Delhi District Court
Sohan Pal Sharma vs M/S Shriram Transport Finance Co. Ltd on 13 December, 2021
IN THE COURT OF SH. HARISH DUDANI
DISTRICT JUDGE (COMMERCIAL COURT): S/W DISTRICT
DWARKA COURTS : NEW DELHI
OMP (COMM.) No. 21-19
1. SOHAN PAL SHARMA
S/O SH. RATI RAM SHARMA
R/O N-116B, BLOCK-N, GURUDWARA ROAD
MOHAN GARDEN, UTTAM NAGAR,
NEW DELHI-110059. ...OBJECTOR/PETITIONER
VERSUS
1. M/S SHRIRAM TRANSPORT FINANCE CO. LTD.
OFFICE AT: S/4-60, NEW MAHAVEER NAGAR
OPP. METRO PILLAR NO. 551,
JANAK PURI EAST, METRO STATION,
NEW DELHI-110018
HAVING ITS REGISTRED OFFICE AT:
MOOKAMBIKA COMPLEX NO. 4,
LADY DESIKA ROAD, MYLAPORE,
CHENNAI-600004. ...RESPONDENT NO. 1
2. SH. I. C. TIWARI
LD. SOLE ARBITRATOR
CHAMBER NO. 397, WESTERN WING,
TIS HAZARI COURT, DELHI 110054. ...RESPONDENT NO. 2
Date of Institution : 04.05.2019
Date of Reserving Judgment : 08.12.2021
Date of Pronouncement of Judgment : 13.12.2021
JUDGMENT
1. This is the petition under Section 34 of Arbitration and Conciliation Act, 1996 filed by the petitioner /objector against the impugned award dated 15.12.2016 passed by Sh. I. C. Tiwari, Ld. Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 1 of 18Sole Arbitrator in the arbitration proceedings in case no. ARB/JP/37/16 titled as M/s Shriram Transport Finance Company Ltd. Vs. Trilochan Singh & Anr.
2. As per the impugned award dated 15.12.2016 passed by Sh. I. C. Tiwari, Ld. Sole Arbitrator the respondent no. 1 has been directed to recover a sum of Rs. 13,10,119/- (Thirteen Lakh Ten Thousand and One Hundred and Nineteen Only) from the applicant (Guarantor) and Principal Debtor jointly and severally together alongwith the interest on the aforesaid amount @ 24% PA w.e.f. 21.03.2016 till the date of realization and apart from this the respondent no. 1 is also directed to recover a sum of Rs. 5,000/- on account of Counsel's fees and miscellaneous expenses and Rs. 5,000/- on account of Arbitral fees paid to this tribunal.
3. The brief facts of the case are that as per the allegation of the claimant (herein respondent no. 1) i.e. M/s Shriram Transport Finance Co. Ltd at the instance and request of Principal Debtor namely Sh. Trilochan Singh and the applicant/ petitioner Sh. Sohan Pal Sharma, a written Loan-cum-Hypothecation agreement dated 31.05.2013 was entered into between the respondent company and applicant and Principal Debtor for an amount of Rs. 9,36,000/- the agreement value whereof amount of Rs. 9,36,000/- the agreement value whereof was Rs. 12,97,703/- was advanced to the Principal Debtor against the security of vehicle bearing no. DL1ZZ2079 (hereinafter for the sake of brevity, referred to as the "said vehicle").
Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 2 of 184. It is stated that the article of the said agreement provides that the respondent no. 1 shall have a right to terminate the said agreement in case of default of any installment committed by the principal debtor or any other dues payable under this agreement are in arrears and remain unpaid after the due date for any reason whatsoever and in this manner principal debtor commits a breach of any of the terms, covenants and conditions of the said agreement or has made any misrepresentation to the claimant.
5. It is further stated that the said matter was referred to Ld. Sole Arbitrator, Sh. I. C. Tiwari (respondent no. 2) and the Ld. Sole Arbitrator passed the award in favour of the respondent no. 1 herein and against the applicant/petitioner herein.
6. It is stated that the impugned award passed by the Sole Arbitrator is arbitrarily, erroneous, vexations based on conjectures and surmises.
7. The present petition has been preferred on the grounds that the impugned award passed by the Ld. Sole Arbitrator is against the law and the Ld. Sole Arbitrator passed the impugned award in favour of the respondent company without giving the opportunity of being heard to the Principal Debtor and applicant (guarantor) and no notice of appointment of the Arbitrator was ever served on the applicant/petitioner. It is stated that no notice of the arbitration proceedings was served upon the petitioner and even at no point of time, arbitration award dated 15.12.2016 signed by the arbitrator served on the petitioner as well as Principal Debtor and it was for the Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 3 of 18first time that copy of the ex-parte impugned award was served upon the applicant/petitioner alongwith the notice of Execution bearing no. 734/2018.
8. It is further stated that on bare perusal of the impugned award, it can easily be seen that the Ld. Arbitrator was proceeding while favouring the respondent company despite knowing the fact that notice for the appointment of Arbitrator as well as summons of Arbitration proceedings vide registered AD dated 07.04.2016 and 27.07.2016 respectively were not received back either served or unserved. Ld. Arbitrator deliberately did not serve on the applicant and principal debtor, the said notice and relevant documents for the purpose of giving the applicant/petitioner an opportunity of being heard and participating in the arbitration proceedings. It is stated that the impugned award is unsustainable in law and is liable to be set- aside as the same is hit by the provision contained in Section 34 (2)
(iii) of Arbitration and Conciliation Act, 1996.
9. It is further stated that the impugned award cannot be sustained in law as there was no agreement between the applicant/petitioner and respondent company, secondly the petitioner was not a party to the said agreement because the applicant had not signed the agreement as a Guarantor for principal debtor and he signed it as a witness of execution of said agreement between the respondent company and principal debtor in front of him, therefore petitioner is not bound by that agreement and dispute between them cannot be referred to arbitration and also no liability could be attributed to the petitioner. It is stated that the present application is being field within the period of Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 4 of 18limitation as for the first time in first week of February, 2019 petitioner received the copy of impugned award alongwith notice of execution petition, therefore period of limitation is to be reckoned from the date mentioned above. It is stated that the impugned award dated 15.12.2016 passed by the respondent no. 2 is against the law and facts on record as no specific date was mentioned when principal debtor stopped making the payment to respondent company which creates suspicion that arbitration proceedings might be time barred.
10. The respondent no. 1 has filed reply to the petition under Section 34 of Arbitration and Conciliation Act, 1996 and has contested the same. It is stated that the petition does not disclose ground for setting aside the award as per Section 34 of Arbitration and Conciliation Act, 1996.
11. It is stated in the reply that Sh. Trilochan Singh had approached and persuaded the respondent no. 1 to advance him a loan of Rs. 9,36,000/- (Rupees Nine Lakh Thirty Six Thousand only) in his favour against the hypothecation of his vehicle bearing registration no. DL1ZZ2079 and accordingly, after negotiations, the respondent no. 1 had agreed to advance a loan of Rs. 9,36,000/- (Rupees Nine Lacs and Thirty Six Thousand Only) in favour of Sh. Trilochan Singh against the hypothecation of the aforesaid vehicle and loan cum hypothecation agreement dated 31.05.2013 was entered between Sh. Trilochan Singh and the petitioner herein on the other hand and the respondent no. 1 on the other hand and Sh. Trilochan Singh herein had agreed to return back the total loan value of Rs. 13,10,119.00 in equal monthly installments. It is further stated that after availing the Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 5 of 18said loan amount, the said Sh. Trilochan Singh failed to repay even a single penny qua the repayment of the said loan amount.
12. It is further stated in the reply that the matter was referred to the sole arbitrator i.e. respondent no. 2, to adjudicate upon the dispute between the parties. The said arbitrator after entering upon the reference, issued notices of the said arbitration proceedings to Sh. Trilochan Singh and the petitioner herein on 07.04.2016, returnable on 25.04.2016 and said notices were sent to their last known addresses through Registered AD however, the said notices were neither received back either served or unserved. Nobody had appeared when the matter came up for hearing on 25.04.2016 on behalf of Sh. Trilochan Singh as well as the petitioner and the matter was adjourned to 27.07.2016 by respondent no. 2 but even on 27.07.2016 nobody had appeared on behalf of Sh. Trilochan Singh or the petitioner herein and respondent no. 1 filed its statement of claim alongwith documents before respondent no. 2 and the respondent no. 2 directed service of statement of claim upon Sh. Trilochan Singh as well as the petitioner herein through Registered AD post, returnable for 20.08.2016. On 20.08.2016 again no body appeared either on behalf of Sh. Trilochan Singh or on behalf of petitioner herein nor the registered AD notices were received back.
13. It is further stated in the reply that the respondent no. 2 directed the respondent no. 1 to serve Sh. Trilochan Singh as well as the petitioner herein through publication in daily newspaper "Vande Matram" for 13.10.2016. After publication nobody appeared on behalf of Sh. Trilochan Singh or the petitioner herein on 13.10.2016 Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 6 of 18and the respondent no. 2 was compelled to proceed ex-parte against Sh. Trilochan Singh as well as the petitioner herein and adjourned the case for ex-parte evidence. After completion of the proceedings the award was announced on 15.12.2016 and the copy of the said award was also sent to Sh. Trilochan Singh as well as the petitioner herein but they failed to make payment of the awarded amount. The respondent no. 1 preferred an execution petition in respect of the said exparte award. It is stated in the reply that after notice of said execution petition was served upon the petitioner herein, he challenged the same before this Hon'ble Court by virtue of filing the present petition thereby taking therein false and frivolous stand.
14. It is stated in the reply that in the entire objection petition the petitioner has not denied the disbursement of the loan amount in favour of Sh. Trilochan Singh nor denied that the petitioner stood as a guarantor for the repayment of the said loan amount nor disputed the claim of the respondent no. 1 and hence the present petition is not maintainable. It is stated that Ld. Arbitrator had rightly passed the impugned award after considering each and every fact and document available before him while passing the impugned award and the present petition is hopelessly barred by limitation and hence the same is not maintainable.
15. In the reply respondent no. 1 has denied that the impugned award passed by the Sole Arbitrator is arbitrary, erroneous, vexatious or based on conjectures and surmises as alleged. It is also denied that the Sole Arbitrator passed the impugned award in favour of the respondent company without giving an opportunity of being heard to Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 7 of 18the principal debtor and applicant or no notice of appointment of the arbitrator was even served on the applicant. It is also denied that even after initiation of the arbitration proceedings no notice of the said proceeding was even served upon the petitioner or that even at no point of time, arbitration award dated 15.12.2016 signed by the Arbitrator was served on the petitioner as well as principal debtor or it was for the first time that copy of the ex-parte impugned award was served upon the applicant/petitioner alongwith the notice of execution bearing no. 734/2018.
16. Ld. Counsel for the petitioner had submitted part arguments on 08.03.2021 and he sought time for submitting further arguments as he wanted to produce certain authorities but thereafter, Ld. Counsel for petitioner has not appeared for submitting further arguments. I have heard Ld. Counsel for respondent no. 1 and perused record.
17. Ld. Counsel for the respondent no. 1 has contended that this Court has no territorial jurisdiction to entertain the present petition as the proceedings were conducted and Award was passed by Ld. Sole Arbitrator at Tis Hazari Courts, Delhi and the said place is not within the territorial jurisdiction of this Court. Ld. Counsel for respondent no. 1 has further contended that the notice of arbitration were duly served on the petitioner and Ld. Arbitrator also served the notice of arbitration on the petitioner by way of publication in the newspaper "Bande Matram" dated 15.09.2016 and despite service the petitioner preferred to remain ex-parte in the arbitration proceedings. It is further contended by Ld. Counsel for respondent no. 1 that the petition is barred by period of limitation.
Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 8 of 1818. Ld. Counsel for the respondent no. 1 has further contended that since the question of jurisdiction goes to the root of the matter hence, the same is to be decided first and this Court can adjudicate on the objections only if it is found that this Court has territorial jurisdiction in respect of the matter in question.
19. Ld. Counsel for the petitioner has contended that the petitioner is resident of Uttam Nagar, New Delhi which is within the territorial jurisdiction of this Court and the Office of respondent no. 1 is also in Janak Puri, New Delhi which is also within the territorial jurisdiction of this Court, hence, this Court has jurisdiction to adjudicate upon the questions involved in the petition.
20. It is contended that Loan cum Hypothecation Agreement dated 31.05.2013 was executed between the parties and by way of the said agreement it was agreed between the parties that all the disputes, differences or claims arising out of the said agreement shall be settled by way of arbitration to be held in Delhi and in pursuance of the same Sh. I. C. Tiwari, Chamber No. 397, Western Wing, Tis Hazari Courts, Delhi - 54 was appointed as Sole Arbitrator. Ld. Sole Arbitrator conducted the proceedings and passed the impugned award dated 15.12.2016 at Tis Hazari Courts, Delhi.
21. The clauses 15 and 15.1 of the Loan cum Hypothecation Agreement dated 31.05.2013 which is Ex.CW1/5 in the proceedings Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 9 of 18of the Ld. Sole Arbitrator read as :-
15.ARBITRATION:
All disputes, differences and / or claims arising out of these present or as to the construction, meaning or effect here of or as to the rights and liabilities of the parties hereunder shall be settled by arbitration to be held in Delhi in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory amendments there of or any statute enacted for replacement thereof and shall be referred to the sole arbitration of a person to be nominated / appointed by Shriram. In the event of death, refusal, neglect, inability or incapability of the persons so appointed to act as an arbitrator, Shriram may appoint a new arbitrator. The award including the interim award/s of the arbitrator shall be final and biding on all parties concerned. The arbitrator may lay down from time to time the procedure to be followed by him in conducting arbitration proceedings in such manner as the considers appropriate. Any proceedings to be initialed in any court of law in pursuance of this arbitration shall be instituted and held in the court at Delhi only.
15.1 JURISDICTION:
It has been agreed between the parties here to that Delhi courts alone shall have exclusive jurisdictions in respect of any matter, claim or dispute arising out of or in any way relating to there presents or to anything to be done pursuant to these presents or in regard to interpretation of these presents or of any clause or provision thereof.
22. Sh. I. C. Tiwari who was appointed as Sole Arbitrator conducted the arbitration proceedings and passed the award at Chamber No. 397, Western Wing, Tis Hazari Courts, Delhi - 54 which is not within the territorial jurisdiction of this Court. Section 42 of the Arbitration and Conciliation Act, 1996 provides for the jurisdiction in respect of filing of any application in respect of an arbitration agreement. Section 42 of the Arbitration and Conciliation Act, 1996 reads as:-
42.Jurisdiction.-Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.OMP (Comm.) No. 21-2019 Page No. 10 of 18
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.
23. In Cinepolis India Private Ltd. vs Celebration City Projects Limited & Another, 2020 SCC Online Del 301., Hon'ble High Court of Delhi was pleased to hold.
21. Having examined the respective contentions of the parties on this issue, I am of the view that there is no merit in the contention of the respondents. A bare perusal of the arbitration clause shows that the parties have clearly designated New Delhi as the place for arbitration proceedings. While it is true that the arbitration clause does not specifically use the word "seat" but it is no longer res integra that the term "place" would be the "juridical seat" for the purpose of Section 2(2) of the Act. It has also been settled by various judgments that the word "place" would refer to "juridical seat‟ for the purpose of Section 20(1) and Section 20(2) of the Act whereas in Section 20(3) the word "place" is equivalent to "venue". This position of law is clear from reading of the judgment of the Constitution Bench in the case of BALCO (supra) and Indus Mobile Distribution Private Limited (supra).
22. The Constitution Bench of the Supreme Court examining the issue of seat and venue of an Arbitral proceeding 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 Para 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity." [Blackaby, Partasides, Redfern and Hunter (Eds.), Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009).] 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 Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 11 of 18convenient 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. v. Compania International de Seguros del Peru [(1988) 1 Lloyd's Rep 116 (CA)] 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 such 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."
"96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under:
'2. Definitions.--(1) In this Part, unless the context otherwise requires -- (a)-(d) ***
(e) "Court" means 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;' 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 confined 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 Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 12 of 18arbitration 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."
23. The Supreme Court in the case of Indus Mobile Distribution Private Limited (supra) after referring to Sections 2(1)(e) and 20 of the Act and various judgments including the judgment in the case of BALCO (supra) held as under:-
18. The amended Act, does not, however, contain the aforesaid amendments, presumably because the BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810] judgment in no uncertain terms has referred to "place" as "juridical seat" for the purpose of Section 2(2) of the Act. It further made it clear that Sections 20(1) and 20(2) where the word "place" is used, refers to "juridical seat", whereas in Section 20(3), the word "place" is equivalent to "venue".
This being the settled law, it was found unnecessary to Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 13 of 18expressly incorporate what the Constitution Bench of the Supreme Court has already done by way of construction of the Act.
19. A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. 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. The neutral venue may not in the classical sense have jurisdiction -- that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Sections 16 to 21 of CPC be attracted. In arbitration law however, as has been held above, the moment "seat" is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties."
24. The Supreme Court in the case of Indus Mobile Distribution Private Limited (supra) analyzed Section 2(1)
(e) and Section 20 of the Act as well as the Law Commission Report, 2014. It was held that the moment a seat is designated it is akin to an exclusive jurisdiction clause. It was further held that under the law of arbitration unlike the CPC which applies to suits, reference to seat is a concept by which a neutral venue can be chosen by the parties which may not in the classic sense have jurisdiction i.e. no part of the cause of action may have arisen and neither would any of the provisions of Sections 16 to 21 of the CPC be attracted. In the said case, the Court was concerned with two different clauses, one which stipulated that arbitration shall be conducted at Mumbai and the other as per which the disputes and differences arising out of the agreement was subject to the exclusive jurisdiction of the courts at Mumbai. The respondent had filed a petition under Section 11 of the Act for appointment of an arbitrator before this Court. The petition was disposed of by the High Court holding that no part of the cause of action arose in Mumbai and the exclusive jurisdiction clause would not apply and Delhi being the first Court in which the petition was filed and where the part of cause of action had arisen would have jurisdiction. The Supreme Court held that the seat of Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 14 of 18arbitration was Mumbai and even the exclusive jurisdiction vested in the Mumbai courts. It was thus held that Mumbai courts alone would have jurisdiction to the exclusion of all other courts as the juridical seat of arbitration was at Mumbai.
25. Very recently the Supreme Court in the case of BGS SGS Soma JV vs. NHPC Ltd. 2019 SCC OnLine SC 1585 has decided the issue of jurisdiction of a Court to entertain a petition under Section 11 of the Act. The Apex Court has at length analyzed the definition of "Court" under Section 2(c) of the Act as well as Section 20 relating to the place of arbitration. Reliance has been placed on the judgment of the Apex Court in the case of BALCO (supra) as well as several other judgments such as Roger Shashoua vs. Muksh Sharma, (2009) EWHC 957 (Comm), Indus Mobile Distribution Private Limited (supra), Enercon (India) Ltd. vs. Enercon GMBH, (2014) 5 SCC 1. In Enercon (supra) the Supreme Court followed the dictum in Roger Shashoua (supra) as follows :
"126. Examining the fact situation in the case, the Court in Shashoua case observed as follows:
"The basis for the court's grant of an anti-suit injunction of the kind sought depended upon the seat of the arbitration. An agreement as to the seat of an arbitration brought in the law of that country as the curial law and was analogous to an exclusive jurisdiction clause. Not only was there agreement to the curial law of the seat, but also to the Courts of the seat having supervisory jurisdiction over the arbitration, so that, by agreeing to the seat, the parties agreed that any challenge to an interim or final award was to be made only in the courts of the place designated as the seat of the arbitration. Although, „venue‟ was not synonymous with „seat‟, in an arbitration clause which provided for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that „the venue of arbitration shall be London, United Kingdom‟ did amount to the designation of a juridical seat..."
In Paragraph 54, it is further observed as follows:
There was a little debate about the possibility of the issues relating to the alleged submission by the claimants to the jurisdiction of the High Court of Delhi being heard by that court, because it was best fitted to determine such issues under Indian Law. Whilst I found this idea attractive initially, we are persuaded that it would be wrong in principle to allow this and that it would create undue practical problems in any event. On the basis of what I Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.OMP (Comm.) No. 21-2019 Page No. 15 of 18
have already decided, England is the seat of the arbitration and since this carries with it something akin to an exclusive jurisdiction clause, as a matter of principle the foreign court should not decide matters which are for this Court to decide in the context of an anti- suit injunction."
26. The Supreme Court placed reliance on the observations made by the Court of Appeal, England in C v. D (2008) BusLR 843, wherein it is observed that:-
"It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award."
27. In the aforesaid case, the Court of Appeal had approved the observations made in A v. B, (2007) 1 All ER (Comm) 591, wherein it is observed that:
"... an agreement as to the seat of an arbitration is analogues to an exclusive jurisdiction clause. Any claim for a remedy.... as to the validity of an existing interim or final award is agreed to be made only in Courts of the place designated as the seat of Arbitration."
28. In fact in the case of BGS SGS Soma JV (supra), the Supreme Court has laid down the tests for determination of the seat. It has been held that wherever there is an express designation of a venue and no designation of any alternative place as the seat combined with supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding.
29. Finally, it was held that whenever there is a 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 whether the venue is really the seat. If the arbitration proceedings as a whole are intended to be held at a particular place, including the making of an award at that place, then the venue is the seat. This language has to be contrasted with the language where it is only mentioned that the tribunal is to meet or have witnesses examined and in such a case the place is only a venue and not the seat.
24. In Hindustan Construction Company Limited vs NHPC Ltd. & Another, (2020) 4 SCC 310, Hon'ble Supreme Court Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 16 of 18was pleased to hold:-
3)This Court in Civil Appeal No. 9307 of 2019 entitled BGS SGS Soma JV vs. NHPC Ltd. delivered a judgment on 10.12.2019 i.e. after the impugned judgment was delivered, in which reference was made to Section 42 of the Act and a finding recorded thus: (SCC pp. 287-88, para 59) "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."
Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 17 of 184) This was made in the backdrop of explaining para 96 of the Balco, which judgment read as a whole declares that once the seat of arbitration is designated, such clause then becomes an exclusive jurisdiction clause as a result of which only the courts where the seat is located would then have jurisdiction to the exclusion of all other courts.
5)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. This being the case, the impugned judgment is set aside following BGS SGS Soma JV, as a result of which it is the courts at New Delhi alone which would have jurisdiction for the purposes of challenge to the Award.
25. In view of decisions in Hindustan Construction Company Limited vs NHPC Ltd. & Another (supra) and Cinepolis India Private Ltd. vs Celebration City Projects Limited & Another (supra) this Court has no jurisdiction to adjudicate upon the present dispute. The petition under Section 34 of Arbitration and Conciliation Act, 1996 stands dismissed accordingly. Parties are left to bear their own costs. File be consigned to Record Room.
HARISH Digitally signed by
HARISH DUDANI
DUDANI Date: 2021.11.12
18:51:37 +05'30'
Pronounced in the open Court
on December 13th, 2021 (Harish Dudani)
District Judge (Commercial Court),
South West District, Dwarka Courts,
NewDelhi/13.12.2021
Sohan Pal Sharma Vs. M/s Shriram Transport Finance Co. Ltd. & Anr.
OMP (Comm.) No. 21-2019 Page No. 18 of 18