Delhi High Court
Pcp International Limited vs Lanco Infratech Limited on 17 July, 2015
Author: Valmiki J. Mehta
Bench: Valmiki J.Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ OMP (I) No. 350/2015
% 17th July, 2015
PCP INTERNATIONAL LIMITED ..... Petitioner
Through: Mr. Rajiv Nayar, Senior Advocate with
Ms. Gauri Rasgotra, Advocate, Mr.
Raunak Dhillon, Advocate, Mr. George
Varghese, Advocate and Mr. Sumit
Attri, Advocate.
versus
LANCO INFRATECH LIMITED ..... Respondent
Through:
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
To be referred to the Reporter or not?
VALMIKI J. MEHTA, J (ORAL)
I.A. No.14081/2015 (exemption)
1. Exemption allowed subject to just exceptions.
I.A. stands disposed of.
+ OMP(I) No.350/2015
2. This is a petition under Section 9 of the Arbitration & Conciliation Act, 1996 filed by the petitioner with respect to disputes arising between the parties under the contract dated 3.11.2010 by which petitioner was awarded the contract for erection, testing and commissioning of 2 x 660 MW OMP(I) 350/2015 Page 1 of 15 Boiler Units and Auxiliaries (Part A) at the Lanco Vidharbha Thermal Power Project situated in the village of Mandwa, Wardha district, Maharashtra, India.
Petitioner's office is at Chandigarh and respondent's office is at Gurgaon.
3. Territorial jurisdiction of this Court is claimed on the basis of paras 55.6.0 and 55.7.0 of the general conditions of contract which give exclusive jurisdiction to the courts at New Delhi.
4. It is trite and a settled principle of law that parties by consent cannot confer jurisdiction on a court which does not have any vide the judgment in the case of M/s. Patel Roadways Limited, Bombay Vs. M/s.
Prasad Trading Company (1991) 4 SCC 270. In a contractual matter, there are four courts which have jurisdiction. First is where the contract is executed, secondly where the contract is to be performed, thirdly where the payment under the contract has to be made and fourthly where the defendant/respondent resides. This is the ratio laid down by the Supreme Court in the judgment in the case of A.B.C. Laminart Pvt. Ltd. & Anr. Vs. A.P. Agencies, Salem, AIR 1989 SC 1239.
Accordingly, I have put it to the learned senior counsel for the petitioner to show me if the contract in question was executed at Delhi or the contract was to be performed at Delhi or payment under the contract was made at New Delhi.
OMP(I) 350/2015 Page 2 of 15(i) It is nowhere stated in the pleading or in the contract dated 3.11.2010 that where the contract was entered into, but, the Work Order dated 3.11.2010 is addressed to the petitioners at Chandigarh and not Delhi.
Even the various offices of the respondent are not at Delhi but shown at Gurgaon in Haryana or in Hyderabad, Telangana. I specifically put a query to the learned senior counsel for the petitioner to show me a line in this Work Order/Contract dated 3.11.2010 that the contract is executed at Delhi but nothing is pointed out to me in the Work Order that this Work Order dated 3.11.2010 states that it is executed at Delhi.
(ii) Even performance of the contract is admittedly not at Delhi because the Work Order was to be executed by erection, testing and commissioning of the Boiler Units at Mandwa, Wardha District, Maharashtra.
(iii) Also, there is no averment in the petition, and on a query put to the learned senior counsel for the petitioner no pleading or document could be shown to me, that any payment under the contract has been made to the petitioner at Delhi.
5. Therefore, neither the contract is executed at Delhi nor the contract was to be performed (or is breached) at Delhi and nor is any OMP(I) 350/2015 Page 3 of 15 payment made under the contract at Delhi. Even the respondent does not carry on business or work at Delhi but does so either at Gurgaon in Haryana or at Hyderabad in Telangana. Clearly therefore this Court would have no territorial jurisdiction to try this petition inasmuch as merely because a party chooses a contractual clause to give them jurisdiction at Delhi, this Court would not have territorial jurisdiction once cause of action wholly or in part does not arise within the territorial jurisdiction of this Court.
6 (i). Learned senior counsel for the petitioner has sought to argue by placing reliance upon the Constitution Bench judgment of the Supreme Court in the case of Bharat Aluminium Company and Ors. etc. etc. Vs. Kaiser Aluminium Technical Service, Inc. and Ors. etc. etc. (2012) 9 SCC 552 that once the venue of arbitration is in Delhi, this Court would have territorial jurisdiction.
(ii) In my opinion, the argument urged on behalf of the petitioner that merely because the venue of arbitration is in Delhi, this Court would have territorial jurisdiction is a misconceived argument because there is a difference between venue of the arbitration and seat of arbitration. It is only the seat of arbitration which will give territorial jurisdiction and not the venue of jurisdiction. I note that 'seat' means the place where court is, OMP(I) 350/2015 Page 4 of 15 which has the territorial jurisdiction with respect to the subject matter/cause of action of the matter, and venue is the place, which is a place where the arbitral tribunal sits to hold the arbitration proceedings and which sitting of the arbitral tribunal need not be at the place where the 'seat' of arbitration is located. Nowhere the Supreme Court in the judgment in the case of Bharat Aluminium Company and Ors. etc. etc. (supra) lays down the law that even if there is a difference between the seat of arbitration and venue of arbitration, the venue of arbitration (which is not the 'seat') will confer territorial jurisdiction to a Court.
(iii) In fact, Supreme Court speaking through Hon'ble Mr. Justice S.S. Nijjar and who was also the author of the judgment in the case of Bharat Aluminium Company and Ors. etc. etc. (supra) has clarified the difference between the venue of arbitration and seat of arbitration in the recent judgment in the case of Enercon (India) Limited and Others Vs. Enercon GMBH and Another (2014) 5 SCC 1. The difference in the legal impact of the expressions "seat" and "venue" have been discussed in paras 40 to 44, 97 to 101, 104 to 107, 115, 116, 131, 134 & 135 of the judgment and these relevant paras of this judgment read as under:-
OMP(I) 350/2015 Page 5 of 15"40. Mr. Nariman submitted that for the purposes of fixing the seat of arbitration the Court would have to determine the territory that will have the closest and most intimate connection with the arbitration. He pointed out that in the present case provisions of the Indian Arbitration Act, 1996 are to apply; substantive law of the contract is Indian law; law governing the arbitration is Indian Arbitration law; curial law is that of India; Patents law is that of India; IPLA is to be acted upon in India; enforcement of the award is to be done under the Indian law; Joint Venture Agreement between the parties is to be acted upon in India; relevant assets are in India. Therefore, applying the ratio of law in Naviera Amazonica Peruana S.A. v. Compania Internacional De Seguros Del Peru : (1988) 1 Llyod's Rep 116 (CA), the seat of arbitration would be India. The submission is also sought to be supported by the Constitution Bench decision of this Court in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (BALCO).
41. Mr. Nariman submitted that the interpretation proposed by the Respondents that the venue London must be construed as seat is absurd. Neither party is British, one being German and the other being Indian. He submits that the Respondents have accepted that the choice of law of the underlying agreement is Indian. But, if "venue of arbitration" is to be interpreted as making London the seat of arbitration it would: (a) make the English Act applicable when it is not chosen by the parties; (b) would render the parties' choice of the Indian Arbitration Act, 1996 completely nugatory and otiose. It would exclude the application of Chapter V of the Indian Arbitration Act, 1996 i.e. the curial law provisions and Section 34 of the Indian Arbitration Act, 1996. On the other hand, interpretation propounded by the Appellants would give full and complete effect to the entire clause as it stands.
42. Mr. Nariman also submitted that there are even more clear indicators within the arbitration clause which show that the parties intended to be governed only by the Indian Arbitration Act, 1996.
The clause uses the word presiding arbitrator and not Chairman; this language is expressly used in Sections 11 and 29 of the Indian OMP(I) 350/2015 Page 6 of 15 Arbitration Act, 1996 as distinct from Section 30 of the English Arbitration Act, 1996.
43. Mr. Nariman gave another reason as to why London can't be the seat of the Arbitration. According to him, if the interpretation propounded by the Respondents is accepted, it would lead to utter chaos, confusion and unnecessary complications. This would result in absurdity because the Indian Arbitration Act, 1996 would apply to the process of appointment under Section 11; English Arbitration Act, 1996 would apply to the arbitration proceedings (despite the choice of the parties to apply Chapter V to the Part I of the Indian Arbitration Act, 1996); challenge to the award would be under English Arbitration Act, 1996 and not under the Part I of the Indian Arbitration Act, 1996; Indian Arbitration Act, 1996 (Section 48) would apply to the enforcement of the award.
44. Lastly, it was submitted by Mr. Nariman that provisions of Section 18 of the English Arbitration Act, 1996 are derogable and in any event the parties have chosen the Indian Court for constitution of Arbitral Tribunal.
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97. This now clears the decks for the crucial question, i.e., is the "seat" of arbitration in London or in India. This is necessarily so as the location of the seat will determine the Courts that will have exclusive jurisdiction to oversee the arbitration proceedings. Therefore, understandably, much debate has been generated before us on the question whether the use of the phrase "venue shall be in London" actually refers to designation of the seat of arbitration in London.
98. We find much substance in the submissions of Mr. Nariman that there are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be the "venue" to hold the proceedings of arbitration. We find force in the submission made by learned senior Counsel for the Appellants that the facts of OMP(I) 350/2015 Page 7 of 15 the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. (supra) applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters III, IV, V. and VI of the Indian Arbitration Act, 1996 applicable. Even Dr. Singhvi had submitted that Chapters III, IV, V. and VI would apply if the seat of arbitration is in India. By choosing that Part I of the Indian Arbitration Act, 1996 would apply, the parties have made a choice that the seat of arbitration would be in India. Section 2 of the Indian Arbitration Act, 1996 provides that Part I "shall apply where the place of arbitration is in India". In BALCO (supra), it has been categorically held that Part I of the Indian Arbitration Act, 1996, will have no application, if the seat of arbitration is not in India. In the present case, London is mentioned only as a "venue" of arbitration which, in our opinion, in the facts of this case can not be read as the "seat" of arbitration.
99. We are fortified in taking the aforesaid view since all the three laws applicable in arbitration proceedings are Indian laws. The law governing the Contract, the law governing the arbitration agreement and the law of arbitration/Curial law are all stated to be Indian. In such circumstances, the observation in Naviera Amazonica Peruana S.A. (supra) would become fully applicable. In this case, the Court of Appeal in England considered the agreement which contained a clause providing for the jurisdiction of the courts in Lima, Peru in the event of judicial dispute; and at the same time contained a clause providing that the arbitration would be governed by the English law and the procedural law of arbitration shall be the English law. The Court of Appeal summarised the state of the jurisprudence on this topic. Thereafter, the conclusions which arose from the material were summarised as follows:
"All contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law: (1) the law governing the substantive contract; (2) the law governing OMP(I) 350/2015 Page 8 of 15 the agreement to arbitrate and the performance of that agreement; (3) the law governing the conduct of the arbitration. In the majority of cases all three will be the same. But (1) will often be different from (2) and (3). And occasionally, but rarely, (2) may also differ from (3)."
It was observed that the problem about all these formulations, including the third, is that they elide the distinction between the legal localisation of arbitration on the one hand and the appropriate or convenient geographical locality for hearings of the arbitration on the other hand.
100. On the facts of the case, it was observed in Naviera Amazonica case (supra) that since there was no contest on Law 1 and Law 2, the entire issue turned on Law 3, "the law governing the conduct of the arbitration". This is usually referred to as the curial or procedural law, or the lex fori. Thereafter, the Court approvingly quoted the following observation from Dicey and Morris on the Conflict of Laws (11th Edn.): "English Law does not recognise the concept of a delocalised arbitration or of arbitral procedures floating in the transnational firmament, unconnected with any municipal system of law". It is further held that "accordingly every arbitration must have a 'seat' or 'locus arbitri' or 'forum' which subjects its procedural rules to the municipal law which is there in force". The Court thereafter culls out the following principle:
"Where the parties have failed to choose the law governing the arbitration proceedings, those proceedings must be considered, at any rate prima facie, as being governed by the law of the country in which the arbitration is held, on the ground that it is the country most closely connected with the proceedings."
The aforesaid classic statement of the conflict of law rules as quoted in Dicey and Morris on the Conflict of Laws (11th Edn.), Vol. 1, was approved by the House of Lords in James Miller and Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd.:
(1970) 1 Lloyd's Rep 269 Mustill, J. in Black Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. OMP(I) 350/2015 Page 9 of 15 (1981) 2 Lloyd's Rep. 446 at p. 453, a little later characterised the same proposition as "the law of the place where the reference is conducted, the lex fori". The position of law in India is the same.
101. The Court in Naviera Amazonica (supra), also, recognised the proposition that "there is equally no reason in theory which precludes parties to agree that an arbitration shall be held at a place or in country X but subject to the procedural laws of Y". But it points out that in reality parties would hardly make such a decision as it would create enormous unnecessary complexities. Finally it is pointed out that it is necessary not to confuse the legal seat of arbitration with the geographically convenient place or places for holding hearings. In the present case, Dr. Singhvi, it seems to us, is confusing the geographically convenient place, which is London, with the legal seat which, in our opinion, is undoubtedly India.
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104. In view of the above, we are unable to accept the submissions made by Dr. Singhvi that in this case, the term "venue" ought to be read as seat.
105. We are also unable to accept the submission made by Dr. Singhvi that in this case the venue should be understood as reference to place in the manner it finds mention in Section 20(1), as opposed to the manner it appears in Section 20(3), of the Indian Arbitration Act, 1996. Such a submission cannot be accepted since the parties have agreed that Curial law would be the Indian Arbitration Act, 1996.
106. In BALCO (supra), it has been clearly held that concurrent jurisdiction is vested in the Courts of seat and venue, only when the seat of arbitrations is in India (para 96). Reason for the aforesaid conclusion is that there is no risk of conflict of judgments of different jurisdictions, as all courts in India would follow the Indian Law. Thus, the reliance placed by D. Singhvi on BALCO(supra) in this context is misplaced.
OMP(I) 350/2015 Page 10 of 15107. It is correct that, in virtually all jurisdictions, it is an accepted proposition of law that the seat normally carries with it the choice of that country's arbitration/Curial law. But this would arise only if the Curial law is not specifically chosen by the parties. Reference can be made to BALCO (supra), wherein this Court considered a number of judgments having a bearing on the issue of whether the venue is to be treated as seat. However, the court was not required to decide any controversy akin to the one this Court is considering in the present case. The cases were examined only to demonstrate the difficulties that the court will face in a situation similar to the one which was considered in Naviera Amazonica(supra).
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115. The Learned Senior Counsel has rightly submitted that in fixing the seat in India, the court would not be faced with the complications which were faced by the English High Court in the Braes of Doune. In that case, the court understood the designation of the seat to be in Glasgow as venue, on the strength of the other factors intimately connecting the arbitration to England. If one has regard to the factors connecting the dispute to India and the absence of any factors connecting it to England, the only reasonable conclusion is that the parties have chosen London, only as the venue of the arbitration. All the other connecting factors would place the seat firmly in India.
116. The submission made by Dr. Singhvi would only be worthy of acceptance on the assumption that London is the seat. That would be to put the cart before the horse. Surely, jurisdiction of the courts can not be rested upon unsure or insecure foundations. If so, it will flounder with every gust of the wind from different directions. Given the connection to India of the entire dispute between the parties, it is difficult to accept that parties have agreed that the seat would be London and that venue is only a misnomer. The parties having chosen the Indian Arbitration Act, 1996 as the law governing the substantive contract, the agreement to arbitrate OMP(I) 350/2015 Page 11 of 15 and the performance of the agreement and the law governing the conduct of the arbitration; it would, therefore, in our opinion, be vexatious and oppressive if Enercon GMBH is permitted to compel EIL to litigate in England. This would unnecessarily give rise to the undesirable consequences so pithily pointed by Lord Brandon and Lord Diplock in Abidin Daver:1984 AC 398. It was to avoid such a situation that the High Court of England and Wales, in Braes of Doune, construed a provision designating Glasgow in Scotland as the seat of the arbitration as providing only for the venue of the arbitration.
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131. Upon consideration of the entire matter, it was observed in SulameRica supra that "In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England". It was thereafter concluded by the High Court that the English law is the proper law of the agreement to arbitrate.
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134. It is accepted by most of the experts in the law relating to international arbitration that in almost all the national laws, arbitrations are anchored to theseat/place/situs of arbitration. Redfern and Hunter on International Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), in para 3.54 concludes that "the seat of the arbitration is thus intended to be its centre of gravity." In BALCO (supra), it is further noticed that this does not mean that all proceedings of the arbitration are to be held at the seat of arbitration. The Arbitrators are at liberty to hold meetings at a place which is of convenience to all concerned. This may become necessary as Arbitrators often come from different countries. Therefore, it may be convenient to hold all or some of the meetings of the arbitration in a location other than where the seat of arbitration is located. In BALCO (supra), the relevant passage OMP(I) 350/2015 Page 12 of 15 from Redfern and Hunter, has been quoted which is as under:
(SCC p. 598, para 75) "75......'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.' (Naveria case (supra), Llyod's Rep p. 121)"
These observations have also been noticed in Union of India v. McDonnel Duglas Corprn.: (1993) 2 Llyod's Rep 48)
135. In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London. In an International Commercial Arbitration, venue can often be different from the seat of arbitration. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. This is precisely the ratio in Braes of Dounne. Therefore, in the present case, the seat would remain in India." (emphasis is mine) OMP(I) 350/2015 Page 13 of 15
7. The aforesaid paragraphs in the judgment in the case of Enercon (India) Limited and Others (supra) make it clear as to what is the difference between the venue and the seat of arbitration and that merely because the arbitrator chooses to hold the arbitration at a venue which is different than the seat of the arbitration does not confer territorial jurisdiction on the court where the venue of the arbitration exists. Therefore merely because the venue of arbitration is in Delhi, this Court would not have territorial jurisdiction because under Section 2(1)(e) of the Arbitration and Conciliation Act, 1996 'Court' is defined as a court having jurisdiction to decide questions forming the subject matter of arbitration if the same had been the subject matter of the suit, i.e, normal proceedings of the Code of Civil Procedure, 1908 (CPC) with respect to territorial jurisdiction being Sections 16 to 20 will apply and hence applying these Sections with the ratios of the judgments of the Supreme Court in the cases of M/s. Patel Roadways Limited, Bombay (supra) and A.B.C. Laminart Pvt. Ltd. (supra), this Court would have no territorial jurisdiction.
8. During the course of hearing and in view of the aforesaid proposition of law, I asked the learned senior counsel for the petitioner whether petitioner wants leave to withdraw the petition with liberty granted OMP(I) 350/2015 Page 14 of 15 by this Court to approach the court of territorial jurisdiction but the learned senior counsel for the petitioner states that he has instructions to invite a judgment.
9. In view of the above, this Court does not have territorial jurisdiction to try this petition. Dismissed.
JULY 17, 2015 VALMIKI J. MEHTA, J.
Ne
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