Bombay High Court
L And T Finance Limited vs Manoj Pathak And Anr on 31 January, 2020
Equivalent citations: AIRONLINE 2020 BOM 84, 2020 (2) ABR 386
Author: G.S. Patel
Bench: G.S.Patel
L&T Finance Limited v Manoj Pathak & Anr
J-929-carbp1315-19.doc
Arun
REPORTABLE
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION NO. 1315 OF 2019
L&T Finance Ltd,
A Company incorporated under the
Companies Act, 1956, having it's
Corporate Ofce at Brindavan,
Plot No.177, CST Road, Vidyanagari
Marg, Kalina, Near Shaman Mercedes
Benz Showroom, Santacruz (East),
Mumbai -- 400098 ... Petitioner
~ VERSUS ~
1. MANOJ PATHAK,
Residing at 346 Nagla Paise,
Mathura, Uttar Pradesh 281001.
2. Vinod Chaturvedi,
Residing at 1402, Lasarena Coop
Housing Society, JP Road,
Andheri West, Mumbai -- 400 058. ... Respondents
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A PPEARANCES
FOR THE PETITIONER Mr Akash Rebello, with Mr Nadeem
Shama, Ms Hubab Sayyed & Mr
Salman Athania, i/b Triumph Legal.
FOR THE Mr Ashish Kamat, with Mr Kunal Mehta,
RESPONDENT i/b Neeta Parekh.
CORAM : G.S.Patel, J.
DATED : 31st January 2020
ORAL JUDGMENT:
1. This order, by consent, and at the specifc request of Mr Rebello for the Petitioners, made on instructions he received, addresses only one of the two preliminary objections raised by the Respondents. The Petition itself is under Section 9 of the Arbitration and Conciliation Act 1996. It is the usual Petition by a NBFC seeking interim protective orders pending arbitration against two persons, Manoj Pathak and Vinod Chaturvedi, both said to be guarantors for the repayment of a principal debtor's dues. We are not concerned with the principal debtor, Usher Agro Limited ("Usher Agro").
2. In February 2010, Usher Agro sought a loan of about Rs. 35 crores for a capacity expansion project in Uttar Pradesh from Axis Bank. Usher Agro entered into a Security Trustee Agreement dated 13th July 2012 with IDBI Trusteeship Services Limited ("ITSL"). This will become important shortly. In parallel the Petitioner, L&T Page 2 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc Finance Limited ("L&T Finance") sanctioned a term loan to Usher Agro in the amount of Rs. 22,59,49,410/-. It did not actually disburse this amount. Instead, on 10th October 2013 there was a Deed of Assignment between Axis Bank and L&T Finance for the loan amount of Rs. 22,59,49,410/-. Then there was an Addendum No.1 to the Term Loan Agreement of 15th October 2013 by which Axis Bank, L&T Finance and Usher Agro made the terms and conditions of the original Loan Agreement applicable to the assigned loan i.e. the loan assigned to L&T Finance. The period of repayment of this assigned loan was 13 quarterly instalments at a floating interest rate of 13.25t per annum. Pathak and Chaturvedi issued two Deeds of Guarantees dated 15th October 2013. We will not be concerned with these because it is common ground that these guarantees were substituted by a later document jointly executed by Pathak and Chaturvedi.
3. In August 2014, there was a Working Capital Consortium Agreement dated 23rd August 2014. The Parties to this were Usher Agro, Axis Bank, ITSL and various other banks. L&T Finance does not seem to have been a party of this Consortium Agreement. At least paragraph 11 of the Petition does not say so clearly. Under this arrangement, Usher Agro took additional term loans and working capital facilities. It executed a Deed of Accession to the Security Trustee Agreement with ITSL (of 13th July 2012). The securities created by Usher Agro were extended to ITSL and, according to L&T Finance, this extension was for the beneft of the L&T Finance. There was also security in favour of L&T Finance under the Term Loan Agreement of 15th October 2013. The security cover Page 3 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc is a charge on the movable and immovable assets, present and future, as also current assets.
4. Then there was an Inter Se Agreement dated 23rd August 2014. Again several fnancial institutions were party to this. There is said to be additional security but again I am not concerned with this. There followed on that day a Security Trustee Agreement to which ITSL was a party. I will pass over some of the intervening documents because they do not make a material diference. What matters is that on 23rd August 2014, Pathak and Chaturvedi, the two Respondents, jointly issued or got issued a single substituted guarantee. It is agreed that this guarantee of 23rd August 2014 (jointly issued by Pathak and Chaturvedi) was in substitution of the previous personal guarantees.
5. A copy of this guarantee in a more legible retyped version is from pages 226A to 226AB. This guarantee itself has an arbitration clause 43 with sub-clauses from (a) to (t). This is how it reads:
"43. CLAUSE SPECIFIC TO L&T Arbitration:
In case of a dispute with regard to any claim or right of L&T against the Borrower/Guarantor, the same shall be referred to arbitration under the Arbitration and Conciliation Act, 1996 ("Arbitration Act") and it is agreed by all the Parties that:
(a) claims, disputes or rights, of L&T against the Borrower/Guarantor may be adjudicated by L&T through arbitration as provided hereinafter. All/any disputes or Page 4 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc diferences between the Borrower/Guarantor as provided hereunder may be referred to arbitration under the provisions of the Arbitration and Conciliation Act, 1996.
(b) Such disputes or diferences shall be adjudicated by a sole arbitrator to be appointed by L&T, in accordance with the provisions of the Arbitration and Conciliation Act, 1996, and rules framed there under and any amendments thereto from time to time.
(c) It is agreed between the Borrower and L&T that nothing contained in Section 17 of Arbitration and Conciliation Act, 1996, shall in any way, afect the right of, or preclude L&T to/from seek/seeking such interim reliefs under Section 9 of the Arbitration and Conciliation Act, 1996, and the rules framed thereunder.
(d) The award of the arbitrator shall be a speaking award and shall be fnal, conclusive and binding on all the parties to the arbitration whether on question of law or fact.
(e) In the event of death, refusal, negligence, inability, incapability of the person so appointed to act as the sole arbitrator, a new shall be appointed by L&T. (f ) The venue of arbitration shall be New Delhi or such other place as may be determined by L&T in its sole discretion and courts in New Delhi or such other place shall have exclusive jurisdiction.
(g) In the event the legal status of L&T changes or in the event of the law being made or amended so as to bring L&T under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 ("Securitization Act") or the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 ("DRT Act") to enable L&T to cause enforcement of the Security under the Page 5 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc Securitization Act or proceed to recover dues from the Borrower/Guarantor under the DRT Act, the arbitration provisions hereinbefore contained shall, at the option of L&T, cease to have any efect and if arbitration proceedings are commenced but no award is made, then at the option of L&T such proceedings shall stand terminated and the mandate of the arbitrator shall come to an end from the date of the making of the law or the date when amendment becomes efective or the date when L&T exercises the option of terminating the mandate of arbitrator, as the case may be.
(h) The Guarantors agree, confrm and covenant that the Guarantors shall not object to claims arising out of the out standings of L&T covered by this section between L&T and the Guarantors, alone being adjudicated by the sole arbitrator in terms of this section, on any grounds including the ground that the claim/s of the other lenders (as defned in the Security Trustee Agreement) against the Guarantors is/are to be adjudicated in any other appropriate forum/court/authority/tribunal.
(i) The Guarantors agree, confrm and covenant that the Guarantors shall not dispute the validity of the reference or the award on the ground that the other Lenders are not parties to the reference or the award.
(j) The Guarantors expressly agree that they shall not contend that L& has given up its rights on the Security by reason of L&T making a reference to the arbitration for its monetary claim only and accepts its share in the net sale proceeds from the Security Trustee. It is agreed that in the event of the other Lenders ceasing to have any interest in the securities, the arbitraror shall have power to grant reliefs in respect of the securities including realization thereof in Page 6 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc favour of L&T and such claim shall be deemed to have been issued by arbitration agreement mentioned in 20(a) above.
(k) The Guarantors agree and covenant that the Guarantors shall not raise the fact of notices invoking arbitration or reference to or pendency of arbitration proceedings, as a ground of objection/defence in any appropriate forum/court/authority tribunal in respect of claims between the other Lenders and the Guarantors or when action is taken by them or by the Security Trustee in respect of the claim of the other Lenders.
(l) The Security Trustee/ Guarantors shall recognize the monetary claim of L&T to the extent shown by the Security Trustee in the fnal statement of account evidencing the total claim due to the entire body of Lenders, as being the amount due and payable by the Guarantors to L&T, or to the extent awarded by the arbitrator, under the award, as the case may be, as secured on the security assets of the Guarantors. L&T's claim out of the secured assets and the distribution of the net sale proceeds shall be governed pursuant to the provisions of the Memorandum of Confrmation of Security Ranking Arrangement between all the Lenders.
(m) The Security Trustee shall, at the time of distribution to the other Lenders of the proceeds realized from the Security, on a pro rata basis make payments to L&T together with the other Lenders. In the event the Security Trustee is injuncted from making such payment pursuant to an order of a court or competent jurisdiction, then, the Security Trustee shall hold such portion of L&T's share realized from the Security Interest, in trust for L&T upon the injunction being vacated or under the award, whichever is earlier, or otherwise and shall not deal with the same and in prejudicial manner whatsoever.Page 7 of 21
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(n) The Security Trustee shall not insist for any further directions/orders from any court/tribunal for enabling the Security Trustee to act upon the said award.
(o) After realization and pro-rata distribution by the Security Trustee to all other Lenders, in the event of a shortfall, it is agreed between the Parties that the Lenders shall be entitled to institute appropriate recovery proceedings with respect to the shortfall as provided under the terms of Finance Documents and/or law as may be applicable to the Parties hereto.
(p) The Guarantors agree and covenant with the Security Trustee that the Guarantors shall not raise or cause to be raised objections of any nature whatsoever regarding enforcement of the claim of L&T and/or the other Lenders against the Security and/or distribution therefrom in the manner as agreed by and between all the Lenders inter se.
(q) It is understood and agreed by L&T that such reference to arbitration, shall at all times, subject to the provisions hereunder, be without prejudice to the interest of the other Lenders and the right and/or remedies of the other Lenders. L&T as the case may be shall inform the Security Trustee before entering into reference for arbitration.
(r) The Borrower hereby indemnifes and agrees to keep indemnifed the Security Trustee/ L&T or any of them of, from and against all costs including actual legal costs, charges and expenses that the Security Trustee / L&T or any of them shall incur as a consequence of invocation/enforcement of its rights in the manner as provided herein.
(s) In the event that the dues of the other Lenders excluding L&T have been repaid and/or settled by the Page 8 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc Guarantors without the Security Trustee/other Lenders having to enforce the Security, in that event L&T shall be entitled to enforce its rights over the Security before the arbitral tribunal or any other court or forum towards recovery of its outstanding under the Finance Documents.
(t) It is agreed that in the aforesaid event, the Security Trustee shall notwithstanding the other Lenders having agreed to or having released the Security pertaining to their rights, shall continue to hold the entire Security for and on behalf of L&T till the same is realized and the net sale proceeds are handed over to L&T towards satisfaction of its claims and further, the Security Trustee shall be bound by the arbitration process and will be a party to any proceedings that may be adopted by L&T against the Borrower.
The Guarantors agree and confrm that the reference to "dispute" in the above Clause 43 pertains to any disputes arising between the L&T and the Guarantors only."
(Emphasis added)
6. Before I look at the objections taken, one further point is to be noted which is the framing of the document itself at page 226C where it begins. Both Pathak and Chaturvedi are named. They are the guarantors. The guarantee is expressly said to be in favour of ITSL, IDBI Trusteeships Services Limited. L&T Finance is not a named party to the document at all. It is not a signatory to the document.
7. However clause 43 is, as we have seen, said to be "specifc to L&T Finance". Now this caption, and sub-clause (f ) (emphasized Page 9 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc above) lie at the heart of the objection taken by Mr Kamat for the Respondents.
8. The frst objection is as to jurisdiction and is based on a reading of clause (f ). The second objection is that since L&T Finance is not a signatory to the document, nor a party that can be fairly said to be a party named in the document (in the sense that the guarantee is not given directly or explicitly 'in favour of' L&T Finance), therefore there is no arbitration agreement as between the Respondent and L&T Finance at all.
9. Mr Rebello's request is this. He seeks that I should address myself to the jurisdictional issue or objection based on sub-clause (f ), but should only turn to the question of the existence of the Arbitration Agreement if I fnd in his favour on the jurisdictional question, i.e. only if I hold that this Court does have jurisdiction. Should I hold against him on jurisdiction and conclude that this Court lacks the necessary jurisdiction, then he seeks that all contentions as to the existence of the Arbitration Agreement be kept open and left at large. The reason for making this submission is that in that scenario (in which Mr Rebello fails the jurisdictional test) he will at least be entitled to approach a Court of otherwise competent jurisdiction where he may address any objection as to the existence of the Arbitration Agreement. I think this is both fair and reasonable and Mr Kamat on behalf of the Respondents has absolutely no objection. From another perspective, I think Mr Rebello has quite wisely chosen this course because should I be inclined to hold against him on both aspects of the matter then there could Page 10 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc conceivably be a situation where he is left entirely without a Court to which he can go.
10. I have granted Mr Rebello's request. I have addressed the question of jurisdiction frst. I have, for the reasons that follow, held against him, and found that this Court does not have jurisdiction. I have, therefore, not addressed the other objections as to the existence of the arbitration agreement, and left all contentions open in that regard.
11. For clarity I will now reproduce clause (f ) again.
(f ) The venue of arbitration shall be New Delhi or such other place as may be determined by L&T in its sole discretion and courts in New Delhi or such other place shall have exclusive jurisdiction.
12. The opposition from Mr Kamat is that this clause has two distinct elements. First there is an unequivocal nomination by the parties of a venue of choice, i.e. New Delhi, and that the Courts in New Delhi have exclusive jurisdiction. Second, his submission is that to the extent that the clause purports to grant a unilateral overriding discretion to L&T Finance to choose 'any other place' as a venue and says that 'such other place' (being the place nominated by L&T Finance) to be the jurisdictional hub, the clause must fail because the Supreme Court has now clearly said that considerations under Section 20 of the Arbitration Act and the demands of party autonomy, neutrality and even handedness do not permit one party to dictate terms and unilaterally foist its choice or decision on the other. Whether it is a matter of appointment of an arbitral tribunal Page 11 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc or, as in this case, a selection of a seat/venue and Court jurisdiction, one party to the dispute cannot lay down the terms and impose these on the other.
13. The third limb to this argument is that the distinction in domestic arbitrations between seat and venue is now all but obliterated. He cites a certain amount of precedent to support this, and I will turn to that presently.
14. I now note how Mr Rebello fashions his submissions and how he commends I approach the clause in question. He, too, seeks to parse the clause into two component parts, but quite diferently from Mr Kamat's formulation. To ensure that there is no ambiguity about my understanding of his submission, I will reproduce this clause for a third time, this time with some internal numbering:
(f ) (i) The venue of arbitration shall be New Delhi or such other place as may be determined by L&T in its sole discretion, and
(ii) courts in New Delhi or such other place shall have exclusive jurisdiction.
15. Mr Rebello's submission is that assuming (i) sufers from any legal infrmity, it has no bearing at all on (ii). The second part of the clause does not confer exclusive jurisdiction, and, necessarily this implies that it is not the venue or the seat that will determine a Court's jurisdiction, but, rather, the traditional cause of action or Section 20 Code of Civil Procedure 1908 ("CPC") concept. It is not his submission that the entire clause from start to fnish is Page 12 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc invalidated but that it is the second portion of the clause that is determinative of a Court's jurisdiction. If there is any ambiguity or jurisprudential prohibition on discretion being vested in one party and such discretion being unilaterally exercised, then the second limb of the clause must begin to operate.
16. Yet another look at the clause in question is necessary to see if Mr Rebello's formulation is entirely accurate. I think it is not. sub- clause (f ) divides itself not into two parts, as Mr Rebello suggests, but into four. The two parts in Mr Rebello's interpretation is each divisible into two subsidiary parts. The frst, regarding venue (the part shown as (i) above) has at its forefront the nomination or designation of a specifed venue, New Delhi. The subsidiary part of
(i) then confers discretion on L&T Finance to pick such other venue as it deems ft. Then comes the jurisdictional part to which Mr Rebello refers. But this again has two sub-components, New Delhi, and -- this is important -- such other place.
17. In other words, fully dissected, the clause would read thus:
(f ) (i) The venue of arbitration shall be
(a) New Delhi or
(b) such other place as may be determined
by L&T in its sole discretion, and
(ii) courts in
(a) New Delhi or
(b) such other place
shall have exclusive jurisdiction.
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18. Everything turns on how we approach this expression 'such other place' in (f )(ii)(b) above. Mr Rebello's submission is that the second occurrence of 'such other place' means another place that has a cause of action based jurisdiction. I do not think this is a fair reading of that clause or that it can be so entirely divorced from the discretionary part of the second portion of the frst part (f )(i)(b) above. 'Such other place' occurs in both subsidiary clauses and in both contexts i.e. regarding venue and in regard to a Court's jurisdiction. For venue, it does not simply say 'such other place'. That would make no sense. It says such other place as may be determined by L&T Finance in its sole discretion. This confers on L&T Finance a unilateral discretion to choose any other venue at will, whether or not the Respondents agree. In its second occurrence, therefore, 'such other place' must be a reference not to some cause of action based jurisdictional Court but to 'such other place as L&T Finance in its sole discretion may' have previously determined, i.e. to court with jurisdiction over 'such other' venue that L&T Finance in its sole discretion chose. That is the only holistic and harmonious reading of the whole of sub-clause (f ). If we read it in that fashion, and I do believe there is no other way of reading it, this brings us back full circle to L&T Finance being impermissibly conferred with a unilateral discretion, but this time to unilaterally name the Court to which it will go rather than going to the place chosen by the parties by agreement, New Delhi.
19. I do not think that it is possible to read 'such other place' in the latter portion of the clause as meaning some place other than the one chosen by L&T Finance in its sole discretion.
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20. In approaching this, we must bear in mind that we are concerned with a domestic arbitration. The settled law now is that in a domestic arbitration, a named venue is the seat of the arbitration unless there is something to indicate that the place is a 'mere venue' (where a tribunal may examine witnesses etc). If a venue is specifed, then absent a specifc indication of it being merely a venue, it will constitute the seat of the arbitration; and jurisdiction will be determined by the location or situs of the seat. It is only if neither seat nor venue are specifed that the cause of action based jurisdiction concept can operate. Simply: venue is ordinarily the seat and venue-seat determine jurisdiction, not vice-versa.
21. This is also the current position in law from the Supreme Court decision in Indus Mobile Distribution Private Limited v Datawind Innovations Private Limited And Ors.1 The second decision is BGS SGS Soma Jv v NHPC Ltd.2 Both sides have, however, relied on paragraph 85 of BGS SGS. It reads thus:
"85. 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 he 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 "tribunals are to meet 1 (2017) 7 SCC 678.
2 (2019) SCC OnLine SC 1585 Page 15 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc 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 that 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."
(Emphasis added)
22. Mr Rebello emphasizes the second portion of this, the passage shown in underlining above, to say that there must be internal indicators showing that the parties made a distinction i.e. they agreed that the stated venue is merely a venue and not the seat of the arbitrator proceedings. I think Mr Rebello is in error, and, indeed, I believe that this paragraph, correctly read as a whole actually assists Mr Kamat and not Mr Rebello. The opening portion seems to me indicate quite unambiguously that whenever the word 'venue' is used in regard to domestic arbitration proceedings, it is Page 16 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc really an indication then that is to be seat of those proceedings. The only exception is when a 'venue' is separately designated as a meeting place of convenience.
23. Incidentally, SGS BGS also addresses the question of how a judgment must be read, that is to say not by plucking a sentence out of context from here or there, but holistically and for what it actually decides. It is this that is said to be the 'ratio' of a judgment.
24. But this only answers the frst portion of the argument. Mr Rebello's construct proceeds on the footing that the whole of the selection of the seat (or venue=seat) provision is rendered bad because of the discretion impermissibly conferred on L&T Finance to choose some other place in its sole discretion. That is not so. All that this means is that L&T Finance cannot pick any venue other than New Delhi, and that the stated venue, New Delhi, will be the seat (since there is nothing to indicate that it is a 'mere venue', a meeting place of convenience). Mr Rebello may have been correct had the clause simply said the venue of the arbitration will be at such place as L&T Finance may in its sole discretion decide. That would have rendered the entire clause void, and then there would be no designated venue/seat at all. Instead, in its current form, the clause does name a venue. It does not say it is merely a venue or meeting place of convenience. This venue, New Delhi, is therefore the seat. It then goes on to give L&T Finance additional discretion to unilaterally select some other venue/seat. What is bad and would be unacceptable is L&T Finance exercising its choice to pick any other venue. This would not dislodge the consensus arrived at between the parties designating New Delhi as the chosen venue.
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25. Once we see it like this, and once we have the settled law that in domestic arbitrations where a venue is specifed it connotes the seat unless there is a specifc indication to the contrary, then obviously no question of any other cause of action jurisdiction can survive for the purposes of selecting the competent Court.
26. Mr Rebello does attempt an argument that despite the law both in Indus Mobile and BGS SGS, the provision under Section 2(1)
(e)(i) in regard to a Court for domestic arbitrations remains untouched. I do not believe that is correct either. In fact if there is any doubt about this, this seems to be put to rest entirely in BGS SGS which considered the law as it stood prior to the fve Judge Bench decision in Bharat Aluminium Co (BALCO) v Kaiser Aluminium Technical Service,3 the position after that decision, the provisions of Section 20 ("place of arbitration"), the important decision in Roger Shashoua v Mukesh Sharma4 and the evolution of the law since then, including the 2015 amendment. BGS SGS provides us with an analysis of how the test for determining where lies the seat of an arbitration (paragraphs 63 to 84). In paragraph 84 of BGS SGS, citing a very recent decision in Brahmani River Pellets Ltd v Kamachi Industries Ltd,5 the Supreme Court held:
"84. Most recently, in Brahmani Rivel Pellets (supra), this Court in a domestic arbitration considered clause 18 -- which was the arbitration agreement between the parties -- and which stated that arbitration shall be under Indian Arbitration and Conciliation Act, 1996, and the venue of arbitration shall be Bhubaneswar. After citing several 3 (2012) 9 SCC 552.
4 (2009) EWHC 957 (Comm).
5 (2019) SCC OnLine SC 929.Page 18 of 21
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"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 diference.
19. When the parties have agreed to the have the "venue" of arbitration at Bhubaneshwar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only the 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."
(Emphasis added)
27. Our present case falls squarely not only within BGS SGS but actually within the frame of the discussion in Brahmani River Pellets. There again the parties agreed that the venue of the arbitration would be at Bhubaneshwar. If we apply this to our case and exclude the discretionary factor, as I believe we must, we are left with New Page 19 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 ::: L&T Finance Limited v Manoj Pathak & Anr J-929-carbp1315-19.doc Delhi being the only venue that can fairly be said to be the one agreed on by the parties. Once we have that venue and that venue is regarded as the seat, and since there are no other indicia that it is only a meeting place of convenience, then on any fair reading of these decisions, only the Courts at New Delhi that would have jurisdiction and not any other Court.
28. Mr Rebello's construct really amounts to writing out of the clause every reference to New Delhi, including as to nominated or agreed venue, or, in other words, to rewriting the entire clause. That is impermissible.
29. There emerges the following trifecta of propositions in regard to a domestic arbitration:
(a) A stated venue is the seat of the arbitration unless there are clear indicators that the place named is a mere venue, a meeting place of convenience, and not the seat;
(b) Where there is an unqualifed nomination of a seat (i.e. without specifying the place as a mere venue), it is courts where that seat is situated that would have exclusive jurisdiction; and
(c) It is only where no venue/seat is named (or where it is clear that the named place is merely a place of convenience for meetings) that any other consideration of jurisdiction may arise, such as cause of action.Page 20 of 21
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30. Viewed from this perspective, I do not believe I can accept Mr Rebello's submissions. I hold that this Court has no jurisdiction.
31. For the reasons set out above, the second objection raised by Mr Kamat as to the existence of an arbitration agreement is not addressed on merits. All contentions are specifcally kept open.
32. The Arbitration Petition is dismissed on this ground of jurisdiction.
33. Although this is in the Commercial Division, and therefore an order of costs is mandatory, in the present case and having regard to the limited point on which this decision is rendered, I make no order of costs.
(G.S. PATEL, J.) Page 21 of 21 31st January 2020 ::: Uploaded on - 03/02/2020 ::: Downloaded on - 21/03/2020 22:36:55 :::