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2021 DIGILAW 1113 (KER)

Krishnakumar P. N. v. Reliance Industries Limited, Represented By Its Managing Director, Mumbai

2021-12-04

DEVAN RAMACHANDRAN

body2021
ORDER : This Arbitration Request, filed by the petitioner, does not have many factual disputations. 2. It is admitted by both sides that Annexure P1 Agreement was entered into between them and that Clause 60 thereof stipulates that both sides must subject themselves to Arbitration, if any disputes are to arise from its terms or relating thereto. 3. It is also on record – as is affirmed by both sides – that an Arbitrator was nominated by the 1st respondent and that the petitioner was directed to appear before him and raise his claims. 4. The petitioner, however, contends that the afore nomination by the 1st respondent is illegal and incompetent under the purlieus of Section 12 (5) of the Arbitration Conciliation Act, 1996, (hereinafter referred to “Act” for short) and under the declaratory umbra of the judgments of the Hon’ble Supreme Court in Perkins Eastman Architects DPC and another v. HSCC (India) Ltd. [2019 SCC Online 1517], which has been followed by this Court in Tulsi Developers India Pvt. Ltd. v. Dr. Appu Benny Thomas ( 2021 (5) KLT 339 ); and thus prays that this Court appoint an independent Arbitrator. 5. Au contraire, the respondent maintains that the nomination made by them to be valid and opposes this Arbitration Request, arguing it to be not maintainable for the adscititious reason that Clause 60 of Annexure P1 Agreement specifically warrants the seat of arbitration to be at Mumbai, thus this Court being jurisdictionally incompetent to consider it. 6. It is thus perspicuous that the twin points of 1st controversy between the parties are as to whether the respondent can nominate an Arbitrator; and whether the seat of Arbitration has to be in Mumbai, as postulated by Clause 60 of Annexure P1 Agreement. 7. I have heard Sri.P.Vijayakumar, learned counsel appearing for the petitioner; Smt.Pooja Menon, learned counsel appearing for respondents 1 and 2 and Sri.Sudhinkumar, learned counsel appearing for the 4th respondent. 8. Even though notice from this Court has been validly served on the 3rd respondent, he has chosen not to be present in person or to be represented through counsel; but am of the view that it will not impede this Court from disposing of this matter in his absence because he is the Arbitrator nominated by the 1st respondent and whose competence is now called into question in this case. 9. 9. Sri.P.Vijayakumar took me extensively through the various provisions of Annexure P1 Agreement to argue that some of its terms are oppressive to his client and further that the disputes arising from it can only be resolved through the process of Arbitration, for which, the Seat will have to be construed as being in Kerala, for the singular reason that the 1st respondent has chosen to file an application for interim measures, under Section 9 of the “Act”, before the Sub Court, Kollam. 10. Sri.P.Vijayakumar edificed his arguments on Section 42 of the Act, to contend that when any application is made by any party under the First Part thereof in a Court, then that Court alone will have jurisdiction over the Arbitral proceedings and all the subsequent applications arising out of the Agreement. He further pointed out that, going by Section 42 of the “Act”, Arbitral proceedings shall be made in that court and no other Court. He then took me through the various materials available on record, to assert that even though Clause 60 of Annexure P1 Agreement mandates the seat of Arbitration to be at Mumbai, the 1st respondent, admittedly, chose to move a Sub Court in Kerala, invoking jurisdiction under Section 9 of the “Act”; which then, according to him, would render the position inescapable that only this Court would obtain jurisdiction under Section 11 of the “Act” to appoint a Sole Arbitrator. He relied heavily on the judgment of the Hon’ble Supreme Court in BGS SGS SOMAJV v. NHPC [(2020) 4 SC 234] in substantiation; and then went on to the primary limb of his argument that the nomination of the 3rd respondent as an Arbitrator by the 1st respondent company is incompetent and illegal, under the mandate of Section 12 (5) of the Act. 11. Sri.P.Vijayakumar proceeded to vehemently assail the 1st nomination of the 3rd respondent as Arbitrator by the respondent predicating that it cannot obtain any legitimacy in law, after Section 12(5) had been introduced into the “Act” and after the Hon’ble Supreme Court declared unambiguously that no party to an Agreement can either Arbitrate or nominate an Arbitrator and relied on Perkins Eastman Architects DPC (supra)in strength. 12. 12. Sri.Vijayakumar thus prayed that this Arbitration Request be allowed and that this Court appoint an independent Sole Arbitrator in substitution of the 3rd Arbitrator and to declare that the latter has no statutory mandate to continue. 13. In response, Smt.Pooja Menon, learned counsel appearing for respondents 1 and 2, made submissions at length with respect to the law and precedents governing the field, with specific reference to paragraph 59 of BGS SGS SOMA (supra), contending that once the Arbitration Clause specifies the seat of Arbitration, then it cannot be “waived” by any of the parties; and that, consequently, even though her client has approached the Sub Court in Kerala for the purpose of an interim measure under Section 9 of the “Act”, it would, by no stretch of imagination, vacate the rigour of Clause 60 of Annexure P1 Agreement, which indubitably mandates that the seat of the Arbitration shall be in Mumbai. 14. Smt.Pooja Menon then read paragraph 59 of the BGS SGS SOMA (supra) to argue that when the seat of Arbitration is fixed specifically in an Agreement, even if an interim measure sought for in a Court outside the said jurisdiction, it would not vest that Court with competence under Section 11 of the “Act”; and that the declarations of law in the afore judgment would apply only where no seat is designated in the Agreement or where the said seat is only a “convenient venue”. She then invited my attention to Clause 60 of Annexure P1 Agreement to impress upon me that the seat of arbitration specified in it is not merely a “convenient venue”, but one unequivocally designated as much, with the full volition of both sides and therefore, that the petitioner cannot argue that her client has waived the same, merely because they have approached a Court in Kerala for an interim measure. She reitertingly added that when a Seat is designated in the Agreement, then Section 42 of the “Act” will operate to render the Court in jurisdiction of that place alone to have the power to control the proceedings of the Arbitration, notwithstanding the fact that an interim measure may have been sought somewhere else. She, thus prayed that this Arbitration be dismissed, because her client has already nominated the 3rd respondent as the Arbitrator to sit at Mumbai. 15. She, thus prayed that this Arbitration be dismissed, because her client has already nominated the 3rd respondent as the Arbitrator to sit at Mumbai. 15. After contending as afore, Smt.Pooja Menon then argued that the nomination of the 3rd respondent by her client is not, in any manner, incompetent, even going by Section 12(5) of the “Act” because the Arbitration Clause specifies that the Sole Arbitrator can only be appointed by her client. She submitted that, therefore, the precedents cited by Sri.P.Vijayakumar would also not apply in this matter. 16. Sri.Sudhinkumar, learned counsel appearing for the 4th respondent, submitted that his client is a total stranger to Annexure P1 Agreement and that he has been arrayed in this case only because he had purchased certain properties from the petitioner’s wife. He prayed that, therefore, this Arbitration Request, as against his client, be dismissed. 17. In reply to the afore recorded submissions of Smt.Pooja Menon, Sri.P.Vijayakumar maintained that this Arbitration Request is imminently deserving to be allowed for an additional reason, namely, that the competence to nominate the Arbitrator by the first respondent having been obliterated by Section 12(5) of the “Act”, it is only the Arbitration consequent to such nomination, which would have had to be conducted in Mumbai. For this proposition, he again read the Arbitration Clause to point out that it is only when the disputes are referred to a Sole Arbitrator to be appointed by the 1st respondent, need the Arbitration be conducted in Mumbai. He emphasised on the word “such” in the 5th line of the said Clause, to drive home the point that what is specified is “such Arbitration” and not all Arbitrations. 18. I have examined and evaluated the afore submissions with great amount of care, since the legal issues involved are certainly extremely interesting and appears to be res nova. 19. He emphasised on the word “such” in the 5th line of the said Clause, to drive home the point that what is specified is “such Arbitration” and not all Arbitrations. 18. I have examined and evaluated the afore submissions with great amount of care, since the legal issues involved are certainly extremely interesting and appears to be res nova. 19. As I have already indicated above, the fundamental two questions involved in this case – with every other being admitted by both sides - are whether : a) the 1st respondent can nominate an Arbitrator after Section 12 (5) had been brought into the “Act”, or within the declaratory ambit of Perkins Eastman Architects DPC (supra); and (b) whether, even if this Court is to hold against the 1st respondent to the afore question, this Arbitration Request is incompetent before this Court because of the contractual prescriptions of the seat of Arbitration being at Mumbai, in Annexure P1 Agreement. 20. On the 1st issue, as to the nomination of the 3rd respondent as the Arbitrator by the 1st respondent is concerned, I have no doubt that it is incompetent because, admittedly, the said nomination was made after Section 12(5) of the “Act” was brought in; thus being consequently, hit by the rigour of the declarations both in Perkins Eastman Architects DPC (supra) and Thulsi Developers (supra). In fact, I must also record that, to a specific query from this Court on this aspect, Smt.Pooja Menon was unable to affirm to the contrary and I do not blame her because the curial declarations in the afore two precedents are so unambiguous that it be difficult for any person to assert otherwise. 21. With that being answered against the respondents, the sole further question of relevance is whether the seat of Arbitration will have to be construed to be in Mumbai, which will then render me incapable of making any nomination, as prayed for by the petitioner in this Arbitration Request. 22. For this purpose, certainly, my path is illuminated by paragraph 59 of BGS SGS SOMA (supra),which reads as under : Equally incorrect is the finding in Antrix Corpn. Ltd. That Section 42 of the Arbitration Act, 1996 would be rendered ineffective and useless. 22. For this purpose, certainly, my path is illuminated by paragraph 59 of BGS SGS SOMA (supra),which reads as under : 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 were 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. 23. For all these reasons, the law stated by the Bombay and Delhi High Courts in this regard is incorrect and is overruled. 23. The afore succinct legal affirmations of the Hon’ble Supreme Court will have to be read along with the provisions of Section 42 of the Act, which, for the purpose of easy reference, is reproduced below: Jurisdiction.—Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect 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. 24. When one closely examines the views and holdings of the Hon’ble Supreme Court in BGS SGS SOMA (supra) extracted above, it would present no doubt that, normally, when a seat is designated in the Arbitration Agreement/Clause, it is that which would be relevant for the purpose of Section 42 of the “Act” and that it is the Court which obtains jurisdiction over that seat, which alone can control the Arbitration proceedings thereafter and no other. 25. However, there is a very pertinent intervening event in this case, which renders the scenario not so simple. 26. This is that, even when the seat of Arbitration is, ad idem, designated as being in Mumbai and even though there would have presented no legal inhibition for the respondents to have approached the Court in jurisdiction of that seat for an interim measure under Section 9 of the “Act”, the 1st respondent deliberately and consciously chose to approach a Sub Court within the jurisdiction of this Court, namely the Sub Court, Kollam, for such purpose. Interestingly, against the orders of the said Court, two Arbitration appeals are pending before this Court, namely: (a) Arbitration Appeal No.35/2017, filed by the petitioner impugning that portion of the order granting interim attachment of his private property; and Arb. Appeal No.32/2017 filed by the 1st respondent herein assailing the order to the extent to which it refused injunction sought for by them against the 4th respondent herein. 27. Appeal No.32/2017 filed by the 1st respondent herein assailing the order to the extent to which it refused injunction sought for by them against the 4th respondent herein. 27. It is, therefore, ineluctable that this Court is already seized of the Arbitration proceedings, because the 1st respondent had voluntarily chosen the Sub Court, Kollam, as the one to impel their claim for interim measures under Section 9 of the “Act”, even knowing that the designated seat for Arbitration is in Mumbai. 28. In the afore factual scenario, when one causes an in-depth analysis of Section 42 of the “Act”, it will become apodictic that when an application under Part I of it – which takes in both Section 9 and Section 42 – has been made in a Court, that Court alone shall have jurisdiction over the Arbitral proceedings and all subsequent applications arising out of the agreement. Obviously, therefore, when a party chooses a particular Court, it would be impossible to resile from the consequences of that choice and to then assert that the proceedings will still be controlled by another Court. This can generally be not acceded to, going by the specific interpretational umbra of Section 42. 29. Indubitably, this is precisely what is said by the Hon'ble Supreme Court in BGS SGS SOMA (supra), when it declared that where a seat is designated in the Agreement, all applications under Part I of the Act will be made only in the Court where the same is located, which alone will then continue to hold jurisdiction over the arbitral proceedings and all subsequent applications arising out of the arbitration Agreement. 30. Thus, when the seat of Arbitration has been fixed in Mumbai as per the Agreement in question, the parties were contractually enjoined to invoke the jurisdiction of that Court alone. That said, the Hon’ble Supreme Court, as well as the various High Courts, have been strongly declaring repeatedly that the choices of the parties under a contract will have to be given primacy and that, if they have bound themselves to a particular course, they are entitled to invoke or enforce it. 31. That said, the Hon’ble Supreme Court, as well as the various High Courts, have been strongly declaring repeatedly that the choices of the parties under a contract will have to be given primacy and that, if they have bound themselves to a particular course, they are entitled to invoke or enforce it. 31. However, the conceded fact herein being that the 1st respondent has chosen to invoke the jurisdiction of a Court other than in Mumbai for the purpose of an interim measure, certainly compels a different line of thinking, particularly within the declarations of law in BGS SGS SOMA (supra), extracted above. 32. As is inescapable from the observations of the Hon’ble Supreme Court, Section 42 is not rendered ineffective or useless merely because the Seat is designated in the Arbitration Clause itself. True, when a Seat is designated, then Section 42 would come to play in the event of an application is made to the Court having territorial jurisdiction over the same, notwithstanding if any part of the cause of action arose within its territory or otherwise. But, as seen in this case, when an application is voluntarily made by one of the parties in a Court other than the one which obtained jurisdiction over the “Seat” specified in the Agreement, the entire position alters and derives a different colour. 33. This is because, as I have said above, Section 42 does not speak about the “Seat” per se, but only with respect to the Court before which an application is made by any of the parties under part I of the “Act”. 34. Axiomatically, hence, in spite of the Seat being contractually designated, when the 1st respondent chose not to invoke that Court which controls such Seat, but a Court in a different State, the relevant question which arises is whether they have agreed to the arbitration proceedings being controlled by the High Court of another State, rather than one in which the jurisdiction over the designated Seat is vested in. 35. In this context, it is not the doctrine of waiver which is relevant, but the inevitable consequences of the choice exercised by the parties. In every contract, the choices made by the parties are paramount and it would guide the proceedings thereunder. 35. In this context, it is not the doctrine of waiver which is relevant, but the inevitable consequences of the choice exercised by the parties. In every contract, the choices made by the parties are paramount and it would guide the proceedings thereunder. If the 1st respondent had chosen to approach the Court within which the designated Seat under the Agreement is situated, there would have been no controversy at all, as is presented now. However, they chose with full volition to approach a different Court, by making an application; and then to subject its orders to challenge through appeals before this Court -which are still pending, it becomes apodictic that the 1st respondent was fully cognizant that the Arbitral proceedings, under Section 42 of the ‘Act’, will be, thereafter, within the jurisdiction of this Court alone. 36. At this time, I must record that I asked Smt.Pooja Menon specifically whether her clients have a case that the application moved by them under Section 9 of the ‘Act’, before the Sub Court, Kollam, was in error, because the Seat mentioned in the Arbitration Clause is Mumbai. She vehemently argued to the contrary and maintained that her clients have made no error and consequently that the Arbitration Appeals before this Court are also maintainable. 37. When the 1st respondent takes such a stand, and that too with an unmistakable vehemence, it is limpid that it is their choice, which they have exercised willingly, that will control the future course of the Arbitration proceedings. 38. In such perspective, one cannot forget that the Honourable Supreme Court has irrefragably declared in BGS SGS SOMA (supra) that when a Seat is designated in an Agreement, it would require that all applications under Part I of the ‘Act’ be only made in the Court where the same is located and that the said Court alone has the jurisdiction over the arbitral proceedings. This is the unequivocal fallout of the contractual choices of the parties and surely, therefore, the 1st respondent could have moved their application for interim measure in a competent Court in Mumbai, if they wanted to, as they also unhesitatingly admit. Therefore, when they chose otherwise, it is not a matter of waiver, but is the adoption of a conscious decision by them to subject the Arbitral proceedings to another Court -to which they were fully aware - with their eyes open. 39. Therefore, when they chose otherwise, it is not a matter of waiver, but is the adoption of a conscious decision by them to subject the Arbitral proceedings to another Court -to which they were fully aware - with their eyes open. 39. Before I tread forward, I must address another argument of Smt.Pooja Menon that BGS SGS SOMA (supra) only relates to an Agreement where the parties have not agreed upon a Seat of arbitration, or where such Seat is only a convenient one. I am afraid that this argument can never find legs to stand on because the Honourable Supreme Court was dealing with the interplay between Section 42 of the ‘Act’ and the designation of a particular Seat of Arbitration in the Agreement, to hold that where there is a seat designated in the agreement, all applications under Part I of the ‘Act’ be made only in the Court where it is located; but that where no such seat is designated, then an application under Section 9 of the Act can be preferred before any court in which part of the cause of action arises. The Hon'ble Court thereafter affirmatively says that the Court to which the earliest application is made, in which part of the cause of action arises, would then be the exclusive Court under Section 42, which would have control over the arbitral proceedings. 40. Therefore, the argument of Kum.Pooja Menon that BGS SGS SOMA (supra) can only be a precedent when the seat of arbitration is not specified in the agreement, cannot obtain imprimatur because the holdings therein are completely to the contrary and what has been stated in paragraph 59 – which is extracted supra – is only as to the manner in which Section 42 applies in both circumstances, namely, when the seat of arbitration is specified and otherwise. 41. Coming to the case at hand, no doubt, the Seat of arbitration, as agreed by the parties, is in Mumbai, but the 1st respondent consciously chose to approach the Sub Court, Kollam, seeking an interim measure under Section 9. 41. Coming to the case at hand, no doubt, the Seat of arbitration, as agreed by the parties, is in Mumbai, but the 1st respondent consciously chose to approach the Sub Court, Kollam, seeking an interim measure under Section 9. I am, therefore, of the firm view that, going by BGS SGS SOMA (supra) and the ambit of Section 42 of the ‘Act’, only this Court now obtains jurisdiction to control and supervise the arbitration proceedings between the parties, particularly when, concededly, two Arbitration Appeals from the interim orders of the Sub Court, Kollam, are already pending before this Court. 42. As a peripheral argument, of course, Sri.P.Vijayakumar also contended that this Arbitration Request is maintainable because the entire cause of action under the Agreement arose within this Court. 43. I am afraid that the afore argument would not be relevant because, had not the first respondent approached the Sub Court, Kollam under Section 9 of the Act, the factum of the entire cause of action arising in Kerala would be immaterial because when the seat of arbitration is contractually specified to be in Mumbai, the parties could have subjected themselves to any proceedings under the ‘Act’ only before a Court holding jurisdiction over the said seat. 44. In the conspectus of the above, it is clear that this Court is now enjoined to examine Ext.P1 Agreement and to verify whether there is a valid Arbitration Clause, which would then allow me to exercise jurisdiction under Section 11(6A) of the Act. 45. It is indubitable -as is also admitted – that Clause 60 of Annexure P1 Agreement binds the parties contractually to subject every dispute arising therefrom and relating thereto, to the process of arbitration. 46. I am, therefore, without doubt in my mind that this Court is obligated to appoint a sole Arbitrator. 47. However, when any such arbitration proceedings is taken forward, I fail to understand how the 4th respondent can be involved and why he is impleaded in this Arbitration Request. Since the pleadings show and it is conceded that he has been made only a formal party and that no reliefs have been sought against him, I am certain that he need not be dragged into the arbitration proceedings. It is so declared. Since the pleadings show and it is conceded that he has been made only a formal party and that no reliefs have been sought against him, I am certain that he need not be dragged into the arbitration proceedings. It is so declared. Resultantly, I allow this Arbitration Request in the following manner: (a) I nominate Mr.Justice Thottathil B. Radhakrishnan, ‘Sai Gayathri’, B.T.S.Road, Keerthi Nagar, Elamakkara P.O., Kochi – 682 026 as the sole Arbitrator to adjudicate and resolve the disputes and differences between the parties to this case, except the 4th respondent arising from Annexure P1 agreement. (b) The Registry is directed to communicate a copy of this order to the learned Arbitrator, within a period of two weeks from today and to obtain a Statement of Disclosure from him under Section 11(8) read with Section 12(1) of the Arbitration and Conciliation Act, 1996. (c) Once the Disclosure Statement is obtained from the learned Arbitrator, the Registry shall release the certified copy of this order, with a copy of the said statement appended to it, retaining the original of the same on the files of this case. (d) The fees of the Arbitrator shall be governed by the Fourth schedule to the Arbitration and Conciliation Act, 1996. (e) In order to enable the Arbitrator to commence the proceedings without delay, I direct the parties to mark appearance before him at 11 a.m. on 25.02.2022.