CAUSE TITLE

Aniket SA Investments LLC vs. Janapriya Engineers Syndicate Private Limited & Ors.

[COMMERCIAL ARBITRATION PETITION (L) NO. 1244 OF 2019 ]

DIFFERENT SEAT OF ARBITRATION VS CAUSE OF ACTION IN DIFFERENT JURISDICTION

In an Arbitration Clause, wherein the parties agreed that “the seat of the arbitration proceedings shall be Mumbai”, the Appellant submitted that alternate Court has jurisdiction to entertain Section 9 of the petition as the dispute pertains to a cause of action that has arisen at the site of the project within the territorial jurisdiction of the Court.

FINDINGS

(A) Court definition

The expression “Court” is defined in Section 2(1)(e) of the Arbitration and Conciliation Act, 1996. The judgment in BALCO was previously understood by some High Courts (including the Impugned Order) to recognize concurrent jurisdiction of the ‘cause of action’ court and the ‘seat’ court. However, the judgment in BALCO, on this point, has been fully explained by the Supreme Court in its decision in BGS SGS SOMA JV v. NHPC LIMITED (“BGS SGS”)[ 6 (2020) 4 SCC 234 ]. As pointed out earlier, even in the case of Indus Mobile, the Supreme Court had taken a view that a choice of seat amounts to conferment of exclusive jurisdiction on the Courts of the seat of arbitration. This understanding of Indus Mobile has been confirmed by the Supreme Court in BGS SGS.

“40. Para 96 of the Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] case is in several parts. First and foremost, Section 2(1)(e), which is the definition of “court” under the Arbitration Act, 1996 was referred to and was construed keeping in view the provisions in Section 20 of the Arbitration Act, 1996, which give recognition to party autonomy in choosing the seat of the arbitration proceedings. Secondly, the Court went on to state in two places in the said paragraph that jurisdiction is given to two sets of courts, namely, those courts which would have jurisdiction where the cause of action is located; and those courts where the arbitration takes place. However, when it came to providing a neutral place as the “seat” of arbitration proceedings, the example given by the five-Judge Bench made it clear that appeals under Section 37 of the Arbitration Act, 1996 against interim orders passed under Section 17 of the Arbitration Act, 1996 would lie only to the courts of the seat — which is Delhi in that example — which are the courts having supervisory control, or jurisdiction, over the arbitration proceedings. The example then goes on to state that this would be irrespective of the fact that the obligations to be performed under the contract, that is the cause of action, may arise in part either at Mumbai or Kolkata. The fact that the arbitration is to take place in Delhi is of importance. However, the next sentence in the said paragraph reiterates the concurrent jurisdiction of both courts.”

46. This Court in Indus Mobile Distribution (P) Ltd.5, after referring to Sections 2(1)(e) and 20 of the Arbitration Act, 1996, and various judgments distinguishing between the “seat” of an arbitral proceeding and “venue” of such proceeding, referred to the Law Commission Report, 2014 and the recommendations made therein as follows : (SCC pp. 692-93, paras 17-20)

x…..x…….x……..x……….x………..x

Amendment of Section 31

17. In Section 31

(i) In sub-section (4), after the words “its date and the” delete the word “place” and add the word “seat”.’ 18. The amended Act, does not, however, contain the aforesaid amendments, presumably because the BALCO4 judgment in no uncertain terms has referred to “place” as “juridical seat” for the purpose of Section 2(2) of the Act. It further made it clear that Sections 20(1) and 20(2) where the word “place” is used, refers to “juridical seat”, whereas, in Section 20(3), the word “place” is equivalent to “venue”. This being the settled law, it was found unnecessary to expressly incorporate what the Constitution Bench of the Supreme Court has already done by way of construction of the Act.

19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause.

(B) Juridicial seat

In BGS SGS paragraph 32 the Court explained the concept of “juridical seat” of the arbitral proceedings and its relationship to the jurisdiction of courts.

The Court observed that the legal principles relating to juridical seat, arbitral proceedings and challenges to arbitral awards was unclear and had to be developed in accordance with international practice on a case-by-case basis by the Supreme Court.

(C) Exclusive jurisdiction

In BALCO, the Court in paragraph 38 observed that once parties select the ‘seat’ of arbitration in their agreement, such selection amounts to an exclusive jurisdiction clause. This, it is stated, would mean that the “seat” would alone have jurisdiction to entertain the challenges to the Award.

It was further held in paragraph 38 of BGS SGS that the judgment in BALCO when read as a whole, applies the concept of “seat” as laid down by English judgments and by harmoniously construing Section 20 with Section 2(1)(e) of the Act. The effect of this is to broaden the definition of “Court” and bring within its ken the courts of the “seat” of the arbitration.

As the Supreme Court clearly notes, Indus Mobile gives two separate reasons for its conclusion and the first of them is that a choice of seat has the effect of conferring exclusive jurisdiction on the Court of the seat.

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.

(Emphasis supplied)

(D) Concurrent jurisdiction

On a reading of the entire judgment, we have no doubt that it clearly applies to the issue of whether there is concurrent jurisdiction of courts in a situation where the parties have chosen a ‘seat’ of arbitration irrespective of whether if it is a domestic arbitration or an international commercial arbitration seated in India such as in the present case. Given that, BGS SGS has held that there is no concurrent jurisdiction of two Courts under Section 2(1)(e) of the Act, the principles applied by the Learned Single Judge that as a matter of party autonomy the parties can choose one of the two courts and confer exclusive jurisdiction on one of those Courts, by relying inter alia upon paragraph 96 of BALCO and the judgment in Swastik Gases, would have no application in a situation where the parties have chosen a seat of arbitration. A choice of seat, as the Supreme Court has explained, is itself an expression of party autonomy and carries with it the effect of conferring exclusive jurisdiction on the Courts of the seat.

(E) Venue and seat

The Supreme Court in BGS SGS, has, in paragraph 82, observed that even when parties use the expression ‘venue of arbitration proceedings with reference to a particular place, the expression ‘arbitration proceedings’ would make it clear that the ‘venue’ should be read as ‘seat’.

(F) ‘Subject to’ vs Notwithstanding

Relying upon the judgments in Jawahar Sons Enterprises Pvt. vs State and Ors.10, and South India Corpn. (P) Ltd. v. Secy., Board of Revenue [11 AIR 1964 SC 207], that the meaning of the expression ‘subject to’ is the opposite of ‘notwithstanding’ and therefore ‘subject to’ could never have been interpreted as ‘notwithstanding’ as has been done in the Impugned Order.

CONCLUSION

The Hon’ble Division Bench allowed the appeal and held that:

• A choice of seat is in itself an expression of party autonomy and carries with it the effect of conferring exclusive jurisdiction on the courts of the seat.
• Further, even if it was to be interpreted that two concurrent courts would have jurisdiction, the choice of courts at Hyderabad is made ‘subject to the seat at Mumbai, which amounts to a choice of courts at Mumbai.

 
ABOUT THE AUTHOR
Adv. Jyoti Srivastava
CEO, Indian Law Watch; Managing Partner JS Law Office, a full service law firm. More tahn 13 years of experience in law. B.Sc. (Hons.) Botany (Hindu College, DU); LL.B (Law Centre-I, DU); IPR (Certificate); PGDADR (ILI, ND) Trained Mediator: Basic Training (ICADR); Advance Commercial Law Mediation Training (Delhi High Court & IICA, Ministry of Corporate Affairs) Joint Secretary, Council for Conflict Resolution - Maadhyam