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IN THE HIGH COURT OF BOMBAY
S.J. Kathawalla, R.I. Chagla, JJ.
ANIKET SA INVESTMENTS LLC, MAURITIUS - Appellant
Vs.
JANAPRIYA ENGINEERS SYNDICATE PVT. LTD., HYDERABAD and others - Respondents
Commercial Appeal No. 504 of 2019 in Commercial Arb. Petition (L) No. 1244 of 2019
Decided on : 29-1-2021
The Supreme Court held that the choice of seat of arbitration has the legal effect of conferring exclusive jurisdiction on the Courts of that seat and no other Court would have jurisdiction under the arbitration agreement.
Fact of the Case:
The appellant and the respondents entered into a Share Subscription and Shareholders Agreement. The Agreement contained an Arbitration Clause wherein the parties agreed that "the seat of the arbitration proceedings shall be Mumbai". A dispute arose between the parties and the appellant issued a Notice of Default. The appellant filed a section 9 Petition under the Arbitration and Conciliation Act, 1996, seeking urgent interim reliefs in relation to the dispute arising out of the Agreement. The respondents submitted that this Court cannot entertain the section 9 Petition for lack of territorial jurisdiction. The learned Single Judge upheld the objection as to jurisdiction and dismissed the section 9 Petition.
Finding of the Court:
The Supreme Court held that the choice of seat of arbitration has the legal effect of conferring exclusive jurisdiction on the Courts of that seat and no other Court would have jurisdiction under the arbitration agreement. The Court further held that the expression ‘subject to’ in Clause 20.3 must be read as ‘notwithstanding’ and that the expression ‘seat’ in Clause 20.4.2(c) must be understood as a ‘venue’.
Issues: 1. Whether the Impugned Order is correct in accepting the respondents primary submission that paragraph 96 of BALCO, recognizes two Courts as having concurrent jurisdiction under section 2(1)(e) of the Act, namely, the Court where the cause of action accrues and the Court of the seat of arbitration?; or, whether a choice of seat of arbitration has the legal effect of conferring exclusive jurisdiction on the Courts of that seat and no other Court would have jurisdiction under the arbitration agreement? 2. If there is concurrent jurisdiction of two Courts, is the Impugned Order correct in holding that as a matter of party autonomy the parties herein have made an express choice in conferring jurisdiction on the Courts at Hyderabad and that to give effect to this plain commercial term of the Agreement, the expression ‘subject to’ must be read as ‘notwithstanding’ and that expression ‘seat’ must be read as ‘venue’?
Ratio Decidendi: The Supreme Court held that the choice of seat of arbitration has the legal effect of conferring exclusive jurisdiction on the Courts of that seat and no other Court would have jurisdiction under the arbitration agreement. The Court further held that the expression ‘subject to’ in Clause 20.3 must be read as ‘notwithstanding’ and that the expression ‘seat’ in Clause 20.4.2(c) must be understood as a ‘venue’.
Final Decision: The Supreme Court set aside the Impugned Order and allowed the Appeal. The section 9 Petition is to proceed on merits before this Court and is accordingly restored.
JUDGMENT :
S. J. KATHAWALLA, J. :—
BRIEF FACTS :
By this Appeal filed under section 37 of the Arbitration and Conciliation Act, 1996 (“the Act”), the appellant-Aniket SA Investments LLC (original Petitioner) has challenged an Order of the learned Single Judge dated 22nd October, 2019 (“the Impugned Order”). The appellant has filed a section 9 Petition under the Arbitration and Conciliation Act, 1996, seeking urgent interim reliefs in relation to a dispute arising out of a Securities Subscription and Shareholders Agreement. The appellant is a foreign investor and shareholder of respondent No. 2-Janapriya Townships Private Limited, a Special Purpose Vehicle or Joint Venture Company that is carrying out a real estate development project in Ameenpur Village, Medak District in Telangana. The other shareholder of respondent No. 2 is respondent No. 1-Janapriya Engineers and Syndicate Private Limited. The appellant, respondent No. 1 and respondent No. 2 have entered into a Share Subscription and Shareholders Agreement dated 21st August, 2008 (“the Agreement”). The Agreement appears to have been subsequently modified. The appellant, respondent No. 1 and respondent No. 2 have also entered into a Development Management Agreement on 2nd March, 2009. According to respondent Nos. 3 to 6, they are the promoters of respondent No. 1.
2. Since disputes arose between the appellant and the respondents in relation to the implementation and execution of the real estate project, the appellant issued a Notice of Default dated 19th March, 2019 followed by a Notice to respondent No. 1 exercising a Put Option under the Shareholders Agreement dated 8th July, 2019, and finally a Dispute Notice invoking arbitration dated 22nd August, 2019.
3. It is in this background that the appellant filed the Petition under section 9 of the Act (“section 9 Petition”) in this Court.
BRIEF SUBMISSIONS BEFORE THE LEARNED SINGLE JUDGE :
4. Relying on Clause 20.4 of the Agreement, which is an Arbitration Clause wherein the parties agreed that “the seat of the arbitration proceedings shall be Mumbai”, the appellant submitted that this Court has jurisdiction to entertain the section 9 Petition although the dispute pertains to a cause of action that has arisen at the site of the project i.e. within the territorial jurisdiction of the Courts at Hyderabad. The respondents submitted that this Court cannot entertain the section 9 Petition for lack of territorial jurisdiction. Respondent Nos. 1 and 2 contended that a “Court” under section 2(1)(e) of the Act, would, in light of paragraph 96 of the decision of the Supreme Court in Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc. (“BALCO”), (2012) 9 SCC 552, also be the Court within whose territorial jurisdiction the cause of action has arisen. It was further submitted that in the Agreement between the parties there is an express clause (Clause 20.3), which states that the Courts at Hyderabad shall have exclusive jurisdiction to try and entertain the disputes arising out of this Agreement. In response to this, the appellant contended before the learned Single Judge, that the judgment of BALCO has been considered by later decisions especially of the Supreme Court in Indus Mobile Distribution (P) Ltd. vs. Datawind Innovatoion (P) Ltd. (“Indus Mobile”), (2017) 7 SCC 678 and in that case the Supreme Court has clearly held that a clause identifying the seat of an arbitration would have the effect of conferring exclusive jurisdiction on Courts where the seat of the arbitration is located. Thus, it was contended that the Courts at Mumbai have exclusive jurisdiction by virtue of the seat being at Mumbai. It was also contended by the appellant that the clause conferring jurisdiction on Courts at Hyderabad is ‘subject to’ clause 20.4, which is the arbitration clause that contains the provision of seat at Mumbai. Therefore, the former clause must yield to the latter clause and this Court has jurisdiction to entertain the section 9 P
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