When Parties Decide The Place Of Arbitration, Only The HC Having Territorial Jurisdiction Over That Place Can Entertain Application U/S 11 Of Arbitration Act: Orissa HC [Read Order]

The Orissa High Court on Thursday (01st October) refused to entertain a petition filed under Section 11 (6) of the Arbitration and Conciliation Act of India, 1996 observing that "the Court does not have the territorial jurisdiction to entertain the petition"The Bench of Chief Justice Mohammad Rafiq was hearing an application filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 by the petitioner-M/s. SJ Biz Solutions Pvt. Ltd. filed an application (for short, "Act, 1996") seeking appointment of an independent arbitrator to arbitrate the disputes between the petitioner and the opposite party.The matter before the CourtThe case of the petitioner was that a dealership agreement (in January 2014, which was renewed from time to time) was entered into between the Petitioner - M/s. SJ Biz Solutions Pvt. Ltd. and the opposite party-M/s. Sany Heavy Industry India Pvt. Ltd., a manufacturer of heavy construction equipment. Lastly, the contract was extended on 01.01.2017 for a period of one year till 31.12.2017.Pursuant to the agreement, the petitioner submitted Bank Guarantee for a sum of Rs.25,00,000/- drawn in the Bank of Baroda in favour of the opposite party.It was alleged that even as the dealership agreement was subsisting, the opposite party (M/s. Sany Heavy Industry India Pvt. Ltd.), illegally terminated the agreement on 04.09.2017, much prior to the expiry of the period.Both the parties on various occasions decided that the dispute would be settled, however, the Petitioner didn't get the payment as promised by the opposite party.As the matter stood thus, the petitioner received a letter dated 05.04.2018 from Bank of Baroda, Barbil Branch, wherein it was intimated to the petitioner that they have received a notice dated 29.03.2018 from the opposite party invoking Bank guarantee in order to make payment of Rs.25,00,000/-.The petitioner by its letter dated 23.07.2018 invoked the arbitration Clause 15.3 of the Dealership Agreement dated 17.01.2017 and requested the opposite party to appoint a sole Arbitrator.The said letter was received by the opposite party on 01.08.2018. Since the opposite party failed to appoint the arbitrator within a period of 30 days, the petitioner was constrained to file this petition under Section 11(6) of the Act, 1996.Arguments Put forthPetitioner's Arguments - The counsel for the petitioner submitted that even if the parties in clause 15 of the Dealership Agreement (Annexure-1) agreed that the place of arbitration shall be at 'Pune', the jurisdiction of this Court to entertain the present application filed under Section 11(6) of the Act, 1996 is not excluded as the cause of action, wholly, or at least in part, has arisen in the territory of the State of Orissa.It was contended that in view of Section 20(1) of the Act, 1996 the parties are free to choose the place of arbitration.Importantly, it was argued that the word 'place' in Section 20 has been used in the sense of the word 'Venue'. Even if the parties in the present case in clause 15.3 of the Dealership Agreement agreed upon the place of arbitration at 'Pune', the word 'place' used therein only denotes the venue of arbitration proceedings, which can take place anywhere.The Arguments of the Opposite Party - The counsel for the opposite party argued that Section 20 of the Act, 1996 has given the freedom to the parties to decide the place of arbitration.Further, it was contended that if the parties in the agreement have chosen a particular place as the place of arbitration, only the High Court having territorial jurisdiction over that place would be competent to entertain and decide the application under section 11 for the appointment of the arbitrator.Court's AnalysisThe Orissa High Court relied on the Supreme Court's rulings in the case of Indus Mobile Distribution Pvt. Ltd. vs. Datawind Innovations Private Ltd. & Ors., (2017) 7 SCC 678, wherein, the Apex Court had revisited the 5-judge bench decision in the case Bharat Aluminium Company (BALCO) vs. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552.In the Case of Indus Mobile (supra), the Supreme Court, while analyzing the definition of the 'Court' under Section 2 (1) (e) and Section 20 of the Act of 1996, had categorically held that the moment the seat (of arbitration) is designated; it is akin to an exclusive jurisdiction clause.In that case, the seat of arbitration was decided by the parties to be Mumbai. The relevant clause of the agreement made it clear that the jurisdiction exclusively vests in the Mumbai courts.The Supreme Court held that under the Law of Arbitration, unlike the code of Civil Procedure, which applies to suits filed in courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause.Further, the Orissa High Court in the present matter also observed that the Supreme Court, in a recently delivered decision in Brahmani River Pellets Limited vs. Kamachi Industries Ltd., (2020) 5...

When Parties Decide The Place Of Arbitration, Only The HC Having Territorial Jurisdiction Over That Place Can Entertain Application U/S 11 Of Arbitration Act: Orissa HC [Read Order]

Sparsh Upadhyay

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