In a recent groundbreaking judgment, the Supreme Court of India delved into the complexities of jurisdiction and venue in arbitration within the context of an agreement for the sale of Iron Ore Pellets. The case highlighted crucial aspects of arbitration law and the significance of the chosen venue. Stay tuned to explore the details of this significant legal decision.
Facts
- Appellant entered into agreement with the respondent for sale of Iron Ore Pellets on FOB terms.
- Payment was to be made by Letter of Credit in Bhubaneswar.
- Agreement stated that the venue of arbitration shall be Bhubaneswar.
- Respondent filed a petition under Section 11(6) for appointment of sole arbitrator in the Madras High Court.
- Appellant denied liability citing contract modifications and breach of terms by the respondent.
- Appellant did not agree to the appointment of the arbitrator when invoked by the respondent.
- Respondent claimed damages for having to procure Iron Ore Pellets from other sources at higher rates.
- Appellant challenged the jurisdiction of Madras High Court, asserting that only Orissa High Court has exclusive jurisdiction for arbitration due to the agreed seat being Bhubaneswar.
- Dispute arose between the parties regarding price and payment terms, leading to non-delivery of goods.
- Appellant challenges the impugned order
- High Court held that both Madras High Court and Orissa High Court have jurisdiction over arbitration proceedings
- Madras High Court appointed former judge as sole arbitrator
- Mere designation of ‘Seat’ does not exclude jurisdiction of other courts
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Arguments
- The learned counsel argued that the Madras High Court erred in assuming jurisdiction under Section 11(6) of the Act despite Bhubaneswar being the Seat of arbitration.
- Citing cases like Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Union of India v. Hardy Exploration and Production (India) Inc., it was emphasized that the agreed place/venue for arbitration becomes the juridical Seat and confers exclusive jurisdiction to the Orissa High Court.
- The appellant’s counsel contended that the agreement’s clause (18) should be interpreted to give sole jurisdiction to the courts at the Seat of arbitration in Bhubaneswar.
- The appellant criticized the High Court for not applying the precedent set in Indus Mobile, where the Supreme Court ruled that in domestic arbitration, the agreed Seat of arbitration grants exclusive jurisdiction to that particular court.
- In contrast, the respondent’s counsel argued that since the cause of action occurred in both Bhubaneswar and Chennai, both the Madras High Court and the Orissa High Court should have supervisory jurisdiction.
- Parties must explicitly tie themselves to an exclusive court jurisdiction in the arbitration agreement for it to confer exclusive jurisdiction upon that court.
- Mere mention of ‘venue’ as the place of arbitration does not automatically give exclusive jurisdiction to that court.
- The expression ‘venue of arbitration shall be Bhubaneswar’ does not imply exclusive jurisdiction for that court.
- Other circumstances or specific language like ‘alone’, ‘exclusive’, or ‘only’ may be required to exclude the jurisdiction of other courts.
- The High Court rightly exercised its jurisdiction under Section 11(6) of the Act in appointing the arbitrator.
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Analysis
- Section 2(1)(e) of the Act must be read along with Section 20, giving parties autonomy in choosing the place of arbitration, without changing the seat of arbitration which remains in India.
- Non-use of words like ‘exclusive jurisdiction’ does not impact the intention of the parties in the agreement.
- The distinction between ‘seat’ and ‘venue’ is crucial when an arbitration agreement designates a foreign country as the seat/place of arbitration.
- In international commercial arbitrations with a legal seat outside India, Part I of the Act is inapplicable if it conflicts with the arbitration law of the seat.
- The choice of ‘seat’ over ‘place’ as defined under Section 20 of the Act determines the applicability of Part I of the Arbitration Act, 1996.
- The parties’ agreement on the ‘seat’ or ‘place’ of arbitration decides the application of the Act; ‘party autonomy’ in choosing the court is within the context of multiple courts with jurisdiction under the Act.
- The jurisdiction to decide questions in arbitration is determined by the definition of ‘court’ in Section 2(1)(e) of the Act.
- The ‘court’ refers to the principal Civil Court or High Court depending on the nature of arbitration, as specified in the Act.
- For arbitrations taking place in India, Part-I of the Act applies, and the definition of ‘court’ in Section 2(1)(e) is to be followed.
- The ‘court’ does not include Civil Courts of inferior grades or Courts of Small Causes.
- In international commercial arbitrations, the High Court with appropriate jurisdiction is considered the ‘court’.
- Part-I of the Act governs all arbitrations in India.
- The determination of the ‘seat’ in arbitration law gives exclusive jurisdiction to the courts at that location.
- Jurisdiction clause in an agreement can exclude the jurisdiction of other courts if a specific location is named.
- Courts where arbitration takes place must exercise supervisory control over arbitral proceedings.
- Even if parties are from different locations, the courts at the arbitration venue have jurisdiction.
- The concept of ‘juridical seat’ grants exclusive jurisdiction to the courts of that location.
- The maxim ‘expressio unius est exclusio alterius’ applies to jurisdiction clauses in agreements.
- Party autonomy and freedom to choose arbitration location are upheld in the law.
- Clarity in jurisdiction clauses indicating a specific court implies exclusivity.
- Selection of a foreign seat and Arbitration Act does not change the Indian seat of arbitration.
- The intention to exclude all other courts is inferred when a specific court is named in the agreement.
- The impugned judgment is set aside.
- The agreement of the parties states Bhubaneswar as the venue of arbitration.
- The intention of the parties is to exclude all other courts.
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Decision
- Parties are allowed to approach the Orissa High Court for appointment of an arbitrator.
- Venue of arbitration agreed to be in Bhubaneswar.
- Impugned order of the Madras High Court in OP No.398 of 2018 dated 02.11.2018 is set aside.
- Orissa High Court to have jurisdiction to entertain the petition under Section 11(6) of the Act.
Case Title: BRAHMANI RIVER PELLETS LTD. Vs. KAMACHI INDUSTRIES LTD.
Case Number: C.A. No.-005850-005850 / 2019
