Meaning of Seat of Arbitration#indianlaws

The term “subject matter of the arbitration” cannot be confused with “subject matter of the suit”. The term “subject matter” in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process.The provision in Section 2(1)(e)has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. The legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process.

What is the ratio of the decision reported as 2012 (9) SCC 552 Bharat Aluminium Company Vs. Kaiser Aluminium Technical Services Inc. was the principal issue between the parties. We are of the opinion, the term “subject matter of the arbitration” cannot be confused with “subject matter of the suit”. The term “subject matter” in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e)has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the Learned Counsel for the Appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. 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 37must lie to the Courts 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.

In this case,Priya, her father Niranjan and her brother Darshan; of the well-known Hiranandani clan had entered into a business association agreement to jointly undertake construction-cum-development in the real estate sector in India. There existed an arbitration clause as per which the place of arbitration was New Delhi and the language of the arbitration proceedings was English. The clause expressly stated that issues concerning decision by the Arbitral Tribunal could be taken to any Court of Competent Jurisdiction and that notwithstanding any provision of law concerning conferring jurisdiction in a Court where arbitration is held or any award delivered the right of parties to approach a Court of law shall be unaffected. The Arbitral Tribunal comprising Cherie Booth (QC); Justice (Retd.) Ajit P.Shah; and Lucy.F.Reed, issued a partial award on July 27, 2013 fixingliability upon the father and the son and in favour of Priya and made corrections thereto on September 18, 2013. The parties informed that they accept the partial award and thus on November 04, 2013 the Arbitral Tribunal issued the consent partial award fixing the liabilities. The date of signing of the partial award is November 04, 2013 but its index has the date October 23, 2013 thereon.

The Tribunal declared that Priya was entitled to recover claim damages, but upon proof and in amounts to be quantified concerning projects in the city of Chennai and Mumbai. Quantification of the costs was expressly recorded to be a part of the final award.

Hearings were held before the Arbitral Tribunal for quantification of the claims of Priya. A draft final award was circulated by the Arbitral Tribunal, and this act of transparency led to newspaper reports and litigation commenced in Mumbai and at Delhi.

With reference to the draft final award dated September 14, 2015 which had left blank the amounts which the Arbitral Tribunal intended to award, but indicated the reasoning thereof, the father came to know that he would be recompensed a portion of the arbitration cost incurred by him and his son (probably on account of a sum which the two had agreed to pay to Priya and she did not agree and as a result the Arbitral Tribunal had to hold sittings to record evidence and hear the parties). Aware of the partial liability award as per which a sum had to be quantified; payable by the father and son to Priya but some costs to be reimbursed by Priya, Niranjan filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 in the High Court of Judicature at Bombay pleading that with reference to the draft final award he estimate a recompense of `40 crores to him from his daughter. He pleaded that he estimates further litigation cost in sum of `10 crores and thus sought security to be furnished by the daughter in said sum.

Niranjan filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 in the High Court of Judicature at Bombay pleading that with reference to the draft final award he estimate a recompense of `40 crores to him from his daughter. He pleaded that he estimates further litigation cost in sum of `10 crores and thus sought security to be furnished by the daughter in said sum.

Priya filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 in the Delhi High Court on May 02, 2016 which was listed before the learned Single Judge on May 03, 2016. In her petition she claimed that the net sum awarded would be in her favour. Pleading that as per newspaper reports the father and son were trying to corporatize the assets and this may render the process of recovery of her dues cumbersome and time consuming, she prayed for an injunction against her father and brother to be issued restraining them from selling, alienating or transferring the ownership interests in the partnership firms including transferring such assets to a corporate entity.

With reference to Section 42 of the Arbitration and Conciliation Act, 1996 the debate took the parties to interpret the words ‘has been made’ in Section 42 of the Act; for the father and son oppose the maintainability of the petition filed by Priya under Section 9 of the Act before the Delhi High Court on the plea that the father had instituted a petition under Section 9 in the Bombay High Court on April 25, 2016. Priya urged two points. The first was that ‘has been made’ must mean to the Court, as in, laid before the Judge; as distinct from merely filing in the Registry of the Court. She urged that to pre-empt her from approaching the Court in Delhi, the act of merely filing a petition under Section 9 of the Act in the Registry of the Bombay High Court would not amount to the father making an application in the Court at Mumbai. Pithily put, the argument was that the mandate of Section 42, which took away the right of parties to approach a Court in case of concurrent jurisdiction of Courts, and conferred exclusive jurisdiction to the Court which was first seized of an application filed by a party, meant the Court, as in, the Judge having before him/her the petition filed. The second limb of her stand was that a party cannot, under colour of a claim, which ex-facie is frivolous, approach any Court and claim that said Court is the one which would henceforth be the only Court where applications under the Act can be filed. The factual setting of said argument was that the final award had been pronounced, and she was the net recipient of the money from her father and brother. As per her the father and son knew that. Even in their pleadings in the application filed under Section 9 of the Act before the Bombay High Court the two had admitted that notwithstanding part of cost incurred by them being reimbursed to them from her, she would be the net recipient of money from her father and brother and thus the sole intention of the father was to appropriate jurisdiction in the Bombay High Court and not to enforce any bona-fide claim in the argument of Priya. It was urged that motivated and vexatious petitions need to be held as not maintainable and if a petition before a Court is held to be not maintainable, it would be a case where the Court would not be conferred with the exclusive jurisdiction envisaged by Section 42 of the Act.

a bona-fide petition filed under the Act first in point of time would exclude jurisdiction of other Courts and vest exclusive jurisdiction in the said Court in view of Section 42 of the Act and the filing would mean a properly constituted petition filed in the Registry of the Court. But if the Court finds that there was a hidden agenda in ousting jurisdiction of another Court and that the petition filed was devoid of merit and the Court so expressly states, the cunning act of filing the petition in said Court would not be treated as the said Court being the first one to be approached and therefore excluding jurisdiction in the other Court and vesting jurisdiction in said Court alone; for the reason a mala-fide act with cunning and having a hidden agenda can never be countenanced by any Court of record; and Courts in India are not only Courts of law but even of justice and equity. In said situation it has to be held that no advantage accrues to the party which has resorted to cunning and had a hidden agenda to oust jurisdiction.

On facts of the instant appeal it only means this. If the High Court Judicature at Bombay dismisses the petition filed by Niranjan Hiranandani holding the same to be devoid of merits, an act of cunning having an hidden agenda intending to oust jurisdiction of the Court at Delhi, Priya would be entitled to file an application in the Delhi High Court praying for an interim measure or under any other Section. But if the Bombay High Court does not hold so, that would be the end of the matter concerning jurisdiction of the Courts at Delhi.