[Vivek Krishnani is a student at National Law University, Jodhpur]
The judgment of the Indian Supreme Court in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. has invited diverse opinions from legal researchers and law students (which can be found here and here). While it is appreciated that the distinction between domestic and international arbitration has been correctly identified in the latter post, the importance accorded to the “venue” in domestic arbitrations is something that invites my disagreement.
Brief Factual Background and the Judgment
Before delving into the argument, it would be desirable to briefly consider the facts of the case. In this case, a contract was entered into by the parties for sale of iron ore pellets. According to the terms of the contract, the loading port was in Odisha and the destination was Chennai (Madras). Equally relevant for our purposes is the fact that the contract had an arbitration clause which provided for an arbitration in Bhubhaneshwar, Odisha with the Indian Arbitration and Conciliation Act, 1996 governing the same.
Upon disagreement between the parties as to the appointment of the arbitrator, the respondent approached the Madras High Court. To this, an objection was raised by the appellant on the ground that the Odisha High Court had jurisdiction given that the venue of arbitration was chosen as Bhubaneshwar. However, the Madras High Court observed that in the absence of an express clause in the contract as to the ousting of jurisdiction of other courts, the Court has jurisdiction in this case. The order of the Madras High Court was appealed against before the Supreme Court.
The appellants argued that the parties’ agreement regarding the place/venue of arbitration gets the status of the juridical seat and, therefore, only the Odisha High Court will have jurisdiction. Per contra, the respondents contended that since cause of action arose at both the places, i.e., Bhubaneswar and Chennai, both Madras High Court as well as Orissa High Court should have supervisory jurisdiction.
Emphasizing on the choice of Bhubaneshwar as the place of arbitration, the Court found that the Odisha High Court alone had jurisdiction to hear the matter and quashed the order of the Madras High Court. The Court’s reasoning could be best summarised in the following words that find place in the judgment:
Where the contract specifies 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.
As could be gleaned from the facts of the case, however, Bhubaneshwar was chosen merely for the conduct of arbitral proceedings and the jurisdiction of the court was not specified. This patent flaw has invited strident critique against the Court’s stand. On these lines, it has been observed that the Court has not enquired about the arbitral seat and directly treated the same to be Bhubaneshwar. While the Court’s ruling is debatable in this regard, there is something more significantly objectionable about the reasoning employed.
Some Clarity on the Idea of Seat in Domestic Arbitration
To begin with, an elucidation of the concept of “seat” in the context of domestic arbitration provides a great basis for presenting my argument. Unlike international arbitration, domestic arbitration does not face issues involving questions of governing laws or jurisdiction of courts of different countries.
To make things clearer, the judgment of the Delhi High Court in PCP International Limited v. LANCO Infratech Limited, which has been discussed here, may be referred to. Therein, it was argued by the petitioner that the Delhi High Court had jurisdiction to hear the matter because the venue of arbitration was Delhi. This contention was rejected by the Court to hold that under the Indian Act, ‘court’ is defined as any court having jurisdiction to decide questions forming the subject matter of arbitration if the same had been the subject matter of the suit. Accordingly, the facts of the case were examined to ascertain which court(s), according to the applicable Procedural law i.e. Code of Civil Procedure, 1908 (“CPC”), had jurisdiction to hear the case. In fact, because the contract in question was neither executed nor performed in Delhi, the Court held that the Delhi High Court lacks jurisdiction.
The author argues that for determination of territorial jurisdiction of courts with regard to matters relating to a domestic arbitration, the choice of venue of conducting arbitral proceedings is irrelevant. The curial law, which was the Indian Act in this case, provides jurisdiction to the courts of India. Consequently, all the courts eligible to hear the matter, according to the provisions of the CPC, should have jurisdiction.
Conspicuously, jurisdiction can only be conferred by law. Nonetheless, an agreement could be made by the parties to oust jurisdiction of a court(s) when multiple courts have jurisdiction. Noteworthy is the fact that, in the Brahmani River Pellets case, the parties had agreed upon conducting the arbitration in Bhubhaneshwar as against choosing the Odisha High Court for trying their dispute. Resultantly, the Supreme Court’s observation as to the exclusive jurisdiction of Odisha High Court to try the case is, with respect, not well founded.
– Vivek Krishnani