Case Note & Summary
The appeal arose from a dispute between Brahmani River Pellets Limited (appellant) and Kamachi Industries Limited (respondent) concerning a contract for sale of iron ore pellets. The agreement contained an arbitration clause (Clause 18) stating that arbitration shall be under the Indian Arbitration and Conciliation Law 1996 and the venue of arbitration shall be Bhubaneswar. Disputes arose regarding price and payment terms, and the respondent invoked arbitration. The appellant did not agree to appointment of an arbitrator, prompting the respondent to file a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Madras High Court. The appellant challenged the jurisdiction of the Madras High Court, contending that the parties had agreed that the seat of arbitration is Bhubaneswar, and therefore only the Orissa High Court had exclusive jurisdiction. The Madras High Court appointed a former judge as sole arbitrator, holding that mere designation of seat does not oust jurisdiction of other courts absent an express exclusion clause. The appellant appealed to the Supreme Court. The Supreme Court examined the distinction between seat and venue under Section 20 of the Act, relying on BALCO and Indus Mobile. It held that when parties designate a venue, it is akin to selecting the seat of arbitration, and the courts at that seat have exclusive supervisory jurisdiction. The Court found that the Madras High Court erred in assuming jurisdiction, as the parties had agreed to Bhubaneswar as the seat. The Supreme Court allowed the appeal, set aside the impugned order, and directed the respondent to approach the Orissa High Court for appointment of an arbitrator.
Headnote
A) Arbitration Law - Jurisdiction of Court - Section 11(6) read with Section 2(1)(e) and Section 20 of the Arbitration and Conciliation Act, 1996 - Where parties agree that venue of arbitration shall be a particular place, that place constitutes the juridical seat, conferring exclusive jurisdiction on the courts at that seat - The Madras High Court erred in assuming jurisdiction despite the clause designating Bhubaneswar as venue - Held that the designation of venue as Bhubaneswar amounts to selection of seat, and only the Orissa High Court has supervisory jurisdiction (Paras 2, 9-12).
Issue of Consideration
Whether the Madras High Court could exercise jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 despite the arbitration clause stating that the venue of arbitration shall be Bhubaneswar.
Final Decision
The Supreme Court allowed the appeal, set aside the impugned order of the Madras High Court dated 24.01.2018 in OP No.398 of 2018, and directed the respondent to approach the Orissa High Court for appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Law Points
- Seat of arbitration determines exclusive jurisdiction of courts
- Venue designation as seat confers exclusive jurisdiction
- Section 2(1)(e) read with Section 20 of Arbitration Act defines court with supervisory control
- Parties' autonomy to choose seat binds courts
Case Details
Civil Appeal No. 5850 of 2019 (Arising out of SLP(C) No.15672 of 2019)
Brahmani River Pellets Limited
Kamachi Industries Limited
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Nature of Litigation
Civil appeal against order of Madras High Court appointing arbitrator under Section 11(6) of Arbitration and Conciliation Act, 1996.
Remedy Sought
Appellant sought setting aside of Madras High Court order appointing arbitrator and declaration that only Orissa High Court has jurisdiction.
Filing Reason
Appellant challenged jurisdiction of Madras High Court to appoint arbitrator when arbitration clause designated Bhubaneswar as venue.
Previous Decisions
Madras High Court in OP No.398 of 2018 appointed a former judge as sole arbitrator, holding that mere designation of seat does not oust jurisdiction of other courts.
Issues
Whether the Madras High Court could exercise jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 despite the arbitration clause stating that the venue of arbitration shall be Bhubaneswar.
Submissions/Arguments
Appellant: When parties agree on a place/venue for arbitration, it becomes the juridical seat, conferring exclusive jurisdiction on courts at that seat. Reliance on Indus Mobile and Hardy Exploration.
Respondent: Cause of action arose at both Bhubaneswar and Chennai, so both High Courts have jurisdiction. Mere mention of venue does not exclude other courts unless words like 'alone', 'exclusive', 'only' are used.
Ratio Decidendi
In domestic arbitration, when parties designate a venue for arbitration, that venue constitutes the juridical seat, and the courts at that seat have exclusive supervisory jurisdiction under Section 2(1)(e) read with Section 20 of the Arbitration and Conciliation Act, 1996. The designation of venue as Bhubaneswar in the arbitration clause amounts to selection of seat, and only the Orissa High Court has jurisdiction to appoint an arbitrator under Section 11(6).
Judgment Excerpts
Whether the Madras High Court could exercise jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 despite the fact that the agreement contains the clause that venue of arbitration shall be Bhubaneswar, is the question falling for consideration in this appeal.
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.
Procedural History
Dispute arose between parties regarding sale of iron ore pellets. Respondent invoked arbitration clause on 07.10.2016. Appellant did not agree to appointment of arbitrator. Respondent filed OP No.398 of 2018 under Section 11(6) before Madras High Court on 24.01.2018. Madras High Court appointed sole arbitrator on 24.01.2018. Appellant appealed to Supreme Court by SLP(C) No.15672 of 2019, which was converted to Civil Appeal No.5850 of 2019.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 11(6), Section 2(1)(e), Section 2(2), Section 20, Section 20(1), Section 20(2), Section 20(3)
