Place Of Arbitration’ no basis to Determine ‘Seat Of Arbitration’

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expression place of arbitration

Facts: Petitioner alleged that the proposed arbitration between the Petitioner and the respondent being an arbitration between a company registered in India under the Companies Act, 1956 and the respondent – a body corporate which is incorporated under the laws of Hong Kong, is an “International Commercial Arbitration” as per Section 2(1)(f) of the Arbitration and Conciliation Act, 1996 having seat of arbitration in Delhi. In terms of Section 11(6) read with Section 11(9), the petitioner therefore seeks appointment of arbitrator.

Submissions : Mr. Vikas Dutta, learned counsel for the petitioner submitted that Clause 17.1 of the MoU clearly stipulates that the MoU is governed by the laws of India and the courts at New Delhi have the jurisdiction. It was submitted that the petitioner and the respondent have only agreed Hong Kong as the “Venue” of arbitration and Hong Kong is not the juridical seat of the arbitration. As to the decision in the case of Union of India v. Hardy Exploration and Production (India) INC (2018) 7 SCC 374, the learned counsel for the petitioner has contended that the ratio of the judgment clearly postulates that a “venue” can become a “seat” only if – (i) no other 6 condition is postulated; (ii) if a condition precedent is attached to the term “place”, the said condition/indicia has to be satisfied first for “venue” to be equivalent to “seat”. It was submitted that in view of clear Clause 17.1 where the parties have clearly agreed that the MoU has to be governed by the laws of India and the courts at New Delhi would have the jurisdiction, Part-I of the Act is applicable and hence, prayed for appointment of sole arbitrator.

Question for determination was whether the parties have agreed that the seat of arbitration is at Hong Kong and whether this Court lacks jurisdiction to entertain the present petition filed under Section 11 of the Arbitration and Conciliation Act, 1996.

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Held: The petitioner is a company incorporated in India; whereas the respondent is a company incorporated under the laws of Hong Kong. 

Section 2(1)(f) of the Act defines “International Commercial Arbitration”. As per Section 2(1)(f), to be an “International Commercial Arbitration”, three factors ought to be fulfilled – (i) arbitration; (ii) considered as commercial under the laws in force in India; and (iii) at least one of the parties is national or habitual resident in any country other than India. 

In the present case, since the respondent is a company incorporated under the laws of Hong Kong, we are concerned with “International Commercial Arbitration”. 

 As per Section 2(2), Part-I shall apply where the place of arbitration is in India. If the “International Commercial Arbitration” is seated in India, then Part-I of the Act shall apply. The interpretation of Section 2(2) of the Act was considered by the Constitution Bench 10 in BALCO, wherein it was held that Part-I of the Act would have no application to “International Commercial Arbitrations” held outside India. In para (194) of the judgment, it was held as under:- 

“194. …..Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. ……” 

It is pertinent to note that Section 11 is not included in the proviso and accordingly, Section 11 has no application to “International Commercial Arbitrations” seated outside India. 26. The words in Clause 17.1 “without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” do not take away or dilute the intention of the parties in Clause 17.2 that the arbitration be administered in Hong Kong. The words in Clause 17.1 do not suggest that the seat of arbitration is in New Delhi. Since Part-I is not applicable to “International Commercial Arbitrations”, in order to enable the parties to avail the interim relief, Clause 17.3 appears to have been added. The words “without 18 regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” in Clause 17.1 is to be read in conjunction with Clause 17.3. 

Since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act is not maintainable and the petition is liable to be dismissed. 

In the result, Arbitration Petition filed by the petitioner seeking appointment of an arbitrator under Section 11(6) of the Act is dismissed. It is however open to the petitioner to approach Hong Kong International Arbitration Centre for appointment of the arbitrator, if they so desire.