Mankastu Impex Private Limited vs Airvisual Limited

Arbitration and Conciliation Act, 1996 – s.2(1)(f) – International Commercial Arbitration – Factors to be fulfilled for – Held: Three factors ought to be fulfilled-(i) arbitration; (ii) considered as commercial under the laws in force in India; and (iii) at least one of the parties is national or habitual resident in any country other than India.

Arbitration and Conciliation Act, 1996 – Proviso to s.2(2) & ss.9, 27, 37 – Held: By 2015 Amendment Act, a proviso has been added to s.2(2) as per which, certain provisions of Part-I of the Act i.e. ss.9, 27, 37(1)(a) and 37(3) have been made applicable to “International Commercial Arbitrations” even if the place of arbitration is outside India – Arbitration and Conciliation Amendment Act, 2015.

Arbitration and Conciliation Act, 1996 – International Commercial Arbitration seated outside India – Proviso to s.2(2), s.11 – Applicability of s.11 – Held: s.11 is not included in proviso to s.2(2) and thus, it has no application to International Commercial Arbitrations seated outside India – Arbitration and Conciliation Amendment Act, 2015.

Dismissing the petition, the Court

HELD: 1.1 As per Section 2(1)(f) of the Arbitration and Conciliation Act, 1996, to be an “International Commercial Arbitration”, three factors ought to be fulfilled-(i) arbitration; (ii) considered as commercial under the laws in force in India; and

(iii) at least one of the parties is national or habitual resident in any country other than India. As per Section 2(2), Part-I shall apply where the place of arbitration is in India. If the “International Commercial Arbitration” is seated in India, then Part-I of the Act shall apply. [Paras 15, 16][574-C-D]

1.2 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. “Seat of arbitration” and “venue of arbitration” cannot be used inter-changeably. 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. On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as “place of arbitration” is not a simple reference as the “venue” for the arbitral proceedings; but a reference to Hong Kong is for final resolution by arbitration administered in Hong Kong. Clause 17.2 of the MoU stipulates that the dispute arising out of or relating to MoU including the existence, validity, interpretation, breach or termination thereof or any dispute arising out of or relating to it shall be referred to and finally resolved by the arbitration administered in Hong Kong. The words in Clause 17.2 that “arbitration administered in Hong Kong” is an indicia that the seat of arbitration is at Hong Kong. Once the parties have chosen “Hong Kong” as the place of arbitration to be administered in Hong Kong, laws of Hong Kong would govern the arbitration. The Indian courts have no jurisdiction for appointment of the arbitrator. If the arbitration agreement is found to have seat of arbitration outside India, then the Indian Courts cannot exercise supervisory jurisdiction over the award or pass interim orders. It would have therefore been necessary for the parties to incorporate Clause 17.3 that parties have agreed that a party may seek interim relief for which Delhi Courts would have jurisdiction. By the Amendment Act, 2015 (w.e.f. 23.10.2015), a proviso has been added to Section 2(2) of the Act as per which, certain provisions of Part-I of the Act i.e. Sections 9- interim relief, 27- court’s assistance for evidence, 37(1)(a)- appeal against the orders and Section 37(3) have been made applicable to “International Commercial Arbitrations” even if the place of arbitration is outside India. Section 11 is not included in the proviso and accordingly it has no application to “International Commercial Arbitrations” seated outside India. [Paras 19-23, 25][575-F-G; 576-A, D-G; 578-H; 579-A-B]

1.3 The words in Clause 17.1 do not suggest that the seat of arbitration is in New Delhi. Since Part-I is not applicable to “International Commercial Arbitrations”, in order to enable the parties to avail the interim relief, Clause 17.3 appears to have been added. The words “without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” in Clause 17.1 is to be read in conjunction with Clause 17.3. Since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act is not maintainable. [Para 26][579-F-H]

Bharat Aluminium Company v. Kaiser Aluminium

Technical Services Inc. (BALCO) (2012) 9 SCC 552 : [2012] 12 SCR 327 – followed.

Enercon (India) Limited and others v. Enercon GMBH and another (2014) 5 SCC 1 : [2014] 2 SCR 855; Eitzen Bulk A/S v. Ashapura Minechem Ltd. and another (2016)

11 SCC 508 : [2016] 2 SCR 634; Indus Mobile

Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. and others (2017) 7 SCC 678 : [2017] 4 SCR 744 – relied on.

Union of India v. Hardy Exploration and Production (India) INC (2018) 7 SCC 374 : [2018] 5 SCR 662; BGS SGS SOMA JV v. NHPC Ltd. 2019 (17) SCALE

369; Chandra Prakash and others v. State of U.P and another (2002) 4 SCC 234 : [2002] 2 SCR 913 –

referred to.