BRAHMANI RIVER PALLETS LTD. V. KAKACHI INDUSTRIES LTD.
CITATION- SLP(C) NO. 15672,2019
APPELLANT- BRAHMANI RIVER PALLETS LTD.
RESPONDENT- KAMACHI INDUSTRIES LTD.
FACTS- the appellant Brahmani river pellets Ltd entered into an agreement with the respondent Kamachi industries. The agreement was about 40,000 wet metric tonne of iron ore pellets on FOB terms. The payment was to be made by letter of credit in Bhubaneswar. The loading was to be done at dharma port, district Bhadrali in the state of Orissa, and the destination was Chennai port in the state of Tamil Nadu. The dispute between the parties arose due to price and payment terms. Further, the appellant did not deliver the goods to the respondent. Now, the respondent had claimed for damages alleging that they had to procure the iron ore pallets from other sources at a high rate. The appellant in response denied any liability to pay the damages faced by the respondent on the ground that the contract was later modified and the respondent breached the material terms which led to conflict between them.
There was a clause 18 added in the agreement which stated as- " Arbitration shall be under Indian arbitration and conciliation act 1996 and the venue of same shall be in Bhubaneswar.
The Appellant didn't agree with the appointment of the arbitrator. Hence the respondent applied section-11 of the act. The petition was filed before the Madras High court.
Appellant submitted- he contested the petition challenging the jurisdiction was the high court of Madras in agreement under clause-18, they agreed that the seat of arbitration shall be Bhuvneshwar and therefore only Orissa high court had the sole jurisdiction to the appointment of a sole arbitrator.
Madras High court- It rejected the contention brought by the appellant and held that mere designation of "seat" by parties doesn't exclude the jurisdiction of other courts. Instead, it stated that in absence of any express clause, which states that such and such court only has jurisdiction both Madras and Orissa high court has jurisdiction over arbitral proceedings.
Appellant submission- Challenging the impugned order, it filed an appeal in the supreme court. It stated that when parties have added clause 18 and mentioned the "seat" of Arbitration center then only Orissa high court had the jurisdiction over an arbitral dispute. The appellant submitted that Madras High court had failed to understand the purpose of clause 18 and erred in not applying the ratio of Indus Mobile Distribution Pvt. Ltd. V. Datawind innovations Pvt. Ltd. In this supreme court held that in case of domestic Arbitration where the parties have agreed at the seat of Arbitration, the decided court will have exclusive jurisdiction.
Respondent submission- is submitted that since the cause of action at both the places i.e. Bhuvneshwar and Chennai. Thus, Madras and Orissa high court both shall have the jurisdiction. He stated based on Bharat aluminum v. Kaiser aluminum technical services.
It also submitted that in domestic Arbitration, unless the parties have tied themselves to a particular jurisdiction of the court and only mention of " venue" as a place of Arbitration won't confer exclusive jurisdiction to that court. There should be words like "only" "alone etc.
Supreme court judgment- firstly, the Supreme court defined "court" under section-2(1) of the act. It also stated that the subject matter of Arbitration is different from the subject matter of the suit.
As per section-20 of the act, parties are free to agree on the place of Arbitration. This was made clear in a 3 judge bench in swastic gases v. Indian oil Ltd.
Supreme court held that not using the words "only" doesn't make it decisive. Clause 18 is added and hence it is automatically presumed the place of Arbitration.
The impugned order of Madras High court was side aside and parties were allowed to go to Orissa high court for selecting an arbitrator.