Honey Bee Multitrading Pvt. Ltd. v. Ruchi Soya Industries Ltd.

12. Before I proceed to deal with the rival contentions to ascertain whether, this Court would be in a position to exercise it’s power for appointment of an Arbitrator in terms of clause 20 of the Lease Agreement, it would be apposite to reproduce the arbitration clause contained in the Agreement, which reads thus:- “In case of any dispute/difference arising out of this agreement, the same shall be referred to the sole Arbitrator to be appointed by the Lessee in consultation and approval with 8 2022 LiveLaw (SC) 493 the Lessor. Incase of failure to appoint Arbitrator with mutual consent then High Court Judge will decide the Arbitrator. The award passed by the Arbitrator shall be fnal and binding upon the parties. The venue of arbitration shall be Mumbai.”

13. The statutory scheme compiled in the Act of 1996 provide for appointment of an Arbitrator by the Court, when the circumstances enumerated in Section 11 of the Act of 1996, come into foreplay and in particular, where the parties to an agreement fail to arrive at the consensus regarding the appointment of the Arbitrator, and as contemplated by the appointment procedure agreed between the parties, one party fails to act as required or the parties or the two appointed arbitrators fail to reach an agreement expected of them, or under the procedure, a person, including an institution, fails to perform any function entrusted to him or it, on a request by the parties, the High Court or the Supreme Court, as the case may be, take such necessary measures as are warranted.

14. The Act of 1996 has defned certain terms and in Section 2, the term ‘Court’ is defned as under:- “(e) “Court” means-

(i) in the case of an arbitration other than intentional commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of Courts subordinate to that High Court.”

15. Section 20 of the Act specify the place of arbitration and the relevant Section reads thus:- “20. Place of arbitration.-(1) The parties are free to agree on the place of arbitration. (2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenienece of the parties. (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.” Another relevant Section for determining the discord between the parties as regards the selection of seat/venue of arbitration, is in form of Section 42, which determine the jursidiction and reads thus:- “42.Jurisdiction.- Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.”

16. The Act of 1996 do not defne the term ‘venue’ as well as the term ‘seat’, though Section 20 of the Act has left the discretion in the parties to agree on the ‘place of arbitration’. Failing any agreement between the parties, the place of arbitration shall be determined by the Arbitral Tribunal, having regard to the circumstances of the case, including the convenience of the parties. In the wake of a notwithstanding clause, the Arbitral Tribunal may, unless otherwise agreed by the parties, meet at any place, which it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, of for inspection of documents, goods or other property. The discretion is left in the parties to agree upon the language to be used in the proceedings and if there is no agreement, the Arbitral Tribunal shall determine the language to be used throughout the proceedings.

17. The place of arbitration in terms of Section 20 may thus either refer to ‘seat’ or ‘venue’ and the legislature has carefully chosen not to apply the term, ‘venue’ or ‘seat’, but instead it has used th e term ‘place of arbitration’. The term ‘place of arbitration’ itself carries two distinct meanings; Section 20(1) and 20(2) signifying the seat of arbitration, whereas notwithstanding sub-section (1) and (2) of Section 20, any indication to the location, as distinct from the seat, where the Arbitral Tribunal would conduct it’s proceedings, signifying the geographical location. Despite the importance of choice of a ‘seat’ in arbitration proceedings, it being a juridical concept, the arbitration agreements often apply the terms ‘seat’, ‘venue’ or ‘place’ inter-changeably and in such situation, it is left either to the Court or Arbitral Tribunal to determine, which place would amount to ‘seat’ of the arbitration.

18. Indian jurisprudence on the subject of arbitration, undisputedly has witnessed divergent use, with regard to it’s various fascets, including the subject-matter of arbitrability of the dispute and the fne line of distinction between ‘seat’ and ‘venue’. Through various binding precedents, the highest Court of this country, the Hon’ble Apex Court and various High Courts assigned distinct connotation to the term ‘seat’, ‘venue’, ‘place’, but it was the Constitution Bench of the Apex Court in the case of BALCO (supra) examined the concept of ‘seat’ and ‘venue’ and deduced an inference that they are distinct. It offered a clarifcation that although the arbitration proceedings may take place anywhere in the world, the seat of those proceedings is located at a specifc Arbitral institution such as international commercial Court or another similar authority, whereas the venue where the meetings are held, would only refer to any geographical area, within which the party can negotiate.

19. The conundrum between the ‘seat’ and the ‘venue’ expressedly featured in the case of BALCO (supra) before a Constitution Bench of the Apex Court, and in paragraph 75, Their Lordships turned down the argument advanced, that Act of 1996 does not make seat of the arbitration as the centre of gravity and observed as under:- “75. We are also unable to accept the submission of the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in most of the national laws, arbitrations are anchored to the seat/place/situs of arbitration. Redfern in Paragraph 3.54 concludes states that “the seat of the arbitration is thus intended to be its centre of gravity.” This, however, does not mean that all the proceedings of the arbitration have to take place at the seat of the arbitration. The arbitrators at times hold meetings at more convenient locations. This is necessary as arbitrators often come from different countries. It may, therefore, on occasions be convenient to hold some of the meetings in a location which may be convenient to all. Such a situation was examined by the court of appeal in England in Naviera Amazonica Peruana S.A. Vs. Compania Internacionale de Seguros del Peru wherein at p.121 it is observed as follows: “The preceding discussion has been on the basis that there is only one “place” of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or “seat” of the arbitration. This does not mean, however, that the arbitral tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an arbitral tribunal to hold meetings or even hearings in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses…… It may be more convenient for an arbitral tribunal sitting in one country to conduct a hearing in another country, for instance, for the purpose of taking evidence….. In fact circumstances each move of the arbitral tribunal does not of itself mean that the seat of arbitration changes. The seat of arbitration remains the place initially agreed by or on behalf of the parties.” Paragraph 76, further recorded as under:- “76. It must be pointed out that the law of the seat or place where the arbitration is held, is normally the law to govern that arbitration. The territorial link between the place of arbitration and the law governing that arbitration is well established in the international instruments, namely, the New York Convention of 1958 and the UNCITRAL Model Law of

1985. It is true that the terms “seat” and “place” are often used interchangeably. In Redfern and Hunter on International Arbitration, 5th Edn. (para 3.51), the seat theory is defned thus: “The concept that an arbitration is governed by the law of the place in which it is held, which is the ‘seat’ (or ‘forum’ or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration. In fact, the 1923 Geneva Protocol states: “2. The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place.”

20. Dealing with the defnition of the term “Court”, in paragraph 96, the Constitution Bench has remarked as under:- “96. ….. We are of the opinion, the term “subject-matter of the arbitration” cannot be confused with “subject-matter of the suit”. The term “subject-matter” in Section 2(1)(e) is confned to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the Courts of Delhi being the Courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the Courts would have jurisdiction, i.e. the Court within whose jurisdiction the subject matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located.”

21. While construing Section 20, which determine the place of arbitration, it was specifcally held as under:- “98......A plain reading of Section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any “place” or “seat” within India, be it Delhi, Mumbai etc. In the absence of the parties’ agreement thereto, Section 20(2) authorises the tribunal to determine the place/seat of such arbitration. Section 20(3) enables the tribunal to meet at any place for conducting hearings at a place of convenience in matters such as consultations among its members for hearing witnesses, experts or the parties.” In Paragraph 117 of the law report, the conclusion is drawn in the following words:- “117. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat/place of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable the Indian courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English procedural law/curial law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat/place in India.”

22. The Constitution Bench accepted that the parties could confer jurisdiction on an unconnected/neutral forum to supervise arbitration proceedings, but did not offer clarifcation, whether this choice would be the exclusive or non-exclusive choice. This clarifcation, however, came from the Apex Court in the case of Indus Mobile Distribution Private Limited (supra) wherein it was clarifed that the contracting party would choose an un-connected forum as a ‘seat’ and that would vest exclusive jurisdiction in the said Court to decide any dispute.

23. In the case of Union of India Vs. Hardy Exploration and Production (India) Inc.9, the parties entered into a production sharing contract containing an arbitration clause, which provided that the “venue of conciliation or arbitration proceedings....unless the parties otherwise agree, shall be Kuala Lumpur...” and that “arbitration proceedings shall be conducted in accordance with the UNCITRAL Model Law on International Commercial Arbitration of 1985....” Union of India challenged the arbitral award rendered in the arbitration proceedings under Section 34 of the Act before the Delhi High Court on the ground that the arbitration clause did not satisfy the seat of arbitration, but only specifed the venue of arbitration as ‘Kuala Lumpur’ and, hence, New Delhi was the ‘seat’ of arbitration. The above claim was contested by Hardy Exploration and in the background facts, the Apex Court held that the choice of Kuala Lumpur as a ‘venue’ did not mean that Kuala

Lumpur was the ‘seat’ of arbitration. It was held that the mere choice of venue could not by itself be construed as choice of the seat of arbitration; instead, venue could become the seat, if someting else is added to it as a concomitant, though the Apex Court did not deem it appropriate to identify as to what would be the additional factors, which would be considered by it to determine, whether the choice of venue is to be treated as choice of seat.

24. After this decision, came the verdict of the Hon’ble Apex Court in the case of Brahmani River Pellets Limited (supra), wherein the arbitration clause in form of caluse 18 read thus:- “18. Arbitration shall be under Indian Arbitration and Conciliation Law 1996 and the Venue of Arbitration shall be Bhubaneswar.” In paragraph 15, the Apex Court held as under:- “15. As per Section 20 of the Act, parties are free to agree on the place of arbitration. Party autonomy has to be construed in the context of parties choosing a court which has jurisdiction out of two or more competent courts having jurisdiction. This has been made clear in the three-Judges Bench decision in Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd.

15.1. In the said case, respondent-Indian Oil Corporation Ltd. appointed M/s. Swastik Gases (P) Ltd. situated at Jaipur, Rajasthan as their consignment agent. The dispute arose between the parties as huge quantity of stock of lubricants could not be sold by the applicant and they could not be resolved amicably. In the said matter, Clause 18 of the agreement between the parties provided that the agreement shall be subject to the jurisdiction of the courts at Kolkata. 15.[2] The appellant-Swastik invoked Clause 18 – arbitration clause and fled application under Section 11(6) of the Act before the Rajasthan High Court for appointment of arbitrator. The respondent contested the application made by Swastik inter alia by raising the plea of lack of territorial jurisdiction of the Rajasthan High Court in the matter. The plea of Indian Oil Corporation was that the agreement has been made subject to jurisdiction of the courts at Kolkata and the Rajasthan High Court lacks the territorial jurisdiction in dealing with the application under Section 11(6) of the Act. 15.[3] The designated Judge held that Rajasthan High Court did not have territorial jurisdiction to entertain the application under Section 11(6)of the Act and gave liberty to Swastik to fle the arbitration application in the Calcutta High Court which order came to be challenged before the Supreme Court. 15.[4] Pointing out that the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used in the agreement and use of such words is not decisive and non-use of such words does not make any material difference as to the intention of the parties by having Clause 18 of the agreement that the courts at Kolkata shall have the jurisdiction, the Supreme Court held as under:- “31. In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What the appellant says is that part of cause of action has also arisen in Jaipur and, therefore, the Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11. Having regard to Section 11(12) (b) and Section 2(e) of the 1996 Act read with Section 20(c) of the Code, there remains no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court has jurisdiction in the matter. The question is, whether parties by virtue of Clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of Clause 18 of the agreement, the jurisdiction of the Chief Justice of the Rajasthan High Court has been excluded?

32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties—by having Clause 18 in the agreement— is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifes the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner.”

25. Paragraphs 18 and 19 recorded the conclusion in the following words:- “18. Where the contract specifes the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the “venue” of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As held in Swastik, non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.

19. When the parties have agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition fled under Section 11(6) of the Act, the impugned order is liable to be set aside.”

26. In this case, the Hon’ble Supreme Court deviated from the decision in Hardy Exploration (supra) holding that the parties’ choice of the “venue of arbitration” is really that of the “seat of arbitration”, though the Apex Court did not consider it necessary to examine whether there existed any circumstances, justifying designation of venue as designation of seat.

27. Thereafter, the Apex Court was once again confronted with a similar issue in BGS SGS Soma JV (supra), wherein the arbitration agreement specifed that, “the arbitration proceedings shall be held at New Delhi/Faridabad”. It is this decision, in which the Apex Court declared it’s earlier decision in Hardy Exploration (supra) to be per incuriam, since it did not follow the decision of the Five-Judge Bench in BALCO (supra), which approved the “shashoua principle”. The Hon’ble Apex Court reiterated the “shashoua principle” and laid down the following tests for determining the ‘seat’ of arbitration:- “1. Where the arbitration clause contains a choice of a place as the venue of arbitration proceedings, the use of the expression “arbitration proceedings” signifes that the entire proceedings would be held at such place, as opposed to one or more hearings. In such case, the chosen venue is really the seat of the arbitration.

2. Where the arbitration clause contains wording such as “tribunals are to meet at or have witnesses, experts or the parties” where only hearings are to be conducted at such place, it would lead to the conclusion that, other things beings consistent, the chosen venue is not the seat of the arbitration.

3. Where the arbitration clause contains wording such as “arbitration proceedings shall be held at” at a particular venue, this would indicate that the arbitration proceedings are anchored at such venue and accordingly, such venue is the seat of the arbitration.

4. In all these cases above, there must be no other “signifcant contrary indicia” which suggest that the chosen venue is merely a geographically convenient place for meeting and not the seat of the arbitration.

5. In the context of an international arbitration, if a supranational body of rules is to govern the arbitration, then this would be a further indication that the venue is really the seat of the arbitration Similarly, in the context of a domestic arbitration, the choice of the Act to govern arbitral proceedings would point towards the choice of venue being in reality a choice of seat.” In paragraph, 61, the Hon’ble Apex specifcally held that, “wherever there is an express designation of a “venue”, and no designation of any alternative place as the “seat”, combined with a supranational body of rules governing the arbitration, and no other signifcant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitration proceedings.”

28. In paragraph 82, it is specifcally held as under:- “82. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings, the expression “arbitration proceedings would make it clear that the “venue” is really the “seat” of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as “tribunal are to meet or have witnesses, experts or the parties” where only hearings are to take place in the “venue”, which may lead to the conclusion, other things being equal, that the venue so stated is not the “seat” of arbitral proceedings,but only a convenient place of meeting. Further, the fact that the arbitral proceedings “shall be held” at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that the place is the seat of the arbitral proceedings. This, coupled with there being no other signifcant contrary indicia that the stated venue is merely a “venue” and not the “seat” of the arbitral proceedings, would then conclusively show that such a clause designates a “seat” of the arbitral proceedings. In an international context, if a supranational body of rules is to govern the arbitration, this would further be an indicia that “the venue”, so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the “stated venue”, which then becomes the “seat” for the purposes of arbitration.”

29. Another decision of the Apex Court, which is relevant and which must be referred to is in the case of Mankastu Impex Private Limited (supra), where the parties, an Indian company and a Hong Kong company had entered into a Memorandum of Understanding (MoU), which stipulated Indian law as governing law and specifed that the Court at New Delhi has jurisdiction for resolution of disputes by providing as under:- “Arbitration administered in Hong Kong” and “place of arbitration shall be Hong Kong”. When the dispute arose between the parties, the Mankastu Impex Private Limited approached the Supreme Court for appointment of a sole arbitrator under Section 11(6) of the Act of 1996 and it was contended that the Courts at New Delhi shall have jurisdiction and the seat of arbitration was New Delhi. Relying upon the decision in the case of Hardy Exploration (supra), it was argued that Hong Kong was only the venue and not the seat. The respondent -Airvisual, relying upon the decision in the case of BGS SGS Soma JV (supra), contended that Hong Kong was the seat of arbitration, on the basis that the arbitration agreement in the MoU specifcally provided that the place of arbitration was Hong Kong. In the wake of the rival contentions, it was held that mere reference to Hong Kong as the “place of arbitration” did not signify that the parties had chosen Hong Kong as the seat of arbitration. Instead, the intention of the parties have to be determined by examining the rest of the arbitration agreement and their conduct, as the use of the words “arbitration administered in Hong Kong” in rest of the agreement clearly indicated that the seat of the arbitration was Hong Kong and the Hong Kong law was the procedural law and, hence, the Indian Courts did not have jurisdiction.

30. Once again in PASL Wind Solutions Private Limited Vs. GE Power Conversion Indian Private Limited10, the Hon’ble Supreme Court clarifed the position in the case of Mankastu Impex (supra), when it drew a parallel in the agreement between the parties, which provided for “that dispute to be resolved in Zurich in accordance with the Rules of Conciliation and Arbitration of the ICC”. It was held that seat of arbitration is Zurich and this conclusion was derived upon one signifcant factor, being the agreement between the parties provided that the dispute shall be resolved in Zurich.

31. In this legal scenario, when the position of law was crystallised as above, the Two-Judge Bench of the Apex Court delivered it’s decision in the case of Ravi Ranjan (supra), where it determined a similar issue, in the backdrop of the fact that the Development Agreement was entered into between the parties for development of the property situated at Muzaffarpur in Bihar, outside the jurisdiction of Calcutta High Court. The Development Agreement was also executed in Muzaffarpur and contained an arbitration clause, which read as under:- “37. That in case of any dispute or difference between the parties arising out of and relating to this development agreement, the same shall be settled by reference of the disputes or differences to the Arbitrators appointed by both the parties and such arbitration shall be conducted under the provisions of the Indian Arbitration and Conciliation Act, 1996 as amended from time to time and the sitting of the said Arbitral Tribunal shall be at Kolkata.”

32. The facts placed before the Court reveal that, the respondent moved an arbitration application in Calcutta High Court, seeking appointment of an Arbitrator, but it was withdrawn on technical grounds. It again fled a second arbitration petition, wherein the appellant fled an affdavit questioning the territorial jurisdiction of the Calcutta High Court, by submitting that Calcutta High Court has no territorial jurisdiction to entertain and determine the application, as the agreement has been executed and registered in Muzaffarpur, Bihar and the piece and parcel of land, subject matter of the agreement, was also situated in Muzaffarpur Municipal Corporation, outside Calcutta. It was also objected on the ground that no part of cause of action has arisen within the jurisdiction of the Court and, hence, the Court in Calcutta had no territorial jurisdiction to entertain and determine the present application, as it is not a Court within the meaning of Section 2(i)(e) of the Act of 1996. Merely because a place of sitting was Kolkata was not determinative of the jurisdiction in Calcutta High Court was the submission advanced. The Calcutta High Court allowed the arbitration petition and appointed a sole Arbitrator. The said order was passed, since the counsel for the parties did not dispute the existence of valid arbitration clause and agreed to appoint an Arbitrator to settle the disputes. It was sought to be argued that the consent was given on behalf of the appellant, without any instructions.

33. The question which, therefore, arose for consideration before the Hon’ble Supreme Court was, whether the Calcutta High Court had jurisdiction to appoint an Arbitrator. The answer was given in the negative, in the following words:- “20. The question in this case is, whether the Calcutta High Court had territorial jurisdiction to pass the impugned orders. The answer to the question has to be in the negative for the reason that the Development Agreement was admittedly executed and registered outside the jurisdiction of the High Court of Calcutta, the agreement pertains to development of property located in Muzzafarpur outside jurisdiction of the Calcutta High Court. The Appellant has its registered offce in Patna outside the jurisdiction of Calcutta High Court. The appellant has no establishment and does not carry on any business within the jurisdiction of the Calcutta High Court. As admitted by the respondent, no part of the cause of action had arisen within the jurisdiction of Calcutta High Court.”

34. Further observation in paragraphs 26 to 28 is also relevant, which read thus:- “26. Of course, under Section 11(6),an application for appointment of an Arbitrator necessarily has to be moved in the High Court, irrespective of whether the High Court has the jurisdiction to decide a suit in respect of the subject matter of arbitration and irrespective of whether the High Court at all has original jurisdiction to entertain and decide suits. As such, the defnition of Court in Section 2(1)(e) of the A & C Act would not be applicable in the case of a High Court exercising jurisdiction under Section 11 (6) of the A & C Act to appoint an Arbitrator/Arbitral Tribunal

27. At the same time, an application under Section 11(6) of the A & C Act for appointment of an Arbitrator/ Arbitral Tribunal cannot be moved in any High Court in India, irrespective of its territorial jurisdiction. Section 11(6) of the A & C Act has to be harmoniously read with Section 2(1)(e) of the A & C Act and construed to mean, a High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A & C Act.

28. It could never have been the intention of Section 11(6) of the A & C Act that arbitration proceedings should be initiated in any High Court in India, irrespective of whether the Respondent raised or carried on business within the jurisdiction of that High Court, and irrespective of whether any part of the cause of action arose within the jurisdiction of that Court, to put an opponent at a disadvantage and steal a march over the opponent.”

35. By referring to the decision in the case of Mankastu Impex (supra) and Hardy Exploration (supra), the Hon’ble Apex Court concluded as under:- “46. In this case, the Development Agreement provided that the sittings of the Arbitral Tribunal would be conducted in Kolkata. As observed above, the parties never agreed to submit to the jurisdiction of Calcutta High Court in respect of disputes, nor did the parties agree upon Kolkata as the seat of arbitration. Kolkata was only the venue for sittings of the Arbitral Tribunal.

47. It is well settled that, when two or more Courts have jurisdiction to adjudicate disputes arising out of an arbitration agreement, the parties might, by agreement, decide to refer all disputes to any one Court to the exclusion of all other Courts, which might otherwise have had jurisdiction to decide the disputes. The parties cannot, however, by consent, confer jurisdiction on a Court which inherently lacked jurisdiction, as argued by Mr.Sinha.

48. In this case, the parties, as observed above did not agree to refer their disputes to the jurisdiction of the Courts in Kolkata. It was not the intention of the parties that Kolkata should be the seat of arbitration. Kolkata was only intended to be the venue for arbitration sittings. Accordingly, the Respondent himself approached the District Court at Muzaffarpur, and not a Court in Kolkata for interim protection under Section 9 of the A & C Act. The Respondent having himself invoked the jurisdiction of the of the District Court at Muzaffarpur, is estopped from contending that the parties had agreed to confer exclusive jurisdiction to the Calcutta High Court to the exclusion of other Courts. Neither of the parties to the agreement construed the arbitration clause to designate Kolkata as the seat of arbitration. We are constrained to hold that Calcutta High Court inherently lacks jurisdiction to entertain the application of the Respondent under Section 11(6) of the Arbitration Act. The High Court should have decided the objection raised by the Appellant, to the jurisdiction of the Calcutta High Court, to entertain the application under Section 11(6) of A & C Act, before appointing an Arbitrator.”

36. Recently, in the case of BBR (India) Private Limited (supra), the Hon’ble Supreme Court considered the issue, whether the change in place of conducting arbitration due to appointment of new Arbitrator will shift the jurisdictional seat of arbitration. In this case, the arbitration agreement did not stipulate either the ‘seat’ or ‘venue’ and the sole Arbitrator determined the venue of proceedings. The Hon’ble Supreme Court, relying upon BGS SGS Soma JV (supra), held that the reference to the venue of the proceedings was really a reference to the seat of the arbitration and once the seat is fxed by the Arbitral Tribunal under Section 20(2), it shall remain static and fxed, whereas the venue can be moved to new location, but change of venue does not change the seat of arbitration and the Court held that, subsequent hearings or proceedings at a different location other than the place fxed by the Arbitrator as the seat of arbitration should not be treated as a change or relocation of jurisdictional seat.

37. The seat of arbitration is a juridical concept, which refers to the legal home of the arbitration and it assumes great signifcance, since the seat would determine the procedural law applicable to the arbitration process. The Courts of the seat have exclusive jurisdiction over the conduct of arbitration except in relation to certain ancillary matters like grant of interim relief and enforcement of arbitral award. As a result, the seat of arbitration has primary jurisdiction over the arbitration, with all other jurisdictions becoming secondary. Thus, the seat is considered to be centre of gravity of arbitration and it is often described as anchor for the arbitration. In contrast, the venue of arbitration is merely a geographical location, where the parties and/or the Arbitral Tribunal may fnd it convenient to meet or hold meetings, with little signifcance. When place of arbitration is referred to, it may either cover a ‘seat’ or a ‘venue’. The Act of 1996 do not defne the terms ‘seat’ or ‘venue’, but instead uses the term, ‘place of arbitration’ in Section 20 and this has been interpreted by the Hon’ble Apex Court by referring to the two distinct meaning being assigned. However, Section 20(1), which uses the expression ‘place’ in the same context, in terms of the ‘seat’ i.e. the ‘centre of gravity’ of an arbitration, the same expression ‘place’ is used in the different context i.e. ‘venue’, which is a location for conducting meetings, hearings and consultations, which can be changed in accordance with the convenience of the Arbitrators or the parties. Often, it result into a confusing state of affairs, when there is a reference to ‘seat of arbitration’, which indicate a legal system, which an arbitration can call it’s ‘home’, indicating not a physical location, but connection with the legal system of a country, which has great signifcance in the context of the international arbitration because the choice of ‘seat’ can effectively determine, what is the governing law of arbitration. It would determine, whether Part I or Part II of the Act of 1996 is applicable, but within a domestic framework of Indian Courts, the choice of seat as ‘city’ has no relevance to the applicable system of law, which shall be always the Indian law irrespective of which city is chosen as ‘seat’. Prior to the decision in BALCO (supra), a stipulation of ‘seat’ in arbitration clause was not perceived to have bearing purely on domestic arbitration. A jurisdiction of a Court was determined by taking recourse to Section 2(1)(e) of the Act of 1996 and the relevant provisions of the Civil Procedure Code,

1908. However, the Five-Judge Bench of the Apex Court in BALCO (supra) clearly opined that the subject matter of arbitration cannot be confused with the subject matter of the seat. The former has reference and connection with the process of dispute resolution. It was held that jurisdiction is vested in two courts i.e. the court having jurisdiction over the cause of action and the court where the arbitration takes place. The Five-Judge Bench clothed the jurisdiction upon the courts located at the seat of arbitration. Even in the purely domestic context which in the Court’s world do not otherwise exist, thus paving the way for the concept of ‘seat’ to assume center stage in domestic arbitrations, despite indication in the statutory framework to the contrary. Persuaded to accept that the party autonomy is supreme, the Constitution Bench found it appropriate to extend it’s scope in the domestic arbitration too. This was attempted through para 96 of the judgment, focusing upon the concept of ‘seat’ in Indian arbitration, by clearly carving out a term ‘subject-matter of arbitration’, so as to identify the Court having supervisory control over the arbitration proceedings, which was held to be essentially a Court of the ‘seat of the arbitration’ process. While emphasising on party autonomy, the Hon’ble Supreme Court, however, conferred upon jurisdiction on two different Courts to exercise the power under the Act i.e. the Court with supervisory jurisdiction over the seat of arbitration and the Court in whose jurisdiction the cause of action arose. The observation in the case of BALCO (supra), in para 96, particularly created confusion and led to conficting decisions of different High Courts. However, in Enercon (India) Limited & Ors. Vs. Enercon GMBH & Anr.11, the Apex Court once again ruled to the effect that once a seat of arbitration has been fxed in India, it would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the arbitration process. In Indus Mobile Distribution Private Limited (supra), while the Apex Court was dealing with the issue of exclusive jurisdiction with reference to the seat of arbitration, it re-examined the concept of ‘seat’ and ‘venue’ and the conclusion drawn was, once a seat is designated, it is akin to exclusive jurisdiction clause and consequently, the Courts at the ‘seat’ are vested with the exclusive jurisdiction to exercise the powers and regulate arbitral proceedings to the exclusion of all other Courts, including the Courts, where the cause of action arose. The above principle was followed in Brahmani River Pellets Limited (supra).

38. The aforesaid authoritative rulings are, therefore, indicative of the fact that the Apex Court deviated from the concurrent jurisdiction principle highlighted in paragraph 96 of BALCO (supra) and held that the exclusive jurisdiction is in the Court of ‘seat’ of arbitration. It was ultimately in BGS SGS Soma JV (supra), a Three-Judge Bench, speaking through Hon’ble Shri Justice Rohinton Nariman (as His Lordship was then), offered some stability to the contradicting trends by expressly recording a fnding that there do not exist a concept of concurrent jurisdiction. The Three-Judge Bench reiterated that once the parties designate the seat of arbitration, only the Courts governing the seat shall have exclusive jurisdiction to govern such arbitration proceedings and the jurisdiction of all other Courts stand ousted. The aforesaid observation came in the wake of the fact of an arbitration clause, which stipulated that arbitration shall be held in New Delhi/Faridabad and 71 sittings were held in Delhi and the Award was passed in Delhi, which was appealed in District Court, Faridabad, Haryana. In paragraphs 60 and 61, it is held as under:- “60. The judgments of the English courts have examined the concept of the “juridical seat” of the arbitral proceedings, and have laid down several important tests in order to determine whether the “seat” of the arbitral proceedings has, in fact, been indicated in the agreement between the parties. The judgment of Cooke, J., in Shashoua, states: “34. London arbitration is a well-known phenomenon which is often chosen by foreign nationals with a different law, such as the law of New York, governing the substantive rights of the parties. This is because of the legislative framework and supervisory powers of the courts here which many parties are keen to adopt. When therefore there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other signifcant contrary indicia, the inexorable conclusion is, to my mind, that London is the juridical seat and English Law the curial law. In my judgment it is clear that either London has been designated by the parties to the arbitration agreement as the seat of the arbitration, or, having regard to the parties’ agreement and all the relevant circumstances, it is the seat to be determined in accordance with the fnal fall back provision of Section 3 of the Arbitration Act.”

61. It will thus be seen that wherever there is an express designation of a “venue”, and no designation of any alternative place as the “seat”, combined with a supranational body of rules governing the arbitration, and no other signifcant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding.”

39. In paragraph 91 of the said law report, the principle laid down in Hardy Exploration (supra), was not approved, as it was found to be contrary to BALCO (supra) and paragraphs 98 and 99, it was specifcally recorded as under:- “98. However, the fact that in all the three appeals before us the proceedings were fnally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the “seat” of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. Therefore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the “seat” has been chosen, which would then amount to an exclusive jurisdiction clause so far as courts of the “seat” are concerned.

99. Consequently, the impugned judgment is set aside, and the Section 34 petition is ordered to be presented in the courts in New Delhi, as was held by the learned Single Judge of the Special Commercial Court at Gurugram. The appeals are allowed in the aforesaid terms.”

40. In BGS SGS Soma JV (supra), once again Shashoua principle was reiterated. In no uncertain terms, the Hon’ble Supreme Court concluded that when a clause designates a venue of arbitration and declare that arbitration shall be held at such a place, it indicates that venue is actually the seat, coupled with the fact that there are no contrary signifcant indicia that ‘venue’ is not a ‘seat’. The judgment of Hardy Exploration (supra), was held to be contrary to the principle laid down in BALCO (supra) and, hence, “not being good law”. It was categorically held that the Three-Judge Bench in Hardy Exploration (supra), failed to apply the Shashoua principle to the arbitration clause in question and had it been applied, in the facts of the case, the answer would have been that Kuala Lumpur, which was stated to be the ‘venue’ of arbitration proceedings, would be governed by a supranational set of rules i.e. UNCITRAL Model Law, and there being no other contrary indicated, Kuala Lumpur would have been the juridical ‘seat’ of arbitration. By construing that there is no contrary indication, where India was designated as ‘seat’ and the parties had chosen either New Delhi or Faridabad, as a place where the arbitration could be held, considering the wordings, “arbitration proceedings shall be held at New Delhi/Faridabad, India” and, since the clause did not state that it is the venue nor is the language used “the Tribunal may meet,” or “may hear witnesses, experts or parties”, the use of word ‘venue’ is really the ‘seat’ of the arbitral proceedings and, hence, New Delhi/ Faridabad, India was designated as seat of arbitration under Section 20(1) of the Act of 1996 and, hence, it was held that the Courts at New Delhi alone, would have exclusive jurisdiction over the arbitral proceedings.

41. In Mankastu Impex Private Limited (supra), the Three- Judge Bench relied upon the principle laid down in BALCO (supra) and focused upon the exclusive jurisdiction clause, the moment ‘seat’ is determined in arbitration proceedings. Construing a clause in the MoU stipulating that the MoU is governed by the law of India and the Courts at New Delhi shall have jurisdiction, it was held that the the words did not mean to take away or dilute the intention of the parties in clause 17.2, where it was agreed that the arbitration shall be administered in Hong Kong, since the words in clause 17.[1] did not suggest that the seat of arbitration is in New Delhi. Since, the arbitration was seated at Hong Kong, the petition fled under Section 11(6) of the Act of 1996 in New Delhi was held to be without jurisdiction and not entertained.

42. The law has thus been crystallized to the above effect from the series of judgments and while this legal scenario was prevailing, when the decision delivered by the Two-Judge Bench of the Appex Court in Ravi Ranjan (supra) is carefully perused, it is apparent that Their Lordships dealt with the peculiar facts and on it’s assimilation, considered the objection raised by the respondent in the reply that whenever there is designation of place of arbitration in the arbitration clause as being the ‘venue’, the expression “arbitral proceedings” would make it clear that venue is really the ‘seat’. In the peculiar facts it is noted that the appellant fled petition under Section 9. Thereafter, the respondent moved an arbitration petition before Calcutta High Court, seeking appointment of Arbitrator, which was withdrawn for technical reasons and a second arbitration petition came to be fled once again before the Calcutta High Court, which was allowed by appointing an Arbitrator and this appointment was challenged before the Hon’ble Apex Court. While dealing with the issue, whether Calcutta High Court had territorial jurisdiction to pass the impugned order, the learned counsel for the appellant emphasised upon the property being located in Muzaffarpur, outside jurisdiction of Calcutta High Court and the appellant having it’s registered offce in Patna. Section 2(1)(e), defning the term ‘Court’, was pressed into service and the argument advanced was, no suit could have been fled in any Court over which the Calcutta High Court exercise the jurisdiction, as the suit admittedly pertain to immovable property situated at Muzaffarpur in Bihar, outside the territorial jurisdiction of Calcutta High Court and no part of action arose in the jurisdiction of Calcutta High Court. The crux of the matter is crystallized in paragraph 27, where it is recorded as under:- “27. At the same time, an application under Section 11(6) of the A & C Act for appointment of an Arbitrator/ Arbitral Tribunal cannot be moved in any High Court in India, irrespective of its territorial jurisdiction. Section 11(6) of the A & C Act has to be harmoniously read with Section 2(1)(e) of the A & C Act and construed to mean, a High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A & C Act.”

43. Section 42 of the Act of 1996 was also pressed into service and one of the argument advanced on behalf of the appellant is, on an application for interim protection having moved at the District Court at Muzzafarpur, the respondent could not have invoked jurisdiction of the Calcutta High Court. This background was appreciated positively by holding that Section 42 of the Act of 1996 is mandatory. The counsel for the respondent pressed into service the decision of Indus Mobile Distribution Private Limited (supra) and BGS SGS Soma JV (supra), in support of his submission that the seat of arbitration confers a exclusive jurisdiction clause and the arguments advanced were dealt with by recording that the decision in the case of Indus Mobile Distribution Private Limited (supra) as well as BALCO (supra) was in context of section 2(2) of the Act of 1996 and the Constitution Bench decided upon whether Part-I of the Act of 1996 applied to arbitrations, where the place of arbitration was outside India. The judgment in the case of BGS SGS Soma JV (supra) was also held to be rendered in context of Section 2(2) of the Act of 1996 and the applicability of Part-I of the Act to an international commercial arbitration, where the seat of arbitration was not India. Hardy Exploration (supra) was relied upon for the proposition that the ‘seat of arbitration’ and ‘place of arbitration’ has different connotations. The ultimate conclusion derived is that it was not the intention of the parties that Kolkata should be the seat of arbitration, but it was only intended to be venue for arbitration sittings.

44. The aforesaid observations in Ravi Ranjan (supra) are in the peculiar facts of the case, where Section 42 was pressed into service and Their Lordships focused upon the intention of the parties to the effect that Kolkata would not be the seat of arbitration, but was intended to be venue.

45. In the light of the authoritative pronouncement by the Constitution Bench of the Hon’ble Apex Court, which is further reiterated in the case of BGS SGS Soma JV (supra), the position of law is crystallized to the effect that once the parties have agreed as to the venue of arbitration, unless indicated otherwise, amount to the ‘seat’ of arbitration. In the present case, perusal of clause 20 of the Lease Agreement would make it explicit that the parties have agreed for their differences to be resolved through a sole Arbitrator, with his Award being given a fnal and binding effect. The venue of arbitration has been agreed to be in Mumbai, a conscious choice despite the fact that the plant is situated in Ganganagar and the Agreement is executed in Madhya Pradesh, Indore. By applying the principle enunciated by the Constitution Bench in the case of BALCO (supra), which is re-affrmed in BGS SGS Soma JV (supra), in case of domestic arbitration when the venue of arbitration is decided to be Mumbai, without reference to the seat of arbitration, the Court in Mumbai would be the competent Court to exercise jurisdiction over the proceedings and Section 2(1)(e), which provide for jurisdiction of the subject-matter of a suit, will not be a determinative factor in ascertaining the Court, which would exercise the jurisdiction as regards the appointment of the Arbitrator under Section 11.

46. In recording the aforesaid conclusion, I am gainfully laid by the decision of this Court in the case of Priya Malay Sheth (supra), wherein relying upon the decision of the Apex Court in BALCO (supra) as well as BGS SGS Soma JV (supra), a similar conclusion was drawn in the wake of a clause where it was agreed that the venue of arbitration shall be Delhi and it was held that seat of arbitration shall be necessarily at Delhi.

47. As regards the objection in respect of insuffcient stamp duty is concerned, the issue having been made over to a larger Bench to settle the jurisprudence on the issue of stamping and arbitrality, the specifc observation that at a pre-appointment stage, the matters cannot be kept hanging, with a further clarifcation, being offered in the case of Weatherford Oil Tool Middle East Limited Vs. Baker Hughes Singapore Pte.12 in paragraph 16, I see no legal impediment to the enforceability of the arbitration agreement, pending payment of stamp duty on the substantive contract.

48. In the light of the aforesaid discussion, I deem it appropriate to exercise the power conferred under Section 11 for appointment of a sole Arbitrator, since the arbitration clause contained in the Lease Agreement is not in dispute nor is it’s invocation. The appointment of a sole Arbitrator, as prayed in the application, shall be in the following manner:- TERMS OF APPOINTMENT (a) Appointment of Arbitrator: Mr.Gautam Ankhad, an Advocate of this Court, is hereby appointed as a Sole Arbitrator to decide the disputes and differences between the parties under the Lease Agreement. (b) Communication to Arbitrator of this order:-

(i) A copy of this order will be communicated to the learned Sole Arbitrator by the Advocates for the applicant/ petitioner within one week from the date this order is uploaded.

(c) Disclosure: The learned Arbitrator, within a period of 15 days before entering the arbitration reference, shall forward a statement of disclosure as per the requirement of Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996, to the Prothonotary & Senior Master of this Court, to be placed on record of this application, with a copy to be forwarded to both the parties.

(d) Appearance before the Arbitrator:The parties shall appear before the Sole Arbitrator within a period of two weeks from today and the learned Arbitrator shall fx up a frst date of hearing in the week commencing from 03/04/2023. The Arbitral Tribunal shall give all further directions with reference to the arbitration and also as to how it is to proceed. (e) Contact and communication information of the parties: Contact and communication particulars are to be provided by both sides to the learned Sole Arbitrator. This information shall include a valid and functional E-mail address as well as mobile numbers of the parties, participating in the process as well as of the Advocates. (f) Section 16 application: The respondent is at liberty to raise all questions of jurisdiction within the meaning of section 16 of the Arbitration Act. All contentions are left open. (g) Fees: The sole Arbitrator shall be entitled to the fees prescribed under the Bombay High Court (Fee Payable to Arbitrators) Rules, 2018 and the arbitral costs and fees of the Arbitrator shall be borne by the parties in equal portion and shall be subject to the fnal Award that may be passed by the Tribunal. (h) Venue and seat of Arbitration: Parties agree that the venue and seat of the arbitration will be in Mumbai.

(i) Procedure: These directions are not in derogation of the powers of the learned Sole Arbitrator to decide and frame all matters of procedure in arbitration.

49. All contentions of both the sides are left open, to be raised by the respective parties before the Arbitral Tribunal, in accordance with law.

50. Comm. Arbitration Application No.82 of 2022 stands disposed off.

51. In view of the disposal of the Comm. Arbitration Application, Interim Application does not survive and stands disposed off. ( SMT.

BHARATI DANGRE, J.)