Arbitration; Bygging India Ltd. Vs. Lanco Infratech Ltd. [Delhi High Court, 07-10-2016]

Arbitration and Conciliation Act, 1996 – Section 11 – An arbitration agreement is an independent agreement and in terms of Section 20(1) of the Act, the parties are free to agree on the place of arbitration. In one sense, the place of arbitration is where the arbitration agreement is to be performed. Thus, clearly the Court having jurisdiction over the place of arbitration would indisputably have jurisdiction under Part-I of the Act.

Jurisdiction

IN THE HIGH COURT OF DELHI AT NEW DELHI

CORAM: HON’BLE MR. JUSTICE VIBHU BAKHRU

07.10.2016

ARB.P. 479/2016

BYGGING INDIA LTD. ….. Petitioner Through : Mr S.K. Maniktala and Mr Swetab Kumar, Advocates. Versus LANCO INFRATECH LTD. ….. Respondent Through : Mr Deepak Khurana and Ms Aditi Sharma, Advocates.

ORDER

VIBHU BAKHRU, J

1. The petitioner has filed the present petition under

Section 11 of the Arbitration and Conciliation Act, 1996

(hereafter ‘the Act’) praying that an arbitrator be appointed for adjudicating the disputes that have arisen between the parties in relation to the “Settlement Agreement” (hereafter ‘the Agreement’) dated 19.02.2014 entered into between the parties.

2. Clause 6 and 7 of the Agreement are relevant and are set out below:-

“6. Any dispute or claim arising out of this Agreement shall be referred to a sole arbitrator and the arbitration will be conducted under the Arbitration and Conciliation Act, 1996. The venue of Arbitration shall be Delhi and the Courts of Delhi shall have the sole jurisdiction.

7. All Disputes shall be governed exclusively by the Courts of Delhi.”

3. The learned counsel for the respondent does not dispute the existence of the Agreement or the arbitration clause. The only objection taken by the respondent is regarding jurisdiction of the court to entertain the present petition; the Agreement was executed in Gurgaon, Haryana and according to respondent, no part of cause of action has arisen in Delhi.

4. The respondent had issued a Work Order No.LITL/NPCL/ Civil/CHY/WO/30 and awarded certain works to the petitioner for the purposes of construction of 275M High Twin Flue RCC Chimney, which was to be constructed in Nagarjuna 2 x 507.5 MW Thermal Power Plant at Padubidri, Udupi District, Karnataka. Certain disputes arose between the parties in relation to the said work order which were settled in terms of the Agreement.

5. Mr. Khurana, the learned counsel appearing for the respondent submitted that even though the parties had agreed that the venue of arbitration would be in Delhi and that the Courts in Delhi would have the exclusive jurisdiction, the same did not confer jurisdiction on the courts in Delhi since the agreement was executed in Gurgaon and no part of the cause of action had arisen in Delhi. He further submitted that the decision of the Supreme Court in

Bharat Aluminium Company and Ors. v. Kaiser Aluminium Technical Services, Inc. and ors; 2012 (9) SCC 552

would not be applicable since in that case the court was concerned with the supervisory jurisdiction in relation to an International Commercial Arbitration and the decision was in the context of “seat” or “place” of arbitration which is not the same as the “venue” of arbitration. He submits that the word “venue” only defines where the meetings of the arbitral tribunal are to be held. He also relied upon the decision of the Bombay High Court in

Anilkumar Phoolchand Sanghvi and Ors. v. Chandrakant P. Sanghvi and Ors; 2016 (2) ABR 535

in support of his contention that an application under Section 11 would not lie before a court only because meetings of arbitral tribunal are held within the territorial jurisdiction of that Court.

6. He has also relied upon the decision of the

Swastik Gases Private Limited v. Indian Oil Corporation Limited, (2013) 9 SCC 32

in support of his contention that the provisions of Section 20 of the Code of Civil Procedure would also be relevant as to the territorial jurisdiction relating to an application under Section 11 of the Act.

7. I have heard the learned counsel for the parties.

8. At the outset, it is relevant to refer to the paragraph 96 of the decision of the Supreme Court in the case of Bharat Aluminium Company (supra) which is set out below:-

“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)

(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 37must 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.”

9. The aforesaid decision clearly explains that the courts having jurisdiction where the arbitration is located would also have jurisdiction under Part-I of the Act. A Division Bench of this Court has also followed the aforesaid dicta in its decision in