Tvs Motors Company Ltd vs M/S Bagaria Motors
2023 Latest Caselaw 4673 Raj/2

[2023:RJ-JP:19616]                    (1 of 16)                      [CW-15490/2016]


        HIGH COURT OF JUDICATURE FOR RAJASTHAN
                    BENCH AT JAIPUR

                 S.B. Civil Writ Petition No. 15490/2016

TVS Motors Company Ltd., A Company Incorporated Under The
Companies       Act,   1956      Through          Its   Authorize,   Jayalakshmi
Estates, No. 24, Old No. 8 Haddows Road, Chennai- 600 006 And
Its Factory At Pb No. 4, Harita, Hosur-635109 Tamil Nadu
                                                                     ----Petitioner
                                      Versus
M/s Bagaria Motors, through Its Proprietorix, Mrs. Kamla Devi,
H-8, RIICO Industrial Area, NH-11, Fatehpur Shekhawati, District
Sikar-332
                                                                   ----Respondent

For Petitioner(s) : Mr. K.K. Sharma, Sr. Adv. assisted by Mr. Madhusudan Singh Rajpurohit For Respondent(s) : Mr. Rajendra Prasad, Sr. Adv. assisted by Ms. Harshita Thakral

HON'BLE MR. JUSTICE SAMEER JAIN

Judgment

Reportable Reserved on 04.08.2023 Pronounced on 11.09.2023

1. Being aggrieved and dissatisfied with the impugned

order dated 06.10.2016, passed by the Court of learned Additional

District Judge, Fatehpur Shekhawati, District Sikar, in Appeal No.

02/2016, the present writ petition was filed under Article 227 of

the Constitution of India with the following prayers:

"1. By issuance of a writ of certiorari or any other appropriate writ, order or direction in the nature thereof, the order dated 6th October 2016 passed by Additional District Judge, Fatehpur Shekhawati, District Sikar, be quashed and set aside and consequently the application filed by the respondent under Section 34 of the Act of 1996 before Additional District Judge, Fatehpur

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Shekhawati, District Sikar, may also be directed to be dismissed. Further, it may be declared that the court at Fatehpur Shekhawati does not have the jurisdiction to entertain and decide the application under Section 34 of the Act of 1996 filed by the non-petitioner.

2. Any other order or direction which this Hon'ble Court deems just and proper in the facts and circumstances of the case may also be passed in favour of the petitioner."

FACTS/BACKGROUND:

2. The brief and necessary facts of the case, as per the

record, are as follows:

2.1) That the petitioner-company is a manufacturer of

motorcycles, mopeds and other two wheelers, having nationwide

presence. For the purpose of providing effective after sales

services and repairing of its manufactured vehicles, the company

appoints Authorised Service Centre (for short "ASC") of the

company at various places. In this regard, the petitioner company

appointed the respondent as an ASC of the petitioner-company in

Fatehpur Shekhawati, District Sikar (Rajasthan). The ASC

agreement (Annexure-1) was executed on 01.10.2008 at Hosur in

Tamil Nadu. As per the terms of ASC agreement, the petitioner-

company appointed the respondent as an ASC on a non-exclusive

basis for a period of three years from the date of the agreement

subject to renewal thereafter done by the petitioner-company at

its discretion.

2.2) That as per Clause 22 of the ASC agreement, which

provides for dispute resolution mechanism, the parties had to

resolve their dispute through negotiation and in case the

negotiation fails, then the parties can refer the matter to the sole

arbitrator, who was to be appointed by the Managing Director of

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the petitioner-company as per the Arbitration and Conciliation Act,

1996 (hereinafter referred to as "Act of 1996").

2.3) That as per Clause 22.4(c) of the ASC agreement, the

venue of the arbitration was to be in Hosur in the State of Tamil

Nadu. Further, as per Clause 21 of the ASC agreement, the parties

mutually consented that Courts at Hosur shall have the exclusive

jurisdiction in respect of any matter or dispute arising between

them in relation to the ASC agreement.

2.4) That on account of some purported deficiencies in

services by the respondent, the petitioner-company exercised its

discretion, provided under Clause 15.1 of the ASC agreement, to

not renew the agreement after the completion of period of three

years. On 30.09.2011, the ASC agreement came to an end due to

efflux of time and the agreement was not renewed.

2.5) Being aggrieved by the non renewal, the respondent

sent a letter dated 09.10.2012 to the petitioner-company. The

said letter was treated by the petitioner-company as claim

statement and an arbitrator was appointed by the petitioner-

company. The said arbitrator, vide order dated 12.12.2012, shifted

the venue from Hosur to Bangalore (Karnataka) on the request of

the petitioner-company and fixed the procedure to be followed by

in the arbitration proceedings, without even issuing notices to the

respondent. Thereafter, when the respondent came to know about

the order dated 12.12.2012, the respondent filed a recall

application, which was allowed vide order dated 05.04.2013 and

the order dated 12.12.2012 was recalled. Further, the said

arbitrator recused himself and withdrew from the arbitration

proceedings.

[2023:RJ-JP:19616] (4 of 16) [CW-15490/2016]

2.6) After the first arbitrator withdrew from the proceedings,

a letter dated 07.10.2013 was sent by the respondent requesting

for shifting the place of arbitration proceedings from Hosur to

Bangalore. The said request was accepted by the petitioner-

company and the parties mutually agreed to change the venue

from Hosur to Bangalore. An order to this effect was also passed

by the newly appointed arbitrator on 15.10.2013.

2.7) Thereafter, with the consent of the parties, the

arbitration proceedings were initiated and conducted at Bangalore.

The respondent filed its claim petition with the prayer that the ASC

agreement be resumed/renewed and respondent be appointed as

an ASC of the petitioner-company. The said claim petition was

rejected by the Arbitrator vide award dated 21.10.2015

(Annexure-2).

2.8) Aggrieved of the Arbitral Award dated 21.10.2015, the

respondent filed an application, which was registered as Appeal

No. 2/2016, before the Court of Additional District Judge, Fatehpur

Shekhawati, District Sikar, under Section 34 of the Act of 1996.

The petitioner-company filed an application under Section 151 of

CPC raising objection regarding maintainability of the application

and jurisdiction of the Court of Additional District Judge, Fatehpur

Shekhawati, District Sikar. The said application of the petitioner-

company was dismissed by way of impugned order dated

06.10.2016.

SUBMISSIONS OF PETITIONER

3. Learned counsel for the petitioner-company contends

that the Court at Sikar has no jurisdiction to entertain an

application filed under Section 34 of the Act of 1996. It is

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submitted that Clause 21 of the ASC agreement, which was

subject to Clause 22, specifically provides that whenever judicial

intervention is possible, the Courts at Hosur (Tamil Nadu) would

have exclusive jurisdiction to adjudicate and decide in respect of

all disputes arising out of or in relation to the ASC agreement.

Further, Clause 21 incorporates that parties have irrevocably

waived off any objection to the jurisdiction of the Courts at Hosur

to adjudicate the disputes and the parties have mutually

consented to exclusive jurisdiction of Courts at Hosur.

4. Learned counsel for the petitioner-company has also

highlighted Clause 22.4(c) of the ASC agreement, which mentions

the venue of arbitration to be in Hosur. It is contended when the

seat of arbitration is not separately mentioned, 'seat' and 'venue'

are used interchangeably. By mutual consent, said venue/seat

was changed to Bangalore and the arbitral proceedings were

conducted in Bangalore. Consequently, the arbitral award was also

passed in Bangalore. The application under Section 34 of the Act

of 1996 at Court in Sikar is not maintainable as neither the

agreement was executed in Sikar nor the arbitral proceedings

were conducted in Sikar and nor was the arbitral award passed in

Sikar. In arbitration law, the fact that the 'seat' is at Bangalore

would vest Bangalore Courts with exclusive jurisdiction for

purposes of regulating arbitral proceedings arising out of the

agreement between the parties. In support of his contention,

learned counsel for the petitioner-company has placed strong

reliance on Apex Court judgment of Indus Mobile Distribution

Private Limited vs. Datawind Innovations Private Limited

and Ors. (Neutral citation: 2017/INSC/369) reported in

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(2017) 7 SCC 678, wherein it was held that 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 Code of Civil Procedure be

attracted. In arbitration law however, the moment 'seat' is

determined, it is akin to an exclusive jurisdiction clause.

5. Learned counsel for the petitioner-company further

submits that the Court below, in its impugned order, has wrongly

held that parties to an agreement cannot mutually oust the

jurisdiction of any Court. Reliance in this regard is again placed on

Indus Mobile Distribution (supra). Learned counsel for the

petitioner-company has also contended that the reliance placed by

the Court below on the Apex Court judgment of Bharat

Aluminium Company (BALCO) and Ors. vs. Kaiser

Aluminium Technical Service, Inc. and Ors. reported in

(2012) 9 SCC 552 is misplaced as the subject matter of dispute

and the discussion of law was completely different from the

present case. It is further contended that the said judgment was

with regard to challenge of foreign arbitral award in Courts at

India. The said judgment does not deal with the cases where the

parties have consented to exclusive jurisdiction of the Court at a

particular place. Learned counsel for the petitioner-company has

further relied on recent Apex Court judgment of BGS SGS SOMA

JV vs. NHPC Ltd. (Neutral Citation: 2019/INSC/1349)

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reported in (2020) 4 SCC 234, which has considered/clarified the

dictum of BALCO (supra) and held that 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.

6. Learned counsel for the petitioner-company has also

placed strong reliance on recent pronouncement of Apex Court in

Inox Renewables Ltd. vs. Jayesh Electricals Ltd. (Neutral

Citation: 2021/INSC/251) reported in (2023) 3 SCC 733

wherein it was held that once seat of arbitration is replaced by

mutual agreement from X to Y, the Courts at X are no longer

vested with jurisdiction as exclusive jurisdiction is now vested in

the Courts at Y, given the change in seat of arbitration.

SUBMISSIONS OF RESPONDENT

7. Per contra, learned counsel for the respondent, at the

outset, submits that the parties had merely chosen the venue of

arbitration to be at Hosur and then to Bangalore. The said

locations were never intended to be the 'seat' of the arbitration.

Learned counsel for the respondent further submits that the

impugned order is based on the Constitutional Bench judgment of

BALCO (supra). It is submitted that para 96 of BALCO (supra)

speaks of the concurrent jurisdiction of Courts within whose

jurisdiction the cause of action arises wholly or in part, and Courts

within the jurisdiction of which the dispute resolution, i.e.

arbitration, is located. The said para 96 of BALCO (supra) is

reproduced as under:

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

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"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

[2023:RJ-JP:19616] (9 of 16) [CW-15490/2016]

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."

8. Learned counsel for the respondent submits that the

judgment of BALCO (supra) was delivered by a five judge

Constitutional Bench and as per settled position of law, the same

will constitute binding precedence on equal or lower strength

benches. Any judgment by a lower strength Bench, which deviates

from BALCO (supra), including that of Indus Mobile

Distribution (supra), BGS SGS SOMA JV (supra) and Inox

Renewables (supra), cannot be construed as binding precedent.

Reliance in this regard is placed on Apex Court judgment of

Official Liquidator v. Dayanand reported in (2008) 10 SCC 1.

9. Learned counsel for the respondent has also drawn

attention of this Court to Clause 21 of the ASC agreement, which

was subject to Clause 22 of the ASC agreement. It is contended

that the jurisdiction conferred on Hosur Courts in Clause 21 was

subject to the venue of the arbitration to be at Hosur, in terms of

Clause 22.4 of the ASC agreement and once the venue changed,

the jurisdiction conferred on the Courts at Hosur got extinguished.

10. Learned counsel for the respondent has placed further

reliance on Apex Court judgment of BBR (India) Private

Limited vs. S.P. Singla Constructions Private Limited

(Neutral Citation: 2022/INSC/590) reported in (2023) 1 SCC

693.

[2023:RJ-JP:19616] (10 of 16) [CW-15490/2016]

ANALYSIS

11. Heard the arguments advanced by both the sides,

scanned the record of the writ petition and considered the

judgments cited at Bar.

12. The concepts of 'Seat' and 'Venue' are of utmost

significance in any arbitration proceeding as they not only

determine where the arbitration is conducted but is also crucial in

ascertaining the supervisory jurisdiction of Courts and the curial

law (lex arbitri) which governs such arbitration. The 'Seat' of

arbitration is the 'situs' of arbitration, the place where the

arbitration is anchored. The seat of arbitration defines the curial

law or procedural law governing the arbitration and also

determines which Court(s) will exercise supervisory jurisdiction

over such arbitration. In contrast, the 'Venue' of arbitration merely

defines the geographical place where such arbitration is conducted

and is not associated with either the curial law or the jurisdiction

of Courts. The term 'Seat' and 'Venue' has not been defined

either under the Arbitration Act, 1940 or under the Act of 1996.

Section 20 of the Act of 1996 defines 'Place of Arbitration' which is

used interchangeably for both seat and venue.

13. It is noted that the ASC agreement was executed at

Hosur and as per Clause 22 of the ASC agreement, the venue of

Arbitration was also Hosur. Accordingly, as per Clause 21 of the

ASC agreement, parties had consented to exclusive jurisdiction of

Courts at Hosur. However, the venue of Arbitration was shifted

from Hosur to Bangalore based on mutual agreement of the

parties. As per the dictum of Apex Court judgment of BALCO

(supra), which has been followed in Indus Mobile Distribution

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(supra), BGS SGS SOMA JV (supra) and Inox Renewables

(supra), when parties had selected a venue of arbitration without

designating a seat of arbitration, it would be safe to conclude that

venue is the seat of the arbitration provided that the parties have

selected a body of rules to govern the arbitration and there is no

other indication to the contrary. In the case in hand, the parties

had initially selected Hosur to be the venue of arbitration and had

also conferred exclusive jurisdiction to Courts at Hosur. Therefore,

in the light of above referred Apex Court judgments, it can safely

be assumed that Hosur was intended to be the seat of the

arbitration as well. Subsequently, when the parties had changed

the venue from Hosur to Bangalore, as Clause 21 of ASC

agreement was subject to Clause 22 of ASC agreement, it can

further safely be assumed that Bangalore was the new seat and

venue of arbitration.

14. In international commercial arbitration, it is a settled

principle that if the parties choose to have a seat of arbitration in

a particular country, then the laws of that country relating to

regulation of arbitration proceedings will apply, and the Courts of

that country will have supervisory jurisdiction over the arbitration

proceedings. The question which remains is whether this principle

can be extended to a choice of city in India as a seat so as to

confer exclusive supervisory jurisdiction on the Courts of that city

over the arbitration proceedings. The said question was considered

in Indus Mobile Distribution (supra), wherein the Apex Court

was directly dealing with the issue as to whether the seat of

arbitration connotes an exclusive jurisdiction and ousts the

jurisdiction of all other Courts. The Apex Court examined the

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concepts of Seat and Venue threadbare and after analyzing the

entire legal position, concluded that once a seat is designated, it is

akin to an exclusive jurisdiction clause. Consequently the Courts

at the "Seat" are vested with exclusive jurisdiction to exercise

powers and regulate arbitral proceedings, to the exclusion of all

other Courts, including Courts where the cause of action arose.

15. Much reliance has been placed by learned counsel for

the respondent on para 96 (reproduced above) of Apex Court

judgment of BALCO (supra). However, BALCO (supra) itself did

not involve the question of choosing between the jurisdictions of

two cities. In para 96 of the judgment, the cities of Delhi, Mumbai

and Kolkata are mentioned only by way of examples. Further, the

Apex Court in SGS SOMA JV (supra) has followed and clarified,

and not deviated from, the dictum of BALCO (supra) and held

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 meeting. Further, the fact that the arbitral

proceedings 'shall be held' at a particular venue would also

[2023:RJ-JP:19616] (13 of 16) [CW-15490/2016]

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.

16. The Apex Court reiterated that once the parties

designate the seat of arbitration, only the Courts governing the

seat have exclusive jurisdiction to govern such arbitration

proceeding and jurisdiction of all other Courts stand ousted. The

relevant portion of SGS SOMA JV (supra) is reproduced as

under:

"44. If paras 75, 76, 96, 110, 116, 123 and 194 of Balco [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552] are to be read together, what becomes clear is that Section 2(1)(e) has to be construed keeping in view Section 20 of the Arbitration Act, 1996, which gives recognition to party autonomy -- the Arbitration Act, 1996 having accepted the territoriality principle in Section 2(2), following the Uncitral Model Law. The narrow construction of Section 2(1)

(e) was expressly rejected by the five-Judge Bench in Balco [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552] . This being so, what has then to be seen is what is the effect Section 20 would have on Section 2(1)(e) of the Arbitration Act, 1996.

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

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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 [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552] 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 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 [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552] 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."

17. The judgment of SGS SOMA JV (supra) was followed

by the Apex Court in the recent pronouncement of Inox

Renewables (supra). The facts of Inox Renewables (supra)

are somewhat similar to the case in hand. In Inox Renewables

(supra), as per arbitration agreement therein, the venue of the

arbitration was to be Jaipur (Rajasthan). However, the parties

therein mutually agreed to change the venue from Jaipur to

Ahmedabad (Gujarat) and consequently the proceedings were

conducted at Ahmedabad. Accordingly, the Apex Court observed

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that the parties had by mutual agreement specifically shifted the

venue/ place of arbitration from Jaipur to Ahmedabad. The Apex

Court observed that the "venue" being shifted from Jaipur to

Ahmedabad was in fact a shifting of the venue/place of arbitration

with reference to Section 20(1), and not with reference to Section

20(3) of the Act of 1996, as it has been made clear that Jaipur did

not continue to be the seat of arbitration and Ahmedabad was the

seat designated by the parties, and not a venue to hold meetings.

The Apex Court thus held that the jurisdiction clause and the

arbitration clause were to be read together as the Courts in

Rajasthan had been vested with jurisdiction only because the seat

of arbitration was to be Jaipur. It further held that once the seat of

arbitration was replaced by mutual agreement to be at

Ahmedabad, the Rajasthan Courts were no longer vested with

jurisdiction as exclusive jurisdiction had now been vested with the

Courts in Ahmedabad, given the change in the seat of arbitration.

18. In the opinion of this Court, the lis in question is

squarely covered by the Apex Court judgment of Inox

Renewables (supra). There is no indication whatsoever that the

seat of the arbitration was at District Sikar. Once the parties

mutually agreed to change the venue from Hosur to Bangalore,

where the arbitration proceedings commenced and concluded

without any disturbance, only the Courts at Bangalore would have

the exclusive supervisory jurisdiction. The Court of learned

Additional District Judge, Fatehpur Shekhawati, District Sikar

wrongly assumed jurisdiction and therefore the impugned order

dated 06.10.2016 is liable to be quashed and set aside.

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RESULT

19. Consequently, the impugned order dated 06.10.2016 is

quashed and set aside. The writ petition is, accordingly, allowed.

20. Pending application(s), if any, shall stand disposed of.

(SAMEER JAIN),J

JKP/377

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