Appellants: Mankastu Impex Private Limited
Respondent: Airvisual Limited
Facts: A Memorandum of Understanding (MoU) was entered into between the parties under which the Respondent agreed to sell to the Petitioner the complete line of the Respondent's air quality monitors products for onward sale. As per the terms of the agreement, the Petitioner was appointed as an exclusive distributor for the products for sale within India. The Petitioner received an e-mail from proposed Respondent No. 2 informing that Respondent No.2 acquired all technology and the associated assets of the Respondent. The letter also stated that Respondent No.2 would not assume any contracts or legal obligations of the Respondent and would work on a case to case basis with resellers to negotiate new contracts. The Petitioner issued a notice invoking the arbitration Clause provided in Clause 17 the MoU. In response to the Petitioner's notice invoking the arbitration clause, IQAir vide its letter, under its asset purchase agreement with the Respondent, it had not assumed any contractual and legal obligations and that the terms of the MoU were not enforceable against Respondent No.2. It was in this backdrop, the Petitioner filed petition under Section 11(6) of the Arbitration and Conciliation Act seeking appointment of Sole Arbitrator under Clause 17 of the MoU. The Respondent also sent its reply to the notice stating that Clause 17 of the MoU provides for arbitration administered and seated in Hong Kong. According to the Petitioner, the proposed arbitration between the Petitioner and the Respondent being an arbitration between a company registered in India under the Companies Act, 1956 and the Respondent - a body corporate which is incorporated under the laws of Hong Kong, was an International Commercial Arbitration. In terms of Section 11(6) read with Section 11(9), the Petitioner therefore seeks appointment of arbitrator.
Held: 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. The words, the place of arbitration shall be Hong Kong, had to be read along with Clause 17.2 of MoU. Clause 17.2 provides that any dispute, controversy, difference arising out of or relating to the MoU shall be referred to and finally resolved by arbitration administered in Hong Kong. On a plain reading of the arbitration agreement, it was clear that the reference to Hong Kong as place of arbitration was not a simple reference as the venue for the arbitral proceedings but a reference to Hong Kong was 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 had 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. Clause 17.2 of the MoU stipulates that the dispute arising out of or relating to MoU including the existence, validity, interpretation, breach or termination thereof or any dispute arising out of or relating to it shall be referred to and finally resolved by the arbitration administered in Hong Kong. The words in Clause 17.2 that arbitration administered in Hong Kong was an indicia that the seat of arbitration is at Hong Kong. Once the parties had chosen Hong Kong as the place of arbitration to be administered in Hong Kong, laws of Hong Kong would govern the arbitration. The Indian courts have no jurisdiction for appointment of the arbitrator.