LE Correspondent

New Delhi, June 10, 2022: The Bombay High Court has observed that such part of the arbitration agreement wherein the parties agree that the venue of the arbitration shall be at Delhi would be required to be read as distinct and independent, from the arbitral mechanism as agreed between the parties, setting out the other modalities in the dispute resolution clause.

The Single Bench of Justice G.S. Kulkarni disposed of  the present petition instituted under  Section 11 of the Arbitration and Conciliation Act, 1996 whereby the applicant prayed for appointment of an Arbitral Tribunal for adjudication of the disputes and differences which arose between the parties under an agreement titled as the Infrastructure and Facility Management Agreement, by observing that it did not have the jurisdiction to entertain the proceedings for appointment of an arbitral tribunal. However, the Court granted the liberty to the applicant to file appropriate proceedings before the Court of Delhi. 

Factual matrix of the case was such that the respondent being an infrastructure provider, had persuaded the applicant-VLCC to become a collaborator and infrastructure provider for running the VLCC slimming, skin and hair services Centre for its business activities in Mumbai. Accordingly the agreement was entered into between the applicants and the respondent. The objective of the agreement was to enable the respondent to carry out business activities at the premises/centre which would be developed by the applicant (the Infrastructure Provider) as per Clause 3 of the said agreement, by using the mark and know-how of VLCC. 

The applicant as an Infrastructure provider was to undertake the development of the premises by incurring all expenses through its own resources as per the approval of the respondent.  Thereafter, the agreement was executed, but the emergence of dispute occurred between the partieson grounds that the centre was not functioning as per the expectations of the respondent, in respect of which prolonged correspondence was entered between the parties. 

Meanwhile, the applicant claimed that she suffered loss under the agreement in question and thus demanded from the respondent to pay the applicant her undisputed investment of Rs.1.30 crores along with the interest at the rate of 24%. The applicant also demanded compensation from the respondent to the tune of Rs.50 lakhs for mental harassment and trauma. It was also stated by the applicant that she will invoke the arbitration clause at last, in case, if her demands were not accepted and acted upon.   In view of the same, the present application was filed by the applicant under Section 11 of the Act, 1996 in order to settle the disputes. 

Referring to the contention on behalf of the respondent that as per clause 13.1 only respondent  could appoint the arbitrator, the Court stated that the same was bad in law in view of the principles of law as laid down by the Supreme Court  in TRF Ltd. Vs. Energo Engineering Projects Ltd. In relation to the same, the Court opined that respondent couldnot have unilateral authority to appoint an arbitral tribunal. 

Next on the question of whether this Court had the  jurisdiction to entertain this application, as the parties in Clause 13.2 of the agreement  agreed that the venue of the arbitration shall be at Delhi, the Court once the parties had agreed that the seat of the arbitration was to be at Delhi, then necessarily the supervisory jurisdiction over the arbitral proceedings would be with the Courts at Delhi. Further, reliance was placed on the judgments in, Bharat Aluminium Company & Ors. vs. Kaiser Aluminium Technical Service, Mankastu Impex Pvt. Ltd. vs. Airvisual Ltd.

Thus, the Court noted that once the parties in the present case conceded to fact that the venue of the arbitration in its entirety shall be at Delhi, then the seat of arbitration should be necessarily at Delhi. Hence, the jurisdiction to entertain the proceedings for appointment of an arbitral tribunal would lie with the Courts of Delhi.  This Court, thus, would not have jurisdiction to entertain the present application, the Court observed. However, the applicant was given the liberty to approach the appropriate Court for the same. 

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