The Calcutta High Court observed that in the absence of any contrary indication throughout the document as to any other place being designated as the seat of arbitration, the designated venue had to be construed as the seat of arbitration.

The Appeal before the High Court was filed against the Single-Judge Bench order refusing to adjudicate the application for setting aside the Award under Section 34 of the Arbitration and Conciliation Act along with the connected application under Section 9 due to lack of territorial jurisdiction.

The Division Bench comprising Justice Soumen Sen and Justice Biswaroop Chowdhury asserted, “The seat of arbitration is a vital aspect of any arbitration proceeding as it is not just about where an institution is placed or where the hearings shall be held, but it is about which Court would have supervisory power over such proceedings …”

Advocate Tapas Dutta represented the Appellants while Advocate Hasnuhana Chakraborty represented the Respondent.

Factual Background

The appellant, a proprietary concern engaged in the business of construction and hiring vehicle for carrying goods, purchased a Dumper on a hire-purchase basis financed by the respondent. The appellant obtained a loan for an amount of Rs 42,16,095 out of which he had paid an amount of approximately Rs 28 lakh and the balance amount of over Rs.13 lakh was payable to the respondent. The respondent had invoked the arbitration clause contained in the loan agreement and a notice was sent to the appellant.

However, the appellant didn’t choose to participate in the arbitration since he did not consent to the said arbitrator in terms of Section 12(5) of the Arbitration and Conciliation Act. Subsequently, an award was passed in the arbitration proceeding. When the matter reached the Single Judge as per the purported agreement, relying on which the respondents had obtained an Award from the arbitral tribunal, the High Court had no territorial jurisdiction to take up the matter.

The Single-Judge Bench had also observed that since clause 21.1 of the document clearly stated the phrase “Arbitration to be held in Mumbai”, in the absence of any contrary indication throughout the document as to any other place being designated as the seat of arbitration, Mumbai had to be construed to be not merely a “venue” but also the intended seat of arbitration.

Reasoning

Elucidating upon the concept of seat of arbitration, the Division Bench relied upon a judgment of the Apex Court in BGS SGS SOMA JV v NHPC Limited (2020) wherein it was observed that whenever there is a designation of the place of arbitration in an arbitration clause as being the “venue” of arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” was really the “seat” of the arbitral proceedings as the aforesaid expression did 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. “Several division benches of the Supreme Court in earlier cases have also understood the law to be that once the seat of arbitration is chosen, it amounts to an exclusive jurisdiction clause, insofar as the courts at that seat are concerned…”, it added.

On a perusal of the agreement between the parties, the Bench noted that apart from Clause 21.1 which clearly stated that arbitration was to be held in Mumbai in accordance with the 1996 Act and Clause 22 the jurisdiction clause which vested power on competent Courts and tribunals in Mumbai in respect of legal proceedings arising out of or in connection with the agreement, there was no other place indicated in the agreement as the venue of arbitration and hence in the absence of any other contrary indication visible by conduct of the parties, Mumbai was the venue as well as seat of arbitration.

It was further noticed that the appellant had voluntarily chosen to not participate in the proceeding even after being sent a notice for arbitration and had hence suffered an ex parte award. “Hence, in light of the discussion above it follows that the “principal civil court of original jurisdiction in a district” in Mumbai or the Bombay High Court would be the Court having supervisory jurisdiction over the arbitral proceeding as well as the post arbitral jurisdiction under Section 34 and/or Section 37 of the Act and hence there seems to be no need for interference in the learned Single judge’s order”, the Division Bench held.

Thus, finding no reason to interfere with the order of the Single Judge, the Division Bench dismissed the Appeal.

Cause Title: Versatile Construction v. Tata Motors Finance Ltd (Case No.: APOT/389/2024)

Appearance:

Appellants: Advocates Tapas Dutta, Atrayee Chatterjee

Respondent: Advocates Hasnuhana Chakraborty, Anna Malhotra, Rishav Maity

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