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IN THE HIGH COURT OF DELHI AT NEW DELHI
C. Hari Shankar, J.
My Preferred Transformation And Hospitality Pvt. Ltd. - Appellant
Versus
Sumithra Inn - Respondent
Arbitration Petition No. 269 of 2020
Decided On : 05-01-2021
ARBITRATION - APPOINTMENT OF ARBITRATOR - JURISDICTION - EXCLUSIVE JURISDICTION CLAUSE - SEAT OF ARBITRATION CLAUSE - CONFLICT BETWEEN CLAUSES - INTERPRETATION - SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996.
Fact of the Case:
The petitioner, a hospitality company, entered into a Management Services Agreement (MSA) with the respondent, a hotel owner. The MSA contained an arbitration clause providing for arbitration in New Delhi and conferring exclusive jurisdiction on courts at New Delhi in all matters arising out of the MSA. Subsequently, an Addendum to the MSA was executed, changing the exclusive jurisdiction clause to confer exclusive jurisdiction on courts at Bengaluru. The petitioner alleged that the respondent had breached the MSA and sought appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 (the 1996 Act). The respondent objected to the jurisdiction of the court and the locus standi of the petitioner.
Finding of the Court:
The court held that the seat of arbitration clause, fixing the seat of arbitration at New Delhi, resulted in courts at New Delhi being exclusively competent to entertain petitions under the 1996 Act, in exercise of its supervisory jurisdiction over the arbitral process, unless there was a separate clause conferring exclusive jurisdiction on a court in another territorial location, qua the particular provision which was in issue. The court further held that the petitioner had locus standi to maintain the petition as the genuineness of the communication regarding assignment of the MSA and the issue of whether the email ID provided was the respondent's email ID were disputed issues of fact that had to be tested in arbitration.
Issues: 1. Whether the court had jurisdiction to entertain the petition for appointment of an arbitrator, given the exclusive jurisdiction clause conferring exclusive jurisdiction on courts at Bengaluru? 2. Whether the petitioner had locus standi to maintain the petition.
Ratio Decidendi: 1. The court held that the seat of arbitration clause, fixing the seat of arbitration at New Delhi, resulted in courts at New Delhi being exclusively competent to entertain petitions under the 1996 Act, in exercise of its supervisory jurisdiction over the arbitral process, unless there was a separate clause conferring exclusive jurisdiction on a court in another territorial location, qua the particular provision which was in issue. The court relied on the decision in Mankastu Impex Pvt. Ltd. v. Airvisual Ltd., (2020) 5 SCC 399, where the Supreme Court held that the fixation of the seat of arbitration as Hong Kong resulted in the vesting of exclusive jurisdiction, to entertain the petition for appointment of the arbitrator, with courts at Hong Kong, and divested all other courts of jurisdiction in the matter. 2. The court held that the petitioner had locus standi to maintain the petition as the genuineness of the communication regarding assignment of the MSA and the issue of whether the email ID provided was the respondent's email ID were disputed issues of fact that had to be tested in arbitration.
Final Decision: The petition was allowed, and the court appointed a retired judge as the sole arbitrator to arbitrate on the disputes between the parties.
JUDGMENT
C. Hari Shankar, J. - By the present petition, under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act"), the petitioner seeks appointment of an arbitrator, to arbitrate on the dispute between the parties.
2. Mr. V. Prabhakar, learned counsel appearing for the respondent, has not seriously contested the existence of an arbitrable dispute. He has raised, essentially, two objections to the grant of the reliefs sought by the petitioner. The first is that this Court does not possess the territorial jurisdiction to adjudicate on the petition. The second is that the petitioner is a stranger to the contract containing the arbitration clause, which is between the respondent and M/s. Alcott Town Planners Private Limited (hereinafter referred to as "Alcott"), which came to be known, later, as "OYO Hotels and Homes Private Limited") (hereinafter referred to as "OYO").
3. In order to appreciate these objections of Mr. Prabhakar, it is necessary to refer, to some extent, to the relevant facts, as urged by the petitioner in the petition.
Facts as urged by the petitioner
4. The facts of the case, as urged by the petitioner, may be enumerated thus:
(i) The petitioner is a hospitality company, which claims to be part of the "OYO group of companies", which is engaged, essentially, in the hospitality industry.
(ii) On 29th October, 2018, a Management Services Agreement (MSA) was executed between the respondent and Alcott. Article 10 of the MSA, which dealt with resolution of disputes arising thereunder, read thus:
"Article 10 - Governing Laws and Dispute Resolution:
10.1 This Agreement shall be governed and interpreted in accordance to the laws of India and the courts at New Delhi shall have exclusive jurisdiction in all matters arising out of this Agreement.
10.2 In the event any dispute arises between the Parties out of or in connection with this Agreement, the Parties hereto shall endeavor to settle such dispute amicably in the first instance. The attempt to bring about an amicable settlement shall be treated as having failed as soon as one of the Parties hereto, after reasonable attempts, which shall continue for not less than thirty (30) days, gives a notice to this effect, to the other Party in writing.
10.3 In case of such failure, the dispute shall, upon the expiry of the aforesaid period, be referred to arbitration to be conducted by a sole arbitrator, who shall be jointly appointed by the Parties. The language of arbitration shall be English, and the place of arbitration shall be New Delhi. The decision of the arbitrators shall be final and binding on the parties."
(iii) As is apparent from Articles 10.1 and 10.3 of the MSA, the place of arbitration was fixed at New Delhi, and courts at New Delhi were conferred exclusive jurisdiction in all matters arising out of the MSA. This position, however, underwent a change by an Addendum, dated 7th March, 2019, to the MSA, which replaced Article 10.1 to read thus:
"10.1 This Agreement shall be governed and interpreted in accordance to the laws of India and the courts at Bengaluru shall have exclusive jurisdiction in all matters arising out of this Agreement."
(iv) With the execution of the aforesaid Addendum, dated 7th March, 2019, therefore, while the place of arbitration continued to be New Delhi, the Courts at Bengaluru were conferred exclusive jurisdiction in all matters arising out of the MSA.
(v) A second Addendum, dated 22nd April, 2019, was also executed between the parties, amending, inter alia, Article 5.2.11 of the MSA. This Addendum is not, however, of particular relevance to the present controversy.
(vi) On 30th April, 2019, Alcott addressed the following communication to Mr. S. A. Ramesh Babu, at the e-mail id gururaju.18@gmail.com:
"ALCOTT TOWN PLANNERS PRIVATE LIMITED
Reg.Office:408, Ashirwad, Paras 100 Feet, Corporate
Road, Prahlad Nagar Ahmedabad Gujarat -380015,
India.
Email:legal@alcotthospitality.com,
Contact No.:+91 9654247699
CIN:
The seat of arbitration clause, fixing the seat of arbitration at New Delhi, resulted in courts at New Delhi being exclusively competent to entertain petitions under the 1996 Act, in exercise of its ....
The jurisdiction for appointing an arbitrator lies with the court where the principal agreement was executed, as per Section 11(6), despite a venue specified in an ancillary agreement.
The main legal principle established in the judgment is that the court at the seat of arbitration has exclusive jurisdiction over all applications under Part I of the Arbitration and Conciliation Act....
The main legal point established in the judgment is that the designation of a place of arbitration as the 'venue' in an arbitration clause indicates the intention to anchor arbitral proceedings to th....
The appointment of an arbitrator is valid under revised jurisdictional laws, superseding past dismissals on grounds of territorial limitations.
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