Arbitration and Conciliation Act, 1996 – ss.2(1)(e), 2(2), 11(6), and 20 – Appellant entered into an agreement with the respondent for sale of 40,000 WMT (Wet Metric Tonne) of Iron Ore Pellets on FOB terms – Dispute arose regarding the price and payment terms – Respondent claimed damages alleging that it had to procure the Iron Ore Pellets from other sources at higher rates– Appellant denied liability to pay damages – Respondent filed petition u/s.11(6) before the Madras High Court for appointment of the sole arbitrator – Appellant challenged the jurisdiction of the High Court on the ground that the parties agreed that Seat of arbitration will be Bhubaneswar and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator – High Court vide impugned order appointed former judge of the Madras High Court as the sole arbitrator – On appeal, held: As per s.2(2), Part-I would apply to all arbitration where the place of arbitration is in India – s.2(1)(e) defines “court” with reference to Part-I of the Act and would govern the place of arbitration – Further, u/s.2(1)(e), if the “subject-matter of the suit” is situated within the arbitral jurisdiction of two or more courts, the parties can agree to confine the jurisdiction in one of the competent courts – Under s.20, parties are free to agree on the place of arbitration – Party autonomy has to be construed in the context of parties choosing a court which has jurisdiction out of two or more competent courts having jurisdiction – 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 – In the present case, the parties 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 KAMACHI INDUSTRIES LTD.
– Non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference – When the parties agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction u/s.11(6) – Since only Orissa High Court will have the jurisdiction to entertain the petition filed u/s.11(6), the impugned order is set aside – Parties at liberty to approach the Orissa High Court seeking appointment of the arbitrator.
Words & Expressions – “Seat”, “Venue” – Discussed – Arbitration and Conciliation Act, 1996.
Allowing the appeal, the Court
HELD: 1.1 As per Section 2(2) of the Arbitration and Conciliation Act, 1996, Part-I would apply to all arbitration where the place of arbitration is in India. Section 2(1)(e) of the Act defines “court” with reference to Part-I of the Act and would govern the place of arbitration. [Para 9] [1147-A]
1.2 In BALCO, the court highlighted the distinction between the “Seat” and “Venue” in the context of Section 20(3) of the Act. Section 20(3) of the Act allows the parties to hold meetings, proceedings and hearings at any place agreed by the parties. In BALCO, the court has held that in an international commercial arbitration “seated” in India, parties may by mutual agreement, hold arbitral proceedings outside India. This, however, would not have the effect of changing the Seat of arbitration which would continue to remain in India. The court then envisages a situation where the arbitration agreement designates a foreign Seat and also selects Arbitration Act, 1996 as the law applicable to the conduct of arbitration proceedings and in such circumstances, hearing of the arbitration conducted at the venue fixed by the parties would not have the effect of changing the Seat of arbitration which would remain in India. [Para 11] [1147-D-F]
1.3 Section 2(1)(e) of the Act defines the “Court” with reference to the term “subject-matter of the suit”. As per Section 2(1)(e) of the Act, if the “subject-matter of the suit” is situated within the arbitral jurisdiction of two or more courts, the parties can agree to confine the jurisdiction in one of the competent courts. In para (96) of BALCO, the Supreme Court held that the term “subject-matter” in Section 2(1)(e) of the Act is to identify the court having supervisory control over the arbitral proceedings. The Supreme Court held that the provisions in Section 2(1)(e) of the Act has to be read in conjunction with Section 20 of the Act which give recognition to the autonomy of the parties as to “place of arbitration”. [Para 12] [1148-G-H; 1149-A-B]
1.4 As per Section 20 of the Act, parties are free to agree on the place of arbitration. Party autonomy has to be construed in the context of parties choosing a court which has jurisdiction out of two or more competent courts having jurisdiction. This has been made clear in the three-Judges Bench decision in Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. [Paras 13] [1150C-D]
1.5 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, non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference. When the parties have agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the Act, the impugned order is liable to be set aside. In the result, the impugned order of the Madras High Court is set aside and this appeal is allowed. The parties are at liberty to approach the Orissa High Court seeking for appointment of the arbitrator. [Paras 16-18] [1153-G-H; 1154-A-C]
Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552 : [2012] 12 SCR 327 – followed.
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Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Others (2017) 7 SCC
678 : [2017] 4 SCR 744; Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC 32 : [2013] 7 SCR 581 – relied on.
Union of India v. Hardy Exploration and Production (India) Inc. (2018) 7 SCC 374 : [2018] 5 SCR 662; Bhatia International v. Bulk Trading S.A. and Another (2002) 4 SCC 105 : [2002] 2 SCR 411; Enercon (India) Limited and Others v. Enercon GMBH and Another (2014) 5 SCC 1 : [2014] 2 SCR 855; Reliance Industries Limited and Another v. Union of India (2014) 7 SCC
603 : [2014] 6 SCR 456 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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