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Rajasthan High Court · body

2023 DIGILAW 1703 (RAJ)

TVS Motors Company Ltd. , Through Its Authorize, Jayalakshmi Estates v. Bagaria Motors, through Its Proprietorix, Mrs. Kamla Devi

2023-09-11

SAMEER JAIN

body2023
JUDGMENT : 1. Being aggrieved and dissatisfied with the impugned order dated 06.10.2016, passed by the Court of learned Additional District Judge, Fatehpur Shekhawati, District Sikar, in Appeal No. 02/2016, the present writ petition was filed under Article 227 of the Constitution of India with the following prayers: “1. By issuance of a writ of certiorari or any other appropriate writ, order or direction in the nature thereof, the order dated 6th October 2016 passed by Additional District Judge, Fatehpur Shekhawati, District Sikar, be quashed and set aside and consequently the application filed by the respondent under Section 34 of the Act of 1996 before Additional District Judge, Fatehpur Shekhawati, District Sikar, may also be directed to be dismissed. Further, it may be declared that the court at Fatehpur Shekhawati does not have the jurisdiction to entertain and decide the application under Section 34 of the Act of 1996 filed by the non-petitioner. 2. Any other order or direction which this Hon’ble Court deems just and proper in the facts and circumstances of the case may also be passed in favour of the petitioner.” FACTS/BACKGROUND: 2. The brief and necessary facts of the case, as per the record, are as follows: 2.1) That the petitioner-company is a manufacturer of motorcycles, mopeds and other two wheelers, having nationwide presence. For the purpose of providing effective after sales services and repairing of its manufactured vehicles, the company appoints Authorised Service Centre (for short “ASC”) of the company at various places. In this regard, the petitioner company appointed the respondent as an ASC of the petitioner-company in Fatehpur Shekhawati, District Sikar (Rajasthan). The ASC agreement (Annexure-1) was executed on 01.10.2008 at Hosur in Tamil Nadu. As per the terms of ASC agreement, the petitioner-company appointed the respondent as an ASC on a non-exclusive basis for a period of three years from the date of the agreement subject to renewal thereafter done by the petitioner-company at its discretion. 2.2) That as per Clause 22 of the ASC agreement, which provides for dispute resolution mechanism, the parties had to resolve their dispute through negotiation and in case the negotiation fails, then the parties can refer the matter to the sole arbitrator, who was to be appointed by the Managing Director of the petitioner-company as per the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “Act of 1996”). 2.3) That as per Clause 22.4(c) of the ASC agreement, the venue of the arbitration was to be in Hosur in the State of Tamil Nadu. Further, as per Clause 21 of the ASC agreement, the parties mutually consented that Courts at Hosur shall have the exclusive jurisdiction in respect of any matter or dispute arising between them in relation to the ASC agreement. 2.4) That on account of some purported deficiencies in services by the respondent, the petitioner-company exercised its discretion, provided under Clause 15.1 of the ASC agreement, to not renew the agreement after the completion of period of three years. On 30.09.2011, the ASC agreement came to an end due to efflux of time and the agreement was not renewed. 2.5) Being aggrieved by the non renewal, the respondent sent a letter dated 09.10.2012 to the petitioner-company. The said letter was treated by the petitioner-company as claim statement and an arbitrator was appointed by the petitioner-company. The said arbitrator, vide order dated 12.12.2012, shifted the venue from Hosur to Bangalore (Karnataka) on the request of the petitioner-company and fixed the procedure to be followed by in the arbitration proceedings, without even issuing notices to the respondent. Thereafter, when the respondent came to know about the order dated 12.12.2012, the respondent filed a recall application, which was allowed vide order dated 05.04.2013 and the order dated 12.12.2012 was recalled. Further, the said arbitrator recused himself and withdrew from the arbitration proceedings. 2.6) After the first arbitrator withdrew from the proceedings, a letter dated 07.10.2013 was sent by the respondent requesting for shifting the place of arbitration proceedings from Hosur to Bangalore. The said request was accepted by the petitioner-company and the parties mutually agreed to change the venue from Hosur to Bangalore. An order to this effect was also passed by the newly appointed arbitrator on 15.10.2013. 2.7) Thereafter, with the consent of the parties, the arbitration proceedings were initiated and conducted at Bangalore. The respondent filed its claim petition with the prayer that the ASC agreement be resumed/renewed and respondent be appointed as an ASC of the petitioner-company. The said claim petition was rejected by the Arbitrator vide award dated 21.10.2015 (Annexure-2). 2.7) Thereafter, with the consent of the parties, the arbitration proceedings were initiated and conducted at Bangalore. The respondent filed its claim petition with the prayer that the ASC agreement be resumed/renewed and respondent be appointed as an ASC of the petitioner-company. The said claim petition was rejected by the Arbitrator vide award dated 21.10.2015 (Annexure-2). 2.8) Aggrieved of the Arbitral Award dated 21.10.2015, the respondent filed an application, which was registered as Appeal No. 2/2016, before the Court of Additional District Judge, Fatehpur Shekhawati, District Sikar, under Section 34 of the Act of 1996. The petitioner-company filed an application under Section 151 of CPC raising objection regarding maintainability of the application and jurisdiction of the Court of Additional District Judge, Fatehpur Shekhawati, District Sikar. The said application of the petitioner-company was dismissed by way of impugned order dated 06.10.2016. SUBMISSIONS OF PETITIONER 3. Learned counsel for the petitioner-company contends that the Court at Sikar has no jurisdiction to entertain an application filed under Section 34 of the Act of 1996. It is submitted that Clause 21 of the ASC agreement, which was subject to Clause 22, specifically provides that whenever judicial intervention is possible, the Courts at Hosur (Tamil Nadu) would have exclusive jurisdiction to adjudicate and decide in respect of all disputes arising out of or in relation to the ASC agreement. Further, Clause 21 incorporates that parties have irrevocably waived off any objection to the jurisdiction of the Courts at Hosur to adjudicate the disputes and the parties have mutually consented to exclusive jurisdiction of Courts at Hosur. 4. Learned counsel for the petitioner-company has also highlighted Clause 22.4(c) of the ASC agreement, which mentions the venue of arbitration to be in Hosur. It is contended when the seat of arbitration is not separately mentioned, ‘seat’ and ‘venue’ are used interchangeably. By mutual consent, said venue/seat was changed to Bangalore and the arbitral proceedings were conducted in Bangalore. Consequently, the arbitral award was also passed in Bangalore. The application under Section 34 of the Act of 1996 at Court in Sikar is not maintainable as neither the agreement was executed in Sikar nor the arbitral proceedings were conducted in Sikar and nor was the arbitral award passed in Sikar. Consequently, the arbitral award was also passed in Bangalore. The application under Section 34 of the Act of 1996 at Court in Sikar is not maintainable as neither the agreement was executed in Sikar nor the arbitral proceedings were conducted in Sikar and nor was the arbitral award passed in Sikar. In arbitration law, the fact that the ‘seat’ is at Bangalore would vest Bangalore Courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties. In support of his contention, learned counsel for the petitioner-company has placed strong reliance on Apex Court judgment of Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited and Ors. (Neutral citation: 2017/INSC/369) reported in (2017) 7 SCC 678 , wherein it was held that under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in Courts, a reference to "seat" is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction -that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the Code of Civil Procedure be attracted. In arbitration law however, the moment ‘seat’ is determined, it is akin to an exclusive jurisdiction clause. 5. Learned counsel for the petitioner-company further submits that the Court below, in its impugned order, has wrongly held that parties to an agreement cannot mutually oust the jurisdiction of any Court. Reliance in this regard is again placed on Indus Mobile Distribution (supra). Learned counsel for the petitioner-company has also contended that the reliance placed by the Court below on the Apex Court judgment of Bharat Aluminium Company (BALCO) and Ors. vs. Kaiser Aluminium Technical Service, Inc. and Ors. reported in (2012) 9 SCC 552 is misplaced as the subject matter of dispute and the discussion of law was completely different from the present case. It is further contended that the said judgment was with regard to challenge of foreign arbitral award in Courts at India. The said judgment does not deal with the cases where the parties have consented to exclusive jurisdiction of the Court at a particular place. It is further contended that the said judgment was with regard to challenge of foreign arbitral award in Courts at India. The said judgment does not deal with the cases where the parties have consented to exclusive jurisdiction of the Court at a particular place. Learned counsel for the petitioner-company has further relied on recent Apex Court judgment of BGS SGS SOMA JV vs. NHPC Ltd. (Neutral Citation: 2019/INSC/1349) reported in (2020) 4 SCC 234 , which has considered/clarified the dictum of BALCO (supra) and held that the very fact that parties have chosen a place to be the seat would necessarily carry with it the decision of both parties that the Courts at the seat would exclusively have jurisdiction over the entire arbitral process. 6. Learned counsel for the petitioner-company has also placed strong reliance on recent pronouncement of Apex Court in Inox Renewables Ltd. vs. Jayesh Electricals Ltd. (Neutral Citation: 2021/INSC/251) reported in (2023) 3 SCC 733 wherein it was held that once seat of arbitration is replaced by mutual agreement from X to Y, the Courts at X are no longer vested with jurisdiction as exclusive jurisdiction is now vested in the Courts at Y, given the change in seat of arbitration. SUBMISSIONS OF RESPONDENT 7. Per contra, learned counsel for the respondent, at the outset, submits that the parties had merely chosen the venue of arbitration to be at Hosur and then to Bangalore. The said locations were never intended to be the ‘seat’ of the arbitration. Learned counsel for the respondent further submits that the impugned order is based on the Constitutional Bench judgment of BALCO (supra). It is submitted that para 96 of BALCO (supra) speaks of the concurrent jurisdiction of Courts within whose jurisdiction the cause of action arises wholly or in part, and Courts within the jurisdiction of which the dispute resolution, i.e. arbitration, is located. The said para 96 of BALCO (supra) is reproduced as under: “96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under: “2. The said para 96 of BALCO (supra) is reproduced as under: “96. Section 2(1)(e) of the Arbitration Act, 1996 reads as under: “2. Definitions.— (1) In this Part, unless the context otherwise requires— (a)-(d)*** (e) ‘Court’ means the Principal Civil Court of Original Jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such Principal Civil Court, or any Court of Small Causes;” We are of the opinion, the term “subject-matter of the arbitration” cannot be confused with “subject-matter of the suit”. The term “subject-matter” in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the courts of Delhi being the courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the courts would have jurisdiction i.e. the court within whose jurisdiction the subject-matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located.” 8. Learned counsel for the respondent submits that the judgment of BALCO (supra) was delivered by a five judge Constitutional Bench and as per settled position of law, the same will constitute binding precedence on equal or lower strength benches. Any judgment by a lower strength Bench, which deviates from BALCO (supra), including that of Indus Mobile Distribution (supra), BGS SGS SOMA JV (supra) and Inox Renewables (supra), cannot be construed as binding precedent. Reliance in this regard is placed on Apex Court judgment of Official Liquidator v. Dayanand reported in (2008) 10 SCC 1 . 9. Learned counsel for the respondent has also drawn attention of this Court to Clause 21 of the ASC agreement, which was subject to Clause 22 of the ASC agreement. It is contended that the jurisdiction conferred on Hosur Courts in Clause 21 was subject to the venue of the arbitration to be at Hosur, in terms of Clause 22.4 of the ASC agreement and once the venue changed, the jurisdiction conferred on the Courts at Hosur got extinguished. 10. Learned counsel for the respondent has placed further reliance on Apex Court judgment of BBR (India) Private Limited vs. S.P. Singla Constructions Private Limited (Neutral Citation: 2022/INSC/590) reported in (2023) 1 SCC 693 . ANALYSIS 11. Heard the arguments advanced by both the sides, scanned the record of the writ petition and considered the judgments cited at Bar. 12. The concepts of 'Seat' and 'Venue' are of utmost significance in any arbitration proceeding as they not only determine where the arbitration is conducted but is also crucial in ascertaining the supervisory jurisdiction of Courts and the curial law (lex arbitri) which governs such arbitration. The 'Seat' of arbitration is the 'situs' of arbitration, the place where the arbitration is anchored. The seat of arbitration defines the curial law or procedural law governing the arbitration and also determines which Court(s) will exercise supervisory jurisdiction over such arbitration. The 'Seat' of arbitration is the 'situs' of arbitration, the place where the arbitration is anchored. The seat of arbitration defines the curial law or procedural law governing the arbitration and also determines which Court(s) will exercise supervisory jurisdiction over such arbitration. In contrast, the 'Venue' of arbitration merely defines the geographical place where such arbitration is conducted and is not associated with either the curial law or the jurisdiction of Courts. The term 'Seat' and 'Venue' has not been defined either under the Arbitration Act, 1940 or under the Act of 1996. Section 20 of the Act of 1996 defines 'Place of Arbitration' which is used interchangeably for both seat and venue. 13. It is noted that the ASC agreement was executed at Hosur and as per Clause 22 of the ASC agreement, the venue of Arbitration was also Hosur. Accordingly, as per Clause 21 of the ASC agreement, parties had consented to exclusive jurisdiction of Courts at Hosur. However, the venue of Arbitration was shifted from Hosur to Bangalore based on mutual agreement of the parties. As per the dictum of Apex Court judgment of BALCO (supra), which has been followed in Indus Mobile Distribution (supra), BGS SGS SOMA JV (supra) and Inox Renewables (supra), when parties had selected a venue of arbitration without designating a seat of arbitration, it would be safe to conclude that venue is the seat of the arbitration provided that the parties have selected a body of rules to govern the arbitration and there is no other indication to the contrary. In the case in hand, the parties had initially selected Hosur to be the venue of arbitration and had also conferred exclusive jurisdiction to Courts at Hosur. Therefore, in the light of above referred Apex Court judgments, it can safely be assumed that Hosur was intended to be the seat of the arbitration as well. Subsequently, when the parties had changed the venue from Hosur to Bangalore, as Clause 21 of ASC agreement was subject to Clause 22 of ASC agreement, it can further safely be assumed that Bangalore was the new seat and venue of arbitration. 14. Subsequently, when the parties had changed the venue from Hosur to Bangalore, as Clause 21 of ASC agreement was subject to Clause 22 of ASC agreement, it can further safely be assumed that Bangalore was the new seat and venue of arbitration. 14. In international commercial arbitration, it is a settled principle that if the parties choose to have a seat of arbitration in a particular country, then the laws of that country relating to regulation of arbitration proceedings will apply, and the Courts of that country will have supervisory jurisdiction over the arbitration proceedings. The question which remains is whether this principle can be extended to a choice of city in India as a seat so as to confer exclusive supervisory jurisdiction on the Courts of that city over the arbitration proceedings. The said question was considered in Indus Mobile Distribution (supra), wherein the Apex Court was directly dealing with the issue as to whether the seat of arbitration connotes an exclusive jurisdiction and ousts the jurisdiction of all other Courts. The Apex Court examined the concepts of Seat and Venue threadbare and after analyzing the entire legal position, concluded that once a seat is designated, it is akin to an exclusive jurisdiction clause. Consequently the Courts at the "Seat" are vested with exclusive jurisdiction to exercise powers and regulate arbitral proceedings, to the exclusion of all other Courts, including Courts where the cause of action arose. 15. Much reliance has been placed by learned counsel for the respondent on para 96 (reproduced above) of Apex Court judgment of BALCO (supra). However, BALCO (supra) itself did not involve the question of choosing between the jurisdictions of two cities. In para 96 of the judgment, the cities of Delhi, Mumbai and Kolkata are mentioned only by way of examples. Further, the Apex Court in SGS SOMA JV (supra) has followed and clarified, and not deviated from, the dictum of BALCO (supra) and held that whenever there is the designation of a place of arbitration in an arbitration clause as being the ‘venue’ of the 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 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 significant 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. 16. The Apex Court reiterated that once the parties designate the seat of arbitration, only the Courts governing the seat have exclusive jurisdiction to govern such arbitration proceeding and jurisdiction of all other Courts stand ousted. The relevant portion of SGS SOMA JV (supra) is reproduced as under: “44. If paras 75, 76, 96, 110, 116, 123 and 194 of Balco [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 ] are to be read together, what becomes clear is that Section 2(1)(e) has to be construed keeping in view Section 20 of the Arbitration Act, 1996, which gives recognition to party autonomy — the Arbitration Act, 1996 having accepted the territoriality principle in Section 2(2), following the Uncitral Model Law. The narrow construction of Section 2(1) (e) was expressly rejected by the five-Judge Bench in Balco [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 ]. This being so, what has then to be seen is what is the effect Section 20 would have on Section 2(1)(e) of the Arbitration Act, 1996. 48. The aforesaid amendment carried out in the definition of “Court” is also a step showing the right direction, namely, that in international commercial arbitrations held in India, the High Court alone is to exercise jurisdiction over such proceedings, even where no part of the cause of action may have arisen within the jurisdiction of such High Court, such High Court not having ordinary original jurisdiction. In such cases, the “place” where the award is delivered alone is looked at, and the High Court given jurisdiction to supervise the arbitration proceedings, on the footing of its jurisdiction to hear appeals from decrees of courts subordinate to it, which is only on the basis of territorial jurisdiction which in turn relates to the “place” where the award is made. In the manner indicated by this judgment. 49. Take the consequence of the opposite conclusion, in the light of the facts of a given example, as follows. New Delhi is specifically designated to be the seat of the arbitration in the arbitration clause between the parties. Part of the cause of action, however, arises in several places, including where the contract is partially to be performed, let us say, in a remote part of Uttarakhand. If concurrent jurisdiction were to be the order of the day, despite the seat having been located and specifically chosen by the parties, party autonomy would suffer, which Balco [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 ] specifically states cannot be the case. Thus, if an application is made to a District Court in a remote corner of the Uttarakhand hills, which then becomes the court for the purposes of Section 42 of the Arbitration Act, 1996 where even Section 34 applications have then to be made, the result would be contrary to the stated intention of the parties — as even though the parties have contemplated that a neutral place be chosen as the seat so that the courts of that place alone would have jurisdiction, yet, any one of five other courts in which a part of the cause of action arises, including courts in remote corners of the country, would also be clothed with jurisdiction. This obviously cannot be the case. If, therefore, the conflicting portion of the judgment of Balco [Balco v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 ] in para 96 is kept aside for a moment, the very fact that parties have chosen a place to be the seat would necessarily carry with it the decision of both parties that the courts at the seat would exclusively have jurisdiction over the entire arbitral process.” 17. The judgment of SGS SOMA JV (supra) was followed by the Apex Court in the recent pronouncement of Inox Renewables (supra). The judgment of SGS SOMA JV (supra) was followed by the Apex Court in the recent pronouncement of Inox Renewables (supra). The facts of Inox Renewables (supra) are somewhat similar to the case in hand. In Inox Renewables (supra), as per arbitration agreement therein, the venue of the arbitration was to be Jaipur (Rajasthan). However, the parties therein mutually agreed to change the venue from Jaipur to Ahmedabad (Gujarat) and consequently the proceedings were conducted at Ahmedabad. Accordingly, the Apex Court observed that the parties had by mutual agreement specifically shifted the venue/ place of arbitration from Jaipur to Ahmedabad. The Apex Court observed that the “venue” being shifted from Jaipur to Ahmedabad was in fact a shifting of the venue/place of arbitration with reference to Section 20(1), and not with reference to Section 20(3) of the Act of 1996, as it has been made clear that Jaipur did not continue to be the seat of arbitration and Ahmedabad was the seat designated by the parties, and not a venue to hold meetings. The Apex Court thus held that the jurisdiction clause and the arbitration clause were to be read together as the Courts in Rajasthan had been vested with jurisdiction only because the seat of arbitration was to be Jaipur. It further held that once the seat of arbitration was replaced by mutual agreement to be at Ahmedabad, the Rajasthan Courts were no longer vested with jurisdiction as exclusive jurisdiction had now been vested with the Courts in Ahmedabad, given the change in the seat of arbitration. 18. In the opinion of this Court, the lis in question is squarely covered by the Apex Court judgment of Inox Renewables (supra). There is no indication whatsoever that the seat of the arbitration was at District Sikar. Once the parties mutually agreed to change the venue from Hosur to Bangalore, where the arbitration proceedings commenced and concluded without any disturbance, only the Courts at Bangalore would have the exclusive supervisory jurisdiction. The Court of learned Additional District Judge, Fatehpur Shekhawati, District Sikar wrongly assumed jurisdiction and therefore the impugned order dated 06.10.2016 is liable to be quashed and set aside. RESULT 19. Consequently, the impugned order dated 06.10.2016 is quashed and set aside. The writ petition is, accordingly, allowed. 20. Pending application(s), if any, shall stand disposed of.