Appellants: Brahmani River Pellets Limited
Respondent: Kamachi Industries Limited
The Appellant entered into an agreement with the Respondent for sale of 40,000 WMT (Wet Metric Tonne) of Iron Ore Pellets on FOB terms and payment was to be made by Letter of Credit in Bhubaneswar. Dispute arose between the parties regarding the price and payment terms and the Appellant did not deliver the goods to the Respondent. The Respondent claimed for damages alleging that it had to procure the Iron Ore Pellets from other sources at higher rates. The Appellant denied any liability to pay damages on the ground that contract was later modified and that the Respondent breached the material terms of the contract and this led to the dispute between the parties. Respondent invoked arbitration clause. The Appellant did not agree for the appointment of the arbitrator. Hence, the Respondent filed petition under Section 11(6) of Act, 1996 before the Madras High Court for appointment of sole arbitrator. The Appellant contested the petition challenging the jurisdiction of the Madras High Court on the ground that, the parties have agreed that Seat of arbitration be Bhubaneswar and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. The Madras High Court vide impugned order appointed a former judge of the Madras High Court as the sole arbitrator by holding that mere designation of "Seat" by parties does not oust the jurisdiction of other courts other than at the Seat of arbitration. The High Court held that, in absence of any express Clause excluding jurisdiction of other courts, both the Madras High Court and the Orissa High Court will have jurisdiction over the arbitration proceedings. Challenging the impugned order, the Appellant has preferred this appeal.
Section 2(1)(e) of the Act defines the "Court" with reference to the term "subject-matter of the suit". As per Section 2(1)(e) of the Act, if the "subject-matter of the suit" is situated within the arbitral jurisdiction of two or more courts, the parties can agree to confine the jurisdiction in one of the competent courts. In para (96) of Bharat Aluminium Company and Ors. etc. etc. v. Kaiser Aluminium Technical Service, Inc. and Ors. (BALCO), the Supreme Court held that the term "subject-matter" in Section 2(1)(e) of the Act is to identify the court having supervisory control over the arbitral proceedings. The Supreme Court held that the provisions in Section 2(1)(e) of the Act has to be read in conjunction with Section 20 of the Act which give recognition to the autonomy of the parties as to "place of arbitration".
In Swastik Gases P. Ltd. v. Indian Oil Corporation Ltd., the Supreme Court held that Clause like (18) of the agreement will not be hit by Section 23 of the Contract Act and it is not forbidden by law nor it is against public policy. It was so held that as per Section 20 of the Act, parties are free to choose the place of arbitration. This "party autonomy" has to be construed in the context of choosing a court out of two or more courts having competent jurisdiction under Section 2(1) (e) of the Act.
When the parties have agreed to have the "venue" of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the Act, the impugned order is liable to be set aside.
Impugned order of the Madras High Court is set aside and this appeal is allowed. The parties are at liberty to approach the Orissa High Court seeking for appointment of the arbitrator.