Place Designated As The "Venue" Of Arbitration In Its Entirety, Is The "Seat" Of Arbitration: Bombay High Court
The Bombay High Court has reiterated that whenever a place is designated as the "venue" of the arbitration proceedings in its entirety in an Arbitration Clause, the said place would necessarily be the "seat" of the arbitral proceedings. The Single Bench of Justice G.S. Kulkarni held that such part of the Arbitration Agreement wherein the parties had agreed upon the venue...
The Bombay High Court has reiterated that whenever a place is designated as the "venue" of the arbitration proceedings in its entirety in an Arbitration Clause, the said place would necessarily be the "seat" of the arbitral proceedings.
The Single Bench of Justice G.S. Kulkarni held that such part of the Arbitration Agreement wherein the parties had agreed upon the venue of the arbitration proceedings, would be required to be read as distinct and independent from the arbitral mechanism agreed between the parties.
After certain disputes between the applicant Priya Malay Sheth and the respondent VLCC Health Care Ltd. under an agreement arose, the applicant invoked the arbitration clause. The applicant filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Bombay High Court for appointment of an Arbitrator.
The respondent VLCC submitted before the High Court that as per the Arbitration Agreement between the parties, the arbitral proceedings are to be held at Delhi. Hence, the respondent averred that the seat of the arbitration is at Delhi and therefore, the Bombay High Court did not have the jurisdiction to entertain the application.
The applicant Priya Malay Sheth averred that as per the first clause of the Arbitration Agreement, if the parties failed to resolve the disputes between them by mutual consent, then either party may give a notice in writing of its intention to refer the dispute to arbitration, and that a Sole Arbitrator would then be appointed by the respondent VLCC. The applicant added that the second Clause of the Arbitration Agreement provided that in such event, the arbitration would be conducted in accordance with the ICC Rules and that the venue of the arbitration would be in Delhi.
The applicant contended that since the applicant had invoked the arbitration agreement by issuing a notice to the respondent and that as there was a failure on the part of the respondent to agree to the appointment of an arbitrator, the second Clause of the Arbitration Agreement was rendered inconsequential.
Hence, the applicant submitted that only in the event that an Arbitral Tribunal was appointed as agreed upon under the first Clause, could the procedure contemplated under the second Clause take effect.
The applicant added that under the first Clause, the respondent had been conferred a unilateral authority to appoint an Arbitral Tribunal. Hence, the applicant averred that the said Clause was inconsequential in view of the settled principle of law laid down by the Supreme Court that a party to a contract cannot have an authority to unilaterally appoint an Arbitral Tribunal.
The applicant averred that the respondent failed to act on the arbitration agreement, hence the respondent could not seek recourse to the second Clause of the Arbitration Agreement. The applicant added that in view of the definition of "Court" contained in Section 2(1)(e) of the A&C Act, the Bombay High Court could exercise jurisdiction under Section 11 of the A&C Act and appoint an Arbitral Tribunal.
The Court observed that the Supreme Court in the case of Perkins Eastman Architects DPC. Vs. HSCC (India) Ltd. (2019), had held that a party interested in the outcome of the arbitral proceedings does not have any unilateral power to appoint an arbitrator. The Supreme Court had added that this would, however, not invalidate the Arbitration Agreement. The Supreme Court had accordingly appointed an independent arbitrator.
Hence, the Court noted that the first Clause by conferring an authority on the respondent to appoint an arbitrator unilaterally, was bad in law. The Court added that the respondent could not have any unilateral authority to appoint an Arbitral Tribunal.
The Court observed that under the first Clause of the Arbitration Agreement, the parties had agreed to the modalities of appointing an Arbitral Tribunal of a sole arbitrator. The Court noted that under the second Clause, the parties had agreed to the manner in which the arbitral proceeding would be conducted, i.e., by following the ICC Rules. The Court added that under the second Clause, the venue of the arbitration was decided to be at Delhi.
The Court, thus dismissed the contention of the applicant that the first and second Clause of the Arbitration Agreement were interlinked. The Court held that the said Clauses were distinct and had an independent purport.
The Court held that the intention of the parties was clear that the seat of arbitration was to be at Delhi since the parties had categorically agreed in the second Clause that the venue of the arbitration "shall be" at Delhi.
The Court ruled that such part of the Arbitration Agreement wherein the parties had agreed that the venue of the arbitration shall be at Delhi, would be required to be read as distinct and independent from the arbitral mechanism agreed between the parties.
Th Court added that once the parties had agreed that the seat of the arbitration was to be at Delhi, then the supervisory jurisdiction over the arbitral proceedings would be with the Courts at Delhi.
The Court observed that the Supreme Court in the case of Bharat Aluminium Company & Ors. vesus Kaiser Aluminium Technical Service, Inc. & Ors. (2012) had observed that the "subject matter of the arbitration" cannot be confused with the "subject matter of the suit", and that the term "Court", as defined in Section 2(1)(e) of the A&C Act, was to be identified with the "Court" having supervisory control over the arbitration proceedings. The Supreme Court had held that the "Court", as defined in Section 2(1)(e), would essentially be a Court of the seat of the arbitration process.
The Supreme had ruled that the definition of "Court" has to be construed keeping in view the provisions of Section 20 of the A&C Act, which gives recognition to party autonomy.
The Court further noted that the Supreme Court in the case of BGS SGS Soma JV versus NHPC Ltd. (2019) had ruled that whenever a place is designated as the "venue" of the arbitration proceedings in an Arbitration Clause, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings. The Supreme Court had held that this was because the expression "arbitration proceedings" does not include just one or more individual or particular hearings, but that it includes the arbitration proceedings as a whole, including the making of an award at that place.
Hence, the Court ruled that once the parties had agreed that the venue of the arbitration in its entirety shall be at Delhi, the seat of arbitration was necessarily at Delhi. Thus, the Court held that the jurisdiction to entertain the proceedings for appointment of an Arbitral Tribunal would lie only with the Courts at Delhi.
Therefore, the Court dismissed the application on the ground that it did not have the jurisdiction to entertain the application.
Case Title: Priya Malay Sheth versus VLCC Health Care Ltd.
Dated: 06.06.2022 (Bombay High Court)
Citation: 2022 LiveLaw (Bom) 242
Counsel for the Applicant: Mr. Advait Sethna, Advocate a/w. Mrs. Ruju R. Thakkar & Mr. Tanay M. Mandot
Counsel for the Respondent: Mr. Zal Andhyarujina, Sr. Advocate a/w. Mr. Raghavendra Mehrotra, Mr. Shrey Sancheti, Ms. Riya Sayed i/by Lawkhart Legal