Calcutta High Court
Versatile Construction vs Tata Motors Finance Ltd on 15 January, 2025
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
(COMMERCIAL DIVISION)
BEFORE:
The Hon'ble Justice Soumen Sen
And
The Hon'ble Justice Biswaroop Chowdhury
APOT/389/2024
WITH
AP.COM/822/2024
IA NO: GA-COM/1/2024
VERSATILE CONSTRUCTION
VS
TATA MOTORS FINANCE LTD.
For the Appellants : Mr. Tapas Dutta, Adv.
Ms. Atrayee Chatterjee, Adv.
For the Respondent : Ms. Hasnuhana Chakraborty, Adv.
Ms. Anna Malhotra, Adv.
Mr.Rishav Maity, Adv.
Order dated : 15th January, 2025
Dictated by Soumen Sen, J :
1. The present appeal has been preferred against the order dated
30th September 2024 passed by the single judge bench of Hon’ble Justice
Sabyasachi Bhattacharya in GA COM 1 of 2024 arising out of AP COM 822
of 2024 wherein the learned single judge refused to adjudicate the
application for setting aside of the Award under Section 34 of the Arbitration
and Conciliation Act (hereinafter referred to as “the Act”) along with the
2
connected application under Section 9of the Actbefore this Court due to lack
of territorial jurisdiction.
2. The primary issue for consideration in this appeal is whether
the City Civil Court or any other civil court in the State of West Bengal
would have jurisdiction to entertain an application under Section 34 of the
Arbitration and Conciliation Act, 1996 in view of a dispute being raised by
the present appellant with regard to the validity of the arbitration
agreement.
3. The facts of the case enumerate that the appellant herein is a
proprietary concern engaged in the business of construction and
transportation i.e, hiring vehicle for carrying goods. It had purchased a
vehicle bearing registration No. WB39B9650 i.e., “Dumper” on 21 st October,
2020 on hire-purchase basis financed by the respondent. The appellant
obtained a loan for an amount of Rs.42,16,095/- out of which he had paid
an amount of Rs.28,23,796/- and the balance amount of Rs.13,92,299/-
was payable to the respondent. The respondent had invoked the arbitration
clause contained in the loan agreement and a notice dated 19 July, 2022
was sent to the appellant but the appellant had admittedly not chosen to
participate in the arbitration since he did not consent to the said arbitrator
in terms of Section 12(5) of the Arbitration and Conciliation Act.
Subsequently an award dated 9th September, 2024 was passed in the
arbitration proceeding being arbitration case No. TMFL/295/5792 of 2022
held by Mr. Sachin Gorwadkar, the sole arbitrator.
4. At the stage of entertaining the Section 34 and/or Section 9
application, the learned single judge in the impugned order dated
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30thSeptember, 2024 has noted that at the very inception an issue as to the
jurisdiction of this Court under Section 34 of the Act as well as the
connected application under Section 9 of the Act has been raised. In the
present case the appellant has already suffered an Award and irrespective of
the contentions of the appellant in respect of the said Award and although
the award was passed ex-parte, such an award was equally binding as an
uncontested one. It was held by the learned single judge that it was settled
position of law that once the seat of arbitration is decided by the parties the
provisions of Sections 16 to 20 of the Code of Civil Procedure 1908 would
not be a determinant as to the jurisdiction of the arbitral court.
5. The learned judge has observed that although the appellant in
this case had disputed the veracity and authenticity of the purported loan
agreement between the parties, a copy of the same had been made a part of
the record in this court and was the premise of the Award passed against
the appellant and hence at this stage the court is only to look into the
clauses of the purported document and could not go elsewhere. Since clause
21.1 of the document clearly stated the phrase “Arbitration to be held in
Mumbai”, in the absence of any contrary indication throughout the
document as to any other place being designated as the seat of arbitration,
Mumbai had to be construed to be not merely a “venue” but also the
intended seat of arbitration. It was also significantly noted that the limited
gateway for the court the enter into the dispute, even if pertaining to fraud,
was the territorial jurisdiction envisaged in section 34 read with the
definition of “Court” in Section 2(1)(e) of the 1996 Act, and the appellant
4
having failed to cross the hurdle this Court could not entertain the issues
including that of fraud in the present proceeding.
6. The learned Court in conclusion, held that as per the purported
agreement, relying on which the respondents had obtained an Award from
the arbitral tribunal, this Court had no territorial jurisdiction to take up the
matter and it was even doubtful whether the Mumbai High Court had
jurisdiction, since it could well be possible that one the District courts of
Mumbai qualified as the jurisdictional court having original civil jurisdiction
as contemplated in Section 2(1)(e) of the Act.
7. In Roger Shashoua v. Mukesh Sharma1, the England and
Wales High Court and held that the seat of arbitration has to have an
exclusive jurisdiction over all proceedings that arise out of the arbitration,
which came to be popularly referred to as the ‘Shashoua Principle’. It
propounded that whenever there is 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 indica, the inexorable conclusion is that the seated
venue is actually the juridical seat of the arbitration proceeding. The
position was further confirmed by the Indian leg of the case Roger
Shashoua v. Mukesh Sharma2, wherein it has been held that the “seat” of
the Arbitration would have an exclusive jurisdiction over all the proceedings
that arise out of arbitration.
1
(2009) EWHC 957
2
(2017) 14 SCC 722
5
8. The landmark five judge bench of the Supreme Court in the
case of Bharat Aluminium Company v Kaiser Aluminium Technical
Services Inc.3(hereinafter referred as “BALCO”) succinctly stated that the
phrase “subject matter of the arbitration” in Section 2(1)(e) of the Act should
not be confused with “subject matter of the suit”. The term “subject matter”
in this Section was confined to Part I and its purpose is to identify the
courts having supervisory control over the arbitration proceedings and
hence referred to a court which would essentially be a court of the seat of
the arbitration process.
9. The bench opined that the legislature had intentionally given
jurisdiction to two courts i.e. the court which would have jurisdiction where
the cause of action is located and courts where the arbitration takes place.
This was necessary as on several occasions the agreement may have
provided for a seat of arbitration at a place which was neutral to both the
parties and thus the courts where the arbitration takes place would be
required to exercise supervisory control over the arbitral process.
Consequently, the provisions of Section 2(1)(e) of the Act must be construed
keeping in mind the provisions of Section 20 which gives recognition to
party autonomy.Such above mentioned theory of concurrent jurisdiction
was enunciated with the help of an illustration as follows-
“For example, if the arbitration is held in Delhi, where neither of the parties
are from Delhi, (Delhi having been chosen as a neutral place as between a
party from Mumbai and the other from Kolkata) and the tribunal sitting in
Delhi passes an interim order Under Section 17 of the Arbitration Act, 1996,
the appeal against such an interim order under Section 37 must lie to the
3
(2012) 9 SCC 552
6Courts of Delhi being the Courts having supervisory jurisdiction over the
arbitration proceedings and the tribunal. This would be irrespective of the fact
that the obligations to be performed under the contract were to be performed
either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi.
In such circumstances, both the Courts would have jurisdiction, i.e., the Court
within whose jurisdiction the subject matter of the suit is situated and the
courts within the jurisdiction of which the dispute resolution, i.e., arbitration is
located.”
10. Though it seemed that there was an internal inconsistency in
BALCO supra, subsequently, a three-judge bench of the Apex Court affirmed
and elucidated upon Bharat Aluminium (supra) in BGS SGS SOMA JV v
NHPC Limited4 observing that where parties have selected the seat of
arbitration in their agreement, such selection would then amount to an
exclusive jurisdiction clause as the parties had then indicated that the
courts at the “seat” would alone have jurisdiction to entertain challenges
against the arbitral award which has been made at the seat. In paragraph
82 it was observed that whenever there is a designation of the place of
arbitration in an arbitration clause as being the “venue” of arbitration
proceedings, theexpression “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. Furthermore, 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 is the seat of the arbitral proceedings.
4
(2020) 4 SCC 234
7
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.
11. In BGS SGS SOMA (supra), the Court concluded that the
concurrent jurisdiction theory of BALCO was not its true ratio since if the
seat was designated or determined, only the seat court would have exclusive
jurisdiction.
12. The seat of arbitration is a vital aspect of any arbitration
proceeding as it is not just about where an institution is placed or where the
hearings shall be held, but it is about which Court would have supervisory
power over such proceedings as explained by the Apex Court in
MankatsuImpex Pvt. Ltd. v Airsual Ltd.5Several division benches of the
Supreme Court in earlier cases have also understood the law to be that once
the seat of arbitration is chosen, it amounts to an exclusive jurisdiction
clause, insofar as the courts at that seat are concerned such as Enercon
(India) Ltd. v Enercon GmbH6, Reliance Industries Ltd. Union of India7,
and Videocon Industries Ltd. v Union of India 8.
13. In the case of Samsung India Electronics Pvt. Ltd. v Enn Enn
Corp Limited9, the Delhi High Courtdelving upon the distinction between
“seat” and “venue” noted that the latter was the “place” where arbitration
may be conducted keeping the convenience of the parties in mind and the
5
(2020) 5 SCC 399
6
(2014) 5 SCC 1
7
(2014) 7 SCC 603
8
(2011) 6 SCC 161
9
2023 SCC OnLine Del 3827
8
former was the “seat” which determines the jurisdiction of the Courts where
the parties may agitate any controversy arising out of the arbitration. The
term ‘Seat’ is of utmost importance as it connotes the situs of arbitration.
The term ‘Venue’ though often confused with the term ‘Seat’, is a place
chosen as convenient location by the parties to carry out the arbitration
proceedings, but it should not be confused with ‘Seat’. The term ‘Seat’
carries more weight than ‘Venue’ or ‘place’. The Court reiterated the position
that in arbitration proceedings the parties by way of agreement can confer
jurisdiction upon a court where no cause of action arises i.e., a neutral
venue and the courts in Delhi could have jurisdiction even if no cause of
action had arisen therein.
14. In BGS SGS SOMA (supra)the Supreme Court observed that the
stated venue is the seat of arbitration unless there are clear indicators that
the place named is a mere venue or a meeting place of convenience and not
the seat and hence that the reference to place/venue in the agreement ipso
facto designated the seat in absence of contrary indicia. In Mankatsu
Impex(supra) it was held that the mere expression “place of arbitration”
could not be the sole basis to determine the intention of the parties that
they had intended that place to be the “seat of arbitration” as well and the
intention of parties to agree upon the “seat” had to be determined from other
clauses in the agreement and the conduct of the parties. In the present case,
as has also been observed by the learned Single Judgea reading of the
agreement between the parties would show that apart from Clause 21.1
which clearly stated that arbitration was to be held in Mumbai in
accordance with the 1996 Act and Clause 22 the jurisdiction clause which
9vested power on competent Courts and tribunals in Mumbai in respect of
legal proceedings arising out of or in connection with the agreement, there
was no other place indicated in the agreement as the venue of arbitration
and hence in the absence of any other contrary indication visible by conduct
of the parties, Mumbai was the venue as well as seat of arbitration.
15. This is not a case where one of the parties has not been served
the notice of arbitration. The appellant has voluntarily chosen to not
participate in the proceeding even after being sent a notice for arbitration
and has hence suffered an ex parte award. Hence, in light of the discussion
above it follows that the “principal civil court of original jurisdiction in a
district” in Mumbai or the Bombay High Court would be the Court having
supervisory jurisdiction over the arbitral proceeding as well as the post
arbitral jurisdiction under Section 34 and/or Section 37 of the Act and
hence there seems to be no need for interference in the learned Single
judge’s order.
16. Learned counsel for the appellant has relied upon a decision of
the Hon’ble Supreme Court in Velugubanti HariBabu vs. Parvathini
Narasimha Rao and Ors.10in support of his submission that where serious
dispute has been raised with regard to the validity of the agreement which
contains an arbitration clause, the said issue is required to be decided at
the threshold by the Hon’ble The Chief Justice or his designate at the time
of appointment of the Arbitrator and in view of the fact that the Arbitrator
was chosen unilaterally, the proceeding before the Arbitrator is itself invalid
inasmuch as the Arbitrator has not made any disclosure in terms of Section
10
(2016) 14 SCC 126
10
12(5) of the Arbitration and Conciliation Act. The said judgment has no
manner of application as the issue before the Hon’ble Supreme Court was
the questions that are required to be decided by the Court and the
Arbitrator raised in a proceeding under Section 11 of the Arbitration and
Conciliation Act, 1996. Moreover, if it is demonstrated in the arbitration
proceeding that the Arbitrator has pecuniary and other interest and
thereafter continued with the arbitration, that can be a valid ground for
setting aside of the award. The issue decided by the learned Single Judge
was confined to the jurisdiction and not on merits.
17. On such consideration, we do not find any reason to interfere
with the order passed by the learned Single Judge.
18. The appeal and the application stand dismissed.
(Soumen Sen, J.)
(Biswaroop Chowdhury, J.)