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Implied exclusion of Jurisdiction in Arbitration



With increase in arbitration agreements, issues with respect to jurisdiction has also increased. We have witnessed issue of jurisdiction of courts in foreign seated arbitration getting more settled from Bhatia International[1] to Balco[2] and then to 2015 Amendment. However, with increase in domestic arbitration, issue of jurisdiction of courts in India still has scope of being more precise and clear.


Section 20 of CPC confers jurisdiction to such court, in case of a dispute pertaining to an agreement, within the local limits of whose jurisdiction either cause of action or part of cause of action has arisen or place of defendant.[3] Therefore jurisdiction may lie upon more than one court. It is a settled position of law that an agreement may exclude jurisdiction of other courts in case it lies upon more than one court but the jurisdiction can only be conferred upon the court which originally had it in the first place. The situation is little different when it comes to arbitration agreement, Section 20 of the Arbitration act, 1996 gives parties autonomy to mutually choose jurisdiction of court even if it did not have jurisdiction in the first place. For example, business of X is in Ahmedabad while Y is from Jaipur, a dispute arose between the parties wherein cause of action arose in Vadodara and part of cause of action also arose in Ahmedabad, X may choose either to file suit in courts of Vadodara, Ahmedabad or Jaipur, they may also exclude jurisdiction of courts of Jaipur and Vadodara submitting themselves exclusively to the jurisdiction of courts of Ahmedabad but cannot choose jurisdiction of court other than Vadodara, Ahmedabad or Jaipur, while in arbitration agreement they may exclusively choose to submit to the jurisdiction of court of Mumbai even if no part of cause of action arose in Mumbai.


This article discusses issues related to implied exclusion of courts in arbitration agreements. The above stated issue arose in the case of Swastika Gases Private Limited vs. Indian Oil Corporation Limited[4] wherein clause 18 of the agreement between the parties conferred jurisdiction to the courts at Kolkata. It was the case of the appellant that part of cause of action arose in Jaipur and that the agreement does not expressly oust the jurisdiction of other courts as clause 18 cannot be construed as ouster clause due to lack of words like “alone”, “only”, “exclusive” and “exclusive jurisdiction” in the clause and therefore the courts of Jaipur also has the jurisdiction. The Hon’ble Supreme Court held that for jurisdiction clause in the agreement the words like "alone", "only", "exclusive" or "exclusive jurisdiction" are not decisive and does not make any material difference, that the intention of the parties by having Clause 18 in the agreement is clear and unambiguous and that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction.[5]


The said judgment was followed in B.E. Simoese Von Staraburg Niedenthal vs. Chhattisgarh Investment Limited[6] and in Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited and Others[7]. In B.E. Simoese[8] jurisdiction clause of the agreement stated that “the courts at Goa shall have exclusive jurisdiction”. Whereas in Indus Mobile[9], the seat of arbitration was Mumbai and the jurisdiction clause stated that “all disputes and differences of any kind whatever arising out of or in connection with this agreement shall be subject to the exclusive jurisdiction of courts of Mumbai only." It is pertinent to note here that there was express exclusion of jurisdiction of other courts by using words like exclusive and only in respective cases. However, in Indus the Hon’ble Supreme Court went on to hold that in arbitration law, the moment "seat" is determined, the court of that place would vest with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.


The issue was thereafter discussed in Brahmani River Pellets limited vs. Kamachi Industries Limited[10] wherein the jurisdiction clause of the agreement stated that “Arbitration shall be under Indian Arbitration and Conciliation Law 1996 and the Venue of Arbitration shall be Bhubaneswar.” Respondent in the present case filed petition under section 11 of the arbitration act before Madras High Court for appointment of sole arbitrator. The case of the appellant was that the parties have agreed that Seat of arbitration be Bhubaneswar, that when the parties have agreed for a place/venue for arbitration, it gets the status of Seat which is the juridical Seat and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. The Hon’ble Supreme Court held that “the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the present case, the parties have agreed that the “venue” of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As held in Swastik, non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.”


The Hon’ble Supreme Court relied upon Swastika[11] and Indus Mobile[12] judgment to establish that choosing of seat of arbitration not only vests jurisdiction to the courts of the chosen seat but also implies exclusion of other courts as well. By virtue of the said series of judgment, it is safe to conclude that section 11 application would be maintainable only before a High Court under whose jurisdiction the place chosen as seat of the arbitration is situated and not before any other high court.


Though the situation might slightly be different when it comes to application filed under section 9 before a court. Swastika[13], Indus Mobile[14] and Brahmani River[15] were dealing with section 11 application whereas B.E. Simoese[16] dealt with section 9 application. The Hon’ble Supreme Court in Indus Mobile[17] held that the moment "seat" is determined, the court of that place would vest with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties, it is pertinent to note that section 9 application is not for regulating arbitral proceeding but to provide interim relief to the parties before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36 and hence mere choosing of seat would not ousts the jurisdiction of other competent courts[18] to entertain section 9 application. Nevertheless, any specific clause in the arbitration agreement vesting jurisdiction to the court of chosen seat, even if without the usage of words such as only, alone, exclusive and exclusive jurisdiction, would imply ouster of jurisdiction of other courts for entertaining section 9 application.



References

[1] Bhatia International vs. Bulk Trading S.A., (2002) 4 SCC 105 [2] Bharat Aluminium Company Limited v. Kaiser aluminum Technical Services, (2012) 9 SCC 552 [3] Section 20 of Civil Procedure Code: Subject to the limitations aforesaid, every suit shall be instituted in Court within the local limits of whose jurisdiction-(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of the commencement of the suit actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution; or (c) the cause of action, wholly or in part, arises. [4] (2013) 9 SCC 32 [5] Swastika Gases Private Limited vs. Indian Oil Corporation Limited, (2013) 9 SCC 32, para 32. “It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither a forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner. It is not necessary to include words like alone, only, exclusively to confer jurisdiction to a court and that the intension of parties matter. Therefore exclusion of courts can also be implied.” [6] (2015) 12 SCC 225 [7] (2017) 7 SCC 678 [8] Supra [9] Supra [10] Civil appeal no. 5850 of 2019, Supreme Court. [11] Supra [12] Supra [13] Supra [14] Supra [15] Supra [16] Supra [17] Supra [18] Clause (e) of sub-section (1) of Section 2 of the Arbitration Act, 1996 defines "court" which means the Principal Civil Court of Original Jurisdiction in a district, and includes the High Court in exercise of its ordinary civil jurisdiction, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit, but does not include any civil court of a grade inferior to such Principal Civil Court, or any Court of Small Causes.



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N.C. Jain Advocate & Associates

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