Delhi District Court
Gautam Kumar vs M/S. Toyota Financial Services India ... on 9 January, 2023
IN THE COURT OF SHRI PANKAJ GUPTA:
DISTRICT JUDGE, (S/W) (COMMERCIAL COURT)-01,
DWARKA COURTS : DELHI.
OMP (COMM) NO. 13/21
ID No. DLSW01-009183-2021
In the matter of :
Gautam Kumar
S/o Sh. Daya Nanad Choudhary,
Proprietor of M/s Choudhary Tour and Travels
At: Second Floor, Plot No. 10,
Nawada, Uttam Nagar, New Delhi-110059
...........PETITIONER
Versus
1. M/s. Toyota Financial Services India Ltd.
Having its Registered Office at No. 21,
Centropolis, First Floor, 5th Cross,
Langford Road, Shanti Nagar, Bangalore
Also at:
Branch Office, Janakpuri Delhi
........RESPONDENT
2. Sh. Ankur Dhiman,,
Sole Arbitrator,
At: C-209, Street No. 4, Top Floor, West Vinod Nagar,
Opposite Saraswati Kunj Apartment, Delhi-110092
Also at: P-26, Post Office Lane,
Tis Hazari Courts, Delhi-110054
........SOLE ARBITRATOR
Date of Institution : 08.10.2021
Date when the case reserved : 09.01.2023
for Judgment
Date of Judgment : 09.01.2023
Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.
CS Comm No. 13/21 Page No. 1 of 7
JUDGMENT
1. This is the petition under section 34 of the Arbitration and Conciliation Act, 1996 (the Act) filed by the petitioner being aggrieved by the arbitration award dated 21.06.2021 (the impugned award) passed by the sole arbitrator/the respondent no. 2 (the Arbitrator).
2. Brief facts leading to filing of the present petition are that the respondent no.1 filed the statement of claim before the Arbitrator stating that the petitioner approached the respondent no. 1 for grant of financial assistance and the respondent no. 1 agreed to the same. Consequently, the respondent no. 1 sanctioned the loan in favour of the petitioner. The petitioner executed the requisite the loan documents in favour of the respondent no. 1. However, the petitioner failed to observe the terms and conditions of the loan agreements. Consequently, the petitioner's loan account became irregular and the petitioner failed to regularize the said account. Left with no option, the respondent no. 1 got issued the legal notice upon the petitioner calling upon it to pay the outstanding amount, but of no use. As such, the disputes arose between the parties and the respondent no. 1 invoked the arbitration clause and appointed the respondent no. 2 as the arbitrator. Consequently, the arbitration proceedings were commenced. As revealed from the impugned award, the petitioner failed to participate in the arbitration proceedings and therefore, the said proceedings were conducted ex-parte. The arbitrator conducted the arbitration proceedings and passed the impugned award. Being aggrieved by the impugned award, the petitioners filed the present petition.
3. Notice of the petition was issued to the respondent no.1. The respondent no. 1 contested the petition and prayed for its dismissal.
Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.
CS Comm No. 13/21 Page No. 2 of 74. Notice of the petition was issued to the respondent no.2 and in response thereto, the respondent no. 2 filed the original arbitration record.
5. I have heard the counsel for the petitioner and counsel for the respondent no. 1 and have perused the material available on record.
6. In its reply, the respondent no. 1 raised the preliminary objection that this court does not have the territorial jurisdiction to entertain the petition as the seat of the arbitrator was situated at Karkardooma Courts, Delhi. During the course of argument also, counsel for the respondent no. 1 strenuously pleaded the said objection.
7. On the contrary, counsel for the petitioner pleaded that this court has the territorial jurisdiction to entertain the petition because the branch office of the respondent no. 1 is situated, the vehicle was purchased and the loan was sanctioned within the territorial jurisdiction of this court..
8. Admittedly, the petitioner and the respondent no. 1 entered into the loan agreement dated 18.03.2019 and Article 23 of the said agreement contained the arbitration clause and provided that in case, the disputes arose between the parties shall be referred for the arbitration and the venue of the arbitration shall be in New Delhi or Bangalore. Further, the courts at New Delhi shall have the exclusive jurisdiction to entertain any dispute arising out of the said agreement. In the present case, the arbitrator conducted the arbitration proceedings at C- 209, Street no.4, Top Floor, West Vinod Nagar, Opposite Saraswati Kunj Apartment, Delhi-110092 and not at Karkardooma Courts Delhi as pleaded by counsel for the respondent no. 1. But the fact remains that the seat of the Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.
CS Comm No. 13/21 Page No. 3 of 7arbitrator was not situated within the territorial jurisdiction of this court.
9. In para 7 of the petition, the petitioners pleaded that this court has the territorial jurisdiction to entertain the present petition because the branch office of the respondent no. 1 is situated, the vehicle was purchased and the loan was sanctioned within the territorial jurisdiction of this court.
10. The Hon'ble Supreme Court, in the judgment titled as "BBR (INDIA) Private Limited vs. S.P. Singla Constructions Private Limited", reported in 2022 LiveLaw (SC) 493, held:
"20. BGS SGS Soma (supra) extensively refers to the judgment of this Court in Indus Mobile Distribution Private Limited v. Datawind Civil and Others, which decision refers to the legislative history of Section 2(1)(e) and Section 20 of the Act and the recommendations of the 246th Law Commission Report, 2014. These recommendations, it is observed, were not implemented in consonance with the decision in BALCO (supra), which, in no uncertain terms, refers to the 'place' as the 'jurisdictional seat' for the purpose of clause (e) to sub-section (2) of Section 2 of the Act. This judgment was subsequently followed in Brahmani River Pellets Limited v. Kamachi Industries Limited. It may, however, be noted that clause (e) to sub-section (1) of Section 2 was amended by inserting sub-clause (ii) with the specific objective to solve the problem of conflict of jurisdiction that would arise in cases where interim measures are sought in India in cases of arbitration seated outside India. In the context of domestic arbitrations it must be held that once the 'seat of arbitration' has been fixed, then the courts at the said location alone will have exclusive jurisdiction to exercise the supervisory powers over the arbitration. The courts at other locations would not have jurisdiction, including the courts where cause of action has arisen. As observed above and held in BGS SGS Soma (supra), and Indus Mobile (supra), the moment the parties by agreement designate 'the seat', it becomes akin to an exclusive jurisdiction clause. It would then vest the courts at 'the seat' with exclusive jurisdiction to regulate arbitration proceedings arising out Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.CS Comm No. 13/21 Page No. 4 of 7
of the agreement between the parties.
22. BGS SGS Soma (supra) also refers to decision of this Court in Union of India v. Hardy Exploration and Production (India) Inc., which had held that the choice of the venue of arbitration did not imply that it had become the 'seat of arbitration' and that the venue could not by itself assume the status of 'the seat'; instead a venue could become 'the seat' only if "something else is added to it as a concomitant". According to BGS SGS Soma (supra), the reasoning given in Hardy Exploration (supra) is per incuriam as it contradicts the ratio and law laid down in BALCO (supra). Hence, BGS SGS Soma (supra) holds that it would be correct to hold that while exercising jurisdiction under sub-section (2) of Section 20 of the Act, an arbitrator is not to pass a detailed or a considered decision. The place where the arbitral tribunal holds the arbitration proceedings would, by default, be the venue of arbitration and consequently the 'seat of arbitration'.
24. ........................ This, in the context of the decision in Inox Renewables Ltd (supra), is undoubtedly correct, but the aforesaid decision cannot be read as a precept in cases governed by sub section (2) of Section 20 of the Act. Inox Renewables (supra) was a case governed under sub-section (1) of Section 20 of the Act, that is, where parties by the agreement had fixed the jurisdictional 'seat' at Jaipur, Rajasthan, but thereafter, by mutual consent, had decided to change the venue of proceedings to Ahmedabad prior to the commencement of the arbitration. This evidently resulted in the decision of this Court accepting that the jurisdictional 'seat of arbitration' was Ahmedabad. This decision would apply in case the parties, by consent, agree mutually that the 'seat of arbitration' would be located at a particular place. The said exercise would be in terms of sub-section (1) of Section 20 of the Act, which endorses and emphasises on party autonomy and choice that determines the 'seat of arbitration'. It would not apply when the arbitrator fixes 'the seat' in terms of sub-section (2) of Section 20 of the Act. Once the arbitrator fixes 'the seat' in terms of subsection (2) of Section 20 of the Act, the arbitrator cannot change 'the seat' of the arbitration, except when and if the parties mutually agree and state that the 'seat of arbitration' should be changed to another location, which is not so in the present case.
Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.CS Comm No. 13/21 Page No. 5 of 7
25. ........................... 'The seat' once fixed by the arbitral tribunal under Section 20(2), should remain static and fixed, whereas the 'venue' of arbitration can change and move from 'the seat' to a new location. Venue is not constant and stationary and can move and change in terms of sub-section (3) to Section 20 of the Act. Change of venue does not result in change or relocation of the 'seat of arbitration'.
28. ........................................For clarity and certainty, which is required when the question of territorial jurisdiction arises, we would hold that the place or the venue fixed for arbitration proceedings, when sub-section (2) of Section 20 applies, will be the jurisdictional 'seat' and the courts having jurisdiction over the jurisdictional 'seat' would have exclusive jurisdiction. This principle would have exception that would apply when by mutual consent the parties agree that the jurisdictional 'seat' should be changed, and such consent must be express and clearly understood and agreed by the parties."
11. In view of the forgoing discussions, it can be held that in the article 23 of the loan agreement, it is provided that the venue of the arbitration shall be New Delhi or Bangalore and the courts at New Delhi shall have the exclusive jurisdiction to entertain any dispute arising out of the said agreement. As such, it was agreed that the venue of arbitration shall be New Delhi or Bangalore but no seat of the arbitrator was fixed. This fact is of significance because the District Courts in Delhi are established district wise in 11 districts and exercise the jurisdiction as per their respective district. Hence, in terms of section 20 (2) of the Act, the seat of the arbitration was fixed at Karkardooma Courts, Delhi which does not fall in South-West District, Delhi.
12. Therefore, in view of the judgment BBR (India) Private Limited (supra), it can be held that once the parties have not fixed the seat for arbitration proceedings and the arbitrator has fixed the seat of arbitration, then sub-section Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.
CS Comm No. 13/21 Page No. 6 of 7(2) of section 20 of the Act applies and that seat will be the jurisdictional 'seat' and the courts having jurisdiction over the jurisdictional 'seat' would have exclusive jurisdiction. This principle would have exception that would apply when by mutual consent the parties agree that the jurisdictional 'seat' should be changed, and such consent must be express and clearly understood and agreed by the parties. However, as evident from the record that subsequently, the parties by their mutual consent had not changed the seat of arbitration to deal with the subject dispute.
13. As discussed above, in the present case, the parties agreed that the venue of the arbitration shall be at New Delhi or Bangalore. The seat of the arbitration was fixed by the arbitrator at Karkardooma Courts, Delhi which does not fall in South-West District, Delhi where the entire proceedings were conducted and the arbitration award was passed. Therefore, once the arbitrator fixes the seat, then in the terms of section 20(2) of the Act, that shall be the jurisdictional seat and the courts having the jurisdiction over the jurisdictional seat would have the exclusive jurisdiction. Admittedly, the area where the jurisdictional seat was fixed does not fall in the South West District Delhi. Therefore, I am of the opinion that this court does not have the territorial jurisdiction to entertain the present petition. Liberty is granted to the petitioner to file the petition in the court of competent jurisdiction. No order as to the cost. Petition is disposed of accordingly.
14. File be consigned to Record Room.
ANNOUNCED IN THE OPEN COURT,
On this 9th day of January, 2023 (PANKAJ GUPTA)
District Judge, S/W
(Commercial Court)-01:
NEW DELHI
Gautam Kumar Prop. M/s Choudhary Tour & Travels Vs. Toyota Financial Services India Ltd.
CS Comm No. 13/21 Page No. 7 of 7