Kerala High Court
The Kerala Minerals And Metals Ltd vs Gmm Pfaudler Ltd on 8 July, 2022
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OP (C)No. 1254 of 2019
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE C.S.DIAS
FRIDAY, THE 8TH DAY OF JULY 2022 / 17TH ASHADHA, 1944
OP(C) NO. 1254 OF 2019
AGAINST THE ORDER/JUDGMENT IN OPARB 194/2012 OF III
ADDITIONAL DISTRICT COURT, KOLLAM
PETITIONER/S:
THE KERALA MINERALS AND METALS LTD.,
SANKARAMANGALAM, CHAVARA, KOLLAM- 691 583,
REPRESENTED BY ITS HOD (PERSONNEL AND
ADMINISTRATION/LEGAL).
BY ADVS.
V.KRISHNA MENON
SMT.P.VIJAYAMMA
RESPONDENT/S:
M/S.GMM PFAUDLER LTD.,
VITHAL UDYOGANAGAR, KARUMSAD - 388 325, GUJARAT.
BY ADVS.
SRI.N.N.SUGUNAPALAN (SR.)
SRI.S.SUJIN
THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON
08.07.2022, THE COURT ON THE SAME DAY DELIVERED THE
FOLLOWING:
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OP (C)No. 1254 of 2019
C.S DIAS,J.
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OP (C)No. 1254 of 2019
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Dated this the 8th day of July, 2022.
JUDGMENT
The original petition is filed to set aside the order
dated 20.2.2019 passed by the Court of the Additional
District Judge-III, Kollam, in OP(Arb) No.194/2012.
2. The petitioner's case, in a nutshell, relevant for
the determination of the original petition is that, they are
a Government of Kerala Undertaking. They had
published a tender notice dated 3.8.2005 for supply,
design, engineering etc testing and commissioning of two
numbers of pigment separation. The respondent had
submitted their offer and subsequently entered into a
negotiation with the petitioner. Consequently the work
was awarded in favour of the respondent. Later, the
Board of Directors of the petitioner resolved to cancel the
expansion work, which was approved by the Government
of Kerala. The respondent has, alleging that they have
sustained loss, invoked the arbitration clause in the
OP (C)No. 1254 of 2019
contract. A sole Arbitrator was appointed in terms of
Clause 7.23.1 (see paragraph 4 of Ext P2), which reads
thus:
"Clause 7.23.2: the venue of arbitration shall be at
Kollam/Bangalore or such other place the parties may
mutually agree upon".
2.1. A sole Arbitrator was appointed, who conducted
the proceeding at Ernakulam. The sole Arbitrator by
award dated 23.5.2012 has permitted the respondent to
realise from the petitioner an amount of Rs.18,44,000/-
with interest .
2.2. Aggrieved by the award, the petitioner had
instituted an original petition before the Court of the
District Judge, Kollam, under Sec.34 of the Arbitration
and Conciliation Act, 1996 (in short 'the Act').
2.3. The court below, relying on the decision of the
Hon'ble Supreme Court in Indus Mobile Distribution Pvt. Ltd
vs Datawind Innovations Pvt. Ltd [2017 (2) KLT 665 (SC)], by
the impugned Ext P2 order, has held that it has no
territorial jurisdiction to entertain the original petition.
OP (C)No. 1254 of 2019
Accordingly, the original petition has been returned. Ext
P2 is erroneous and wrong. Hence the original petition.
3. Heard;Sri.V.Krishna Menon, the learned counsel
appearing for the petitioner and Sri.N.N Sugunapalan,
the learned Senior Counsel appearing for the respondent.
4. The point that arises for consideration in the
original petition is whether there is any illegality or error
in Ext P2 order passed by the court below.
5. Undisputedly, Clause 7.23.1 of the agreement
does not stipulate the seat of arbitration. The agreement
only prescribes the venue of the arbitration, which is
Kollam, Bangalore or such other place as mutually
agreed by the parties.
6. After cleavage of opinion, the Hon'ble Supreme
Court in BBR ( India) Private Ltd vs. S.P Singla
Constructions Private Ltd [2022 SCC Online SC 642]
in paragraph 31 has held as follows:
31. We have already referred to the first few sentences of the
aforementioned paragraph and explained the reasoning in the
context of the present case. The paragraph BGS SGS Soma (supra)
also explains the non-obstante effect as incorporated in Section 42
to hold that it is evident that the application made under Part-I
must be to a court which has a jurisdiction to decide such
OP (C)No. 1254 of 2019
application. Where 'the seat' is designated in the agreement,
the courts of 'the seat' alone will have the jurisdiction. Thus,
all applications under Part-I will be made in the court where
'the seat' is located as that court would alone have
jurisdiction over the arbitration proceedings and all
subsequent proceedings arising out of the arbitration
proceedings. The quotation also clarifies that when either
no 'seat' is designated by an 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. An application under Section 9 of the Act may
be preferred before the court in which a part of cause of action
arises in the case where parties had not agreed on the 'seat of
arbitration'. This is possible in the absence of an agreement
fixing 'the seat', as an application under Section 9 may be
filed before 'the seat' is determined by the arbitral tribunal
under Section 20(2) of the Act. Consequently, in such
situations, the court where the earliest application has been made,
being the court in which a part or entire of the cause of action
arises, would then be the exclusive court under Section 42 of the
Act. Accordingly, such a court would have control over the
arbitration proceedings.
7. A similar view has been taken by the Hon'ble
Supreme Court in Inox Renewables Ltd vs Jayesh
Electricals Ltd [2021 SCC Online SC 448] in
paragraphs 12 and 13 , which reads thus:
12. In BGS SGS (supra), this Court, after an
exhaustive review of the entire case law, concluded thus:
32. It can thus be seen that given the new concept of
"juridical seat" of the arbitral proceedings, and the
importance given by the Arbitration Act, 1996 to this
"seat", the arbitral award is now not only to state its date,
but also the place of arbitration as determined in
accordance with Section 20. However, the definition of
"court" contained in Section 2(1)(c) of the Arbitration Act,
OP (C)No. 1254 of 2019
1940,continued as such in the Arbitration Act, 1996,
though narrowed to mean only principal civil court and
the High Court in exercise of their original ordinary civil
jurisdiction. Thus, the concept of juridical seat of the
arbitral proceedings and its relationship to the
jurisdiction of courts which are then to look into matters
relating to the arbitral proceedings - including challenges
to arbitral awards - was unclear, and had to be developed
in accordance with international practice on a case by
case basis by this Court.
xxx xxx xxx
48. The aforesaid amendment carried out in the definition
of "Court" is also a step showing the right direction,
namely, that in international commercial arbitrations held
in India, the High Court alone is to exercise jurisdiction
over such proceedings, even where no part of the cause of
action may have arisen within the jurisdiction of such
High Court, such High Court not having ordinary original
jurisdiction. In such cases, the "place" where the award is
delivered alone is looked at, and the High Court given
jurisdiction to supervise the arbitration proceedings, on
the footing of its jurisdiction to hear appeals from decrees
of courts subordinate to it, which is only on the basis of
territorial jurisdiction which in turn relates to the "place"
where the award is made. In the light of this important
change in the law, Section 2(1)(e)(i) of the Arbitration Act,
1996 must also be construed in the manner indicated by
this judgment.
49. Take the consequence of the opposite conclusion, in
the light of the facts of a given example, as follows. New
Delhi is specifically designated to be the seat of the
arbitration in the arbitration Clause between the parties.
Part of the cause of action, however, arises in several
places, including where the contract is partially to be
performed, let us say, in a remote part of Uttarakhand. If
concurrent jurisdiction were to be the order of the day,
despite the seat having been located and specifically
chosen by the parties, party autonomy would suffer,
which BALCO specifically states cannot be the case.
Thus, if an application is made to a District Court in a
remote corner of the Uttarakhand hills, which then
becomes the court for the purposes of Section 42 of the
OP (C)No. 1254 of 2019
Arbitration Act, 1996 where even Section 34 applications
have then to be made, the result would be contrary to the
stated intention of the parties -as even though the parties
have contemplated that a neutral place be chosen as the
seat so that the courts of that place alone would have
jurisdiction, yet, any one of five other courts in which a
part of the cause of action arises, including courts in
remote corners of the country, would also be clothed with
jurisdiction. This obviously cannot be the case. If,
therefore, the conflicting portion of the judgment of
BALCO in para 96 is kept aside for a moment, the very
fact that parties have chosen a place to be the seat would
necessarily carry with it the decision of both parties that
the courts at the seat would exclusively have jurisdiction
over the entire arbitral process.
xxx xxx xxx
53. In Indus Mobile Distribution (P) Ltd., after clearing the
air on the meaning of Section 20 of the Arbitration Act,
1996, the Court in para 19 (which has already been set out
hereinabove) made it clear that the moment a seat is
designated by agreement between the parties, it is akin to
an exclusive jurisdiction clause, which would then vest the
courts at the "seat" with exclusive jurisdiction for
purposes of regulating arbitral proceedings arising out of
the agreement between the parties.
xxx xxx xxx
82. On a conspectus of the aforesaid judgments, it
may be concluded that whenever there is the
designation of a place of arbitration in an arbitration
Clause as being the "venue" of the arbitration
proceedings, the expression "arbitration
proceedings" would make it clear that the "venue" is
really the "seat" of the arbitral proceedings, as the
aforesaid expression does not include just one or
more individual or particular hearing, but the
arbitration proceedings as a whole, including the
making of an award at that place. This language has
to be contrasted with language such as "tribunals
are to meet or have witnesses, experts or the parties"
where only hearings are to take place in the "venue",
which may lead to the conclusion, other things being
equal, that the venue so stated is not the "seat" of
arbitral proceedings, but only a convenient place of
OP (C)No. 1254 of 2019
meeting. 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. In an International context, if a
supranational body of Rules is to govern the arbitration,
this would further be an indicia that "the venue", so
stated, would be the seat of the arbitral proceedings. In a
national context, this would be replaced by the
Arbitration Act, 1996 as applying to the "stated
venue", which then becomes the "seat" for the
purposes of arbitration.
xxx xxx xxx
98. However, the fact that in all the three appeals before
us the proceedings were finally held at New Delhi, and the
awards were signed in New Delhi, and not at Faridabad,
would lead to the conclusion that both parties have chosen
New Delhi as the "seat" of arbitration Under Section 20(1)
of the Arbitration Act, 1996. This being the case, both
parties have, therefore, chosen that the courts at New
Delhi alone would have exclusive jurisdiction over the
arbitral proceedings. Therefore, the fact that a part of the
cause of action may have arisen at Faridabad would not be
relevant once the "seat" has been chosen, which would
then amount to an exclusive jurisdiction Clause so far as
Courts of the "seat" are concerned.
13. This case would show that the moment the seat is
chosen as Ahmedabad, it is akin to an exclusive
jurisdiction clause, thereby vesting the courts at
Ahmedabad with exclusive jurisdiction to deal with the
arbitration. However, learned Counsel for the Respondent
referred to and relied upon paragraphs 49 and 71 of the
aforesaid judgment. Paragraph 49 only dealt with the
aspect of concurrent jurisdiction as dealt with in Bharat
Aluminium Co. v. Kaiser Aluminium Technical Services
Inc., MANU/SC/0722/2012 : (2012) 9 SCC 552 ["BALCO"]
which does not arise on the facts of the present case.
OP (C)No. 1254 of 2019
Paragraph 71 is equally irrelevant, in that, it is clear that
the parties have, by mutual agreement, entered into an
agreement to substitute the venue at Jaipur with
Ahmedabad as the place/seat of arbitration Under Section
20(1) of the Arbitration and Conciliation Act, 1996.
8. In the case on hand, the parties have not agreed
on the seat of arbitration. Instead, only the venue was
agreed at Kollam, Bangalore or such other place as
mutually agreed by the parties.
9. Admittedly, the arbitration proceeding was held
by the sole Arbitrator at Ernakulam, on mutual consensus
between the parties.
10. Going by the law laid down in BBR ( India)
Private Ltd (supra), the sole Arbitrator had invoked
Section 20(2) of the Act and had fixed the seat at
Ernakulam, which was not challenged by either party.
Thus, the seat of arbitration was at Ernakulam and,
therefore, only the Courts at Ernakulam, would have the
jurisdiction to entertain all the post-award proceedings
filed under the Act. Hence, the finding of the court below
that the Court at Kollam does not have jurisdiction is
OP (C)No. 1254 of 2019
perfectly justifiable and correct, and in accordance with
the law declared by the Hon'ble Supreme Court.
In the result, I confirm Ext P2 order passed by the
court below. Thus, without prejudice to the right of the
petitioner to represent the original petition before the
competent Court at Ernakulam, this original petition is
dismissed. Needless to mention, as there was an order of
stay passed by this Court from 11.4.2019 till date,
staying the operation of Ext P2 order, the petitioner
would be at liberty to claim the benefit of the said order
to exclude the said period, for calculating the period of
limitation.
sd/-
sks/8.07.2022 C.S.DIAS, JUDGE
OP (C)No. 1254 of 2019
APPENDIX OF OP(C) 1254/2019
PETITIONER EXHIBITS
EXHIBIT P1 TRUE COPY OF THE APPLICATION UNDER
SECTION 34 OF THE ACT.
EXHIBIT P2 TRUE COPY OF THE ORDER OF THE III ADDL.
DISTRICT JUDGE, KOLLAM IN O.P.(ARB)
NO.194/2012 DATED 20/2/2019.
