Mr. Suristh Tiwary vs Mr. Purushottam Kumar Chaubey 8 ...
2017 Latest Caselaw 3561 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 30
 
Case :- ARBITRATION AND CONCILI. APPL.U/S11(4) No. - 64 of 2013
 
Applicant :- Mr. Suristh Tiwary
 
Opposite Party :- Mr. Purushottam Kumar Chaubey 8 Others
 
Counsel for Applicant :- Rudra Pratap Mishra,Sanjeev Kumar Pandey
 
Counsel for Opposite Party :- Ashish Kumar Srivastava,Kaushal Kumar Singh,M.D. Singh Shekhar,S K Mishra
 

 
Hon'ble Suneet Kumar,J.

Heard Sri Adarsh Kumar Tiwari, assisted by Sri Sanjeev Kumar Pandey, learned counsel for the applicant and Sri Ashish Kumar Srivastava, learned counsel for the opposite party.

The dispute primarily is with respect to the applicant and opposite party no. 1. The applicant claims to be Managing Director of Private Limited Company, namely, S.T. Constructions Pvt. Ltd., engaged in the construction work. Opposite parties No. 2, 3, 4, 5, 6, 7, 8 & 9 are associates of Amrapali Group of Companies. Whereas,opposite party no. 1 is an employee of Amrapali Group succeeded in getting letter of intent for construction project at Sector-168 NOIDA. In 2011, applicant, associate of Amrapali Group of Companies, a Joint Venture Partner, approached the Chief Managing Director of Amrapali Group with a proposal that applicant with the help of opposite party no. 1 can procure three different plots for the group from three companies. Amrapali Group and its associates agreed for acquisition of entire shareholding of the three companies in a time frame. Accordingly, share purchase agreement dated 31 March 2011 and 20 April 2011 were signed by the applicant and opposite party no. 1 in favour of associate companies which, inter alia, provided for arbitration. Governing Laws and Dispute resolution ( clause-9) is extracted:

"9.1 This agreement and all questions of its interpretation shall be construed in accordance with the laws of the Republic of India, without recourse to its principles of conflict of laws.

9.2 In the event that any dispute, difference, controversy or claim shall arise between the Parties arising out of or related to the provisions or performance of this Agreement, either Party may give notice to the other party of its intention to submit the issues specified in such notice to arbitration.

9.3 If the issues are not amicably resolved between the Parties within 30 days of the issuance of such notice, either Party may thereafter submit the issues to arbitration. The arbitration shall be held in accordance with the Arbitration and Conciliation Act, 1996.

9.4 The arbitration proceedings shall be conducted at New Delhi and English shall be the sole language of the proceedings of the arbitration."

By the instant application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short 'Act 1996'), applicant seeks appointment of an arbitrator to settle the dispute as per Clause-9 of the agreement. Opposite party no. 1 and on behalf of opposite party no. 9 has filed counter affidavit stating that as per the share purchase agreement dated 31 March 2011 executed between opposite party no. 1 and applicant as the first party, opposite parties no. 2 to 6 as the second party and opposite party no. 7 as the third party. Similarly, applicant invoked arbitration clause of share purchase agreement dated 20 April 2011 executed between opposite party no. 1 and applicant as the first party, opposite parties no. 2 to 6 being second party and opposite party no. 8 as the third party.

Insofar opposite party no. 9 M/s Baseline Infra Developers Pvt. Ltd. is concerned, it is stated that the company has no stake, neither is a party to the share holder and facilitator agreement referred to hereinabove. Therefore, it is urged that applicant has no locus to raise dispute with respect to opposite party no. 9. Further, there is no arbitration agreement with opposite party no. 9.

It is further contended that application under Section 11(6) of Act, 1996 is not maintainable for want of jurisdiction. The agreements were executed in New Delhi, companies i.e. opposite parties No. 2 to 8 have registered office at New Delhi. Clause 9.4 provides that arbitration proceedings shall be conducted at New Delhi, therefore, it is urged that the Chief Justice, Delhi High Court would have jurisdiction under Section 11 to appoint arbitrator.

It is further contended that arbitration clause 9.2 can be invoked in the event of any dispute, difference, controversy or claim shall arise between the "Parties" arising out of or related to the provisions or performance of the Agreement. In the facts of the case, applicant and opposite party no. 1, collectively are referred to as first party; opposite parties no. 2 to 6 collectively referred to as second party and opposite party no. 7 as third party in the share purchase agreement dated 31 March 2011, whereas, opposite party no. 8 is third party in share purchase agreement dated 20 April 2011. The first party, second party and third party have been collectively mentioned and referred to as "Parties" in the share purchase agreement, therefore, would urge that the arbitration clause specifically provides for referring the dispute to the arbitrator in case of any dispute having arisen between the first, second and third party, but the agreement does not provide for reference of any dispute having arisen between the members, i.e. inter se, first party i.e. applicant and opposite party no. 1. The application under Section 11 primarily seeks to refer dispute between applicant and opposite party no. 1, who jointly constitute first party, therefore, it is urged that the application is misconceived.

Rival submissions fall for consideration.

Before proceeding to consider the rival contentions, it would be apposite to decide the issue of jurisdiction i.e. maintainability of the application before this Court. The question that would, therefore, arise for consideration is as to whether this Court has jurisdiction to entertain the application under Section 11 in view of Clause 9.4 of the agreement. Clause 9.4 provides that arbitration proceedings shall be conducted at New Delhi.

Learned counsel for the applicant would urge that opposite party no. 1 is residing at Ghaziabad; Associates of Company, whose share was purchased, is situated at Sector 107, Noida, Gautam Buddh Nagar (UP). It is further contended that Director of the Company of opposite party No. 9 is residing at Noida, therefore, it is urged that the dispute raised by the applicant falls within the territorial jurisdiction of this Court. The agreement does not exclude or specify the jurisdiction of a particular Court. It merely provides the venue of arbitration at New Delhi.

Constitution Bench in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc.1, has adverted to "seat" in some detail. Paragraph 96 is instructive and states as under :-

"96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:

"2. Definitions.--(1) In this Part, unless the context otherwise requires--

(a)-(d) * * *

(e) ''Court' means the Principal Civil Court of Original Jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such Principal Civil Court, or any Court of Small Causes;"

We are of the opinion, the term "subject-matter of the arbitration" cannot be confused with "subject-matter of the suit". The term "subject-matter" in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the courts of Delhi being the courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the courts would have jurisdiction i.e. the court within whose jurisdiction the subject-matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located."

Paragraphs 98 to 100 have laid down the law as to "seat" thus:

"98. We now come to Section 20, which is as under:

"20. Place of arbitration.--(1) The parties are free to agree on the place of arbitration.

(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the Arbitral Tribunal having regard to the circumstances of the case, including the convenience of the parties.

(3) Notwithstanding sub-section (1) or sub-section (2), the Arbitral Tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property."

A plain reading of Section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any "place" or "seat" within India, be it Delhi, Mumbai, etc. In the absence of the parties' agreement thereto, Section 20(2) authorises the tribunal to determine the place/seat of such arbitration. Section 20(3) enables the tribunal to meet at any place for conducting hearings at a place of convenience in matters such as consultations among its members for hearing witnesses, experts or the parties.

99. The fixation of the most convenient "venue" is taken care of by Section 20(3). Section 20, has to be read in the context of Section 2(2), which places a threshold limitation on the applicability of Part I, where the place of arbitration is in India. Therefore, Section 20 would also not support the submission of the extra-territorial applicability of Part I, as canvassed by the learned counsel for the appellants, so far as purely domestic arbitration is concerned.

100. True, that in an international commercial arbitration, having a seat in India, hearings may be necessitated outside India. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but it would not have the effect of changing the seat of arbitration which would remain in India. The legal position in this regard is summed up by Redfern and Hunter, The Law and Practice of International Commercial Arbitration (1986) at p. 69 in the following passage under the heading "The Place of Arbitration":

"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 the reference or the minutes of proceedings or in some other way as the place 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 the arbitration remains the place initially agreed by or on behalf of the parties."

This, in our view, is the correct depiction of the practical considerations and the distinction between "seat" [Sections 20(1) and 20(2)] and "venue" [Section 20(3)]. We may point out here that the distinction between "seat" and "venue" would be quite crucial in the event, the arbitration agreement designates a foreign country as the "seat"/"place" of the arbitration and also selects the Arbitration Act, 1996 as the curial law/law governing the arbitration proceedings. It would be a matter of construction of the individual agreement to decide whether:

(i) the designated foreign "seat" would be read as in fact only providing for a "venue"/"place" where the hearings would be held, in view of the choice of the Arbitration Act, 1996 as being the curial law,

OR

(ii) the specific designation of a foreign seat, necessarily carrying with it the choice of that country's arbitration/curial law, would prevail over and subsume the conflicting selection choice by the parties of the Arbitration Act, 1996."

The Court held that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award. An agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause.

Statement of the law enunciated by the Constitution Bench was further expanded in Enercon (India) Ltd. v. Enercon Gmbh2,. After referring to various English authorities in great detail, the Court held that it is accepted by most of the experts in the law relating to international arbitration that in almost all the national laws, arbitrations are anchored to the seat/place/situs of arbitration. 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 or "seat" of the arbitration. It does not mean that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. The seat of arbitration remains the place initially agreed by or on behalf of the parties.

Supreme Court in Indus Mobile Distribution (P) Ltd. vs. Datawind Innovations (P) Ltd.3, upon referring to the authorities and Constitution Bench decision, in para-13, held as follows:

"This Court reiterated that once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration."

In the given facts in Indus Mobile (supra), "Parties agreed that arbitration shall be conducted at Mumbai" and was made subject to "exclusive jurisdiction of courts of Mumbai only." Mumbai was a neutral place and no part of the cause of action arose in Mumbai, only the courts of three territories could have jurisdiction in the matter, namely, Delhi, Chennai and Amritsar. Delhi Court, where, application under Section 9 was moved, held that the exclusive jurisdiction clause would not apply on facts, as the courts in Mumbai would have no jurisdiction at all. It, therefore, determined that Delhi being the first Court that was approached would have jurisdiction in the matter and proceeded to confirm interim order and also proceeded to dispose of the Section 11 petition. Supreme Court reversed the decision of Delhi High Court and held that the seat is the "centre of gravity" of arbitration, and the "seat" of arbitration would be the juridical seat, however, in line with international practice, it was observed that the arbitral hearings may take place at a location other than the seat of arbitration. The distinction between "seat" and "venue" was, therefore, recognized. The BALCO4 judgment (supra) in no uncertain terms has referred to "place" as "juridical seat" for the purpose of Section 20(2) of Act 1996. It further made it clear that Section 20(1) and 20(2) where the word "place" is used, refers to "juridical seat", whereas in Section 20(3), the word "place" is equivalent to "venue". This being the settled law, the Court culled out the principles in para-19 of the report. Para-19 is extracted:

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 Section 16 to 21 of the 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.

In the facts of the case at hand, clause 9.4 provides the "seat" of arbitration at New Delhi. Parties have chosen a particular place of arbitration. It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award. The seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for remedy under Section 11, can be made only in the courts of the place designated as the seat of arbitration.

Having due regard to the arbitration agreement and statement of law stated hereinabove, in my considered opinion, this Court would lack territorial jurisdiction to entertain the application under Section 11 of Act 1996.

The application is, accordingly, dismissed as withdrawn with liberty to the applicant to approach the Court having jurisdiction in terms of the agreement.

Order Date :- 24.8.2017

Mukesh Kr.