IN THE HIGH COURT OF ANDHRA PRADESH : AMARAVATI
HON'BLE MR. JUSTICE ARUP KUMAR GOSWAMI, CHIEF JUSTICE
ARBITRATION APPLICATION No.2 of 2019
(Taken up through video conferencing)
KEI-RSOS PETROLIUM & ENERGY PVT. LTD.,
a private limited company, registered under the
Companies Act, having its Regd. Office at 10-3-316/A,
Masab Tank, Hyderabad- 500 028 and Local office
at Aishwarya Enclave C-156, Walkers Road,
Venkateshwara Nagar, Rajamahendravaram - 533103,
Rep. by Mr. B. Chandra Sekhar S/o. B. Trimurthulu,
Manager of the company.
.. Applicant
Versus
M/s. R.A.K. CERAMICS (I) PVT. LTD.,
P.B.No.11-IDA - Peddapuram, ADB Road,
Samalkot - E.G. DISTRICT, Pin:-533440,
Rep. by its Vice President.
.. Respondent
Counsel for the applicant : Mr. Kakara Venkata Rao
Counsel for the respondent : Mr. C.V. Mohan Reddy, Sr. Advocate
Mr. A. Krishnam Raju
Dates of hearing : 09.04.2021, 09.07.2021, 06.08.2021,
13.08.2021 & 04.09.2021
Date of order : 08.10.2021
ORDER
Heard Mr. Kakara Venkata Rao, learned counsel for the applicant. Also heard Mr. C.V. Mohan Reddy, learned senior counsel, assisted by Mr. A. Krishnam Raju, learned counsel for the respondent.
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2. This application is filed under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for short, 'the Act of 1996') seeking appointment of a sole arbitrator to resolve the dispute between the parties under the agreement dated 04.09.2015.
3. The case of the applicant company, in short, is that the applicant company is a private limited company engaged in the business of production of oil and natural gas and marketing of the same. The respondent company, which is also a private limited company, is involved in the business of manufacturing and sale of ceramic tiles and sanitary- ware. The respondent company had approached the applicant for supply of 40,000 standard cubic meters of natural gas per day to its factory at Samalkot. Accordingly, the applicant company had entered into an agreement with the respondent company on 04.09.2015 for supply of natural gas at a daily contracted quantity of 40,000 standard cubic meters. The period of the agreement is 36 months from the date of the agreement or the date of commencement of production, whichever is later. The production of natural gas by the applicant company had commenced on 01.03.2016 and therefore, 36 months' period would expire by 01.03.2019. The applicant company has been supplying gas to the respondent from 01.03.2016 onwards as per the terms of the agreement. But, the respondent has not been able to fulfil and comply with the Minimum Guaranteed Off-take condition. While so, in the meeting held on 05.03.2018, the respondent company had proposed to stop taking gas supply from the applicant company with effect from 01.04.2018, on account of a better pricing option available to it. The applicant company had conveyed its disagreement to the said proposal. However, on 06.03.2018, the respondent company sent an e-mail dated 3 HCJ Arb.Appl.No.2 of 2019 01.03.2018 to the applicant company stating that in accordance with Clause 6.1.5 of the agreement dated 04.09.2015, the respondent company would be unable to take gas supply from the applicant company with effect from 01.04.2018 due to operational reasons. The applicant company had sent a reply to the said e-mail on 07.03.2018 refusing to accept the same. As the respondent company had failed to adhere to the conditions in the agreement and there was a shortfall in the minimum guaranteed off-take of gas by the respondent company during the period from November, 2016 to February, 2018, on 17.03.2018, the applicant company had raised invoices for an amount of Rs.11,97,41,921/- towards payment of charges for the said shortfall quantity, but the respondent had not paid the said amount. In those circumstances, the applicant company had filed a petition, being A.O.P.No.14 of 2018, before the X Additional District Judge, East Godavari, Rajahmundry, on 28.03.2018, under Section 9 of the Act of 1996, to grant interim injunction against the respondent company from acting upon its e-mail dated 01.03.2018, pending resolution of disputes arose between the parties through arbitration. Though initially, an interim order was passed in the said AOP, subsequently, the AOP was returned on the ground of jurisdiction and to present it before proper Court. The applicant company had issued a notice dated 31.05.2018 to the respondent company invoking arbitration clause under the agreement and seeking appointment of Mr. Justice P.S. Narayana (Retired) as the sole arbitrator to resolve the disputes between them. The respondent company had issued reply notice dated 26.06.2018 disagreeing for appointment of the arbitrator. It is stated that the applicant company has suffered loss to the tune of Rs.57.72 crores. In these circumstances, this arbitration application came to be filed.
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4. The respondent filed counter-affidavit putting forth its own version of events and denying the allegations and contentions of the applicant. The question of the maintainability of the arbitration application was also raised.
5. Learned counsel for the parties have addressed their arguments centering around only on the arbitration clause as incorporated in Clauses 9.1 and 9.3 of the agreement dated 04.09.2015 regarding maintainability of this application and on no other aspects. It is, therefore, appropriate, at the very outset, to quote Clause 9 in its entirety for better appreciation of the arguments of the learned counsel for the parties.
"9. Governing Law and Dispute Resolution 9.1 This Agreement shall be governed by and interpreted in accordance with the substantive laws of India. The Courts of the State of Andhra Pradesh alone shall have sole and exclusive jurisdiction with respect to any proceedings arising out of or in relation to this Agreement.
9.2 Any claim, dispute or controversy arising out of, or in relation to, this Agreement, including any dispute with respect to the existence or validity hereof, the interpretation hereof, the activities performed hereunder, or the breach hereof shall, after written notice by either Party to the other Party, be referred for resolution to a Sole Arbitrator to be appointed by mutual 5 HCJ Arb.Appl.No.2 of 2019 discussions and agreement between the Parties under the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or reenactment thereof. 9.3 The arbitration proceedings shall be conducted in English and the place of arbitration shall be Hyderabad or any place mutually agreed by parties in Andhra Pradesh."
6. Mr. Kakara Venkata Rao, learned counsel for the applicant, submits that Clause 9.1 of the Agreement entered into between the parties clearly states that the Courts of State of Andhra Pradesh alone shall have the sole and exclusive jurisdiction with respect to any proceedings arising out of or in relation to the subject agreement. Thus, the intention of the parties is clear that they have excluded all other Courts in respect of such proceedings, including arbitration proceedings. When Clause 9.1 in specific terms deals with the exclusive jurisdiction, Clause 9.3 stating that the place of arbitration shall be Hyderabad or any place mutually agreed by the parties in Andhra Pradesh, shall be understood to mean that the parties have chosen Hyderabad as the venue for holding arbitration hearings only and they did not intend the same to be the seat of arbitration. He further submits that if the arbitration clause contains any contrary indication, it would be a matter of construction of individual agreement to ascertain the intention of the parties in choosing the designated seat to be only a convenient venue/place fixed for conducting arbitration proceedings/hearings. It is further submitted by him that all the factors, such as, location of the 6 HCJ Arb.Appl.No.2 of 2019 factory of the respondent, supply of gas, delivery of gas (performance of the contract), are connecting the dispute with East Godavari District of the State of Andhra Pradesh and thus, by applying the closest connection theory also, it can be said that the Courts in Andhra Pradesh will only have sole and exclusive jurisdiction, as indicated in Clause 9.1 of the Agreement, and Hyderabad or any place mutually agreed by parties in Andhra Pradesh were intended to be convenient places for holding arbitration hearings/meetings only. He relies on the judgments of the Hon'ble Supreme Court in Brahmani River Pellets Limited v. Kamachi Industries Limited, reported in (2020) 5 SCC 462, Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc., reported in (2012) 9 SCC 552, Enercon (India) Limited and others v. Enercon GMBH and another, reported in (2014) 5 SCC 1 and Swastik Gases Private Limited v. Indian Oil Corporation Limited, reported in (2013) 9 SCC 32.
7. Mr. C.V. Mohan Reddy, learned senior counsel appearing for the respondent company, submits that Clause 9.3 of the agreement has to be construed to mean that the seat of arbitration shall be Hyderabad for arbitration proceedings and, therefore, the High Court of Andhra Pradesh has no territorial jurisdiction to entertain the application filed by the applicant under Section 11(5) and (6) of the Act of 1996 to appoint an arbitrator and it is only the High Court of Telangana that has the territorial jurisdiction to entertain such application. Clause 9.1 of the agreement does not embrace disputes between the parties in relation to arbitration proceedings and therefore, it cannot be understood to mean that the seat of arbitration is in Andhra Pradesh. Once the place of arbitration for conducting arbitration proceedings has been explicitly 7 HCJ Arb.Appl.No.2 of 2019 agreed upon between the parties preceded by the word "shall", such agreed place would serve as the seat of arbitration and that the Courts having territorial jurisdiction over such place would have sole jurisdiction to adjudicate any application under the Act of 1996. It is further submitted that Clause 9.1 of the agreement for all intents and purposes mean that the Courts of the State of Andhra Pradesh shall have sole and exclusive jurisdiction with respect to any proceeding arising out of or in relation to the agreement i.e., subject matter of a "suit", but the same does not take within its fold disputes between the parties in relation to "arbitration proceedings", and as such, Clause 9.1 of the agreement cannot be said to be providing seat of arbitration, more so, when Clause 9.3 of the agreement provides that the seat of arbitration shall be Hyderabad. He further submits that even if a part of cause of action had arisen within the territorial jurisdiction of the State of Andhra Pradesh, yet in view of Clause 9.3 of the agreement, the High Court of Andhra Pradesh will have no jurisdiction to entertain the application filed by the applicant under the Act of 1996. Once the parties agreed that the seat of arbitration is Hyderabad, by applying the principle that party autonomy should be given precedence, the present application is liable to be dismissed. He relies on the decisions of the Hon'ble Supreme Court in Bharat Aluminium Company (supra), Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Pvt. Ltd., reported in (2017) 7 SCC 678, BGS SGS SOMA JV v. NHPC Limited, reported in (2020) 4 SCC 234, Mankastu Impex Private Limited v. Airvisual Limited, reported in (2020) 5 SCC 399.
8. In reply, learned counsel for the applicant submits that the ratio laid down by the Hon'ble Supreme Court in BGS SGS SOMA JV (supra) 8 HCJ Arb.Appl.No.2 of 2019 cannot be applied to the present case as in the said case it was explicitly expressed that arbitration proceeding shall be held in a particular place, which expression is conspicuously absent in Clause 9.3 of the agreement, which only indicates "the place of arbitration". Referring to the judgment of the Hon'ble Supreme Court in Mankastu Impex Pvt. Ltd. (supra), on which the learned senior counsel for the respondent placed reliance, he submits that the place of arbitration, as contained in Clause 9.3 of the agreement, cannot be the basis to determine the intention of the parties that they have intended that place to be the seat of arbitration, and it should be construed that the parties intended Hyderabad to be a convenient place for holding arbitration meetings/hearings, and not for resolution of arbitration of disputes in Hyderabad, in view of the contrary indicia provided in Clause 9.1 of the agreement.
9. I have considered the submissions of the learned counsel for the parties and have perused the materials on record.
10. At the outset, it will be relevant to take note of the judgments cited at the Bar.
11. In Bharat Aluminium Company (supra), the Hon'ble Supreme Court observed that arbitrations are anchored to the seat/place/situs of arbitration and that the seat of arbitration is intended to be the centre of gravity. It, however, does not mean that all the proceedings of the arbitration have to take place at the seat of the arbitration. The arbitrators at times hold meetings at more convenient locations. It was also observed that the terms "seat" and "place" are often used interchangeably. Paragraph 75 of the said judgment reads as under:
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"75. We are also unable to accept the submission of the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in most of the national laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern in Paragraph 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity." This, however, does not mean that all the proceedings of the arbitration have to take place at the seat of the arbitration. The arbitrators at times hold meetings at more convenient locations. This is necessary as arbitrators often come from different countries. It may, therefore, on occasions be convenient to hold some of the meetings in a location which may be convenient to all. Such a situation was examined by the Court of appeal in England in Naviera Amazonica Peruana S.A. Vs. Compania International de Seguros del Peru [(1988) 1 Lloyd's Rep 116 (CA)], wherein at p.121 it is observed as follows:
"The preceding discussion has been on the basis that there is only one 'place' of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place 10 HCJ Arb.Appl.No.2 of 2019 or 'seat' of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings-or even hearings- in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses...... It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country - for instance, for the purpose of taking evidence..... In such circumstances each move of the Arbitral Tribunal does not of itself mean that the seat of arbitration changes. The seat of arbitration remains the place initially agreed by or on behalf of the parties."
(emphasis supplied) These observations were subsequently followed in Union of India v. McDonnell Douglas Corpn. [(1993) 2 Lloyd's Rep 48.]"
12. In Brahmani River Pellets Limited (supra), Clause 18 of the agreement, which contained the arbitration clause, reads as under:
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"18. Arbitration shall be under Indian Arbitration and Conciliation Law, 1996 and the Venue of Arbitration shall be Bhubaneswar."
13. In the aforesaid case, the Hon'ble Supreme Court observed that where the contract specifies the jurisdiction of the Court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. Having regard to the arbitration clause, the Hon'ble Supreme Court held that as the parties had agreed that 'venue' of arbitration shall be at Bhubaneswar, the intention of the parties is to exclude all other courts and that non-use of the words like "exclusive jurisdiction", "only", "exclusive", "alone" is not decisive and does not make any material difference. Paragraph 18 of the said judgment reads as under:
"18. Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the "venue" of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As held in Swastik Gases (P) Ltd. V. Indian Oil Corporation Limited, non-use of words like "exclusive jurisdiction", "only", "exclusive", "alone" is not decisive and does not make any material difference."
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14. In Swastik Gases Private Limited (supra), the jurisdiction Clause 18 in the agreement reads as follows:
"18. Jurisdiction The agreement shall be subject to jurisdiction of the courts at Kolkata."
15. The question that had arisen in the aforesaid case was as to whether parties by virtue of Clause 18 of the agreement have agreed to exclude the jurisdiction of the Courts at Jaipur where part of cause of action had arisen. The Hon'ble Supreme Court answered the question in the following manner.
"32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like "alone", "only", "exclusive" or "exclusive jurisdiction" have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties - by having clause 18 in the agreement - is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that 13 HCJ Arb.Appl.No.2 of 2019 expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner."
16. In Enercon (India) Limited (supra), the relevant clause of arbitration is 18.3, which reads as under:
"18.3 The proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be in London. The arbitrators may (but shall not be obliged to) award costs and reasonable expenses (including reasonable fees of counsel) to the party(ies) that substantially prevail on merit. The provisions of the Indian Arbitration and Conciliation Act, 1996 shall apply.
The reference of any matter, dispute or claim or arbitration pursuant to this Section 18 or the continuance of any arbitration proceedings consequent thereto or both will in no way operate as a waiver of the obligations 14 HCJ Arb.Appl.No.2 of 2019 of the parties to perform their respective obligations under this agreement."
17. In the aforesaid case, i.e., Enercon (India) Limited (supra), the Hon'ble Supreme Court, at paragraph 98, held as under:
"98. We find much substance in the submissions of Mr. Nariman that there are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be the "venue" to hold the proceedings of arbitration. We find force in the submission made by learned Senior Counsel for the appellants that the facts of the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters III, IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even Dr. Singhvi had submitted that Chapters III, IV, V and VI would apply if the seat of arbitration is in India. By choosing that Part I of the Indian Arbitration Act, 1996 would apply, the parties have made a choice that the seat of arbitration would be in India. Section 2(2) of the Indian Arbitration Act, 1996 provides that Part I "shall apply where the 15 HCJ Arb.Appl.No.2 of 2019 place of arbitration is in India". In BALCO, it has been categorically held that Part I of the Indian Arbitration Act, 1996, will have no application, if the seat of arbitration is not in India. In the present case, London is mentioned only as a "venue" of arbitration which, in our opinion, in the facts of this case can not be read as the "seat" of arbitration."
18. Further, on the issue of factors intimately connecting the arbitration to a particular place, the Hon'ble Supreme Court, at paragraph 115 of the aforesaid judgment, held as under:
"115. The learned Senior Counsel has rightly submitted that in fixing the seat in India, the Court would not be faced with the complications which were faced by the English High Court in Braes of Doune. In that case, the Court understood the designation of the seat to be in Glasgow as venue, on the strength of the other factors intimately connecting the arbitration to England. If one has regard to the factors connecting the dispute to India and the absence of any factors connecting it to England, the only reasonable conclusion is that the parties have chosen London, only as the venue of the arbitration. All the other connecting factors would place the seat firmly in India."
19. At paragraph 135 of Enercon (India) Ltd. (supra), it was further observed as under:
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"In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London. In an international commercial arbitration, venue can often be different from the seat of arbitration. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. This is precisely the ratio in Braes of Doune. Therefore, in the present case, the seat would remain in India."
20. The interplay between "seat" and "place of arbitration" came up for consideration in Indus Mobile Distribution Pvt. Ltd (supra), relied upon by the respondent. The Delhi High Court, on an application filed under Section 11 of the Act of 1996, held that as no part of cause of action arose in Mumbai, only the Courts of Delhi, Chennai and Amritsar, where part of cause of action had arisen, could have jurisdiction and held that exclusive jurisdiction clause would not apply on facts, as the Courts of Mumbai would have no jurisdiction at all. The arbitration clause 19 read as follows:
"19. All disputes and differences of any kind whatever arising out of or in connection with this agreement shall be subject to the exclusive jurisdiction of courts of Mumbai only."
21. While setting aside the judgment of the Delhi High Court, the Hon'ble Supreme Court, at paragraphs 19 and 20, held as follows:
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"19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction - that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.
20. It is well settled that where more than one court has jurisdiction, it is open for parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Limited v. Indian Oil Corporation Limited, (2013) 9 SCC 32. This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Limited, (2015) 12 SCC 225. Having regard to the above, it is clear that Mumbai 18 HCJ Arb.Appl.No.2 of 2019 courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps under Section 9 in the Mumbai Court. The appeals are disposed of accordingly."
22. In BGS SGS SOMA JV (supra), having referred to various decisions including Enercon (India) Ltd. (supra), Brahmani River Pellets (supra), it was held by the Hon'ble Supreme Court at paragraphs 82, 97 and 98, as under:
"82. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, 19 HCJ Arb.Appl.No.2 of 2019 other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings "shall be held" at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a "venue" and not the "seat" of the arbitral proceedings, would then conclusively show that such a clause designates a "seat" of the arbitral proceedings. In an International context, if a supranational body of rules is to govern the arbitration, this would further be an indicia that "the venue", so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the "stated venue", which then becomes the "seat" for the purposes of arbitration.
97. Given the fact that if there were a dispute between NHPC Ltd. and a foreign contractor, Clause 67.3(vi) would have to be read as a clause designating the "seat" of arbitration, the same must follow even when sub- clause (vi) is to be read with sub-clause (i) of Clause 67.3, where the dispute between NHPC Ltd. would be with an Indian contractor. The arbitration clause in the present case states that "Arbitration proceedings shall be held at New Delhi/Faridabad, India...", thereby signifying that all 20 HCJ Arb.Appl.No.2 of 2019 the hearings, including the making of the award, are to take place at one of the stated places. Negatively speaking, the clause does not state that the venue is so that some, or all, of the hearings take place at the venue; neither does it use language such as "the Tribunal may meet", or "may hear witnesses, experts or parties". The expression "shall be held" also indicates that the so-called "venue" is really the "seat" of the arbitral proceedings. The dispute is to be settled in accordance with the Arbitration Act, 1996 which, therefore, applies a national body of rules to the arbitration that is to be held either at New Delhi or Faridabad, given the fact that the present arbitration would be Indian and not international. It is clear, therefore, that even in such a scenario, New Delhi/Faridabad, India has been designated as the "seat" of the arbitration proceedings.
98. However, the fact that in all the three appeals before us the proceedings were finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the "seat" of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. Therefore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the "seat" has been chosen, which 21 HCJ Arb.Appl.No.2 of 2019 would then amount to an exclusive jurisdiction clause so far as courts of the "seat" are concerned."
23. In Mankastu Impex Pvt. Ltd. (supra), clause 17 of the Memorandum of Understanding (MoU) is the relevant clause governing the law and dispute resolution. The same reads as under:
"17. Governing law and dispute resolution 17.1. This MoU is governed by the laws of India, without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction.
17.2. Any dispute, controversy, difference or claim arising out of or relating to this MoU, including the existence, validity, interpretation, performance, breach or termination thereof or any dispute regarding non- contractual obligations arising out of or relating to it shall be referred to and finally resolved by arbitration administered in Hong Kong.
The place of arbitration shall be Hong Kong. The number of arbitrators shall be one. The arbitration proceedings shall be conducted in English language.
17.3. It is agreed that a party may seek provisional, injunctive, or equitable remedies, including but not limited to preliminary injunctive relief, from a court having jurisdiction, before, during or after the pendency of any arbitration proceeding."
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24. The question that had fallen for consideration was in view of clause 17.2 of MoU, whether the parties have agreed that the seat of arbitration is at Hong Kong and whether the Courts in India will have jurisdiction to entertain the petition filed under Section 11 of the Act.
25. The Hon'ble Supreme Court answered the question in the following manner:
"19. The seat of arbitration is a vital aspect of any arbitration proceedings. Significance of the seat of arbitration is that it determines the applicable law when deciding the arbitration proceedings and arbitration procedure as well as judicial review over the arbitration award. The situs is not just about where an institution is based or where the hearings will be held. But it is all about which court would have the supervisory power over the arbitration proceedings. In Enercon (India) Ltd. v. Enercon GMBH , (2014) 5 SCC 1, the Supreme Court held that:
"The location of the seat will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. It was further held that the seat normally carries with it the choice of that country's arbitration/curial law." (emphasis supplied)
20. It is well settled that "seat of arbitration" and "venue of arbitration" cannot be used interchangeably. It has also been established that mere expression "place of 23 HCJ Arb.Appl.No.2 of 2019 arbitration" cannot be the basis to determine the intention of the parties that they have intended that place as the "seat" of arbitration. The intention of the parties as to the "seat" should be determined from other clauses in the agreement and the conduct of the parties.
21. In the present case, the arbitration agreement entered into between the parties provides Hong Kong as the place of arbitration. The agreement between the parties choosing "Hong Kong" as the place of arbitration by itself will not lead to the conclusion that the parties have chosen Hong Kong as the seat of arbitration. The words, "the place of arbitration" shall be "Hong Kong", have to be read along with Clause 17.2. Clause 17.2 provides that "... any dispute, controversy, difference arising out of or relating to MoU shall be referred to and finally resolved by arbitration administered in Hong Kong....". On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as "place of arbitration" is not a simple reference as the "venue" for the arbitral proceedings; but a reference to Hong Kong is for final resolution by arbitration administered in Hong Kong. The agreement between the parties that the dispute "shall be referred to and finally resolved by arbitration administered in Hong Kong" clearly suggests that the parties have agreed that the arbitration be seated at Hong Kong and that laws of Hong Kong shall govern the arbitration proceedings as 24 HCJ Arb.Appl.No.2 of 2019 well as have power of judicial review over the arbitration award.
22. As pointed out earlier, Clause 17.2 of MoU stipulates that the dispute arising out of or relating to MoU including the existence, validity, interpretation, breach or termination thereof or any dispute arising out of or relating to it shall be referred to and finally resolved by the arbitration administered in Hong Kong. The words in Clause 17.2 that "arbitration administered in Hong Kong" is an indicia that the seat of arbitration is at Hong Kong. Once the parties have chosen "Hong Kong" as the place of arbitration to be administered in Hong Kong, the laws of Hong Kong would govern the arbitration. The Indian courts have no jurisdiction for appointment of the arbitrator.
27. The words in Clause 17.1, "without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction" do not take away or dilute the intention of the parties in Clause 17.2 that the arbitration be administered in Hong Kong. The words in Clause 17.1 do not suggest that the seat of arbitration is in New Delhi. Since Part I is not applicable to "international commercial arbitrations", in order to enable the parties to avail the interim relief, Clause 17.3 appears to have been added. The words, "without regard to its conflicts of laws provisions and courts at New Delhi shall have the 25 HCJ Arb.Appl.No.2 of 2019 jurisdiction" in Clause 17.1 is to be read in conjunction with Clause 17.3. Since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act is not maintainable and the petition is liable to be dismissed."
26. In the instant case, Clause 9.1 of the agreement confers sole and exclusive jurisdiction to the Courts of the State of Andhra Pradesh with respect to any proceedings arising out of or in relation to the agreement. The intention of the parties is clear that the Courts of State of Andhra Pradesh shall have sole and exclusive jurisdiction and the same is fortified by the expression "alone" used in Clause 9.1. Clause 9.2 provides that any claim, disputes or controversy arising out of or in relation to the agreement, including any dispute with regard to the existence, validity, interpretation or breach of the agreement and activities performed thereunder shall, after written notice by either party to the other party, be referred for resolution to a sole Arbitrator to be appointed by mutual discussions and an agreement between the parties under the provisions of the Act of 1996 or any statutory modification or re-enactment thereof.
27. If there is any contrary indicia, the distinction between "seat of arbitration" and "venue of arbitration" assumes utmost importance and on the basis of the subject agreement, by way of construction, it is to be decided whether parties have intended to designate the place or venue mentioned in the agreement as a seat of arbitration or as a mere convenient place for holding arbitration meetings. "Venue" in all circumstances is not synonymous with the "seat" of arbitration. In the instant case, the expression used in Clause 9.3 of the agreement is "place 26 HCJ Arb.Appl.No.2 of 2019 of arbitration". While the seat of arbitration is fixed, the place of arbitration can be at the convenience of the parties and in such circumstances, the place is merely a "venue" for holding arbitration hearings/meetings, as would be evident from Clause 9.3 of the subject agreement, where place of arbitration is not confined to Hyderabad alone. Though the expression used in Clause 9.3 is "the place of arbitration shall be Hyderabad", it is followed by another expression "or any place mutually agreed by parties in Andhra Pradesh". While Hyderabad is in the State of Telangana, the parties agreed that the place of arbitration, as may be mutually agreed upon, may also be at any other place in the State of Andhra Pradesh. In such circumstances, the word "shall" in the expression "the place of arbitration shall be Hyderabad" have to be construed as "may".
28. The argument of Mr. C.V. Mohan Reddy, learned senior counsel, that the words "arbitration proceedings" in Clause 9.3 coupled with the expression "the place of arbitration shall be Hyderabad" will exclusively and unambiguously mean that the seat of arbitration is Hyderabad, cannot be accepted, because the place of arbitration is not restricted to Hyderabad alone and as may be resolved by the parties, it could be also in any other places in another State, namely, in the State of Andhra Pradesh. It is difficult to subscribe to the argument that the expression "place of arbitration" so far as it relates to Hyderabad should be construed as seat of arbitration and "any place mutually agreed by the parties in Andhra Pradesh" should be construed as a venue. A uniform interpretation has to be given with regard to an expression used in the same sentence. That apart, the words "arbitration proceedings" in Clause 9.3 are relatable to only in which language the proceedings will be 27 HCJ Arb.Appl.No.2 of 2019 conducted and nothing beyond that. It is difficult to accept that, Clause 9.1, having regard to the expression used in Clause 9.3, will not bring within its fold arbitration proceedings and, therefore, it cannot be understood to mean that the seat of arbitration is in Andhra Pradesh.
29. Having regard to the expression used in Clause 9.1, which ousted the jurisdiction of all courts other than the courts of the State of Andhra Pradesh, Clause 9.3 must be construed to mean that the parties intended Hyderabad or any other place in the State of Andhra Pradesh, as may be found convenient, as a venue for holding arbitration hearings and meetings. Clause 9.3 does not contain an expression, such as, "arbitration proceedings shall be held" and all that it says is that the place of arbitration shall be at Hyderabad or any other place mutually agreed by the parties in Andhra Pradesh and as such, the expression "place of arbitration" cannot be taken as a basis to determine that the parties had intended Hyderabad to be the seat of arbitration. The intention of the parties has to be gathered from relevant clauses in the agreement. Clause 9.3, in the understanding of the Court, does not suggest that the parties intended to anchor arbitral proceedings at Hyderabad, signifying thereby that Hyderabad is the seat of arbitral proceedings.
30. The argument advanced that Clause 9.1 relates to the subject matter of the suit between the parties and not to arbitration proceedings has no merit and no such restriction, limiting application of Clause 9.1 to only suits and not arbitration proceedings can be inferred. Clause 9.1 makes it clear that the State of Andhra Pradesh alone shall have sole and exclusive jurisdiction with respect to "any proceedings" arising out of or in relation to the subject agreement. Clause 9.2 also makes it clear that 28 HCJ Arb.Appl.No.2 of 2019 any claim, dispute or controversy arising out of or in relation to the agreement, including any dispute with respect to the existence or the validity of the agreement shall be referred to a sole arbitrator. An application for appointment of arbitrator is a "proceeding" arising out of or in relation to the agreement in question and, therefore, in my opinion, the same would fall under the purview of Clause 9.1 of the agreement. Thus, the plea set up by the respondent company that this Court has no jurisdiction to entertain this application is not tenable.
31. In view of the discussions above, I am of the considered opinion that this is a fit case where the request of the applicant for appointment of sole arbitrator by this Court for resolution of the disputes arising out of the agreement dated 04.09.2015 between the parties, has to be allowed.
32. Accordingly, the Arbitration Application is allowed. Hon'ble Justice Challa Kodandaram (Retired) is appointed as the sole arbitrator. The fee of the arbitrator as well as the other terms and conditions shall be settled by the parties in consultation with the arbitrator so appointed.
33. Registry will send a copy of this order to Hon'ble Justice Challa Kodandaram in his proper address.
34. No costs. Pending miscellaneous applications, if any, shall stand closed.
ARUP KUMAR GOSWAMI, CJ IBL