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2019 Supreme(Del) 1893
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIPIN SANGHI, SANJEEV NARULA, JJ.
Indian Oil Corporation Ltd. — Appellant
Versus
FEPL Engineering (P) Ltd. and Another — Respondent
First Appeal From Order (OS) (Comm) No. 92 of 2019; Civil Miscellaneous No. 19356 of 2019
Decided on : 26-09-2019
Advocate Appeared:
Abhinav Vashisht, Adv., Tannishtha Singh, Adv., Priya Singh, Adv., Akshita Sachdeva, Adv., Rajesh Sharda, Adv., Saket Gogia, Adv., Damini K., Adv.
The main legal point established in the judgment is the significance of the designated seat in conferring exclusive jurisdiction to the courts at the agreed place for arbitration proceedings, despite the blanks in the clauses of the General Purchase Conditions (GPC). The court emphasized the distinction between the 'VENUE' and 'SEAT' of arbitration and upheld the jurisdiction clause agreed between the parties.
Headnote:
Commercial Courts Act - Territorial Jurisdiction - Arbitration and Conciliation Act, 1996 - Section 34 - MSME Act - Section 18 - [ARBITRATION] - [Territorial Jurisdiction] - [Arbitration and Conciliation Act, 1996, Section 34; MSME Act, Section 18] - The court discussed the clauses of the General Purchase Conditions (GPC) and the provisions of the MSME Act to determine the territorial jurisdiction for entertaining the petition under Section 34 of the Arbitration Act. The court interpreted the clauses of the GPC to establish the exclusive jurisdiction of the Courts at New Delhi for arbitration proceedings, despite the blanks in the clauses. The court also emphasized the difference between the 'VENUE' and 'SEAT' of arbitration, highlighting the significance of the designated seat in conferring exclusive jurisdiction to the courts at the agreed place.
Fact of the Case:
The case involved a dispute arising from a purchase order issued for a solar power system. The respondent, governed by the MSME Act, initiated conciliation proceedings, which concluded with an arbitration award in their favor. The appellant challenged the award under Section 34 of the Arbitration Act, contesting the jurisdiction of the Thane court. The court's analysis focused on interpreting the clauses of the General Purchase Conditions (GPC) and the provisions of the MSME Act to determine the territorial jurisdiction for entertaining the petition.
Finding of the Court:
The court found that the clauses of the GPC, despite containing blanks, established the exclusive jurisdiction of the Courts at New Delhi for arbitration proceedings. The court emphasized the significance of the designated seat in conferring exclusive jurisdiction to the courts at the agreed place, distinguishing between the 'VENUE' and 'SEAT' of arbitration. The court rejected the respondent's argument based on the MSME Act, asserting that the jurisdiction clause agreed between the parties must be upheld, and the courts at New Delhi had exclusive jurisdiction to entertain the petition under Section 34 of the Arbitration Act.
Issues: The key issues revolved around the interpretation of the clauses of the General Purchase Conditions (GPC) and the provisions of the MSME Act to determine the territorial jurisdiction for entertaining the petition under Section 34 of the Arbitration Act. The court also addressed the distinction between the 'VENUE' and 'SEAT' of arbitration and the significance of the designated seat in conferring exclusive jurisdiction to the courts at the agreed place.
Ratio Decidendi: The court's decision was based on the interpretation of the clauses of the General Purchase Conditions (GPC) and the provisions of the MSME Act. The court emphasized the significance of the designated seat in conferring exclusive jurisdiction to the courts at the agreed place, distinguishing between the 'VENUE' and 'SEAT' of arbitration. The court upheld the jurisdiction clause agreed between the parties, asserting that the courts at New Delhi had exclusive jurisdiction to entertain the petition under Section 34 of the Arbitration Act.
Final Decision: The court set aside the impugned judgment and restored the petition to its original number, directing the parties to appear before the learned Single Judge for a decision on the merits.
JUDGMENT :
Sanjeev Narula, J.
The present appeal under Section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act, 2015 (hereinafter 'Commercial Courts Act') read with Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter 'the Arbitration Act') impugns the judgment dated 5th April 2019 passed by the learned Single Judge in OMP (Comm) No. 140/2019.
2. The petition [O.M.P (COMM) No. 140/2019] was filed under Section 34 of the Arbitration Act, assailing the Arbitral award dated 14th December 2018, passed by the Maharashtra Micro and Small Enterprises Facilitation Council, Konkan Region, Thana (hereinafter "MSME Council"). The learned Single Judge dismissed the aforesaid petition on the ground that this Court does not have the territorial jurisdiction to entertain the petition. Since the learned Single Judge has not examined merits of the case and has decided the petition only on the ground of jurisdiction, the scope of the present appeal lies in narrow compass and is restricted to evaluation of the legality of the impugned order on the issue of jurisdiction of this Court.
Brief Facts:
3. The bare essential facts that are necessary for disposing of the present appeal are as follows:
3.1. Pursuant to a Notice Inviting Tender issued by the Appellant for "Supply, Installation, Testing, Commissioning and 5 years AMC of 1000 KW Grid Interactive Solar Power System at Gujarat Refinery", a purchase order was issued to the Respondent for Rs. 4,95,00,000/- (Rupees Four Crore Ninety-Five Lac Only). Certain disputes arose between the parties and on 6th March 2017, Appellant issued a Show Cause Notice as to why the Respondent should not be debarred from entering into any contracts with the Appellant because of its failure to comply with the terms of contract. Respondent, being governed by the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as the "MSME Act") filed a petition under Section 18 of the said Act. Taking cognizance thereof, on 23rd May 2017, the MSME Council as per the scheme of the Act initiated conciliation proceedings between the parties. However, on account of failure of the Council to resolve the disputes between the parties, the same were concluded on 12th July 2018. On the same date an order on Roznama was passed, whereby, the MSME Council assumed jurisdiction to resolve the disputes through Arbitration in terms of Section 18(3) of the MSME Act. The said proceedings were terminated on 14th December 2018, resulting in the impugned Award being passed in favour of the Respondent.
3.2. On 9th January 2019, Appellant filed a Writ Petition being W.P. No. 769 of 2019 before the High Court of Bombay titled as "Indian Oil Corporation Limited v. Maharashtra Micro and Small Enterprise Facilitation Council, Konkan Region, Thane", challenging the conduct of arbitration proceedings by the MSME Council. The said petition is stated to be presently pending. On 20th March 2019, Appellant preferred the petition under Section 34 of the Arbitration Act before this Court impugning the award and the same has been dismissed by judgment dated 5th April 2019, impugned in the present appeal.
Impugned Judgment
4. Learned Single Judge, while referring to Clause 34 and 35 of the General Purchase Conditions (GPC), has held that this Court lacks territorial jurisdiction to entertain the petition, as under said clauses, no exclusive seat of arbitration has been agreed upon by the parties. It is also observed that since there were certain blanks in the aforesaid Clauses, it cannot be inferred that the parties vested exclusive jurisdiction to the Courts at New Delhi. The decisions in Swastik Gases Pvt. Ltd. v. Indian Oil Corporation Ltd., (2013) 9 SCC 32 and Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd. & Ors., (2017) 7 SCC 678, were held to be inapplicable to the facts of the present case. Further, while referring to t
