IMPORTANT POINT
Where Arbitration agreement did not provide for venue of arbitration there a decision regarding the venue of the arbitration proceedings cannot be assailed in appeal under Section 34 of Arbitration Act, 1986 as the said decision is not an interim award under Sections 2(6) r/w 20 of the Act. However an erroneous decision on question of venue is appealable under Section 34(2) of the Act.

Headnote:(i) Arbitration and Conciliation Act, 1986-Section 2(6) r/w Section 20-Place of arbitration-Section 34 -Appeal-Technical collaboration agreement-Clause 8.4 providing no agreed venue for arbitration-Disputes between parties-Referred to arbitration-Arbitral Tribunal deciding Delhi to be venue for the sitting of the arbitral Tribunal instead of Japan-Appeal against to High Court of Delhi-Single Judge dismissing-Affirmed by DB-Appeal against to Supreme Court-Whether a decision regarding the venue of the arbitration proceedings is an interim award which could be assailed in appeal under Section 34? (No)-Appeal dismissed Modi s case, 1998(3) SCC 573 applied. Russel on Arbitration followed.
       Held : Section 2(6) and Section 20, therefore leads to the conclusion that in the event, parties do not agree with regard to the place of arbitration, though they were free to determine the same, then they had the right to authorise any person including an institution and in the case in hand, the Joint Committee is such an institution for deciding the venue of the arbitration and such decision of the Committee will not partake the character of adjudication of a dispute arising out of the agreement, so as to clothe it the character of an award. Chapter V of the Act contains Sections 18 to 27 and chapter VI deals with making of arbitral award and termination of proceedings which starts with Section 28. The decision on the question of venue under Section 20 would not come within making of an arbitral award starting from Section 28 and on this view of the matter also, the said decision on the question of venue will not be either an award or an interim award so as to be appealable under Section 34 of the Act. The decision of the Joint Committee on the question of the venue under Clause 8.4 is not a decision, deciding legal rights of the parties under the contract. There is no mutuality and the said Committee is merely a machinery for deciding the question of venue. Such a decision does not have the characteristics of an arbitration award nor even can it be held to be an interim award. The conclusion of the Joint Committee is a conclusion on the guidelines contained in second part of Clause 8.4 of the agreement and is not a judicial determination and as such the said conclusion would not amount to an award. (Para 8)
       The second part of clause 8.4 conferring powers on a Joint Committee to decide the question of venue of the arbitration does not satisfy the aforesaid test laid down in Modi s case, 1998(3) SCC 573 and, therefore would not be an arbitration agreement Necessarily, therefore, the ultimate decision of the said Committee on the question of venue cannot be held to be an award, so as to confer a right of appeal to an aggrieved person under Section 34 of the Act. (Para 9)
       In the present case, the second part of Clause 8.4 of the agreement conceived of the institution of Joint Committee, which institution had the power to decide with regard to the venue and such decision of the said Joint Committee cannot be held to be an award of a arbitral tribunal. In view of our analysis on the different provisions of the agreement as well as the provisions of the Act itself, we are unable to accept Mr. Desai s argument that the agreement conceived of two arbitral proceedings, one in relation to any dispute for the venue and the other in relation to the dispute arising out of the agreement. (Para 10)
       This appeal, accordingly fails and is dismissed. (Para 14)
       (ii) Arbitration and Conciliation Act, 1986-Section 34(2)-Question of venue of arbitrations-Not raised when matter was tried by Arbitrator -Can it be raised after award ? (Yes).
       Held : Mr. Desai s contention that the question of venue is of utmost importance, since the arbitral proceeding will be conducted in accordance with the rules applicable to the place where the arbitration proceeding is conducted and consequently, denial of a right to appeal against the same is never contemplated of, requires consideration. It is undoubtedly true that if the arbitration is to be held in India, then the proceeding will be conducted in accordance with the rules applicable in India and if the arbitration is to be held in Japan, it has to be conducted in accordance with the rules of Japan Commercial Arbitration Association and as such the decision on the question of venue is of utmost importance. But the further contention that an aggrieved party has no right to assail the same, once the said decision is not assailed at this stage, does not appear to be correct. The ultimate arbitral award could be assailed on the grounds indicated in sub-section (2) of Section 34 and an erroneous decision on the question of venue, which ultimately affected the procedure that has been followed in the arbitral proceeding could come within the sweep of Section 34(2) and as such it cannot be said that an aggrieved party has no remedy at all. (Para 13)

JUDGMENT

Pattanaik, J.-Leave granted.

2. This appeal by grant of special leave is directed against the judgment of Delhi High Court dated 8th of August, 2000. The question for consideration is whether a decision regarding the venue of the arbitration proceedings could be assailed in appeal under Section 34 of the Arbitration and Conciliation Act, 1996. The Division Bench of the High Court by the impugned judgment agreed with the conclusion of the learned Single Judge and came to hold on examining the arbitration clause in the agreement that the decision with regard to the venue of the arbitration sitting cannot be held to be an interim award and as such Section 34 of the Act cannot be invoked.

3. The appellant and respondent No. 1 entered into a technical collaboration agreement called "Insoluble Sulphur Technical Collaboration Agreement" on 1st of August, 1989. Under the agreement, respondent No. 1 was required to provide technical information for production of insoluble sulphur in India. Appellant discharged its obligation under the agreement. The said respondent No. 1 in May, 1996, wrote a letter to the Indian Council of Arbitration, making a claim against the appellant on the basis of certain disputes between the parties. But the Indian Council of Arbitration returned the papers to respondent No. 1 on 15.5.96. On the very same day, the said respondent No. 1 filed a statement of claim before respondent No. 2, which was registered as Arbitration Case No. FTA/137. Said respondent No. 2, by its letter dated 25th of June, 1996 called upon the appellant to appoint an arbitrator. On 9.7.1996, the appellant wrote to the respondent No. 2 bringing to its attention clause 8.4 of the agreement and stated that the appellant has not received any demand for arbitration from OCCL and as such the respondent No. 2 has no jurisdiction in the matter. Respondent No. 2 however by its order dated 17th of July, 1996 called upon the appellant to submit the agreement regarding the venue of arbitration with reasons within 30 days. Appellant immediately answered the aforesaid letter of the respondent No. 2 by letter dated 22.7.96, questioning the jurisdiction of the respondent No. 2 and also seeking clarification as to whether FICCI had accepted the statement of claim of respondent No. 1. At this point of time, the appellant was assured that respondent No. 2 will not proceed with the matter till the issues regarding the venue are sorted out. On 9.8.1996, respondent No. 1 s lawyer intimated respondent No. 2 that they had already appointed an arbitrator and it was for the arbitral tribunal to decide the venue under Section 20 of the Arbitration and Conciliation Act, 1996. Respondent No. 2 was called upon to nominate the appellant s arbitrator. Appellant by his letter dated 9th of August, 1996, intimated the respondent No. 2 that the requirement of Article 8.4 not having been complied with, there is no question of nominating arbitrator on behalf of the appellant. Appellant also wrote a letter to the respondent No. 1 on 6th of September, 1996, indicating therein that the Registrar of FICCI had no jurisdiction and that there had been no proper demand for arbitration. It was also stated that in any event, Japan was the designated place of arbitration. On 16th of October, 1996, respondent No. 2 sent a communication to the Manager, Arbitration Department, Japan Commercial Arbitration Association, stating therein that since parties had not been able to agree on the place of arbitration within 30 days of the notice calling upon them to submit the agreement, the JCAA may nominate a member on the Joint Arbitration Committee. In that letter it had been stated that respondent No.2 had already nominated one Umesh Kumar Khaitan as its Member on the Joint Arbitration Committee. Pursuant to the aforesaid letter from respondent No. 2, the JCAA appointed respondent No. 5 as its Member by letter dated 25th of October, 1996. Appellant had made some correspondence and querie

Click Here to Read the rest of this document

2001 Supreme(SC) 307

Cases Referred (2)