1. Agreement for sale of goods — Dispute over price and payment — Petition for appointment of arbitrator under Section 11(6), Arbitration and Conciliation Act, 1996. (Para 3 , 4 , 5 )
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2019 Supreme(SC) 781
SUPREME COURT OF INDIA
R. BANUMATHI, A.S. BOPANNA, JJ.
Brahmani River Pellets Limited – Appellant
Versus
Kamachi Industries Limited – Respondent
Civil Appeal No.5850 2019 (Arising out of SLP(C) No.15672 of 2019)
Decided On : 25-07-2019
Important Points
IMPORTANT POINTS
(1) Parties are free to agree on place of arbitration.
(2) Where contract specifies jurisdiction of court at a particular place, only such court will have jurisdiction to deal with the matter and parties intended to exclude all other courts.
(3) Seat of arbitration – Non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.
(1) Parties are free to agree on place of arbitration.
(2) Where contract specifies jurisdiction of court at a particular place, only such court will have jurisdiction to deal with the matter and parties intended to exclude all other courts.
(3) Seat of arbitration – Non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.
Subject
Arbitration Law - Jurisdiction
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 – Section 11(6) read with Sections 2(1)(e) and 20 – Seat of arbitration – Parties are free to agree on place of arbitration – Party autonomy has to be construed in context of parties choosing a court which has jurisdiction out of two or more competent courts having jurisdiction – Where contract specifies jurisdiction of court at a particular place, only such court will have jurisdiction to deal with the matter and parties intended to exclude all other courts – In present case, parties have agreed that venue of arbitration shall be at Bhubaneswar – Intention of parties is to exclude all other courts – Non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference – When parties have agreed to have venue of arbitration at Bhubaneswar, Madras High Court erred in assuming jurisdiction under Section 11(6) of Act – Since only Orissa High Court will have jurisdiction to entertain petition filed under Section 11(6) of Act, impugned order is liable to be set aside – Impugned order of Madras High Court in set aside – Parties given liberty to approach Orissa High Court seeking for appointment of Arbitrator. (Paras 13, 14, 16, 17 and 18)
Facts of the Case:
Point in issue is whether Madras High Court could exercise jurisdiction under Section 11(6) of Arbitration and Conciliation Act, 1996 despite the fact that agreement contains clause that venue of arbitration shall be Bhubaneswar.
Findings of the Court:
Considering agreement of parties having Bhubaneswar as venue of arbitration, intention of parties is to exclude all other courts. As held in Swastik, non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates Appeared:
For the Petitioner(s):Rajat Bhardwaj, Advocates
For the Respondent(s) S. Santanam Swaminadhan, Aarthi Rajan, Advocates
For the Petitioner(s):Rajat Bhardwaj, Advocates
For the Respondent(s) S. Santanam Swaminadhan, Aarthi Rajan, Advocates
Table of Contents
2. Whether designation of arbitration venue confers exclusive jurisdiction on the court at that place or allows multiple courts where cause of action arose to exercise jurisdiction. (Para 6 , 7 )
3. Designation of venue as the place of arbitration indicates the parties' intention to exclude other courts, regardless of whether words like exclusive or alone are used. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14 )
4. Agreement on the venue of arbitration designates the juridical seat, vesting the courts at that seat with exclusive jurisdiction to regulate arbitral proceedings. (Para 15 , 16 )
5. Impugned order set aside — Appeal allowed — Parties directed to approach the court at the designated venue for appointment of arbitrator. (Para 17 , 18 )
6. What is the distinction between the seat and venue of arbitration under the Arbitration and Conciliation Act, 1996?
The seat is the juridical place that determines which court has supervisory jurisdiction. The venue is the physical location where hearings are held. In domestic arbitration, designating a venue typically establishes the juridical seat. (Para 10 , 11 , 12 )
7. Does the mention of a venue in an arbitration agreement automatically exclude the jurisdiction of other courts?
Yes, when parties agree on a venue, it is construed as the juridical seat, which acts as an exclusive jurisdiction clause. The absence of words like exclusive or alone does not negate this intention. (Para 13 , 15 , 16 )
8. Which court has jurisdiction to appoint an arbitrator under Section 11(6) when a specific venue is designated in the agreement?
The court having jurisdiction over the designated venue, acting as the juridical seat, has exclusive jurisdiction to appoint the arbitrator, excluding other courts where the cause of action may have arisen. (Para 15 , 16 , 17 )
JUDGMENT :
R. BANUMATHI, J.
1. Leave granted.
2. Whether the Madras High Court could exercise jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 despite the fact that the agreement contains the clause that venue of arbitration shall be Bhubaneswar, is the question falling for consideration in this appeal.
3. Brief facts which led to filing of this appeal are as under:-
The appellant entered into an agreement with the respondent for sale of 40,000 WMT (Wet Metric Tonne) of Iron Ore Pellets on FOB terms and payment was to be made by Letter of Credit in Bhubaneswar. The loading port was Dhamra Port, Bhadrak, Odisha and destination was Chennai/Ennore Ports, Tamil Nadu. Dispute arose between the parties regarding the price and payment terms and the appellant did not deliver the goods to the respondent. The respondent claimed for damages alleging that it had to procure the Iron Ore Pellets from other sources at higher rates. The appellant denied any liability to pay damages on the ground that contract was later modified and that the respondent breached the material terms of the contract and this led to the dispute between the parties.
4. Clause 18 of the agreement between the parties contains an arbitration clause which reads as under:-
“18. Arbitration shall be under Indian Arbitration and Conciliation Law 1996 and the Venue of Arbitration shall be Bhubaneswar.”
5. The respondent on 07.10.2016 invoked arbitration clause. The appellant did not agree for the appointment of the arbitrator. Hence, the respondent filed petition being OP No.398 of 2018 under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’) before the Madras High Court on 24.01.2018 for appointment of sole arbitrator. The appellant contested the petition challenging the jurisdiction of the Madras High Court on the ground that the parties have agreed that Seat of arbitration be Bhubaneswar and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. The Madras High Court vide impugned order appointed a former judge of the Madras High Court as the sole arbitrator by holding that mere designation of “Seat” by parties does not oust the jurisdiction of other courts other than at the Seat of arbitration. The High Court held that in absence of any express clause excluding jurisdiction of other courts, both the Madras High Court and the Orissa High Court will have jurisdiction over the arbitration proceedings. Challenging the impugned order, the appellant has preferred this appeal.
6. The learned counsel for the appellant submitted that when the parties have agreed for a place/venue for arbitration, it gets the status of Seat which is the juridical Seat and therefore only, the Orissa High Court will have the jurisdiction under the Act. The learned counsel submitted that the Madras High Court erred in assuming jurisdiction under Section 11(6) of the Act despite Bhubaneswar being the Seat of arbitration. In this regard, reliance was placed upon Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and others (2017) 7 SCC 678, Union of India v. Hardy Exploration and Production (India) Inc. (2018) 7 SCC 374 and other judgments. It was contended that the High Court erred in holding that clause (18) of the agreement does not outst the jurisdiction of the courts other than the courts at the Seat of arbitration at Bhubaneswar. The learned counsel submitted that the High Court erred in not applying the ratio of Indus Mobile wherein the Supreme Court held that in case of domestic arbitration where the parties have agreed at the Seat of arbitration, the said court will have exclusive jurisdiction.
7. Per contra, the learned counsel for the respondent submitted that since cause of action arose at both the places i.e. Bhubaneswar and Chennai, both Madras High Court as well as Orissa High Court will have supervisory jurisdiction. Reliance was placed upon para No. (96) of Bharat Alu
