2020 Supreme(SC) 241

SUPREME COURT OF INDIA
R. BANUMATHI, A.S. BOPANNA, HRISHIKESH ROY, JJ.
Mankastu Impex Private Limited – Petitioner
Versus
Airvisual Limited – Respondent
Arbitration Petition No. 32 of 2018
Decided on : 05-03-2020

IMPORTANT POINTS
If one of the parties to the commercial arbitration is incorporated in another country, the arbitration will be international commercial arbitration.
Seat of arbitration determines applicable law as well as judicial review over the arbitration award.
Seat and Venue of arbitration cannot be used interchangeably.
Seat of arbitration being Hong Kong application u/s 11(6) is not maintainable.

Headnote:

(a) Arbitration and Conciliation Act, 1996 (as amended in 2015) - Section 2(1)(f) - One party to the arbitration agreement is incorporated in India while the other one is incorporated in Hong Kong - Arbitration is international commercial arbitration. (Para 15)

(b) Arbitration and Conciliation Act, 1996 (as amended in 2015) - Section 2(2) - Seat of arbitration - Determines applicable law as well as judicial review over the arbitration award - Seat normally carries with it the choice of that country's arbitration/curial law - Seat and Venue of arbitration - Cannot be used interchangeably - Mere expression "place of arbitration" cannot be determinative of parties’ intention of the place being seat of arbitration - Instantly Hong Kong chosen as place of arbitration - Disputes arising out of or relating to MoU to be referred to and finally resolved by arbitration administered in Hong Kong - Hong Kong not merely ‘venue’ of arbitration - Thus parties agreed that arbitration be seated at Hong Kong, and laws of Hong Kong shall govern arbitration proceedings as well as have power of judicial review over the arbitration award. (Para 19, 20, 21, 24)

(c) Arbitration and Conciliation Act, 1996 (as amended in 2015) - Section 11(6) - seat of arbitration being Hong Kong - Application u/s 11(6) not maintainable. (Para 26)

Facts of the case:

A Memorandum of Understanding dated 12.09.2016 was entered into between the parties under which the respondent agreed to sell to the petitioner the complete line of the respondent's air quality monitors products for onward sale. As per the terms of the agreement, the petitioner was appointed as an exclusive distributor for the products for sale within India. Additionally, non-exclusive rights were given to the petitioner qua distribution for sales in Sri Lanka, Bangladesh and Nepal. This agreement was to continue for a period of five years from the starting date, which date was to commence from the date of delivery of the first lot of Air Quality monitors in India, i.e. 03.10.2016 or 01.11.2016, whichever was later.

On 14.10.2017, the petitioner received an e-mail from one Mr. Charl Cater of IQAir AG (Proposed respondent No.2) informing the petitioner that the respondent is a part of IQAir AG. Attached to the e-mail was a letter dated 13.10.2017 by the CEO of IQAir AG stating that IQAir AG has acquired all technology and the associated assets of the respondent. Further, the product of Air-Visual Node has been discontinued and the IQ Air AG is in the process of relaunching a new and improved version which will be rebranded as IQ Air AirVisual Pro. The letter also stated that IQAir AG will not assume any contracts or legal obligations of the respondent and will work on a case to case basis with resellers to negotiate new contracts.

On 08.12.2017, the petitioner issued a notice invoking the arbitration clause provided in Clause 17 the MoU. The petitioner also proposed the name of Hon'ble Justice RC Chopra as the arbitrator, subject to consent of the respondent and IQAir AG.

IQAir vide its letter dated 15.12.2017, stated that under its asset purchase agreement with the respondent, it has not assumed any contractual and legal obligations and that the terms of the MoU were not enforceable against IQAir AG. The respondent also sent its reply dated 05.01.2018 to the notice dated 08.12.2017 stating that Clause 17 of the MoU provides for arbitration administered and seated in Hong Kong. Further, it was stated that the respondent did not agree to ad hoc arbitration but clearly agreed to administered arbitration in Hong Kong.

The petitioner filed petition under Section 11(6) of the Act seeking appointment of Sole Arbitrator under Clause 17 of the MoU.

Findimg of the Court:

Application u/s 11(6) is not maintainable.

Result: Application dismissed.