The Calcutta High Court has ruled that in cases where an agreement lacks substantial contradictory evidence, the designated venue of arbitration should be considered the seat of arbitration.
A single-judge bench of Justice Krishna Rao's further clarified that the absence of a clear designation of the law governing the arbitration in the agreement does not automatically render the agreement ambiguous, vague, or uncertain. Consequently, this ambiguity cannot be used as a basis for refusing the reference to arbitration under Section 45 of the Act.
Brief Facts:
The parties executed a contract on 27.10.2016, in which the defendant/applicant undertook the responsibility to design, manufacture, and supply goods to the plaintiff/respondent. Clause 19 of the contract stipulated that any dispute would be resolved through arbitration. The agreement designated Singapore as the arbitration venue, and 'International Arbitration Law' as the governing law.
A disagreement emerged between the parties regarding the quality of the delivered goods, prompting the respondent to file a lawsuit seeking the recovery of the paid amount with interest. Subsequently, the applicant filed an application under Section 8 of the A&C Act, urging the Court to refer the dispute to arbitration based on Clause 19 of the agreement, which contained an arbitration clause.
Contentions of the Respondent:
The respondent raised an objection to the petition, asserting that the arbitration clause is not valid due to the inherent ambiguity surrounding the law governing the arbitration. The argument put forth was that the clause refers to a non-existent set of laws known as 'International Arbitration Laws'.
Furthermore, it was argued that the clause merely specifies the arbitration venue, and the absence of a designation of appropriate arbitration laws, along with the absence of a designated seat, renders the arbitration clause invalid. As a result, the clause fails to meet the essential requirements of an arbitration clause.
Contentions of the Petitioner:
The applicant responded to the aforementioned arguments by asserting that, during the arbitrator appointment stage, the Court's examination is limited to a preliminary assessment of the agreement. The applicant further argued that there is a distinct arbitration agreement outlined in Clause 19 of the agreement. Additionally, since Singapore is designated as the arbitration venue, it can be considered as the seat of arbitration in the absence of any conflicting indications. Therefore, the applicant requested the dismissal of the suit and the referral of the parties to arbitration under Section 8 of the A&C Act.
Observations of the Court:
Upon careful consideration of Clause 19 of the agreement, the Court determined that the parties' intention to resolve disputes through arbitration is evident upon a simple examination. The Court emphasized that the absence of a specific law governing the arbitration does not render the agreement ambiguous, uncertain, or vague.
The Court clarified that Section 45 does not permit judicial interference on the grounds of the agreement being null and void, inoperative, or impossible to perform due to objections regarding ambiguity in the applicable law. As long as the intention of the parties to refer the dispute to arbitration is clear, such objections hold no merit.
Furthermore, the Court addressed the issue of the venue and seat of arbitration. Referring to the significant judgment in the BGS SGS Soma case, the Court concluded that designating Singapore as the venue of arbitration also establishes it as the seat of arbitration, as there are no conflicting indications in the agreement.
The decision of the Court:
The Calcutta High Court granted the application under Section 8 of the A&C Act.
Case Title: Dipak Kumar Mondal & Ors. v The State of West Bengal
Coram: Hon’ble Justice Bibek Chaudhuri
Case no: CRA 722 of 2019
Advocate for the Petitioner: Mr. Milon Mukherjee
Advocate for the Respondent: - Mr. Swapan Banerjee
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