KERALA MINERALS AND METALS LTD. vs M/S GMM PFAUDLER LTD.

1 OP (C)No. 1254 of 2019 # **`IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT`** ``` THE HONOURABLE MR.JUSTICE C.S.DIAS FRIDAY, THE 8[TH] DAY OF JULY 2022 / 17TH ASHADHA, 1944 OP(C) NO. 1254 OF 2019 ``` ``` AGAINST THE ORDER/JUDGMENT IN OPARB 194/2012 OF III ADDITIONAL DISTRICT COURT, KOLLAM ``` ## **`PETITIONER/S:`** ``` THE KERALA MINERALS AND METALS LTD., SANKARAMANGALAM, CHAVARA, KOLLAM- 691 583, REPRESENTED BY ITS HOD (PERSONNEL AND ADMINISTRATION/LEGAL). BY ADVS. V.KRISHNA MENON SMT.P.VIJAYAMMA ``` ## **`RESPONDENT/S:`** ``` M/S.GMM PFAUDLER LTD., VITHAL UDYOGANAGAR, KARUMSAD - 388 325, GUJARAT. BY ADVS. SRI.N.N.SUGUNAPALAN (SR.) SRI.S.SUJIN ``` ``` THIS OP (CIVIL) HAVING COME UP FOR ADMISSION ON 08.07.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ``` 2 OP (C)No. 1254 of 2019 ## **C.S DIAS,J.** **--------------------------OP (C)No. 1254 of 2019 ----------------------------Dated this the 8[th] day of July, 2022.** ## **JUDGMENT** The original petition is filed to set aside the order dated 20.2.2019 passed by the Court of the Additional District Judge-III, Kollam, in OP(Arb) No.194/2012. 2. The petitioner’s case, in a nutshell, relevant for the determination of the original petition is that, they are a Government of Kerala Undertaking. They had published a tender notice dated 3.8.2005 for supply, design, engineering etc testing and commissioning of two numbers of pigment separation. The respondent had submitted their offer and subsequently entered into a negotiation with the petitioner. Consequently the work was awarded in favour of the respondent. Later, the Board of Directors of the petitioner resolved to cancel the expansion work, which was approved by the Government of Kerala. The respondent has, alleging that they have sustained loss, invoked the arbitration clause in the 3 OP (C)No. 1254 of 2019 contract. A sole Arbitrator was appointed in terms of Clause 7.23.1 (see paragraph 4 of Ext P2), which reads thus: “Clause 7.23.2: the venue of arbitration shall be at Kollam/Bangalore or such other place the parties may mutually agree upon”. 2.1. A sole Arbitrator was appointed, who conducted the proceeding at Ernakulam. The sole Arbitrator by award dated 23.5.2012 has permitted the respondent to realise from the petitioner an amount of Rs.18,44,000/with interest . 2.2. Aggrieved by the award, the petitioner had instituted an original petition before the Court of the District Judge, Kollam, under Sec.34 of the Arbitration and Conciliation Act, 1996 (in short ‘the Act’). 2.3. The court below, relying on the decision of the Hon’ble Supreme Court in **Indus Mobile Distribution Pvt. Ltd vs Datawind Innovations Pvt. Ltd** [2017 (2) KLT 665 (SC)], by the impugned Ext P2 order, has held that it has no territorial jurisdiction to entertain the original petition. 4 OP (C)No. 1254 of 2019 Accordingly, the original petition has been returned. Ext P2 is erroneous and wrong. Hence the original petition. 3. Heard;Sri.V.Krishna Menon, the learned counsel appearing for the petitioner and Sri.N.N Sugunapalan, the learned Senior Counsel appearing for the respondent. 4. The point that arises for consideration in the original petition is whether there is any illegality or error in Ext P2 order passed by the court below. 5. Undisputedly, Clause 7.23.1 of the agreement does not stipulate the seat of arbitration. The agreement only prescribes the venue of the arbitration, which is Kollam, Bangalore or such other place as mutually agreed by the parties. 6. After cleavage of opinion, the Hon’ble Supreme Court in **BBR ( India) Private Ltd vs. S.P Singla Constructions Private Ltd [2022 SCC Online SC 642]** in paragraph 31 has held as follows: 31. We have already referred to the first few sentences of the aforementioned paragraph and explained the reasoning in the context of the present case. The paragraph BGS SGS Soma (supra) also explains the non-obstante effect as incorporated in Section 42 to hold that it is evident that the application made under Part-I must be to a court which has a jurisdiction to decide such 5 OP (C)No. 1254 of 2019 application. **Where ‘the seat’ is designated in the agreement, the courts of ‘the seat’ alone will have the jurisdiction. Thus, all applications under Part-I will be made in the court where ‘the seat’ is located as that court would alone have jurisdiction over the arbitration proceedings and all subsequent proceedings arising out of the arbitration proceedings. The quotation also clarifies that when either no ‘seat’ is designated by an agreement, or the so-called ‘seat’ is only a convenient venue, then there may be several courts where a part of the cause of action arises that may have jurisdiction.** An application under Section 9 of the Act may be preferred before the court in which a part of cause of action arises in the case where parties had not agreed on the ‘seat of arbitration’. **This is possible in the absence of an agreement fixing ‘the seat’, as an application under Section 9 may be filed before ‘the seat’ is determined by the arbitral tribunal under Section 20(2) of the Act.** Consequently, in such situations, the court where the earliest application has been made, being the court in which a part or entire of the cause of action arises, would then be the exclusive court under Section 42 of the Act. Accordingly, such a court would have control over the arbitration proceedings. 7. A similar view has been taken by the Hon’ble Supreme Court in **Inox Renewables Ltd vs Jayesh Electricals Ltd [2021 SCC Online SC 448]** in paragraphs 12 and 13 , which reads thus: 12. In BGS SGS (supra), this Court, after an exhaustive review of the entire case law, concluded thus: 32. It can thus be seen that given the new concept of "juridical seat" of the arbitral proceedings, and the importance given by the Arbitration Act, 1996 to this "seat", the arbitral award is now not only to state its date, but also the place of arbitration as determined in accordance with Section 20. However, the definition of "court" contained in Section 2(1)(c) of the Arbitration Act, 6 OP (C)No. 1254 of 2019 1940,continued as such in the Arbitration Act, 1996, though narrowed to mean only principal civil court and the High Court in exercise of their original ordinary civil jurisdiction. Thus, the concept of juridical seat of the arbitral proceedings and its relationship to the jurisdiction of courts which are then to look into matters relating to the arbitral proceedings - including challenges to arbitral awards - was unclear, and had to be developed in accordance with international practice on a case by case basis by this Court. xxx xxx xxx 48. The aforesaid amendment carried out in the definition of "Court" is also a step showing the right direction, namely, that in international commercial arbitrations held in India, the High Court alone is to exercise jurisdiction over such proceedings, even where no part of the cause of action may have arisen within the jurisdiction of such High Court, such High Court not having ordinary original jurisdiction. In such cases, the "place" where the award is delivered alone is looked at, and the High Court given jurisdiction to supervise the arbitration proceedings, on the footing of its jurisdiction to hear appeals from decrees of courts subordinate to it, which is only on the basis of territorial jurisdiction which in turn relates to the "place" where the award is made. In the light of this important change in the law, Section 2(1)(e)(i) of the Arbitration Act, 1996 must also be construed in the manner indicated by this judgment. 49. Take the consequence of the opposite conclusion, in the light of the facts of a given example, as follows. New Delhi is specifically designated to be the seat of the arbitration in the arbitration Clause between the parties. Part of the cause of action, however, arises in several places, including where the contract is partially to be performed, let us say, in a remote part of Uttarakhand. If concurrent jurisdiction were to be the order of the day, despite the seat having been located and specifically chosen by the parties, party autonomy would suffer, which BALCO specifically states cannot be the case. Thus, if an application is made to a District Court in a remote corner of the Uttarakhand hills, which then becomes the court for the purposes of Section 42 of the 7 OP (C)No. 1254 of 2019 Arbitration Act, 1996 where even Section 34 applications have then to be made, the result would be contrary to the stated intention of the parties -as even though the parties have contemplated that a neutral place be chosen as the seat so that the courts of that place alone would have jurisdiction, yet, any one of five other courts in which a part of the cause of action arises, including courts in remote corners of the country, would also be clothed with jurisdiction. This obviously cannot be the case. If, therefore, the conflicting portion of the judgment of BALCO in para 96 is kept aside for a moment, the very fact that parties have chosen a place to be the seat would necessarily carry with it the decision of both parties that the courts at the seat would exclusively have jurisdiction over the entire arbitral process. xxx xxx xxx 53. In Indus Mobile Distribution (P) Ltd., after clearing the air on the meaning of Section 20 of the Arbitration Act, 1996, the Court in para 19 (which has already been set out hereinabove) made it clear that the moment a seat is designated by agreement between the parties, it is akin to an exclusive jurisdiction clause, which would then vest the courts at the "seat" with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties. xxx xxx xxx 82. **On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration Clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does 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. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of** 8 OP (C)No. 1254 of 2019 **meeting. Further, 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. 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.** In an International context, if a supranational body of Rules is to govern the arbitration, this would further be an indicia that "the venue", so stated, would be the seat of the arbitral proceedings. **In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the "stated venue", which then becomes the "seat" for the purposes of arbitration.** xxx xxx xxx 98. However, the fact that in all the three appeals before us the proceedings were finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the "seat" of arbitration Under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. Therefore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the "seat" has been chosen, which would then amount to an exclusive jurisdiction Clause so far as Courts of the "seat" are concerned. 13. This case would show that the moment the seat is chosen as Ahmedabad, it is akin to an exclusive jurisdiction clause, thereby vesting the courts at Ahmedabad with exclusive jurisdiction to deal with the arbitration. However, learned Counsel for the Respondent referred to and relied upon paragraphs 49 and 71 of the aforesaid judgment. Paragraph 49 only dealt with the aspect of concurrent jurisdiction as dealt with in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., MANU/SC/0722/2012 : (2012) 9 SCC 552 ["BALCO"] which does not arise on the facts of the present case. 9 OP (C)No. 1254 of 2019 Paragraph 71 is equally irrelevant, in that, it is clear that the parties have, by mutual agreement, entered into an agreement to substitute the venue at Jaipur with Ahmedabad as the place/seat of arbitration Under Section 20(1) of the Arbitration and Conciliation Act, 1996. 8. In the case on hand, the parties have not agreed on the seat of arbitration. Instead, only the venue was agreed at Kollam, Bangalore or such other place as mutually agreed by the parties. 9. Admittedly, the arbitration proceeding was held by the sole Arbitrator at Ernakulam, on mutual consensus between the parties. 10. Going by the law laid down in **BBR ( India) Private Ltd** (supra), the sole Arbitrator had invoked Section 20(2) of the Act and had fixed the seat at Ernakulam, which was not challenged by either party. Thus, the seat of arbitration was at Ernakulam and, therefore, only the Courts at Ernakulam, would have the jurisdiction to entertain all the post-award proceedings filed under the Act. Hence, the finding of the court below that the Court at Kollam does not have jurisdiction is 10 OP (C)No. 1254 of 2019 perfectly justifiable and correct, and in accordance with the law declared by the Hon’ble Supreme Court. In the result, I confirm Ext P2 order passed by the court below. Thus, without prejudice to the right of the petitioner to represent the original petition before the competent Court at Ernakulam, this original petition is dismissed. Needless to mention, as there was an order of stay passed by this Court from 11.4.2019 till date, staying the operation of Ext P2 order, the petitioner would be at liberty to claim the benefit of the said order to exclude the said period, for calculating the period of limitation. **sd/-** sks/8.07.2022 **C.S.DIAS, JUDGE** 11 OP (C)No. 1254 of 2019 ## **`APPENDIX OF OP(C) 1254/2019`** ``` PETITIONER EXHIBITS EXHIBIT P1TRUE COPY OF THE APPLICATION UNDER SECTION 34 OF THE ACT. EXHIBIT P2TRUE COPY OF THE ORDER OF THE III ADDL. DISTRICT JUDGE, KOLLAM IN O.P.(ARB) NO.194/2012 DATED 20/2/2019. ```