2020 (3) TMI 302 - SC - Indian Laws

Appointment of a sole arbitrator - Section 9 of the Arbitration and Conciliation Act - in view of Clause 17.2 of the MoU 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? HELD THAT - It is well-settled that seat of arbitration and venue of arbitration cannot be used inter-changeably. It has also been established that mere expression place of arbitration cannot be the basis to determine the intention of the parties that they have intended that place as 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. In the present case, the arbitration agreement entered into between the parties provides Hong Kong as the place of arbitration. The agreement between the parties choosing Hong Kong as the place of arbitration by itself will not lead to the conclusion that parties have chosen Hong Kong as the seat of arbitration - On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as place of arbitration is not a simple reference as the venue for the arbitral proceedings; but a reference to Hong Kong is for final resolution by arbitration administered in Hong Kong. The agreement between the parties that the dispute shall be referred to and finally resolved by arbitration administered in Hong Kong clearly suggests that the parties have agreed that the arbitration be seated at Hong Kong and that laws of Hong Kong shall govern the arbitration proceedings as well as have power of judicial review over the arbitration award. 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 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. Arbitration Petition filed by the petitioner seeking appointment of an arbitrator under Section 11(6) of the Act is dismissed.

Issues Involved:
1. Determination of the seat of arbitration.
2. Applicability of Part-I of the Arbitration and Conciliation Act, 1996.
3. Jurisdiction of Indian courts in appointing an arbitrator.
4. Interpretation of the arbitration clause in the MoU.

Issue-Wise Detailed Analysis:

1. Determination of the seat of arbitration:
The primary issue was whether Hong Kong was the seat of arbitration as per Clause 17.2 of the MoU. The court observed that the arbitration agreement specified Hong Kong as the place of arbitration and that disputes would be "finally resolved by arbitration administered in Hong Kong." This indicated that the parties intended for Hong Kong to be the seat of arbitration, which implies that the laws of Hong Kong would govern the arbitration proceedings and judicial review of the arbitration award.

2. Applicability of Part-I of the Arbitration and Conciliation Act, 1996:
The court examined whether Part-I of the Act applied to the arbitration, given that the arbitration was to be seated in Hong Kong. Section 2(2) of the Act states that Part-I applies where the place of arbitration is in India. The court referenced the BALCO judgment, which clarified that Part-I does not apply to international commercial arbitrations held outside India. Therefore, since the arbitration was seated in Hong Kong, Part-I, including Section 11 for the appointment of arbitrators, did not apply.

3. Jurisdiction of Indian courts in appointing an arbitrator:
The petitioner sought the appointment of an arbitrator under Section 11(6) of the Act, arguing that the seat of arbitration was in India. However, the court held that the seat of arbitration was Hong Kong, as per the parties' agreement. Consequently, Indian courts did not have jurisdiction to appoint an arbitrator. The court noted that the petitioner could approach the Hong Kong International Arbitration Centre for the appointment of an arbitrator if desired.

4. Interpretation of the arbitration clause in the MoU:
Clause 17 of the MoU was scrutinized to determine the governing law and jurisdiction. Clause 17.1 stated that the MoU was governed by Indian laws and that courts in New Delhi had jurisdiction. However, Clause 17.2 specified that disputes would be resolved by arbitration administered in Hong Kong. The court interpreted these clauses to mean that while the substantive law governing the contract was Indian law, the procedural law governing the arbitration was that of Hong Kong. Clause 17.3 allowed parties to seek interim relief from courts with jurisdiction, but this did not override the agreement that the arbitration would be seated in Hong Kong.

Conclusion:
The court dismissed the petition under Section 11(6) of the Act, concluding that the arbitration was seated in Hong Kong, and thus, Indian courts lacked jurisdiction to appoint an arbitrator. The petitioner was advised to approach the Hong Kong International Arbitration Centre for the appointment of an arbitrator if needed.

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