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2023 Supreme(Cal) 1499

CALCUTTA HIGH COURT
MOUSHUMI BHATTACHARYA, J.
Harji Engineering Works Pvt. Ltd. - Petitioner
Versus
Bharat Heavy Electricals Limited and Anr. – Respondents
A.P. 474 of 2023
Decided On : 12-09-2023

Advocates Appeared:
For the Petitioner: Mr. Sirsanya Bandopadhyay, Mr. Rahul Kumar Singh, Mr. Aditya Kanodia, Mr. Sourajit Dasgupta and Mr. Nilkanta Basak, Advs.
For the Respondents: Mr. Rohit Das, Ms. Kishwar Rahman, Ms. Sristi Roy and Mr. Preetam Majumdar, Advs.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 9 - Performance bank guarantee - High Court considered whether it had jurisdiction to hear the petition based on the designated seat of arbitration - Respondent argued jurisdiction lay with the courts where the contract was issued; petitioner claimed Kolkata as the intended seat - Court found the seat to be in North 24 Parganas based on governing clauses. (Paras 1, 10, 19, 20)

(B) Contract Interpretation - Principles of interpreting arbitration clauses highlighted - The intended seat of arbitration must be clearly defined to avoid ambiguity. (Paras 12, 18)

Facts of the case:
The petitioner sought an injunction against the encashment of performance bank guarantees. The primary contention was about the proper judicial authority to hear the dispute concerning the contract's execution and the interpretation of an arbitration agreement.

Findings of Court:
The jurisdiction lies with the Commercial Court at Rajarhat as the agreed seat of arbitration is within the District of North 24 Parganas, and not with the High Court.

Issues: The court addressed whether the arbitration clause indicated Kolkata or the location where the contract was issued as the seat of arbitration.

Ratio Decidendi: The court determined that the specific mention of Kolkata and the bracketed portion were explanatory, affirming the seat of arbitration was where the contract was issued, implying jurisdiction at the Commercial Court.

Result: Application dismissed as not maintainable.

Table of Content
1. petitioner seeks injunction against bank guarantee invocation. (Para 1)
2. arguments on maintainability of arbitration application. (Para 2 , 3)
3. review of clauses related to arbitration jurisdiction. (Para 4 , 5 , 6 , 7 , 8)
4. clarification needed on 'kolkata' as arbitration seat. (Para 9 , 10 , 11 , 12 , 13)
5. interpretation principles for arbitration clauses. (Para 14 , 18 , 19)
6. supreme court ruling on bracketed terms in arbitration. (Para 15 , 16 , 17)
7. seat of arbitration determined to be in north 24 parganas. (Para 20)
8. court dismisses application for lack of jurisdiction. (Para 21 , 22)

JUDGMENT :

(Moushumi Bhattacharya, J.)

The petitioner has filed the present application under section 9 of The Arbitration and Conciliation Act, 1996 for an injunction restraining the respondent no. 1 Bharat Heavy Electricals Limited (BHEL), from invoking and encashing the performance bank guarantee issued by the respondent no. 2 Punjab and Sind Bank and the modified performance bank guarantee of 7th April, 2021 and 8th March, 2022 respectively.

2. The respondent no. 1 BHEL is represented and learned counsel appearing for BHEL takes a preliminary objection to the maintainability of the application. Counsel submits that the High Court is not the "Court" within the meaning of section 2(1)(e) of the Act for the purposes of the present application as no part of cause of action arose within the original territorial jurisdiction of this Court and the respondent no. 1 as well as the petitioner do not have any office or place of business within the original territorial jurisdiction of this Court. Counsel submits that the Notice Inviting Tender (NIT) was issued by BHEL from its Power Sector Eastern Region (PSER) at Salt Lake City, Kolkata, the Work Order was issued by BHEL from New Delhi and the contract was required to be performed in Jharkhand. Counsel further relies on the amended General Conditions of Contract (GCC) and the Work Order to urge that the seat of arbitration has been designated to be the place from where the contract is issued, which is Salt Lake City, Kolkata.

3. Learned counsel appearing for the petitioner opposes the point of maintainability on the ground of jurisdiction to say that the parties intended that the seat of the arbitral tribunal would be in Kolkata and that the words in Bracket are only meant for the convenience of the arbitral tribunal or the parties for conducting the proceedings of the arbitration. Counsel submits that the bracketed portion does not change the seat of arbitration from Kolkata to North 24 Parganas. It is submitted that it was the express intention of the parties to vest the jurisdiction of the arbitration in Kolkata and that this Court would therefore have the authority to decide the dispute.

4. The relevant clauses of the GCC and Work Order should be reproduced to understand the competing contentions better.

5. Clause 2.2 of the amended GCC constituting part of the NIT dated 31st October, 2020 contains a general forum selection clause and provides as follows.

    "Clause 2.2.- The contract shall be governed by the Law for the time being in force in the Republic of India. Subject to Clause 2.21.1 or 2.21.2 of this Contract, the Civil Court having original Civil Jurisdiction at Delhi for PSNR, at Kolkata for PSER, at Nagpur for PSWR and at Chennai for PSSR, shall alone have exclusive jurisdiction in regard to all matters in respect of the Contract."

6. Clause 34.0 of the Work Order also contains a general forum selection clause which is similar to clause 2.2 of the GCC

    "Clause 34.0.- The contract shall be governed by the Law for the time being in force in the Republic of India. Subject to Clause 35.1 or 35.2 of this Contract, the Civil Court having original Civil Jurisdiction at Delhi for PSNR, at Kolkata for PSER shall alone have exclusive jurisdiction in regard to all matters in respect of the Contract."

7. The amended GCC constituting part of the NIT contains the arbitration ag

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