Manmohan Kapani v. Kapani Resorts Pvt Ltd & Ors.

1. This petition has been filed under Section 9 of the Arbitration and Conciliation Act,1996 (hereinafter referred to as the „Act‟) interalia praying for the following reliefs: “a) Grant ex-parte Ad-interim orders and/or direction in favour of the Petitioner and against the Respondent, from alienating, creating third party rights, discharging, misappropriating the properties of the Respondent Company; b) Grant ex-parte Ad-interim orders and/or against the Respondent, from alienating, creating third party rights, discharging, misappropriating the Greater Kailash Property belonging to the Respondent No.2 and Respondent No. 3; c) Grant ex-parte Ad-interim orders and/or against the Respondent, attaching the assets and bank accounts of the Respondent No.2 and Respondent No. 3 to the extent of 7.[5] crores; d) Grant ex-parte Ad-interim orders and/or direction in favour of the Respondent No.2 and Respondent No. 3, calling upon them to deposit Rs.7,50,00,000 before the Registrar of the Delhi High Court.”

2. The disputes between the parties have arisen out of the “Restated Share Subscription Agreement cum Shareholders‟ Agreement” dated 11.02.2022 executed between the parties. The Arbitration Agreement between the parties is contained in Clause 17 of the said Agreement, and is reproduced herein below: “17.

DISPUTE RESOLUTION If any dispute or difference arises between any of the Parties hereto during the subsistence of this Agreement or thereafter, in connection with the validity, interpretation, implementation or alleged material breach of any provision of this Agreement or regarding any question, including the question as to whether the termination of this Agreement by any Party hereto has been legitimate, the Parties hereto shall endeavor to settle such dispute amicably. The attempt to bring about an amicable settlement is considered to have failed as soon as one of the Parties gives 15 (Fifteen) days' notice thereof to the other Party in writing. 17.[1] All disputes that have not been satisfactorily resolved under Clause 17.[1] shall be referred to arbitration and shall be settled in accordance with the Rules of the Mumbai Centre for International Arbitration (MCIA Rules), as amended from time to time. This Agreement and the rights and obligations of the Parties contained in this Agreement shall remain in full force and effect pending issuance of the award in such arbitration proceedings, which award, if appropriate, shall determine whether and when any termination of this Agreement shall become effective. 17.[2] The language of the arbitration shall be English and all documents submitted (including those submitted as filings, evidence or exhibits) shall be certified English translations if in a language other than English. The seat and venue of arbitration proceedings and the seat of the arbitration shall be Mumbai. 17.[3] The arbitration shall be conducted by a tribunal of 3 (Three) arbitrators, consisting of 1 (One) arbitrator nominated by each Party to the dispute and a 3rd (Third) arbitrator, who shall be the chairman of the tribunal and shall be nominated by the 2 (Two) arbitrators so appointed by the Parties to the dispute. 17.[4] The arbitrator(s) shall make an award in writing. The award of the arbitrator(s) shall be final and conclusive and binding upon the Parties and non-appealable to the extent permitted by Applicable Law. 17.[5] The Parties further agree that the arbitrator shall also have the power to decide on the costs and reasonable expenses (including reasonable fees of counsel) incurred in the arbitration and award interest up to the date of the payment of the award. 17.[6] The award of the arbitrator(s) shall be capable of being entered in judgment in any court of competent jurisdiction. 17.[7] The Parties agree that the arbitration shall be kept confidential and that the existence of the proceeding and any element of it (including but not limited to any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the tribunal, the Parties, their counsel and any Person necessary to the conduct of the proceeding, except as may be lawfully required in judicial proceedings relating to the arbitration or otherwise or as may be required under the laws, bye-laws, regulations, statutory guidance, notifications, guidelines, policies, directions, directives, orders applicable to any of the Parties. When any dispute occurs and is under arbitration, except for the matters under dispute, the Parties shall continue to exercise their remaining respective rights and fulfil their remaining respective duties and obligations to the extent practicable, under this Agreement.” (Emphasis supplied)

3. As in terms of Clause 17.[2] of the Agreement it has been prescribed that the seat of the Arbitration shall be Mumbai, it was put to the learned counsel for the petitioner whether this Court would have the territorial jurisdiction to entertain the present petition. In answer, the learned counsel for the petitioner places reliance on the Clause 16 of the Agreement to contend that by virtue of that Clause, the parties have conferred exclusive jurisdiction in this Court for „all matters arising pursuant to this Agreement‟. He submits that Clause 16 would prevail over Clause 17, which is a general clause of jurisdiction based on the seat of the arbitration. In support, be places reliance on the judgment of the High Court of Calcutta in Commercial Division Bowlopedia Restaurants India Limited v. Devyani International Limited, 2021 SCC OnLine Cal 103, and of this Court in Hunch Circle Pvt. Ltd. v. Future Time Technology India Pvt. Ltd., Neutral Citation No.2022/DHC/000449.

4. Clause 16 of the Agreement is reproduced herein below: “16.

GOVERNING LAW. This Agreement and the relationship among the Parties shall be governed by, and interpreted in accordance with, the Laws of India. Subject to Clause 16, the Courts in Delhi, India shall have jurisdiction over all matters arising pursuant to this Agreement.”

5. He further submits that as the respondent nos.[2] and 3 are residents of Delhi, this Court even otherwise would have the jurisdiction and, therefore, it cannot be said that Clause 16 of the Agreement seeks to vest jurisdiction in a Court which otherwise lacks territorial jurisdiction. Relying upon the judgment in A.B.C. Laminart Pvt. Ltd. & Anr vs A.P. Agencies, Sale, (1989) 2 SCC 163, he submits that a Clause vesting exclusive jurisdiction in a Court which otherwise has jurisdiction has to be enforced.

6. On the other hand, the learned counsel for the respondent, placing reliance on the judgment of the Supreme Court in Hindustan Construction Company Limited. v. NHPC Limited and Another, (2020) 4 SCC 310, submits that keeping in view the mandate of Section 42 of the Act, it is only the Court where the seat of arbitration is situated that would have the exclusive jurisdiction to entertain any application filed under Part-I of the Act. He further submits that Clause 16 would have no application where the seat of the arbitration has been mentioned as Mumbai.

7. I have considered the submissions made by the learned counsels for the parties.

8. In Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd., (2017) 7 SCC 678, the Supreme Court clarified that once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory jurisdiction over the arbitration. This would be so even though no part of the cause of action may have arisen at such place. Paragraphs 19 and 20 of the judgment are quoted herein below:

20. It is well settled that where more than one court has jurisdiction, it is open for the parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. [Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., (2013) 9 SCC 32: (2013) 4 SCC (Civ) 157] This was followed in a recent judgment in B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd. [B.E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd., (2015) 12 SCC 225: (2016) 1 SCC (Civ) 427] Having regard to the above, it is clear that Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment [Datawind Innovations (P) Ltd. v. Indus Mobile Distribution (P) Ltd., 2016 SCC OnLine Del 3744] is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps under Section 9 in the Mumbai Court. The appeals are disposed of accordingly.”

9. In BGS SGS Soma JV v. NHPC Limited, (2020) 4 SCC 234, the Supreme Court considering the effect of Section 42 of the Act, observed as under: “59. Equally incorrect is the finding in Antrix Corpn. Ltd. that Section 42 of the Arbitration Act, 1996 would be rendered ineffective and useless. Section 42 is meant to avoid conflicts in jurisdiction of courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one court exclusively. This is why the section begins with a non-obstante clause, and then goes on to state “…where with respect to an arbitration agreement any application under this part has been made in a court…” It is obvious that the application made under this part to a court must be a court which has jurisdiction to decide such application. The subsequent holdings of this court, that where a seat is designated in an agreement, the courts of the seat alone have jurisdiction, would require that all applications under Part I be made only in the court where the seat is located, and that court alone then has jurisdiction over the arbitral proceedings and all subsequent applications arising out of the arbitral agreement. So read, Section 42 is not rendered ineffective or useless. Also, where it is found on the facts of a particular case that either no “seat” is designated by agreement, or the so-called “seat” is only a convenient “venue”, then there may be several courts where a part of the cause of action arises that may have jurisdiction. Again, an application under Section 9 of the Arbitration Act, 1996 may be preferred before a court in which part of the cause of action arises in a case where parties have not agreed on the “seat” of arbitration, and before such “seat” may have been determined, on the facts of a particular case, by the Arbitral Tribunal under Section 20(2) of the Arbitration Act, 1996. In both these situations, the earliest application having been made to a court in which a part of the cause of action arises would then be the exclusive court under Section 42, which would have control over the arbitral proceedings. For all these reasons, the law stated by the Bombay and Delhi High Courts in this regard is incorrect and is overruled.” (Emphasis supplied)

10. The above judgment has been followed by the Supreme Court in Hindustan Construction Company Ltd (supra), holding as under: “6) Given the finding in this case that New Delhi was the chosen seat of the parties, even if an application was first made to the Faridabad Court, that application would be made to a court without jurisdiction…..”