat of arbitration is that it determines the applicable law when deciding the arbitration proceedings and arbitration procedure as well as judicial review over the arbitration award. The situs is not just about where an institution is based or where the hearings will be held. But it is all about which court would have the supervisory power over the arbitration proceedings. In Enercon (India) Ltd. v. Enercon GmbH [Enercon (India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59] , the Supreme Court held that : (SCC pp. 43 & 46, paras 97 & 107) “[T]he location of the seat will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. It was further held that the seat normally carries with it the choice of that country’s arbitration/curial law.”

It is well settled that “seat of arbitration” and “venue of arbitration” cannot be used interchangeably. It has also been established that mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “seat” of arbitration. The intention of the parties as to the “seat” should be determined from other clauses in the agreement and the conduct of the parties.

The Supreme Court has considered the issue of seat of arbitration in Brahmani River Pellets Limited[2020 (5)SSC 462]. The arbitration agreement was in respect with a domestic arbitration and that Clause 18 of the agreement between the parties specified with the arbitration shall be under Indian Arbitration and Conciliation Law, 1996 and the venue of arbitration shall be Bhubaneswar. It has held as follows :-

“18. Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the “venue” of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As held in Swastik [Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., (2013) 9 SCC 32 : (2013) 4 SCC (Civ) 157] , non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.”

In Aniket Investments LLC  the Bombay High Court has considered a petition under Section 9 of the Act of 1996. In the facts of that case, in an arbitration agreement, governing a domestic arbitration, the parties had agreed that the Courts of Hyderabad shall have exclusive jurisdiction to try and entertain disputes arising out of the agreement and at the same time, it had provided that the seat of arbitration of the proceeding shall be at Mumbai. Construing the two clauses, it has held that, the Courts at Hyderabad would have exclusive jurisdiction to entertain the petition under Section 9 of the Act of 1996. The Court had construed the agreement of the parties for the seat of arbitration to be at Mumbai as one of prescribing a venue of the arbitration. The Court had accepted the party autonomy recognised under Section 20(1) of the Act of 1996. While considering a petition under Section 11 of the Act of 1996, the Delhi High Court in Cars 24 Services Pvt. Ltd., has construed a forum selection clause permitting the parties to approach a Court of competent jurisdiction at Haryana for appointment of arbitrator and a clause prescribing the seat of arbitration to be at New Delhi to mean that, the Section 11 petition was required to be moved before an appropriate court having territorial jurisdiction at Haryana. The authorities noted above, have referred to Bharat Aluminium Company v. Kaiser Aluminium Technical Services INC-(2012 Volume 9 SCC 552).

Bharat Aluminium Company(2012 Volume 9 SCC 552) has held that Part I of the Act of 1996 applies to arbitrations both domestic as well as international, having their juridical or legal seat within the territory of India. If, the seat of arbitration is outside India, then, Part I of the Act of 1996 is inapplicable to the extent of it being inconsistent with the arbitration law of the seat of arbitration even if, the arbitration agreement provides that the Act of 1996 shall govern the arbitration proceedings.

In Hindustan Construction Company , the Supreme Court has held that in view of the seat of arbitration being at New Delhi the Courts at New Delhi alone would have jurisdiction for the purpose of challenge to the award. In that case, the conflict between a forum selection clause and the seat of arbitration was not there.

23. In BGS SGS Soma  the Supreme Court has held, once juridical or legal seat of arbitration is designated or determined, then, it exclusively determines which courts will have jurisdiction over the arbitration as opposed to the place where whole or part of the cause of action arose. Once the seat of arbitration is designated or determined, the same operates as an exclusive jurisdiction clause as a result of which only the courts where the seat is located would have jurisdiction over the arbitration, to the exclusion of all other courts, within courts where part of cause of action may have arisen. It has laid down the test for determination of the seat for arbitration. It has made such observations, in the context of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 and in respect of a domestic arbitration.

In Ramandeep Singh Taneja , the Delhi High Court has while considering an application under Section 11 of the Act of 1996 and noticing that, there was a conflict between the venue of arbitration and the forum selected for resolution of all disputes dismissed the petition on the ground of want of territorial jurisdiction. It has held that, the conflict between the forum selection clause and the seat of arbitration, can be resolved by holding that the disputes that had to be adjudicated without reference to arbitration, the forum selection clause would apply, and where they have to be resolved through arbitration, the seat of arbitration would have exclusive jurisdiction.

 In the M/s. Devyani International Ltd. , the Delhi High Court has considered a petition under Section 9 of the Act of 1996. It has considered a conflict between the seat of arbitration and the forum selection clause. It has granted interim protection when, the seat of arbitration was prescribed to be at New Delhi and the forum selected by the parties specified courts at Mumbai. In M/s. N J Construction (supra), the Delhi High Court has considered a petition under Section 11 of the Act of 1996. In the facts of that case, the selected forum was Court in Guwahati while the seat of arbitration was at New Delhi. It has considered the conflict between the forum selection clause as also the seat of arbitration and allowed the application under Section 11 of the Act of 1996. Similarly, in Cinepolis India Pvt. Ltd. (supra), the Delhi High Court has allowed an application under Section 11 of the Act of 1996. In the facts of that case, the parties had agreed that Courts in Ghaziabad shall have exclusive jurisdiction while the place of Arbitration shall be at New Delhi.

In Aarka Sports Management Pvt. Ltd. (supra), the Delhi High Court has considered an application under Section 11 of the Act of 1996 and refused to entertain the same as, New Delhi was not specified to be the seat of arbitration; no cause of action arose at New Delhi and the respondent did not work at New Delhi. It has held that the agreement was drawn at Ranchi, signed at Lucknow and was to be performed at Patna. It has construed the forum selection clause and held that, since no part of the cause of action arose within the territorial jurisdiction, the parties could not confer jurisdiction on a Court which otherwise had no jurisdiction. The situation would have been different, according to it, had the parties, prescribed the seat for arbitration to be at New Delhi.


Categories: CIVIL

Tagged as: ,