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TMI Blog2003 (4) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... as to the place/venue of arbitration. In support of this contention, Ms. Malhotra has relied upon Sanshin Chemicals Industry v. Oriental Carbons Chemicals Ltd. [2001] 3 SCC 341 1 wherein the Supreme Court observed that though the decision on the question of venue is of utmost importance yet the contention that an aggrieved party has no right to assail the decision once the said decision has not been assailed at the stage when the decision was taken, does not appear to be correct. It was further observed that the aforesaid contention is not correct because the ultimate arbitral award could be assailed on the ground indicated in sub-section (2) of section 34 and an erroneous decision on the question of venue which ultimately affected the procedure that has been followed in the arbitral proceedings could come within the sweep of section 34(2) of the Act and as such it cannot be said that an aggrieved party has no remedy at all. 3. As is apparent, the ratio of this decision is that the aggrieved party has a right to assail the decision of the arbitrator as to the place of arbitration at the stage when the decision is taken and cannot be forced to wait for the arbitral award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch according to learned counsel for the respondent No. 1 speaks for themselves as to the place of arbitration. The arbitration clause which is clause 43 of the agreement reads as under : "Arbitration. All disputes or difference whatsoever arising between the parties out of, or relating to construction, meaning, operation or effect of this contract or the breach thereof shall be settled by arbitration at New Delhi in accordance with the rules of Arbitration of Indian Council of Arbitration and the award made in pursuance thereof shall be binding on both the parties." 6. In spite of the above quoted arbitration clause, the respondent No. 1 filed a suit for recovery before the Chennai High Court. The suit was resisted by the petitioner by invoking the provisions of section 8 of the Arbitration and Conciliation Act, 1996 seeking the dismissal of the suit in view of the arbitration clause. The application under section 8 of the Act was allowed by the learned Single Judge. Feeling aggrieved, the respondent No. 1 approached Division Bench. Before the Division Bench, the parties arrived at an agreement in respect of the name of the arbitrator. The order dated 21-3-2001 passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including the clause relating to the venue of arbitration. 9. After giving due consideration to the aforesaid statement of the parties, the learned Arbitrator observed that "This is a matter on which a finding has to be given by the Hon ble High Court which rendered judgment in OSA Nos. 81 and 82 of 2000 and CMP No. 5546 of 2000. Unless all the parties agree to have Chennai as the venue for arbitration proceedings or unless the High Court of Madras renders a finding to that effect, it will not be possible for me to declare that Chennai will be the venue for the arbitration proceedings and as such the Respondents should participate in the proceedings. In the light what has been stated above it is for the Claimants and Respondents to seek further directions from the High Court as to the venue for the arbitration proceedings." 10. Pursuant to this, the respondent moved application before the Division Bench seeking clarification of the order regarding place of arbitration. The Division Bench left it to the Arbitrator to decide the place with the following observations vide order dated 26-4-2002 : "Having regard to the fact that the arbitrator chosen by the parties is a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly the least agreements between the parties were executed at Madras on 10-4-1996 and 12-9-1996 but some of the transactions were to be carried out at New Mangalore and therefore as defined in section 2( e ) of the Act the Court at Madras has the jurisdiction to decide any dispute between the parties. 14. Section 42 of the Act relates to jurisdiction of arbitration proceedings. It provides as under : "42. Jurisdiction. Notwithstanding anything contained elsewhere in this part or in any other law for the time being in force, where with respect of an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitrator proceedings shall be made in that Court and in no other Court." 15. It is further contended by learned counsel for the respondent that by its conduct the petitioner not only submitted before the Arbitrator but also filed counter-claim and this shows that they had not only agreed to the name of common Arbitrator before the Division Bench of the Madras High Court but also agreed to the value of proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nent to mention here that the respondent approached the Supreme Court for getting the instant petition transferred to Chennai High Court where some proceedings in respect of arbitration matters were initiated earlier and disposed of. The main objection raised by the respondent related to the jurisdiction of the Delhi High Court in view of section 42 of the Arbitration and Conciliation Act, 1996. However, the said petition was dismissed as withdrawn with the observations by the Supreme Court that the objection being canvassed by the respondent before the Supreme Court as to the jurisdiction of the Delhi High Court in view of section 42 of the Act should be raised before the Delhi High Court itself. It was further observed that if such an objection relating to section 42 has been taken, the Delhi High Court will do well in considering the same and decide it first expeditiously. 20. Admittedly it was an application under section 8 of the Act which was moved by the petitioners before the Chennai High Court where plea was taken that the suit filed by the respondent was barred by arbitration clause. Now the question arises whether an application under section 8 of the Act is an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trator initiated the proceedings at Madras that the petitioner had only agreed to name of Common Arbitrator and not to the change of venue which as per the agreement between the parties was New Delhi. Mere consent of the petitioner to the common Arbitrator does not mean that he agreed to the change of venue as well as other conditions of arbitration clause. Section 20 of the Act provides place of arbitration subject to limitations. It is only in case of failure of any such agreement that place of arbitration will be determined by the Arbitral Tribunal having regard to all the facts and circumstances including the convenience of the parties. Wherever there is a written agreement on the place of arbitration, sub-section (2) of section 20 becomes non-applicable. 25. To get teeth more deeply into the reality and the area of agreement between the parties before the Madras High Court order dated 21-3-2001 needs to be reproduced and repeated for ready reference. Same reads as under : "The parties have arrived at an agreement which has been conveyed to us by their respective counsel. Parties have agreed that in the light of the fact that both the agreements provide for arbitration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the parties to have an Arbitrator residing in New Delhi itself to conduct the arbitration proceedings since the expenditure on air travel, hotel accommodation etc. could be avoided and there will also be saving of time. These observations were apt in view of the plea set up by the petitioner as to the venue and the order of the High Court appointing the common named Arbitrator. The High Court did not decide the issue referred by the Arbitrator whether the parties had agreed to change of venue also apart from having agreed to the name of the common Arbitrator and left the matter to the Arbitrator to decide it. With great respect, the High Court abdicated its further function and passed it to the learned Arbitrator. Unfortunately the Arbitrator had no jurisdiction to decide the contentious question. The order passed by the High Court is self-axiomatic. It reads as under : "We, by our order dated 21-3-2001 have recorded the fact that the parties have agreed to have the dispute arbitrated by a single arbitrator. We also recorded that Mr. Justice S. Natarajan will be the common arbitrator. In the proceedings made by Justice S. Natarajan placed before us by counsel for the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Claimant s Counsel". 29. The reference of the question of venue by the High Court to the Arbitrator itself shows that the High Court was not sure whether the parties had also agreed to change of venue along with the common named Arbitrator for deciding the disputes arising from both the agreement. It is also conspicuous from the order of the High Court whereby the matter was sent to the Arbitrator for deciding the question of venue that the parties had given complete go-by to the earlier agreements including the arbitration clause. Had it been so, there was no occasion for the High Court to refer in both the orders that the disputes shall be resolved in terms of the agreement between the parties. 30. With highest regards, the learned Arbitrator was also not competent to decide this issue once it had become contentious issue which was for the High Court to render decision. This is obvious and self-explanatory from the earlier order passed by the learned Arbitrator that it is for the High Court to decide the controversy whether parties had agreed to the change of the venue of the Arbitration proceedings. The function of the Court cannot be exercised by the Arbitrator. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders when seen in the light of observations made by the Arbitrator that it is for the High Court to decide whether the parties agreed before the High Court to the change of venue of arbitration or not shows beyond any doubt that the parties had only agreed to the name of common Arbitrator for deciding their disputes arising out of two different agreements and not the change of venue. Surprise sprung up for the petitioner when the proceedings commenced at Madras immediately at the first opportunity preliminary objection was raised that it had never agreed for the change of place of arbitration and had only agreed to common Arbitrator for two agreements. There is also not an iota of whisper in the two orders of the High Court that the parties had given complete go-by to their earlier agreements. Rather the observations were made that the disputes will be resolved in terms of the agreements between the parties. 34. Upshot of the discussion leads to the following conclusions : (1)That the parties had agreed by way of arbitration agreement as to the place of arbitration being New Delhi. (2)The Division Bench vide order dated 1-3-2001 only recorded the agreement betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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