Thursday, 25 July 2019

Whether HC Which Has Jurisdiction Over 'Venue' Of Arbitration Can Entertain Petition Seeking Appointment Of Arbitrator?

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. In the present case, the parties have agreed that the
“venue” of arbitration shall be at Bhubaneswar. Considering
the agreement of the parties having Bhubaneswar as the venue
of arbitration, the intention of the parties is to exclude all other
courts. As held in Swastik, non-use of words like “exclusive
jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does
not make any material difference.

17. When the parties have agreed to have the “venue” of
arbitration at Bhubaneswar, the Madras High Court erred in
assuming the jurisdiction under Section 11(6) of the Act. Since
only Orissa High Court will have the jurisdiction to entertain the
petition filed under Section 11(6) of the Act, the impugned order
is liable to be set aside.

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5850 2019

BRAHMANI RIVER PELLETS LIMITED Vs KAMACHI INDUSTRIES LIMITED

R. BANUMATHI, J.
Dated:July 25, 2019.

Leave granted.
2. 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.

3. Brief facts which led to filing of this appeal are as under:-
The appellant entered into an agreement with the respondent
for sale of 40,000 WMT (Wet Metric Tonne) of Iron Ore Pellets
on FOB terms and payment was to be made by Letter of Credit
in Bhubaneswar. The loading port was Dhamra Port, Bhadrak,
Odisha and destination was Chennai/Ennore Ports, Tamil
Nadu. Dispute arose between the parties regarding the price
and payment terms and the appellant did not deliver the goods
to the respondent. The respondent claimed for damages
alleging that it had to procure the Iron Ore Pellets from other
sources at higher rates. The appellant denied any liability to
pay damages on the ground that contract was later modified
and that the respondent breached the material terms of the
contract and this led to the dispute between the parties.
4. Clause 18 of the agreement between the parties contains
an arbitration clause which reads as under:-
“18. Arbitration shall be under Indian Arbitration and Conciliation
Law 1996 and the Venue of Arbitration shall be Bhubaneswar.”
5. The respondent on 07.10.2016 invoked arbitration clause.
The appellant did not agree for the appointment of the

arbitrator. Hence, the respondent filed petition being OP
No.398 of 2018 under Section 11(6) of the Arbitration and
Conciliation Act, 1996 (for short ‘the Act’) before the Madras
High Court on 24.01.2018 for appointment of sole arbitrator.
The appellant contested the petition challenging the jurisdiction
of the Madras High Court on the ground that the parties have
agreed that Seat of arbitration be Bhubaneswar and therefore,
only the Orissa High Court has exclusive jurisdiction to appoint
the arbitrator. The Madras High Court vide impugned order
appointed a former judge of the Madras High Court as the sole
arbitrator by holding that mere designation of “Seat” by parties
does not oust the jurisdiction of other courts other than at the
Seat of arbitration. The High Court 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. Challenging the
impugned order, the appellant has preferred this appeal.
6. The learned counsel for the appellant submitted that when
the parties have agreed for a place/venue for arbitration, it gets
the status of Seat which is the juridical Seat and therefore only,

the Orissa High Court will have the jurisdiction under the Act.
The learned counsel submitted that the Madras High Court
erred in assuming jurisdiction under Section 11(6) of the Act
despite Bhubaneswar being the Seat of arbitration. In this
regard, reliance was placed upon Indus Mobile Distribution
Private Limited v. Datawind Innovations Private Limited and
others (2017) 7 SCC 678, Union of India v. Hardy Exploration
and Production (India) Inc. (2018) 7 SCC 374 and other
judgments. It was contended that the High Court erred in
holding that clause (18) of the agreement does not outst the
jurisdiction of the courts other than the courts at the Seat of
arbitration at Bhubaneswar. The learned counsel submitted
that the High Court erred in not applying the ratio of Indus
Mobile wherein the Supreme Court held that in case of
domestic arbitration where the parties have agreed at the Seat
of arbitration, the said court will have exclusive jurisdiction.
7. Per contra, the learned counsel for the respondent
submitted 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.

Reliance was placed upon para No. (96) of Bharat Aluminium
Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC
552. It was submitted that in domestic arbitration, 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.
It was urged that apart from mere mention of “venue” as place
of arbitration, there should be other concomitant circumstances
like use of words “alone”, “exclusive”, “only” etc. or other
circumstances, then only the jurisdiction of the other court
which otherwise would have had jurisdiction would stand
excluded. Taking us through the impugned order, the learned
counsel for the respondent submitted that mere expression
“venue of arbitration shall be Bhubaneswar will have no special
significance” and the High Court rightly exercised its jurisdiction
under Section 11 (6) of the Act in appointing the arbitrator.
8. We have carefully considered the submissions of both the
parties and perused the impugned order and the judgments
relied upon by the parties.

9. As per Section 2(2) of the Act, arbitrations which take
place in India are governed by Part-I of the Act. The “court”
which will have jurisdiction to decide the questions forming the
subject matter of arbitration is the “court” as defined by Section
2(1)(e) of the Act which reads as under:-
2. Definitions. – (1) In this Part, unless the context otherwise
requires,-
……
(e) “Court” means –
(i) in the case of an arbitration other than international
commercial arbitration, 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 subjectmatter
of the arbitration if the same had been the subjectmatter
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;
(ii) in the case of international commercial arbitration, 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, and in other cases,
a High Court having jurisdiction to hear appeals from
decree or courts subordinate to that High Court.
As per Section 2(2) of the Act, Part-I would apply to all
arbitration where the place of arbitration is in India. Section 2(1)

(e) of the Act defines “court” with reference to Part-I of the Act
and would govern the place of arbitration.
10. In BALCO, the issue arose before the Constitution Bench
was as to whether in international commercial arbitrations
whose juridical or legal Seat of arbitration was outside India
whether the provisions of Part-I of the Act would be applicable
for grant of relief as held in Bhatia International v. Bulk Trading
S.A. and another (2002) 4 SCC 105. The Constitution Bench in
BALCO held that “if the legal or juridical seat of arbitration is
outside India, then Part-I of the Arbitration and Conciliation Act,
1996 shall be inapplicable to such arbitrations; and even in
case a clause in the arbitration agreement purports to apply
Part-I of the 1996 Act to an arbitration where the juridical seat
of arbitration is outside India, Part-I shall be inapplicable to the
extent inconsistent with the arbitration law of the seat of
arbitration.”1
11. In BALCO, the court highlighted the distinction between
the “Seat” and “Venue” in the context of Section 20(3) of the
Act. Section 20(3) of the Act allows the parties to hold
1 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552

meetings, proceedings and hearings at any place agreed by
the parties. In BALCO, the court has held that in an
international commercial arbitration “seated” in India, parties
may by mutual agreement, hold arbitral proceedings outside
India. This, however, would not have the effect of changing the
Seat of arbitration which would continue to remain in India. The
court then envisages a situation where the arbitration
agreement designates a foreign Seat and also selects
Arbitration Act, 1996 as the law applicable to the conduct of
arbitration proceedings and in such circumstances, hearing of
the arbitration conducted at the venue fixed by the parties
would not have the effect of changing the Seat of arbitration
which would remain in India. In para (100), the Supreme Court
held as under:-
“100. True, that in an international commercial arbitration, having
a seat in India, hearings may be necessitated outside India. In
such circumstances, the hearing of the arbitration will be
conducted at the venue fixed by the parties, but it would not have
the effect of changing the seat of arbitration which would remain
in India. The legal position in this regard is summed up by
Redfern and Hunter, The Law and Practice of International
Commercial Arbitration (1986) at p. 69 in the following passage
under the heading “The Place of Arbitration”:
…….

This, in our view, is the correct depiction of the practical
considerations and the distinction between “seat” [Sections 20(1)
and 20(2)] and “venue” [Section 20(3)]. We may point out here
that the distinction between “seat” and “venue” would be quite
crucial in the event, the arbitration agreement designates a
foreign country as the “seat”/“place” of the arbitration and also
selects the Arbitration Act, 1996 as the curial law/law governing
the arbitration proceedings. It would be a matter of construction
of the individual agreement to decide whether:
(i) the designated foreign “seat” would be read as in fact
only providing for a “venue”/“place” where the hearings
would be held, in view of the choice of the Arbitration Act,
1996 as being the curial law, OR
(ii) the specific designation of a foreign seat, necessarily
carrying with it the choice of that country’s
arbitration/curial law, would prevail over and subsume the
conflicting selection choice by the parties of the Arbitration
Act, 1996.
Only if the agreement of the parties is construed to provide for
the “seat”/“place” of arbitration being in India — would Part I of
the Arbitration Act, 1996 be applicable. If the agreement is held
to provide for a “seat”/“place” outside India, Part I would be
inapplicable to the extent inconsistent with the arbitration law of
the seat, even if the agreement purports to provide that the
Arbitration Act, 1996 shall govern the arbitration proceedings.”
12. As pointed out earlier, Section 2(1)(e) of the Act defines
the “Court” with reference to the term “subject-matter of the
suit”. 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. In para (96) of BALCO, the Supreme
Court held that the term “subject-matter” in Section 2(1)(e) of
the Act is to identify the court having supervisory control over
the arbitral proceedings. The Supreme Court held that the
provisions in Section 2(1)(e) of the Act has to be read in
conjunction with Section 20 of the Act which give recognition to
the autonomy of the parties as to “place of arbitration”. The
observations in para No. (96) in BALCO pertaining to
arbitrations governed by Part-I of the Act i.e. where the “place
of arbitration” in India read as under:-
“96. …….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 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.”
The above observations in para No. (96) is in the context that
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, it was observed that 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.
13. As per Section 20 of the Act, parties are free to agree on
the place of arbitration. Party autonomy has to be construed in
the context of parties choosing a court which has jurisdiction
out of two or more competent courts having jurisdiction. This
has been made clear in the three-Judges Bench decision in
Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC
32. In the said case, respondent-Indian Oil Corporation Limited
appointed M/s. Swastik Gases (P) Ltd. situated at Jaipur,
Rajasthan as their consignment agent. The dispute arose
between the parties as huge quantity of stock of lubricants
could not be sold by the applicant and they could not be
resolved amicably. In the said matter, clause 18 of the
agreement between the parties provided that the agreement
shall be subject to the jurisdiction of the courts at Kolkata. The
appellant-Swastik invoked clause 18 – arbitration clause and
filed application under Section 11(6) of the Act before the
Rajasthan High Court for appointment of arbitrator. The
respondent contested the application made by Swastik inter

alia by raising the plea of lack of territorial jurisdiction of the
Rajasthan High Court in the matter. The plea of Indian Oil
Corporation was that the agreement has been made subject to
jurisdiction of the courts at Kolkata and Rajasthan High Court
lacks the territorial jurisdiction in dealing with the application
under Section 11(6) of the Act. The designated judge held that
Rajasthan High Court did not have territorial jurisdiction to
entertain the application under Section 11(6) of the Act and
gave liberty to Swastik to file the arbitration application in
Calcutta High Court which order came to be challenged before
the Supreme Court. Pointing out that the words like “alone”,
“only”, “exclusive” or “exclusive jurisdiction” have not been used
in the agreement and use of such words is not decisive and
non-use of such words does not make any material difference
as to the intention of the parties by having clause 18 of the
agreement that the courts at Kolkata shall have the jurisdiction,
the Supreme Court held as under:-
“31. In the instant case, the appellant does not dispute that part
of cause of action has arisen in Kolkata. What appellant says is
that part of cause of action has also arisen in Jaipur and,
therefore, the Chief Justice of the Rajasthan High Court or the
designate Judge has jurisdiction to consider the application

made by the appellant for the appointment of an arbitrator under
Section 11. Having regard to Section 11(12)(b) and Section 2(e)
of the 1996 Act read with Section 20(c) of the Code, there
remains no doubt that the Chief Justice or the designate Judge
of the Rajasthan High Court has jurisdiction in the matter. The
question is, whether parties by virtue of Clause 18 of the
agreement have agreed to exclude the jurisdiction of the courts
at Jaipur or, in other words, whether in view of Clause 18 of the
agreement, the jurisdiction of the Chief Justice of the Rajasthan
High Court has been excluded?
32. For answer to the above question, we have to see the effect
of the jurisdiction clause in the agreement which provides that
the agreement shall be subject to jurisdiction of the courts at
Kolkata. It is a fact that whilst providing for jurisdiction clause in
the agreement the words like “alone”, “only”, “exclusive” or
“exclusive jurisdiction” have not been used but this, in our view,
is not decisive and does not make any material difference. The
intention of the parties—by having Clause 18 in the agreement—
is clear and unambiguous that the courts at Kolkata shall have
jurisdiction which means that the courts at Kolkata alone shall
have jurisdiction. It is so because for construction of jurisdiction
clause, like Clause 18 in the agreement, the maxim expressio
unius est exclusio alterius comes into play as there is nothing to
indicate to the contrary. This legal maxim means that expression
of one is the exclusion of another. By making a provision that the
agreement is subject to the jurisdiction of the courts at Kolkata,
the parties have impliedly excluded the jurisdiction of other
courts. Where the contract specifies the jurisdiction of the courts
at a particular place and such courts have jurisdiction to deal
with the matter, we think that an inference may be drawn that
parties intended to exclude all other courts. A clause like this is
not hit by Section 23 of the Contract Act at all. Such clause is

neither forbidden by law nor it is against the public policy. It does
not offend Section 28 of the Contract Act in any manner.
33. The above view finds support from the decisions of this Court
in Hakam Singh v. Gammon India Limited (1971) 1 SCC 286,
SCC 163, R.S.D.V. Finance Corporation Private Limited v. Shree
Vallabh Glass Works Limited (1993) 2 SCC 130, Angile
Insulations v. Davy Ashomore India Limited (1995) 4 SCC 153,
Shriram City Union Finance Corporation Limited v. Rama Mishra
(2002) 9 SCC 613, Hanil Era Textiles Limited v. Puromatic Filters
Private Limited (2004) 4 SCC 671 and Balaji Coke Industry
Private Limited v. Maa Bhagwati Coke Gujarat Private Limited
(2009) 9 SCC 403.” [underlining added]
14. In Swastik, the Supreme Court held that clause like (18)
of the agreement will not be hit by Section 23 of the Contract
Act and it is not forbidden by law nor it is against public policy.
It was so held that as per Section 20 of the Act, parties are free
to choose the place of arbitration. This “party autonomy” has to
be construed in the context of choosing a court out of two or
more courts having competent jurisdiction under Section 2(1)
(e) of the Act.
15. The inter-play between “Seat” and “place of arbitration”
came up for consideration in the case of Indus Mobile
Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. and others

(2017) 7 SCC 678. After referring to BALCO, Enercon (India)
Limited and others v. Enercon GMBH and another (2014) 5
SCC 1 and Reliance Industries Limited and another v. Union of
India (2014) 7 SCC 603 and also amendment to the Act
pursuant to the Law Commission Report, speaking for the
Bench Justice Nariman held as under:-
“18. The amended Act, does not, however, contain the aforesaid
amendments, presumably because the BALCO (2012) 9 SCC
552 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. On the facts of the present case, it is clear
that the seat of arbitration is Mumbai and Clause 19 further
makes it clear that jurisdiction exclusively vests in the Mumbai
courts. 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 Sections 16 to 21 of CPC be

attracted. In arbitration law however, as has been held above,
the moment “seat” is determined, the fact that the seat is at
Mumbai would vest Mumbai courts with exclusive jurisdiction for
purposes of regulating arbitral proceedings arising out of the
agreement between the parties.
20. It is well settled that where more than one court has
jurisdiction, it is open for the parties to exclude all other courts.
For an exhaustive analysis of the case law, see Swastik Gases
(P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC 32 This was
followed in a recent judgment in B.E. Simoese Von Staraburg
Niedenthal v. Chhattisgarh Investment Ltd. (2015) 12 SCC 225
Having regard to the above, it is clear that Mumbai courts alone
have jurisdiction to the exclusion of all other courts in the
country, as the juridical seat of arbitration is at Mumbai. This
being the case, the impugned judgment is set aside. …...”
[underlining added]
16. 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. In the present case, the parties have agreed that the
“venue” of arbitration shall be at Bhubaneswar. Considering
the agreement of the parties having Bhubaneswar as the venue
of arbitration, the intention of the parties is to exclude all other
courts. As held in Swastik, non-use of words like “exclusive
jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does
not make any material difference.

17. When the parties have agreed to have the “venue” of
arbitration at Bhubaneswar, the Madras High Court erred in
assuming the jurisdiction under Section 11(6) of the Act. Since
only Orissa High Court will have the jurisdiction to entertain the
petition filed under Section 11(6) of the Act, the impugned order
is liable to be set aside.
18. In the result, the impugned order of the Madras High
Court in OP No.398 of 2018 dated 02.11.2018 is set aside and
this appeal is allowed. The parties are at liberty to approach
the Orissa High Court seeking for appointment of the arbitrator.
…………………………..J.
[R. BANUMATHI]
…………………………..J.
[A.S. BOPANNA]
New Delhi;
July 25, 2019

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