Venue Would Be The ‘Seat’ Of Arbitration When There Is No Significant Contrary Indicia Present In The Agreement: Calcutta High Court

The High Court of Calcutta has held that venue would be the seat of arbitration when the agreement between the parties contains no significant contrary indicia.

The bench of Justice Krishna Rao also held that merely because the arbitration agreement does not clearly provide for the law governing the arbitration, it would not make the agreement ambiguous, vague or uncertain so to allow refusal of reference to arbitration under Section 45 of the Act.

The Court held that judicial interference under Section 45 is not permitted, on grounds of agreement being null and void, inoperative or incapable of being performed arising out of objection regarding ambiguity as to the law applicable law, as long as the intention of the parties to refer the dispute to arbitration is clear.

Facts

The parties entered into an agreement dated 27.10.2016 wherein the applicant/defendant was to design, manufacture and supply goods to the respondent/plaintiff. Clause 19 of the agreement provided for resolution of any dispute by way of arbitration. Singapore was designated as the venue of arbitration and the law governing the arbitration was ‘International Arbitration Law’.

A dispute arose between the parties about the quality of the goods delivered by the applicant; accordingly, the respondent filed a suit for the recovery of the money paid along with interest. Thereafter, the applicant moved an application under Section 8 of the A&C Act requesting the Court to refer the dispute to arbitration as the agreement between the parties contains an arbitration agreement under Clause 19.

Objections

The respondent objected to the maintainability of the petition on the ground that the arbitration clause is invalid owing to the inherent ambiguity regarding the law governing the arbitration. It was contended that the clause makes reference to a non-existing body of laws as there are no laws known as ‘International Arbitration Laws’.

Moreover, the clause only provides for the venue of arbitration and the absence of designation of proper laws governing arbitration coupled with the absence of designation of seat makes the arbitration clause an invalid clause and it does not fulfil the necessary elements of an arbitration clause.

The applicant countered the above arguments by contending that at the stage of appointment of arbitrator, the Court’s inquiry would be limited to prima facie examination of the agreement and there is a clear arbitration agreement contained under Clause 19 of the agreement, moreover, the clause designates Singapore as the venue of arbitration and in absence of any contrary indicia, the venue tantamount to the designation of seat of arbitration, therefore, the suit should be dismissed and the parties should be referred to arbitration under Section 8 of the A&C Act.

Analysis by the Court

The Court examined Clause 19 of the agreement and held that the intention of the parties to arbitrate is evidently clear from a bare perusal. The Court held that merely because the agreement does not provide for a clear law governing the arbitration, it cannot be termed that the agreement has elements of ambiguity, uncertainty or vagueness.

The Court held that judicial interference under Section 45 is not permitted, on grounds of agreement being null and void, inoperative or incapable of being performed arising out of objection regarding ambiguity as to the law applicable law, as long as the intention of the parties to refer the dispute to arbitration is clear.

Next, the Court examined the issue of venue and seat of arbitration. The Court referred to the landmark judgment of the Apex Court in BGS SGS Soma to rule that the designation of Singapore as the venue of arbitration makes it the seat of arbitration as there is no contrary indicia present in the agreement.

Accordingly, the Court allowed the application under Section 8 of the A&C Act.

Case Details: Orissa Metaliks Pvt. Ltd. v. SBW Electro Mechanics Import Export Corporation, IA No. GA 2 of 2021 in CS 109 of 2020

Date: 22.06.2023

Counsel for the Applicant: Mr. Jishnu Chowdhury Mr. Ratul Das Mr. Niladri Banerjee Mr. Deepankar Thakur

Counsel for the Respondent: Mr. Debarshi Dutta Mr. Rajarshi Dutta Mr. Vikas Baisya Mr. Aayush Kevlani Mr. Sarbajit Mukherjee

Click Here To Read/Download Order