Torrent Power Ltd. ... vs Dakshinanchal Vidyut Vitran ...
2022 Latest Caselaw 22435 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 


 
Chief Justice's Court
 
Serial No. 307
 

 
HIGH COURT OF JUDICATURE AT ALLAHABAD
 
(LUCKNOW) 
 
***
 
CIVIL MISC. ARBITRATION APPLICATION No. 65 of 2021
 

 
Pronounced on: December 22, 2022
 
(through V.C. Mode)
 

 
Torrent Power Limited through its 
 
Authorized Representative					     .... Applicant
 

 
Through:	Mr. J.N. Mathur, Senior Advocate,
 
	      	with Ms. Mahima Pahwa and Mr. Shivam Shukla, 	      	Advocates
 

 
v/s
 

 
Dakshinanchal Vidyut Vitaran Nigam Limited 
 
through its Managing Director  		        		  ... Respondent
 
		
 
	Through :  	Mr. Amarjeet Singh Rakhra, 
 
                   	Advocate
 

 
Coram:	HON'BLE RAJESH BINDAL, CHIEF JUSTICE
 
		
 
ORDER

1. The prayer made in the present application filed under Section 11(6) of the Arbitration and Conciliation Application Act, 1996 (hereinafter referred to as the "Act") is for appointment of an Arbitrator for resolution of dispute between the parties.

2. Mr. Mathur, learned Senior Advocate, appearing for the applicant, submitted that an agreement was signed between the applicant and respondent-Dakshinanchal Vidyut Vitaran Nigam Limited (hereinafter referred to "DVVNL") on May 18, 2009 for distribution of electricity in urban areas of Agra for which the respondent was a Distribution Licensee. Clause 17 of the agreement provides for resolution of disputes between the parties. Clause 17.2.5. provides for arbitration. Clause 17.1.2 provides for jurisdiction of the Court for entertaining all the disputes between the parties. It has been mentioned as Agra/Allahabad. The venue of arbitration has been provided under Clause 17.2.8 to be at Lucknow.

3. From the aforesaid clauses, it is evident that for all routine disputes, the Clause 17.1.2 may be relevant. However, for arbitration point of view, the seat being at Lucknow, the proceedings will be at Lucknow. Even if the proceedings could be at Allahabad, in fact the dispute falls within the jurisdiction of Allahabad High Court, hence it can be at either of the places. In support of his argument, reliance is placed on Brahmani River Pellets Limited Vs. Kamachi Industries Limited (2020) 5 SCC 462.

4. Referring to the procedure provided in the agreement for resolution of disputes, he submitted that in terms of Clause 17.2.3, a Permanent Dispute Resolution Body, having equal representation from each of the parties is to be constituted. The disputes or differences arising under the agreement shall be referred for resolution to this body which shall communicate its decision within thirty days and thereafter the matter is to be considered in terms of Clause 17.2.4 which provides that in case of non-settlement of dispute by the Permanent Dispute Resolution Body, such dispute or differences shall be referred for decision to a body constituting of MD, DVVNL and Head, Distribution Franchisee (by whatever name called) which shall communicate its decision within a period of fifteen days. Primarily, there are three disputes; (1) Regulatory Surcharge, (2) Electricity Duty, and (3) Tariff Indexation Ratio.

5. Vide letter dated October 21, 2020, the applicant requested for constitution of Permanent Dispute Resolution Body for resolution of the dispute, detailed as that applicant is making payment of Regulatory Surcharge to DVVNL as per TIRn mechanism, but DVVNL is asking for full payment of regulatory surcharge recovered by the applicant. However, no response was received. On October 28, 2020 a committee constituted by MD considered the issues. However, no resolution could be passed. All the three issues were discussed in the aforesaid meeting. Hence, to state that the applicant has not exhausted the remedies available in the agreement for resolution of dispute before invoking the jurisdiction of the Court is not made out.

6. To put the records straight, Mr. Mathur, learned senior counsel, appearing for the applicant, submitted that an application was filed under Section 9 of the Act for interim relief before the Commercial Court, Lucknow. Status-quo was granted on March 16, 2021.

7. The respondent challenged the aforesaid order dated March 16, 2021 passed by Commercial Court, Lucknow by filing FAFO No. 335 of 2021 at Allahabad, which is still pending. The issue of jurisdiction is also under consideration. In terms of the interim order dated July 13, 2021 passed in the aforesaid appeal, again the efforts were made for settlement of the dispute. However, no positive result could be there.

8. Meanwhile, on May 31, 2021, the applicant issued notice seeking appointment of an Arbitrator to which reply was received refusing to appoint Arbitrator raising preliminary objection that the applicant had not exhausted the remedies as provided under the agreement. Huge claim was sought to be made by the respondent against the applicant, deposit thereof was sought before consideration of request of the applicant for appointment of Arbitrator. Clause 17.2.12 of the agreement provides that both the parties shall continue to perform their respective obligations during the currency of the Dispute Settlement Procedure. Deposit of money is not a pre-condition for appointment of an Arbitrator for resolution of any dispute. Reliance was placed on judgment of Supreme Court in Duro Felguera Vs. Gangavaram Port Limited (2017) 9 SCC 729 to submit that only the arbitration clause is to be seen. He further referred to the judgment of Supreme Court in M/s Icomm Tele Ltd. Vs. Punjab State Water Supply and Sewerage Board (2019) 4 SCC 401 to submit that even a clause contained in the agreement providing for pre-deposit of certain amount for invoking arbitration proceedings was held to be bad. In the case in hand, there is no such clause. The respondent just want to add words in the clauses in the agreement, which is not permissible.

9. On the other hand, learned counsel for the respondent submitted that the jurisdiction for invoking the arbitration clause is well defined in the agreement. Clause 17.1.2 clearly provides the jurisdiction of the Court at Agra and Allahabad. The District Court at Agra will have jurisdiction for the dispute for which the jurisdiction of District Court is to be invoked and the correspondingly the High Court at Allahabad will have jurisdiction. Merely because in the agreement venue of arbitration has been given at Lucknow, it will not confer jurisdiction to the Court at Lucknow for filing application under Section 11(6) of the Act. In fact, the applicant had wrongly invoked jurisdiction of Commercial Court at Lucknow while filing the application under Section 9 of the Act. While referring to Clause 17.2.12, it was submitted that it is agreed between the parties that both the parties shall continue to perform their respective obligations during the conduct of the Dispute Settlement Procedure.

10. The respondent is engaged in supply of electricity which is an essential service. More than ₹100 crore are due from the applicant which it has failed to pay despite repeated notices. The dispute arose from the year 2013 onwards. In case, the the applicant was not liable to pay the amount, it could have invoked the arbitration clause then and there. He further submitted that the meeting, as is sought to be referred by the applicant on October 28, 2020, was not held by the Managing Director, as is the requirement of Clause 17.2.4. Once it is admitted case of the applicant that the Court at Agra and Allahabad had jurisdiction, why the application under Section 9 of the Act was filed at Lucknow needs to be explained. Unless the applicant deposits the amount due from him, as provided in Clause 17.2.12 of the agreement in terms of which both the parties shall continue to perform their respective obligations during the conduct of the Dispute Settlement Procedure, he cannot seek appointment of an Arbitrator.

11. Heard learned counsel for the parties and perused the paper book.

12. To appreciate the contention raised by learned counsel for the parties, it would be appropriate to reproduce certain relevant clauses of the agreement.

17.1 Governing Law

17.1.1 This Agreement has been executed and delivered in India and its interpretations, validity and performance shall be construed and enforced in accordance with the laws of India and also the laws applicable to the State of Uttar Pradesh.

17.1.2 Any dispute arising out of compliance/non- compliance of this Agreement shall be exclusively under the jurisdiction of court at Agra/Allahabad.

X     X     X     X
 
17.2		Amicable Settlement
 
X     X     X     X
 

17.2.5 Any dispute arising out of, in connection with or with respect to this agreement, the subject matter hereof, the performance or nonperformance of any obligation hereunder, which cannot be resolved by negotiation between the Parties and the Dispute Resolution procedure as stated in the foregoing Articles, shall be exclusively submitted to arbitration at the request of either party upon written notice to that effect to the other party and the proceedings shall be conducted subject to the provisions of the Arbitration and Conciliation Act, 1996 (the Arbitration Act) by a panel consisting of three arbitrators.

X     X     X     X
 
17.2.8 	The language of the arbitration shall be English. The venue of Arbitration shall be Lucknow."
 
13.		While dealing with the issue of seat and venue in arbitral proceedings, Hon'ble the Supreme Court in BGS SGS SOMA JV Vs. NHPC Ltd. (2020) 4 SCC 234 observed as under: 
 

"59. ........... Also, where it is found on the facts of a particular case that either no "seat" is designated by agreement, or the so-called "seat" is only a convenient "venue", then there may be several Courts where a part of the cause of action arises that may have jurisdiction. Again, an application under Section 9 of the Arbitration Act, 1996 may be preferred before a court in which part of the cause of action arises in a case where parties have not agreed on the "seat" of arbitration, and before such "seat" may have been determined, on the facts of a particular case, by the Arbitral Tribunal under Section 20(2) of the Arbitration Act, 1996. In both these situations, the earliest application having been made to a Court in which a part of the cause of action arises would then be the exclusive Court under Section 42, which would have control over the arbitral proceedings."

14. The Court further held:

"61. It will thus be seen that wherever there is an express designation of a "venue", and no designation of any alternative place as the "seat", combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding."

"82. ............. 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."

(emphasis supplied)

15. In Ravi Ranjan Developers Pvt. Ltd. Vs. Aditya Kumar Chatterjee (Civil Appeal No. 2394-2395 of 2022) decided on March 24, 2022, a development agreement was executed between the parties for development of property situated at Muzaffarpur, Bihar which contained an arbitration clause providing for resolution of disputes between the parties through Arbitration. The place of sitting of Arbitral Tribunal was stipulated to be at Kolkata. The Supreme Court set aside the order of appointment of an Arbitrator by Kolkata High Court on the ground that the appointment was without jurisdiction, observing that:

"43. This Court has perused the Development Agreement. The contention of the Respondent in the Affidavit in Opposition, that the parties to the arbitration agreement had agreed to submit to the jurisdiction of Calcutta High Court, is not correct. The parties to the arbitration agreement only agreed that the sittings of the Arbitral Tribunal would be in Kolkata. Kolkata was the venue for holding the sittings of the Arbitral Tribunal."

"45. In Mankastu Impex Private Limited v. Airvisual Limited (2020) 5 SCC 399, a three Judge Bench of which one of us (Hon. A.S. Bopanna, J) was a member, held:

"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 [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."

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 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."

46. In this case, the Development Agreement provided that the sittings of the Arbitral Tribunal would be conducted in Kolkata. As observed above, the parties never agreed to submit to the jurisdiction of Calcutta High Court in respect of disputes, nor did the parties agree upon Kolkata as the seat of arbitration. Kolkata was only the venue for sittings of the Arbitral Tribunal."

"48. In this case, the parties, as observed above did not agree to refer their disputes to the jurisdiction of the Courts in Kolkata. It was not the intention of the parties that Kolkata should be the seat of arbitration. Kolkata was only intended to be the venue for arbitration sittings."

16. In Hasmukh Prajapati Vs. Jai Prakash Associates Ltd. through its Managing Director AIR 2022 All 121, in the agreement executed between the parties the resolution of dispute between the parties was provided by way of arbitration. The venue of the Arbitration was to be New Delhi. However, the agreement provided exclusive jurisdiction of Courts at Gautambudh Nagar over the disputes arising between the parties. This Court placing reliance on various authorities on the issue, referred to above, held:

"33. In the present case, the arbitration agreement clearly shows that the parties agreed as per Clause 10.6 that the governing law and the jurisdiction of the courts would be the courts of Gautam Buddh Nagar, U.P., India and it shall have jurisdiction over all matters arising out of or relating to the allotment/provisional allotment subject to the provisions of Clause 10.9 of the standard terms and conditions. This exception regarding Clause 10.9 constitutes "significant contrary indica" as per Shashoua principle in agreement regarding treating the "venue" of arbitration (New Delhi) as "seat" of arbitration proceedings (Gautam Buddh Nagar) where the cause of action arose. In Clause 10.9 regarding dispute resolution, it was agreed that the "venue" of arbitration shall be New Delhi, India. Accordingly, the sole arbitrator conducted the arbitration proceedings at the agreed venue of New Delhi and passed the award. From the standard terms and conditions/agreement between the parties, it is clear that the parties never clearly stated about the seat of arbitration but from Clause 10.6 of the agreement, the courts at Gautam Buddh Nagar, U.P., India, was agreed to have jurisdiction over all matters arising out of or relating to the allotment/provisional allotment. This clause proves that the parties had chosen the "seat" of arbitration as Gautam Buddh Nagar, U.P., India, and the "venue" of arbitration as New Delhi, India."

17. In similar situations, in Meenakshi Nehra Bhat and others Vs. Wave Meghacity Centre Private Limited (Arbitration Petition No. 706 of 2020) decided on November 9, 2022 by the Delhi High Court, where the agreement executed between the parties contained arbitration clause providing the venue of the arbitral proceedings to be New Delhi, but conferred exclusive jurisdiction to the Courts at Gautambudh Nagar, the Delhi High Court, while dismissing the petition due to lack of territorial jurisdiction, held that New Delhi is only a location for conducting the arbitral proceedings and the territorial jurisdiction vests in the Courts at Gautambudh Nagar and the Allahabad High Court, as may be applicable, depending on the proceedings in question.

18. In Kush Raj Bhatia Vs. DLF Power and Services Ltd. (Arbitration Petition No. 869 of 2022) decided on December 6, 2022 by the Delhi High Court, the arbitration agreement provided that the place of arbitration would be New Delhi but specified that the exclusive jurisdiction would be of Courts at Gurgaon/High Court at Chandigarh, the Delhi High Court observed that though the place of arbitration was to be New Delhi, but there was a contra indica present in the agreement which provided exclusive jurisdiction to the Courts at Gurgaon/High Court at Chandigarh and as such the Delhi High Court has no territorial jurisdiction.

19. Applying the aforesaid law in facts of the present case, there appears a contra indication in the agreement to an extent that the "venue" of the arbitration is stipulated to be Lucknow, whereas the Courts at Agra and Allahabad are given exclusive jurisdiction in case of any dispute arising out of compliance/non compliance of the agreement. From the jurisdictional perspective, Lucknow is only a venue or location for conducting the Arbitral Proceedings. The exclusive jurisdiction clause contained in the agreement constitutes "significant contrary indica" as per Shashoua principle and only the Courts at Agra/Allahabad will have jurisdiction to decide the disputes between the parties arising out of agreement in question.

20. In view of the discussions made hereinabove, this Court is clearly of the view that the Court at Lucknow has no jurisdiction to entertain the present application and as per the exclusive jurisdiction clause contained in the agreement, the Courts at Allahabad will have jurisdiction to entertain it. The application is, accordingly, dismissed.

21. However, the applicant will be at liberty to move a fresh application seeking the relief as prayed in the present application before this Court at Allahabad, if the applicant is so advised.

(Rajesh Bindal, C.J.)

Allahabad

December 22, 2022

P.Sri.

 

 

 

 
	
 
	Whether the order is speaking	:	Yes/No
 
	Whether the order is reportable	:         Yes