Patna High Court: Designation Of Place Of Arbitration In Arbitration Clause As "Venue" Can Be Treated As "Seat" Of Arbitration Proceedings

The Patna High Court has held that whenever there is designation of a place of Arbitration in an Arbitration Clause as being the “venue” of the Arbitration Proceedings, it would presuppose that the “venue” is the “seat” of the Arbitration Proceedings.

The Court was considering a Petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of an independent/ impartial Arbitrator.

The single bench of Justice Ashutosh Kumar observed, "In the absence of any clause in the agreement apart from Clause 36.3, which speaks of the “venue” being Delhi, there cannot be any other inference or intention of the parties for the “venue” and the “seat” being different."

The Petitioner was represented by Advocate Abhishek Kumar while the Respondent was represented by Advocate Anurag Bhatt.

Facts of the Case

The Petitioner and the Respondent entered into dealership agreement under which the Petitioner agreed to become a dealer for the electric vehicles manufactured by the Respondent at the terms and conditions mentioned in the agreement. Considerable amount of investments were made by the Petitioner for setting up the dealership. Clause 36 of the agreement provided for dispute resolution through arbitration. Clause 36.3 specified that the “venue” of arbitration would be New Delhi.

Since the supply of Vehicles were not made on time, the Dealership Agreement was terminated at the instance of the Petitioner. For settling the dues of the Petitioner, a Notice was sent to the Respondent and when the same was not responded to, another was sent invoking the Arbitration Clause and asking the Respondent to either consent to the name of the Arbitrator provided by the Petitioner or propose a name at their end. This was replied with intimating that the right to appoint an Arbitrator was reserved with the Managing Director/Chief Executive Officer. No name of an independent/impartial Arbitrator was provided by the Respondent. When the Respondent didn't respond to the request of the Petitioner to settle account, present petition was filed.

Counsel for the Respondent, however, submitted that the Court would not have the jurisdiction to entertain the Petition in view of Clause 36.3 which, in clear terms, provides that the “venue” of Arbitration would be in New Delhi, and thus, the jurisdictional Court would be the High Court of New Delhi. The name of the Arbitrator proposed by the Petitioner was also not consented.

It was further urged on behalf of the Respondent that in BGS SGS SOMA JV vs. NHPC LIMITED, 2020, the Supreme Court clearly laid down that whenever there is an express designation of the “venue” and no designation of any alternative place as the “seat”, and no other significant contrary indicia, the inexorable conclusion would be that the stated “venue” is actually the juridical “seat” of the Arbitral Proceedings.

On the other hand, Counsel for the Petitioner contended that the judgment of the Supreme Court in BGS SGS SOMA JV (supra) is not applicable in this case, as it was in the context of International Arbitration with “seat” outside India, whereas the present case is of Domestic Arbitration.

Counsel for the Petitioner relied on the judgment of the Supreme Court in Ms. Ravi Ranjan Developers Pvt. Ltd. Vs. Aditya Kumar, 2022, wherein it was held that “seat of arbitration” and “venue of arbitration” cannot be used interchangeably and that the “venue of the arbitration” cannot be the basis for determining the intention of the parties that the same place has the “seat of Arbitration”. The intention of the Parties as to the seat should be determined from other clauses in the agreement and the conduct of the parties.

Reasoning By Court

The Court at the outset noted that looking at the Agreement, it would become clear that the Parties intended to exclude all other Courts except Delhi.

It mentioned Brahmani River Pellets Limited vs. Kamachi Industries Limited, 2020 wherein it was held that where the contract specifies the jurisdiction of a Court at a particular place, only such Court will have the jurisdiction to deal with the matter and it would be presumed that the parties intend to exclude all other Courts. If the parties agree that the “venue of arbitration” shall be at a particular place, the intention of the parties is to exclude all other Courts.

"It may not be necessary to decide, otherwise, in case of non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone”, which actually do not make any material difference," the Court noted stressing that it has no jurisdiction to entertain any petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996.

It stated that the expression “seat” and “venue” cannot be considered to be interchangeable.

"The unilateral intention of one of the parties to the agreement cannot confer jurisdiction on a Court which inherently lacks the jurisdiction because of the “venue” having been specified and there being no other contrary indicia to infer any other intention," the Court observed.

Cause Title: M/s Pramila Motors Pvt. Ltd. vs. M/s Okinawa Autotech International Pvt. Ltd.

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