M/S Arrow Digital Private Limited vs M/S Sign And Graphics
2022 Latest Caselaw 1596 Guj

     C/IAAP/136/2019                                ORDER DATED: 11/02/2022




           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

           R/PETN. UNDER ARBITRATION ACT NO. 136 of 2019

                             With
 CIVIL APPLICATION (FOR FIXING DATE OF HEARING) NO. 1 of 2022
        In R/PETN. UNDER ARBITRATION ACT NO. 136 of 2019
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                       M/S ARROW DIGITAL PRIVATE LIMITED
                                      Versus
                             M/S SIGN AND GRAPHICS
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Appearance:
MR MAHARSHI V PATEL(6548) for the Petitioner(s) No. 1
MS GARIMA MALHOTRA(11392) for the Petitioner(s) No. 1
MS NILANJANA ADHYA WITH MR ABHISHEKH AGRAWAL WITH MR
HIRENKUMAR M NIYALCHANDANI(9959) for the Respondent(s) No. 1
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 CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE
       ARAVIND KUMAR

                                Date : 11/02/2022

                                 ORAL ORDER

1. This petition under Section 11 of the Arbitration and

Conciliation Act, 1996 is filed seeking appointment of a sole

Arbitrator to adjudicate the dispute which is said to have arisen

between the parties pursuant to Memorandum of Understanding

(hereinafter referred as 'MOU') dated 20.2.2016 entered into

between petitioner and respondent.

2. Heard Ms. Garima Malhotra, learned counsel appearing for

the petitioner and Ms. Nilanjana Adhya, leaned counsel

appearing with Mr. Abhishekh Agrawal for the respondent.

C/IAAP/136/2019 ORDER DATED: 11/02/2022

3. It is the contention of Ms. Garima Malhotra, learned counsel

appearing for the petitioner that since the parties have agreed to

resolve their dispute through alternative dispute redressal

mechanism namely, through arbitration and Clause (13) of MOU

provides for resolution of disputes by arbitration to be held at

Ahmedabad and respondent cannot take any contention contrary

to the same and as such, she has prayed for appointment of

arbitrator and seeks for arbitration proceedings being held at

Ahmedabad.

4. Whereas Ms. Nilanjana Adhya, learned counsel appearing

along with Mr. Abhishekh Agrawal for the respondent has

vehemently contended that arbitration clause which has been

pressed into service does not indicate that venue of arbitration

would be at Ahmedabad and only in the event of dispute not

being settled by arbitration, Court at Ahmedabad has been

agreed to be the Court at which the parties would agitate their

disputes and as such, she seeks for dismissal of the petition.

5. Having heard the learned counsels appearing for the

parties, this Court is of the considered view that it would be apt

and appropriate to extract Clause (13) of the Memorandum of

C/IAAP/136/2019 ORDER DATED: 11/02/2022

Understanding dated 20.2.2016 which reads :

"13. If any dispute arises between the parties hereto in respect of this agreement or in connection with any claim by one against the other the same will be referred to arbitration of a common arbitrator if agreed upon failing which, to two arbitrators one to be appointed by each party to the dispute and the arbitration will be governed by the Arbitration Act, 1940. If the matter is not settled by arbitration and referred to the court of Law, it shall be subject to Ahmedabad Jurisdiction only."

6. A plain reading of the above clause would indicate that

both the parties have agreed to resolve their dispute arising

under the Memorandum of Understanding by resorting to

arbitration and it is also agreed that it would be referred to a

common arbitrator and failing to agree upon a common

arbitrator, it is agreed between the parties that each party would

appoint its own arbitrator and parties would be governed by

provisions of the Arbitration Act, 1940. However, fact remains

that Memorandum of Understanding was entered into on

20.2.2016 on which date, the Arbitration Act, 1940 had stood

repealed and substituted with Arbitration and Conciliation Act,

1996. When parties have agreed that arbitration proceedings

would be under statutory provision governing such arbitration, it

cannot be gainsaid by learned counsel appearing for the

C/IAAP/136/2019 ORDER DATED: 11/02/2022

respondent that Arbitration Act, 1940 is to be read into the said

clause. Said contention stands rejected. Even if Section 20 of the

Arbitration Act, 1940 is considered as attracted as claimed by

Ms. Nilanjana Adhya, it would clearly disclose that where any

person having entered into an arbitration agreement before

institution of any suit with respect to the subject matter of the

agreement or any part to such agreement applies to the said

Court instead of proceeding under Chapter II can apply to a

Court having jurisdiction in the matter to which the agreement

relates and the agreement be filed into the Court and on being

notified, before such agreement being filed and no sufficient

cause is shown, the Court would order the agreement to be filed

and would make a reference to the Arbitrator appointed by the

parties whether in the agreement or otherwise, if parties cannot

agree upon an arbitrator, it would be an arbitrator to be

appointed by the Court. Thus, it would emerge from 1940 Act

that it is only filing of the agreement appointing Arbitrator taken

place under Section 20 and nothing more or nothing less as even

otherwise, when such agreement is to be filed, it is to be filed in

the Court where the parties are at ad-idem namely, in the instant

case it is agreed between the parties that Courts at Ahmedabad

C/IAAP/136/2019 ORDER DATED: 11/02/2022

would have jurisdiction. As such, contention raised by the

learned counsel appearing for the respondent cannot be

accepted and it stands rejected.

7. At this juncture itself, it would be apt and appropriate to

note the judgment of the Hon'ble Apex Court in the case of

Indus Mobile Distribution Pvt. Ltd. Vs. Datawind

Innovations Private Ltd. & Ors. reported in (2017)7 SCC

678 whereunder a similar contention which came to be raised

had been considered and said contention is traceable to

paragraph 6 which reads:

"6. The learned counsel on behalf of the appellant has assailed the judgment of the Delhi High Court, stating that even if it were to be conceded that no part of the cause of action arose at Mumbai, yet the seat of the arbitration being at Mumbai, courts in Mumbai would have exclusive jurisdiction in all proceedings over the same. According to him, therefore, the impugned judgment was erroneous and needs to be set aside."

8. After considering rival contentions, it came to be held as

under:

"9. The concept of juridical seat has been evolved by the courts in England and has now been firmly embedded in our jurisprudence. Thus, the Constitution Bench in BALCO v. Kaiser Aluminium Technical Services Inc. has adverted to "seat" in some detail. Para 96 is instructive and states as under:

(SCC pp. 605-06)

C/IAAP/136/2019 ORDER DATED: 11/02/2022

"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) xxx

(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

C/IAAP/136/2019 ORDER DATED: 11/02/2022

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." (emphasis in original)"

It has been further held by the Hon'ble Apex Court as under:

"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 of 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

C/IAAP/136/2019 ORDER DATED: 11/02/2022

jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties."

9. Thus, designation of seat of arbitration being akin to an

exclusive jurisdiction clause as to the Courts exercising

supervisory powers for arbitration and in the instant case, under

Clause (13), parties having agreed that Courts of Ahmedabad

would have jurisdiction, necessarily arbitration will have to be

held at Ahmedabad. The invoice which has been raised by

petitioner would be of no assistance to contend that Courts of

Kolkotta would have jurisdiction. For this reason also, contention

of Ms. Nilanjana Adhya cannot be accepted and stands rejected.

10. For the cumulative reasons aforesaid, I proceed to pass the

following

ORDER

(i) Petition is allowed.

(ii) Mr. Shailesh Hiralal Oza is hereby appointed as the sole Arbitrator to resolve the disputes between the parties in accordance with the Arbitration Centre (Domestic and International), High Court of Gujarat Rules, 2021. Both Parties would also be bound by said Rules.

C/IAAP/136/2019 ORDER DATED: 11/02/2022

(iii) Registry to communicate this order to the sole Arbitrator forthwith by Speed Post.

(iv) Consequently, Civil Application No.1 of 2022 stands disposed of.

(ARAVIND KUMAR,CJ) RADHAKRISHNAN K.V.