Supreme Court of India: Whether Designation Of “Seat” By Parties Oust The Jurisdiction Of Other Courts Other Than At The Seat Of Arbitration Over The Arbitration Proceedings

Supreme-Court-of-India-1_85138_730x419

In Brahmani River Pellets Limited v. Kamachi Industries Limited 2019 SCC OnLine SC 929, the Supreme Court of India dealt with the issue of whether designation of “seat” by parties oust the jurisdiction of other courts other than at the seat of arbitration over the arbitration proceedings. After considering its earlier dictums and relying on the legal maxim expression unius est exclusio alterius, the Court inter alia held that where seat of arbitration is agreed amongst the parties, the court at the seat of arbitration will have an exclusive jurisdiction in respect of arbitration proceedings and by choosing seat, parties are intended to exclude the supervisory jurisdiction of all other courts for arbitration proceedings. Detailed case analysis given below:-

Factual Matrix

The parties entered into a sale and purchase agreement for Iron Ore. Dispute arose between the parties regarding the prices and payment terms and the supplier did not deliver the goods. The buyer proposed to refer the dispute for arbitration, but the seller disagreed. Therefore, the buyer filed a petition in the Madras High Court seeking appointment of an arbitrator. The jurisdiction of Madras High Court to entertain this petition was contested by the Seller on the ground that the seat of arbitration was agreed to be Bhubaneswar. Therefore, the Seller contested that the Orissa High Court (the High Court in who’s jurisdiction Bhubaneswar falls) will have the ‘exclusive’ jurisdiction to decide such petition. However, the Madras High Court decided against the Seller holding that mere designation of ‘Seat’ by parties does not oust the jurisdiction of other courts other than at the Seat of arbitration. The Madras High Court also held that in absence of any express clause excluding jurisdiction of other courts, both the Madras High Court and the Orissa High Court will have jurisdiction over the arbitration proceedings. This decision of the Madras High Court was under challenge before the Supreme Court of India in the present proceedings.

Arbitration Clause

18 Arbitration shall be under Indian Arbitration and Conciliation Law 1996 and the Venue of Arbitration shall be Bhubaneswar.

Parties Contentions

The Seller contended as under:

  • that when the parties have agreed for a place/venue for arbitration, it gets the status of seat which is the juridical seat conferring exclusive jurisdiction to the seat courts and therefore the Orissa High Court will have the exclusive jurisdiction under the Arbitration & Conciliation Act, 1996 (‘Act’);
  • that the arbitration clause ousts the jurisdiction of the courts other than the courts at the seat of arbitration at Bhubaneswar.

Per contra Buyer contended as under:

  • that since cause of action arose at both the places i.e. Bhubaneswar and Chennai, both Madras High Court as well as Orissa High Court will have supervisory jurisdiction;
  • that unless the parties tie themselves to an exclusive jurisdiction of the court in the agreement, mere mention of “venue” as a place of arbitration will not confer exclusive jurisdiction upon that court.

Judgement

  • As per Section 2(1)(e) of the Act, if the “subject-matter of the suit” is situated within the arbitral jurisdiction of two or more courts, the parties can agree to confine the jurisdiction in one of the competent courts. [Relying on Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552]
  • On many occasions, agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. In such circumstances, the two courts would have jurisdiction that is the court within whose jurisdiction “subject-matter” of the suit is situated and the court within the jurisdiction of which the dispute resolution i.e. the “venue” of arbitration is located.
  • Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. [Relying on Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC 32]

Therefore, the Court held that only Orissa High Court will have the jurisdiction.

My Comments

The case of Bharat Aluminium Company and Ors. etc. vs. Kaiser Aluminium Technical Service, Inc. and Ors. etc 2012 (9) SCC 552 envisages the situation where the parties may provide for a seat of arbitration at a place which would be neutral to both the parties, they may have the intention to exclude the jurisdiction of any other court that may be approached. An example given by the Court is that under a contract the obligations are to be performed either in Kolkata or in Mumbai, and the only arbitration is to take place at 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.”

2 (2)

In Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and others (2017) 7 SCC 678 the Supreme Court observed that the moment the seat is designated by the parties, it is akin to an exclusive jurisdiction clause for purposes of regulating arbitral proceedings arising out of the agreement between the parties. It was further held that it is well settled that where more than one court has jurisdiction, it is open for the parties to exclude all other courts.

3 (2)

In Swastik Gases Private Limited v. Indian Oil Corp. Ltd (2013) 9 SCC 32 inter alia held that where agreement between the parties restricts jurisdiction to only one particular place, the Courts at that place alone would have jurisdiction. Thus, whilst it is correct that in cases where more than one Court exercises concurrent jurisdiction, the parties by an agreement can specify the Court which would exercise the jurisdiction over the subject matter, however, that does not mean that the parties by agreement can confer jurisdiction on a Court that cannot exercise any jurisdiction over the disputes.

4 (2)

Thus, a co-joint reading of the above-mentioned judicial precedents infers that in domestic arbitration in India, two courts would have jurisdiction in respect of arbitration. First, the court within whose jurisdiction “subject-matter” of the arbitration is situated and second the court within the jurisdiction of which the seat of arbitration is located. Once parties have agreed at the seat of arbitration, the court within the jurisdiction of which the seat of arbitration is located will have exclusive jurisdiction in respect of arbitration. Further, it will be presumed that by making such a choice, the parties have ousted the jurisdiction of other courts to deal with matter arising under the arbitration.

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