Brahmani River Pellets Ltd. v. Kamachi Industries Ltd.
- Bench - R. Bhanumathi, A.S. Bopanna, JJ
- Appellant - Brahmani River Pellets Ltd.
- Respondent - Kamachi Industries Ltd.
Issues
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?
Facts
• 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.
• 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.
• 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.” The respondent on 07.10.2016 invoked arbitration clause. The appellant did not agree for the appointment of the arbitrator.
Appellant's Contentions
• 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 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, 3 the Orissa High Court will have the jurisdiction under the Act.
• The learned counsel further contended that the Madras High Court erred in assuming jurisdiction under Section 11(6) of the Act despite Bhubaneswar being the Seat of arbitration.
• 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.
Respondent's Contentions
• 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.
• It was submitted that in domestic arbitration, unless the parties tie themselves to an exclusive jurisdiction of the court in the agreement, mere mention of “venue” as a place of arbitration will not confer exclusive jurisdiction upon that court.
• It was urged that apart from mere mention of “venue” as place of arbitration, there should be other concomitant circumstances like use of words “alone”, “exclusive”, “only” etc. or other circumstances, then only the jurisdiction of the other court which otherwise would have had jurisdiction would stand excluded.
• The learned counsel for the respondent submitted that mere expression “venue of arbitration shall be Bhubaneswar will have no special significance” and the High Court rightly exercised its jurisdiction under Section 11 (6) of the Act in appointing the arbitrator.
Judgement
The impugned order of the Madras High Court was set aside and this appeal was allowed. The parties were at liberty to approach the Orissa High Court seeking for appointment of the arbitrator.
Relevant Paragraphs
• 10. In BALCO, the issue arose before the Constitution Bench was as to whether in international commercial arbitrations whose juridical or legal Seat of arbitration was outside India whether the provisions of Part-I of the Act would be applicable for grant of relief as held in Bhatia International v. Bulk Trading S.A. and another (2002) 4 SCC 105. The Constitution Bench in BALCO held that “if the legal or juridical seat of arbitration is outside India, then Part-I of the Arbitration and Conciliation Act, 1996 shall be inapplicable to such arbitrations; and even in case a clause in the arbitration agreement purports to apply Part-I of the 1996 Act to an arbitration where the juridical seat of arbitration is outside India, Part-I shall be inapplicable to the extent inconsistent with the arbitration law of the seat of arbitration.”
• 11. In BALCO, the court highlighted the distinction between the “Seat” and “Venue” in the context of Section 20(3) of the Act. Section 20(3) of the Act allows the parties to hold 1 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552 7 meetings, proceedings and hearings at any place agreed by the parties. In BALCO, the court has held that in an international commercial arbitration “seated” in India, parties may by mutual agreement, hold arbitral proceedings outside India. This, however, would not have the effect of changing the Seat of arbitration which would continue to remain in India. The court then envisages a situation where the arbitration agreement designates a foreign Seat and also selects Arbitration Act, 1996 as the law applicable to the conduct of arbitration proceedings and in such circumstances, hearing of the arbitration conducted at the venue fixed by the parties would not have the effect of changing the Seat of arbitration which would remain in India.
• The above observations in para No. (96) is in the context that on many occasions, agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. In such circumstances, it was observed that the two courts would have jurisdiction that is the court within whose jurisdiction “subject-matter” of the suit is situated and the court 11 within the jurisdiction of which the dispute resolution i.e. the “venue” of arbitration is located.
• 13. As per Section 20 of the Act, parties are free to agree on the place of arbitration. Party autonomy has to be construed in the context of parties choosing a court which has jurisdiction out of two or more competent courts having jurisdiction. This has been made clear in the three-Judges Bench decision in Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd.
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