Exclusive Jurisdiction Is Good For Civil Suits, Can't Supersede The Seat Of Arbitration: Jharkhand High Court

The Bench of Justice Sujit Narayan Prasad held that exclusive jurisdiction clause cannot supersede the designation of venue/seat of arbitration.

Striking the balance between the exclusive jurisdiction and seat/venue, the court held that exclusive jurisdiction clause would have the force when the parties take recourse to a Civil Suit and the designation of the venue would determine the seat of arbitration.

Facts

The parties entered into an agreement dated 08.05.2012 for the mining and transportation of bauxite. Clause G.1 of the agreement stipulates that the Courts at Lohardaga, Jharkhand shall have the exclusive jurisdiction, whereas, Clause H.1 provides that any dispute between the parties shall be resolved through arbitration and the place of arbitration would be Renukoot, Uttar Pradesh.

A dispute arose between the parties regarding the withholding of the payments claimed by the petitioner. Accordingly, the petitioner served the notice of arbitration on the respondent and requested it to nominate its arbitrator. The respondent proposed that there should be a sole arbitrator, however, the parties failed to reach a consensus regarding the name of the sole arbitrator, therefore, the petitioner approached the Jharkhand High Court under Section 11(6) of the A&C Act.

The Contention of the Parties

The petitioner argued in favour of the maintainability of the petitioner by making the following submissions:

• The designation of place of arbitration is merely the venue of arbitration and cannot be tantamount to seat of arbitration as the parties have conferred exclusive jurisdiction on the Courts in Jharkhand, therefore, the jurisdiction of other courts stands excluded.
• The exclusive jurisdiction of a different court is a contrary indicia.

The respondent objected to the maintainability of the petition on the following grounds:

• The designation of place of arbitration shall be construed to mean the seat of arbitration.
• The exclusive jurisdiction clause would only become effective if the parties abandon their right to arbitration by filing a civil suit.

Analysis by the Court

The Court referred to numerous Apex Court judgments on the issue of Seat and Venue of Arbitration.

The Court held that in view of the ratio laid down in BGS Soma JV v. NHPC Ltd. (2020) 4 SCC 234 the use of the words "the place of arbitration shall be Renukoot" is indicative of the intention of the parties that Renukoot will be the Seat of arbitration.

The Court held that the intention of the parties in having an exclusive jurisdiction clause will have importance if the parties choose to pursue Civil Suit for resolution of dispute as the cause of action arose within the jurisdiction of Courts at Lohardaga, Jharkhand. However, it the parties choose to settle the dispute through arbitration, then the Court would be determined in accordance with the seat of arbitration which is Renukoot, Uttar Pradesh.

The Court observed that the parties have consciously signed the agreement which designated Renukoot as place/seat of arbitration, therefore, Clause H.1 that provides for exclusive jurisdiction cannot be considered to be a contrary indicia.

The Court remarked that the scope of both the Clauses is distinct as one is for the purpose of a civil suit and the other for arbitration.

Accordingly, the Court dismissed the application as non-maintainable.

Case Title: M/s R.K. Mineral Development Pvt. Ltd. v. Hindalco Industries Ltd. Arbitration Application No. 21 of 2019

Date: 21.07.2022

Citation: 2022 LiveLaw (Jha) 80 

Counsel for the Petitioner: Mr. Summer Gadodia

Counsel for the Respondent: Mr. Indrajit Sinha and Mr. Vijay Kant Dubey

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