Venue Would Not Be The Seat Of Arbitration When The Agreement Confers Exclusive Jurisdiction On The Courts At A Different Place: Calcutta High Court

The High Court of Calcutta has held that the venue would not become the seat of the arbitration when the agreement confers exclusive jurisdiction on the Court in a different place.

The bench of Justice Shekhar B. Saraf held that presence of a clause which confers exclusive jurisdiction upon a Court in a place other than the venue of arbitration is a ‘Contrary Indicia’ that prevents the venue of arbitration from becoming the seat.

The Court held that while interpreting two conflicting clauses in an agreement, the Courts should adopt harmonious rule of construction. It held that the Court should not declare the venue as the seat of arbitration when the agreement contains an exclusive jurisdiction clause conferring jurisdiction upon the Court in a different place as it is a ‘Contrary Indicia’.

Facts

The parties entered into a master rent agreement wherein the petitioner took on rent office equipment and furniture on rent from the respondent. The agreement contained an arbitration clause that provided for Kolkata as the venue of arbitration. The agreement contained another clause which conferred exclusive jurisdiction on Courts at Bombay.

In pursuance of this agreement, the petitioner issued a bank guarantee for a sum of Rs. 74 lakhs in favour of the respondent. The respondent had assigned the rent under the agreement to SREI and directed the petitioner to remit a part of rent to SREI.

SREI reduced the amount of bank guarantee from Rs. 74 lakhs to Rs. 64.68 lakhs. The petitioner requested it to reduce the amount further to Rs. 44 lakhs. SREI sent a letter to the respondent requesting it to reduce the amount as requested, however, this request was declined which led to dispute between the parties for which the petitioner invoked the arbitration agreement. On failure of the parties to mutually appoint the arbitrator, the petitioner approached the Court for the appointment of the arbitrator.

Contention of the Parties

The petitioner made the following submissions in favour of the petition:

• The clause designates Kolkata as the venue of arbitration and in view of the Supreme Court judgment in BGS SGS Soma v. NHPC Ltd, the venue essentially means the seat of the arbitration.
• Kolkata is the seat of arbitration and the Court has the jurisdiction over the arbitration proceedings and to decide the present arbitration petition.
• Merely because another clause in the agreement provides for exclusive jurisdiction on the Courts in Mumbai, it would not tantamount to rendering the venue clause ineffective.
• Further, there is a difference between having jurisdiction over subject matter of the agreement and subject matter of arbitration. In this case, while courts in Mumbai may have jurisdiction over subject matter of the agreement, Kolkata has jurisdiction over the arbitration proceedings.

The respondent objected to the maintainability of the petition and made the following submissions:

• The Court does not have the jurisdiction to entertain the petition as the Courts in Mumbai have been conferred with the exclusive jurisdiction.
• The mere designation of the venue would not translate into the designation of the seat of arbitration when the agreement most evidently contains a contrary indicia in the form of a contradictory exclusive jurisdiction clause.
• The designation of exclusive jurisdiction on the Courts in Mumbai is a contrary indicia within the meaning of the Supreme Court judgment in BGS Soma (Supra).
• The clauses in an agreement cannot be read in isolation each other and the Court must consider other clauses also before giving any definitive finding on any clause. A perusal of the exclusive jurisdiction clause would make it clear that Kolkata is just the venue i.e., a geographical location for the arbitral sittings.
• The dispute is regarding the reduction of the amount of bank guarantee and it is not covered under the agreement containing the arbitration clause, therefore, the dispute so raised is beyond the scope of the arbitration clause.

Analysis by the Court

The Court noted that there is still a great amount of ambiguity on the issue of seat and venue of arbitration. It referred to the Supreme Court judgments in BGS Soma, Indus Mobile, Mankatsu Impex and several other judgments of various High Courts dwelling upon the issue of venue and seat of arbitration and the effect of the presence of a contrary indicia on the venue clause.

The Court also distinguished the judgment of the Apex Court in Mankatsu Impex wherein the Court held the venue to be the seat despite the presence of a contrary jurisdiction clause. It held that the judgment in Mankatsu was in relation to an international commercial arbitration wherein the seat of arbitration was Hong Kong and the agreement contained another clause which clarified that exclusive jurisdiction on Courts in Delhi was purely for the purpose of injunctive relief only. Thus, it was of no assistance to the petitioner.

The Court held that the venue would not become the seat of the arbitration when the agreement confers exclusive jurisdiction on the Court in a different place. It held that presence of a clause which confers exclusive jurisdiction upon a Court in a place other than the venue of arbitration is a ‘Contrary Indicia’ that prevents the venue of arbitration from becoming the seat.

The Court held that while interpreting two conflicting clauses in an agreement, the Courts should adopt harmonious rule of construction. It held that the Court should not declare the venue as the seat of arbitration when the agreement contains an exclusive jurisdiction clause conferring jurisdiction upon the Court in a different place as it is a ‘Contrary Indicia’. It held that Kolkata would only be the venue or the place of arbitration and the seat of arbitration would be Mumbai and only the Courts in Mumbai would have the jurisdiction over the arbitration.

Accordingly, the Court dismissed the petition for lack of jurisdiction.

Case Title: Homevista Décor & Furnishing Pvt. Ltd. v. Connect Residuary Pvt. Ltd. A.P. No. 358 of 2020

Date: 08.06.2023

Counsel for the Petitioner: Mr. Krishnaraj Thaker, Adv Ms. Saptarshi Banerjee, Adv. Ms. Namrata Basu, Adv. Ms. Sreenita Ghosh Thaker, Adv.

Counsel for the Respondent: Mr. Sanjay Kumar Baid, Adv. Mr. Rishab Karnani, Adv.

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