Delhi High Court
Sravanthi Infratech Private ... vs Tricolite Electrical Industries ... on 15 December, 2016
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
4.
+ ARB.P. 94/2016
SRAVANTHI INFRATECH PRIVATE LIMITED ..... Petitioner
Through: Mr. Piyush Joshi, Ms. Maulishree Gupta
Ms. Preksha Dagar, Advocates.
versus
TRICOLITE ELECTRICAL INDUSTRIES LIMITED..... Respondent
Through: Mr. Salil Sagar, Senior Advocate with
Mr. Ruchin Midha, Mr. Sankalp Sagar, Mr. IGGU
Chittiappa, Advocates.
CORAM: JUSTICE S.MURALIDHAR
ORDER
% 15.12.2016
1. This petition under Section 11(6) of the Arbitration & Conciliation Act,
1996 („Act‟) by Sravanthi Infratech Pvt. Ltd. („SIPL‟) seeks reference of the
dispute it has with the Respondent Tricolite Electrical Industries Ltd.
(„TEIL‟) arising out of the two purchase orders dated 14th September 2011
and 18th October 2011 along with their respective amendments.
2. It is not in dispute that there exists an arbitration clause in the terms and
conditions governing the said purchase orders which reads as under:
"Arbitration shall be in accordance with Arbitration and Conciliation
Act 1996. Courts in Gurgaon shall have exclusive jurisdiction in all
matters arising under this Purchase Order. The venue of arbitration
shall be Gurgaon/Delhi as per decision of SIPL."
3. The SIPL invoked the above clause by sending a legal notice to the
Respondent calling upon it to agree on the name of the Arbitrator. The
Respondent declined to do so.
4. It is stated that in the meanwhile the Respondent has filed a petition under
Section 433 of the Companies Act, 1956 against the Petitioner before the
High Court of Punjab and Haryana. Although, no Official Liquidator (OL)
has yet been appointed by the High Court of Punjab and Haryana in the said
case, it appears that the Petitioner has filed an application drawing the
attention of that Court to the existence of the above arbitration clause and
praying that the parties be referred to arbitration.
5. Mr. Piyush Joshi, learned counsel for the Petitioner states that in terms of
the above arbitration clause, the SIPL has opted for Delhi as the venue of
arbitration. Relying on the decision in Rajesh Verma v. Ashwani Kumar
Khanna AIR 2016 SC 1910, it is submitted that in a case like the present
one, the Court within whose jurisdiction the arbitration is to take place
would have jurisdiction to entertain the present petition. According to him
all that has to be examined by the Court in terms of Section 11(6A) of the
Act is whether there is an arbitration agreement and, if so, to proceed to
appoint an Arbitrator.
6. Mr. Salil Sagar, learned Senior counsel appearing for the Respondent
TEIL, on the other hand, draws a distinction between „venue‟ of arbitration
and „seat of arbitration‟. He relies on the decision of this Court in Ion
Exchange (India) Ltd. v. Panasonic Electric Works Co. Ltd. 208 (2014)
DLT 597, where the distinction was clearly brought out. He also places
reliance on the decision in PCP International Ltd. v. Lanco Infratech Ltd.
2015 SCC OnLine Del 10428, where the aforementioned decision was
followed. Reliance is also placed on the decision in Jaiprakash Associates
Ltd. v. National Hydroelectric Power Corporation Ltd. 2009 SCC OnLine
Del 2964 in which emphasis was placed on the definition in Section 2 (1) (e)
of the Act in the context of the Court that would have jurisdiction to
entertain a petition under Section 11 of the Act.
7. The above submissions have been considered. The arbitration clause in
the present case has two distinct elements, one that evidences the intention
of the parties to confer the exclusive jurisdiction on the Court in Gurgaon
"in all matters arising under this Purchase Order". This is consistent with the
fact that both the parties have their respective offices in Gurgaon and the
contract was also to be performed there. In other words no part of cause of
action has arisen within the jurisdiction of any other Court but only in the
Courts of Gurgaon.
8. The second element of the above clause is that the parties agree that the
venue of the arbitration should be either Gurgaon or Delhi or both and the
choice in that regard is left to SIPL.
9. The question then arises is whether by virtue of the fact that the SIPL has
chosen Delhi to be the venue of Arbitration, this Court would have
jurisdiction to entertain the present petition?
10. Mr. Sagar for the Respondent has rightly drawn a distinction between
„venue of arbitration‟ and the legal 'seat' of arbitration. In Enercon (India)
Ltd. v. Enercon GmBH (2014) 5 SCC 1 it was observed that it is important
to discern what the seat of arbitration would be since "location of the seat
will determine the Courts that will have exclusive jurisdiction to oversee the
arbitration proceedings". It was urged by the Respondent in that case that
since the parties had agreed that the venue of arbitration being in London the
same place should also be considered to be the seat. This was negatived by
the Supreme Court by observing 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. (supra) 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 of the Indian
Arbitration Act, 1996 provides that Part I "shall apply where the place
of arbitration is in India". In BALCO (supra), 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 cannot be read as the "seat" of
arbitration.
99. We are fortified in taking the aforesaid view since all the three
laws applicable in arbitration proceedings are Indian laws. The law
governing the Contract, the law governing the arbitration agreement
and the law of arbitration/Curial law are all stated to be Indian. In
such circumstances, the observation in Naviera Amazonica Peruana
S.A. (supra) would become fully applicable. In this case, the Court of
Appeal in England considered the agreement which contained a
clause providing for the jurisdiction of the courts in Lima, Peru in the
event of judicial dispute; and at the same time contained a clause
providing that the arbitration would be governed by the English law
and the procedural law of arbitration shall be the English law. The
Court of Appeal summarised the state of the jurisprudence on this
topic. Thereafter, the conclusions which arose from the material were
summarised as follows:
"All contracts which provide for arbitration and contain a
foreign element may involve three potentially relevant systems
of law: (1) the law governing the substantive contract; (2) the
law governing the agreement to arbitrate and the performance
of that agreement; (3) the law governing the conduct of the
arbitration. In the majority of cases all three will be the same.
But (1) will often be different from (2) and (3). And
occasionally, but rarely, (2) may also differ from (3)."
It was observed that the problem about all these formulations,
including the third, is that they elide the distinction between the legal
localisation of arbitration on the one hand and the appropriate or
convenient geographical locality for hearings of the arbitration on the
other hand.
100. On the facts of the case, it was observed in Naviera
Amazonica case (supra) that since there was no contest on Law 1 and
Law 2, the entire issue turned on Law 3, "the law governing the
conduct of the arbitration". This is usually referred to as the curial or
procedural law, or the lex fori. Thereafter, the Court approvingly
quoted the following observation from Dicey and Morris on the
Conflict of Laws (11th Edn.): "English Law does not recognise the
concept of a delocalised arbitration or of arbitral procedures floating
in the transnational firmament, unconnected with any municipal
system of law". It is further held that "accordingly every arbitration
must have a „seat‟ or „locus arbitri‟ or „forum‟ which subjects its
procedural rules to the municipal law which is there in force". The
Court thereafter culls out the following principle:
"Where the parties have failed to choose the law governing the
arbitration proceedings, those proceedings must be considered,
at any rate prima facie, as being governed by the law of the
country in which the arbitration is held, on the ground that it is
the country most closely connected with the proceedings."
The aforesaid classic statement of the conflict of law rules as quoted
in Dicey and Morris on the Conflict of Laws (11th Edn.), Vol. 1, was
approved by the House of Lords in James Miller and Partners
Ltd. v. Whitworth Street Estates (Manchester) Ltd.: (1970) 1 Lloyd's
Rep 269 Mustill, J. in Black Clawson International
Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. (1981) 2 Lloyd's
Rep. 446 at p. 453, a little later characterised the same proposition as
"the law of the place where the reference is conducted, the lex fori".
The position of law in India is the same.
101. The Court in Naviera Amazonica (supra), also, recognised the
proposition that "there is equally no reason in theory which precludes
parties to agree that an arbitration shall be held at a place or in country
X but subject to the procedural laws of Y". But it points out that in
reality parties would hardly make such a decision as it would create
enormous unnecessary complexities. Finally it is pointed out that it is
necessary not to confuse the legal seat of arbitration with
the geographically convenient place or places for holding hearings. In
the present case, Dr. Singhvi, it seems to us, is confusing
the geographically convenient place, which is London, with the legal
seat which, in our opinion, is undoubtedly India.
xxxxx
xxxxx
104. In view of the above, we are unable to accept the submissions
made by Dr. Singhvi that in this case, the term "venue" ought to be
read as seat."
11. In PCP International Ltd. (supra), the parties had agreed that the venue
of arbitration would be Delhi. However, neither the contract was executed
at Delhi nor it was to be performed in Delhi. The Petitioner was located in
Chandigarh and not in Delhi. The Court drew a distinction between the seat
of arbitration and the venue and held "It is only the seat of arbitration which
will give territorial jurisdiction and not the venue of jurisdiction". The
Court also observed "that „seat‟ means the place where court is, which has
the territorial jurisdiction with respect to the subject matter/cause of action
of the matter, and venue is the place, which is a place where the arbitral
tribunal sits to hold the arbitration proceedings and which sitting of the
arbitral tribunal need not be at the place where the 'seat' of arbitration is
located".
12. As rightly observed by the Court in PCP International Ltd. v. Lanco
Infratech Ltd. (supra), the Supreme Court in Bharat Aluminium Company
& Ors. v. Kaiser Aluminium Technical Service (2012) 9 SCC 552
(hereafter „Balco') did not use the words 'seat' and 'place' interchangeably. In
other words the Supreme Court in Balco did not hold that the venue of the
arbitration per se confer territorial jurisdiction on a Court. In fact in Balco
the Supreme Court held that "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". However, the Supreme Court was not considering an
agreement whereby the parties agreed that one particular Court, which
otherwise has jurisdiction, would have exclusive jurisdiction.
13. If one has to accept the plea of the Petitioner in the present case by
merely choosing the venue of the arbitration at Delhi, the jurisdiction would
be conferred on this Court then it would be inconsistent with the other
portion of the arbitration clause which reflects the express intention of the
parties that "Courts in Gurgaon shall have exclusive jurisdiction in all
matters arising under this Purchase Order". Therefore, even if the choice of
venue is taken to be indicative of the jurisdiction of the Court, in the present
case that plea cannot be accepted since it would be inconsistent with the
express intention of the parties to confer exclusive jurisdiction on the Courts
in Gurgaon. Even otherwise in the present case no part of cause of action has
arisen within the jurisdiction of this Court. Both the parties are located
outside its territorial jurisdiction. As pointed out in PCP International Ltd.
(supra) even in the context of domestic arbitration the seat will determine
the Court that would have "exclusive jurisdiction to oversee the arbitration
proceedings".
14. If this Court were to appoint an Arbitrator to hold the proceedings in
Delhi then it is inconceivable that the Courts at Gurgaon would have
exclusive jurisdiction to oversee such arbitral proceedings. With the parties
being clear that the it is the Courts at Gurgaon which will have exclusive
jurisdiction, the question of this Court exercising jurisdiction merely
because the Petitioner has chosen Delhi as the venue of arbitration, does not
arise.
15. For the aforementioned reasons the Court holds that the present petition
cannot be entertained by this Court. This however, will not preclude the
Petitioner from pursuing its application in the winding up petition in the
High Court of Punjab & Haryana or seek any other appropriate remedy in
accordance with law.
16. The petition is accordingly dismissed.
S.MURALIDHAR, J
DECEMBER 15, 2016
mg
