Arbitration Proceedings Against IRCTC; Delhi High Court Rejects Unilateral Appointment Of Arbitrator

The bench of Justice Mini Pushkarna held that venue would not become the seat when the tender documents, the process of award of tender, licence fees, signature and execution of the agreement and the jurisdiction of Court all happens to be on a place other than the venue.

The Court further held that the procedure for appointing the sole arbitrator from the panel of arbitrators maintained by the Employer would be hit by Section 12(5) of the Act.

Facts

The petitioner deals in the business of catering and running food outlets/stalls across various railway stations in India and the respondent is a Central PSU providing ticketing, catering and tourism services to the Indian Railways.

The respondent awarded two licence agreements dated 29.07.2016 and 02.08.2016 to the petitioner to setup food plaza at Patliputra Railway Station and Tata Nagar Railway Station respectively. A Master Licence Agreement dated 27.07.2017 was also executed by the parties.

A dispute arose between the parties and on the failure of the parties to mutually appoint the sole arbitrator, the petitioner filed two applications under Section 11 of the A&C Act for appointment of arbitrator under both the licence agreements.

Contention of the Parties

The petitioner sought the appointment of the arbitrator on the following grounds:

• The arbitration clause stipulates the unilateral appointment of arbitrator and the same is prohibited under the law, therefore, the Court must appoint the independent arbitrator for adjudicating the dispute between the parties.

The respondent raised the following objections:

• The High Court of New Delhi does not have the jurisdiction as the Zonal Offices i.e., Patliputra and Tata Nagar, have been designated as the venue of arbitration, therefore, only the Courts at those places would have the jurisdiction to entertain any application arising out of the dispute between the parties.
• The parties are bound of the arbitration clause, hence, the arbitrator is to appointed only as per the procedure stipulated under the Agreement. Accordingly, the arbitrator can only be appointed from the panel maintained by the respondent.

Analysis by the Court

Firstly, the Court decided on the objection regarding lack of jurisdiction. It observed that the parties have designated Zonal Offices as the venue of arbitration under both the agreements.

The Court held that although both the words are often used interchangeably, however, there is a significant difference between the two. It held that seat is the 'situs' of arbitration and the venue is merely the 'geographical location' where the arbitration proceedings are held, therefore, mere designation of 'venue' would not make it the 'seat' of arbitration.

The Court observed that in one of the agreements, the Courts at New Delhi have been conferred the jurisdiction. Similarly, tender documents, LOA, payment of licence fees, execution of Master Licence Agreement and all the effective control was exercised by the Headquarters at New Delhi, as such, the cause of action clearly arises, either wholly or in part, in New Delhi in terms of Section 20 of Code of Civil Procedure.

It held that jurisdiction is conferred on Courts at New Delhi, all major dealings happened at New Delhi and the Headquarters at New Delhi exercised control over the Zonal Offices regarding the contracts, therefore, all this indicates that the zonal offices were mere 'venues' and the 'seat' of arbitration is New Delhi only.

Next, the Court rejected the objection regarding the appointment only from the panel of arbitrators maintained by the respondent. It held that by virtue of Section 12(5), inserted vide the 2015 Amendment, there cannot be a unilateral appointment of the sole arbitrator. It held that unilateral appointment as given under the agreement between the parties will be de jure void ab initio.

Accordingly, the Court allowed the application and appointed the arbitrator.

Case Title: KMA Caterers v. Indian Railway Catering and Tourism Corporation (IRCTC)

Citation: 2022 LiveLaw (Del) 1031

Date: 31.10.2022

Counsel for the Petitioner: Mr. Akshat Bajpai, Mrs. Ishanee Sharma, Mr.Rishabh Mishra and Mr.Shobhit Trehan, Advocates

Counsel for the Respondent: Mr. Jitendra Kr. Singh, Ms.Anjali Kumari and Mr.Rudresh Tripathi, Advocates

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