IN CS 109 OF 2020 - CAL HC-  Whenever there was a designation of a place of arbitration in an arbitration clause as being the ‘venue’ of the arbitration proceedings, that would make it clear that the ‘venue’ was really the ‘seat' of the arbitral proceedings: Calcutta High Court
Justice Krishna Rao [22-06-2023]

Read more: Orissa Metaliks Pvt. Ltd v. Sbw Electro Mechanics Import Export Corporation

Simran Singh

New Delhi, June 26, 2023:  The Calcutta High Court upon perusing Clause 19 of the agreement between the parties as well as the provisions of Section 44 and 45 of the Arbitration and Conciliation Act, 1996  stated that there was no element of vagueness and uncertainty in Clause 19 of the contract as regard the intent of the parties to arbitrate in the event of any dispute arising out of the contract

The Single Judge Bench of Justice Krishna Rao stated that the plaintiff had only mentioned that the purported arbitration agreement allegedly entered between the parties was vague, uncertain and incapable of being made certain therefore it was invalid. However, it was held that Clause 19 of the contract contained no ambiguity and clearly evinced the intention of the parties to arbitrate. The question raised by the plaintiff did not fall within the exception under Section 45 of the Arbitration Act.

The Court further stated that if the venue of arbitration proceedings had been fixed at Singapore, it could not be presumed that the parties intended the seat also to be Singapore while referring to the case of  Encorn (India) Ltd. v Enercon Gmbh which had held that in an international commercial arbitration, venue could often be different from the seat of arbitration and in such cases the hearing of the arbitration would be conducted at the venue fixed by the parties but this would not bring about change in the seat of the arbitration.

In the matter at hand, the defendant had filed for referring the instant suit to arbitration in terms of Clause 19 of the agreement and for dismissal of the suit under Section 45 of the Arbitration Act). The plaintiff had filed the suit against the defendant for recovery of amount of Rs. 11,93,93,474/- along with interest at the rate of 18% per annum on account of rejection of defective goods supplied by the defendant, difference in weight of the goods supplied, liquidated damage due to delay in supply of goods, loss and damages suffered due to supply of defective and incomplete products. However, the plaintiff had averred that the  purported arbitration agreement allegedly entered between the parties was vague, uncertain and incapable of being made certain therefore it was invalid and consequently, the plaintiff had no recourse to arbitration.

The Bench perused Section 45 of the Arbitration Act which had mandated that a Judicial Authority, when seized of an action in a manner in respect of which the parties had made an agreement, referred to Section 44 of the Arbitration Act would at the request of one of the party or person claiming to or under the agreement, referred the parties to arbitration was when the Judicial Authority found that the said agreement was prima facie found to be null and void, inoperative or incapable of being performed.

“Whenever there is a designation of a place of arbitration in an arbitration clause as being the venue” of the arbitration proceeding, the expression “arbitration proceeding” make it clear that the venue is really the seat of the arbitral proceeding. The language has to be contrasted with the language such as Tribunal are to meet or have witnesses, experts or the parties where only hearing are to take place in the venue which may lead to confusion, other things being equal, that the venue so stated is not the seat of arbitral proceeding, but only a convenient place of meeting.”

The Court stated that the arbitral proceedings would be held at a particular venue would also indicate that the parties intended to anchor arbitral proceeding to a particular place, signifying thereby, that the place was the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the venue was merely a venue and not the seat of the arbitral proceedings, would then conclusively show that such a clause designates a seat of the arbitral proceedings. In an international context, if a supranational body of rules was to govern the arbitration, this would further be in indicia that the venue so stated would be the seat of the arbitral proceedings.

The Court referred to the case of BGS v. NHPC Limited, which had observed that there was an express designation of a ‘venue’, and no designation of any alternative place as the ‘seat’, combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion was that the stated venue was actually the juridical seat of the arbitral proceeding. It was concluded that whenever there was the designation of a place of arbitration in an arbitration clause as being the ‘venue’ of the arbitration proceedings, the expression ‘arbitration proceedings’ would make it clear that the ‘venue’ was really the ‘seat' of the arbitral proceedings, as the aforesaid expression did not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. Further, the fact that the arbitral proceedings ‘shall be held’ at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place WAS the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a ‘venue’ and not the ‘seat’ of the arbitral proceedings, would then conclusively show that such a clause designates a ‘seat’ of the arbitral proceedings. In view thereof, the Court sated that it was mentioned in the contract that the venues of arbitration should seat Singapore and the contract had to be understood that there was no contrary indica in the contract about seat of arbitration. Thus the petition was dismissed.