Jurisdiction of court when there is change of venue of arbitration

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.1457 OF 2015

Unitech Texmech Private Limited,
Vs
ATE Enterprises Private Limited,

CORAM : R.D. DHANUKA, J.

PRONOUNCED ON : 7TH APRIL, 2016
Citation; 2017(3) ALLMR 170

1. By this petition filed under section 34 of the Arbitration
Conciliation Act, 1996 (for short “the said Act”) the petitioner has
impugned an arbitral award dated 7th May, 2015 made by the learned
arbitrator allowing some of the claims made by the respondent and
rejecting the counter claims made by the petitioner.

2. Learned counsel appearing for the respondent has raised
a preliminary issue of territorial jurisdiction of this Court and to
entertain, try and dispose of the present petition filed by the petitioner
on the ground that the parties have agreed to the jurisdiction of the
Court of law at Pune under clause 8 of the Selling Agency Agreement
entered into between the parties on 22nd January, 2010. In view of the
preliminary objection raised by the respondent both the parties have
addressed this Court on the issue as to whether this Court has
territorial jurisdiction to entertain, try and dispose of the present
petition.

3. Some of the relevant facts for the purpose of deciding this
issue are as under :-
The respondent herein was the original claimant in the
arbitral proceedings whereas the petitioner herein was the original
respondent. On 22nd January, 2010 the parties entered into a Selling
Agency Agreement wherein the respondent granted to the petitioner
herein exclusive agency for certain territories specified in the said
agreement. The said contract commenced from 1st April, 2009 and
was valid until three years unless it was mutually terminated earlier.
The petitioner herein has its registered office at Pune, whereas the
respondent herein has its registered office at Mumbai.

4. The dispute arose between the parties. It was the case of
the respondent herein that since the petitioner has neglected to make
payment, the respondent vide its letter dated 14th October, 2013
sought to initiate the arbitral proceedings and gave final opportunity to
the petitioner to make payment however, the petitioner failed and
neglected to make any payments. The respondent accordingly
invoked arbitration agreement and applied for appointment of a sole
arbitrator under rules of Indian Merchants’ Chamber. The Indian
Merchants’ Chamber appointed Mr.Dilip Udeshi, advocate as a sole
arbitrator.

5. The Indian Merchants’ Chamber addressed a letter to both
the parties through their advocates on 6th May, 2014. The Indian
Merchants’ Chamber suggested that both the parties at this stage
may also agree if they want to have the arbitral proceedings in
Mumbai instead in Pune. The learned advocate representing the
petitioner herein on phone informed the Indian Merchants’ Chamber
that he would send a consenting later confirming that the arbitral
proceedings may be held in Mumbai. The Indian Merchants’
Chamber suggested if the arbitral proceedings were to be held in
Mumbai, then both the parties will have to agree and modify clause
8.3 of the Selling Agency Agreement dated 22nd January, 2010 to the
effect that “all proceedings in such arbitration shall be held in Mumbai
instead in Pune”. Both the parties were requested to inform the
Indian Merchants’ Chamber if any agreement had been reached in
respect thereof without any further delay. The said letter dated 6th
May, 2014 was addressed by the Indian Merchants’ Chamber in
continuation of their earlier letter dated 8th April, 2014.

6. Learned advocate for the petitioner herein addressed a
letter to the Indian Merchants’ Chamber on 18th June, 2014 informing
that the parties had agreed that the location of arbitration would be
Pune however, the parties wish to mutually modify the place of

arbitration clause in the arbitral agreement and the petitioner herein
gave the consent to change the location of the arbitration to Mumbai.
By a letter dated 7th July, 2014, the learned advocate representing the
respondent herein informed the Indian Merchants’ Chamber that the
parties have given the consent to change venue from Pune to
Mumbai as the same was convenient to both the parties. She
informed that in the circumstances, the provision of paragraph 8.3 of
the Selling Agency Agreement dated 22nd January, 2010 in regard to
the venue be recorded as null and void. In the said letter the learned
advocate for the respondent herein requested the Indian Merchants’
Chamber to take the said letter on record in regard to change of
venue of the arbitration from Pune to Mumbai and appoint an
arbitrator accordingly. The learned arbitrator had held the arbitral
meetings at Mumbai and made the award on 7th May, 2015 in
Mumbai.

7. It is submitted by the learned counsel for the petitioner that
the Selling Agency Agreement entered into between the parties was
stamped in Mumbai and was sent by the respondent to the petitioner
in Pune for signature. The petitioner had signed the said Selling
Agency Agreement at Pune. He submits that under the said
agreement, the petitioner accepted to take over exclusive agency of
the principal for the States of Tamil Nadu, Andhra Pradesh, Kerala,
Karnataka, Madhya Pradesh, Maharashtra, Gujarat, NTC Mills and
UPST Mills. The learned counsel for the petitioner invited my
attention to clause 7.2 of the said agreement which provided that the
parties shall be entitled to seek demand and obtain specific
performance of the said agreement from and against each other by
due process of law subject to Pune jurisdiction. He submits that in
this case none of the parties had sought or demanded specific
performance of the said agreement from and against each other and
thus the said clause which provided for the dispute being subject to
Pune jurisdiction did not apply to the subject matter of the dispute
between the parties.

8. Learned counsel for the petitioner invited my attention to
clause 8.2 and would submit that under the said clause, the dispute
was referred to arbitration in accordance with the Rules of Arbitration
of the Indian Merchants’ Chamber. Insofar as clause 8.3 of the said
agreement is concerned which provided that all the proceedings in
such arbitration shall be held in Pune, Maharashtra and not
elsewhere is concerned, he submits that the said clause was
admittedly amended by the parties and the place of arbitration was
shifted from Pune to Mumbai. He submits that since the seat / place
of arbitration was shifted from Pune to Mumbai, the Court at Mumbai
will have supervisory jurisdiction over the arbitral proceedings, thus
this Court only will have jurisdiction to entertain, try and dispose of
the present petition.

9. Learned counsel for the petitioner also invited my attention
to clause 8.6 of the said agreement which provided that the said
agreement shall be subject to Court of law at Pune and all the
disputes shall be dealt with by amicable settlement or arbitration of
due process of law. He submits that this clause would not apply in
view of the later agreement between the parties to have the
proceedings to be held at Mumbai. He submits that the respondent
also admittedly has its registered office at Mumbai. In support of the
aforesaid submission, the learned counsel for the petitioner also
invited my attention to Rule 64 of “Rules Of The Court Of Arbitration
Of The Indian Merchants’ Chamber” and would submit that under the
said Rule 64, the arbitral award shall state its date and the place of
arbitration and the award shall be deemed to have been made at that
place.

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10. Learned counsel for the petitioner invited my attention to
the impugned award and would submit that admittedly the impugned
award has been made by the learned arbitrator at Mumbai. He
submits that since the impugned award is made by the learned
arbitrator in Mumbai, that also would give territorial jurisdiction to this
Court to entertain, try and dispose of the present petition. Learned
counsel for the petitioner placed reliance on the judgment of the
Division Bench in case of Vachaspati Sharma vs. India Cements –
Capital Finance Ltd., 2013(6) Mh.L.J. 342 and in particular
paragraphs 9 and 10 and would submit that the Courts having
jurisdiction over the place where the arbitration takes place would
have supervisory jurisdiction. He submits that the Division Bench of
this Court in the said judgment has applied the principles of law laid
down by the Supreme Court in case of Bharat Aluminium Company
vs. Kaiser Aluminium Technical Services Inc., 2012(9) SCC 552.
Learned counsel appearing for the petitioner submits that this Court
has thus exclusive jurisdiction to entertain, try and dispose of the
present petition and not the Court in Pune, as canvassed by the
learned counsel for the respondent.

11. Learned counsel for the respondent on the other hand
submits that the petitioner had admittedly signed the agreement at
Pune. The petitioner also had its registered office at Pune. Under the
said agreement, the petitioner was granted exclusive agency by the
respondent in respect of various territories of several States,
including Maharashtra. She submits that the goods were sold by the
petitioner in various parts of Maharashtra and other States. She
submits that though clause 8.3 of the said agreement was amended
in view of the suggestion made by the Indian Merchants’ Chamber,
the respondent had categorically agreed that the venue of the
arbitration was amended from Pune to Mumbai, as provided in clause
8.3 of the Selling Agency Agreement dated 22nd January, 2010.

12. It is submitted that there was no other amendment to the
said agreement as canvassed by the learned counsel for the
petitioner. She submits that the parties had agreed for change of
venue under section 20 of the said Act and not the change of seat or
place of arbitration. She submits that even if the venue of the
arbitration was shifted from Pune to Mumbai, it would not have any
bearing on clause 8.6 of the said agreement which categorically
provided that the dispute between the parties would be subject to the
jurisdiction of the Courts in Pune. She submits that the petitioner
could not produce any agreement before this Court to demonstrate
that the said clause bearing clause 8.6 was amended by the parties.

13. Learned counsel appearing for the respondent invited my
attention to the letters addressed by the Indian Merchants’ Chamber
and would submit that in view of specific suggestion made by the
Indian Merchants’ Chamber to consider whether the venue of the
arbitration proceedings could be shifted from Pune to Mumbai and
whether an amendment to clause 8.3 of the Selling Agency
Agreement would be agreed by the parties, the respondent had
specifically informed that the parties had agreed to have the venue of
arbitration in Mumbai instead of Pune and to that effect the provision
of paragraph 8.3 of the Selling Agency Agreement be regarded as
null and void. She also invited my attention to the first paragraph of
the impugned award in which the learned arbitrator has recorded that
the parties had communicated to the office of the Indian Merchants’
Chamber that notwithstanding the provisions in the arbitration clause
to the effect that the venue of the arbitration shall be at Pune, the
parties had agreed to Mumbai being the venue and accordingly the
learned arbitrator had entered upon the reference on 14th August,
2014. She submits that it is thus clear that both the parties had
agreed to change the venue from Pune to Mumbai and accordingly
clause 8.3 of the Selling Agency Agreement only stood amended and
not other provisions in the Selling Agency Agreement and more
particularly clause 8.6 thereof.

14. It is submitted by the learned counsel appearing for the
respondent that since substantial part of cause of action has arisen at
Pune and some part of cause of action had arisen at Mumbai, the
parties had mutually agreed and more particularly in clause 8.6 that
the said agreement shall be subject to Court of law at Pune and all
disputes shall be dealt with by amicable settlement or arbitration or
due process of law and thus Court of law at Pune only has exclusive
jurisdiction to entertain, try and dispose of the present proceedings
and not this Court.

15. Learned counsel for the respondent placed reliance on the
judgment of this Court in case of Chandrakant P. Sanghvi Ors.
vs. Anilkumar Phoolchand Sanghvi Ors. delivered on 22nd
December, 2015 in Chamber Summons No.905 of 2013 and more
particularly paragraphs 59, 60, 65, 66 and 88 and would submit that
merely because some of the meetings were held at Mumbai, by
consent of parties, it would not confer jurisdiction on this Court in view
of the specific agreement otherwise between the parties to confer
jurisdiction on the Court of law at Pune. She submits that this Court
has adverted to the judgment of the Supreme Court in case of Bharat
Aluminium Company (supra), Enercon (India) Ltd. Ors. vs.
Enercon GMBH Anr. (2014) 5 SCC 1, Harmony Innovation
Shipping Limited vs. Gupta Coal India Limited Anr., 2015 SCC
Online SC 190 and the judgment of the Division Bench of this Court
in case of Konkola Copper Mines (PLC) vs. Stewarts Lloyds of
India Ltd., delivered on 9th July, 2013 in Appeal (Lodging) No.199 of
2013. She submits that the said judgment of this Court in case of
Chandrakant P. Sanghvi Ors. (supra) is upheld by the Division
Bench of this Court and squarely applies to the facts of this case.

16. Learned counsel appearing for the respondent invited my
attention to paragraph 20 of the arbitration petition and would submit
that only averment in the arbitration petition regarding the jurisdiction
of this Court is that the petitioner carries on business and the
respondent’s registered address is within the jurisdiction of this Court.
The impugned award was passed in Mumbai and therefore, this
Court will have jurisdiction to entertain, try and dispose of the present
petition. She submits that it is not the case of the petitioner in the
petition that the seat / place of arbitration is shifted from Pune to
Mumbai and this Court has supervisory jurisdiction over the arbitral
proceedings.

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17. Learned counsel for the respondent distinguished the
judgment of the Division Bench of this Court in Vachaspati Sharma
(supra) on the ground that the facts before the Division Bench of this
Court in the said judgment were totally different. She also placed
reliance on paragraph 9 of the said judgment of the Division Bench
and would submit that the said paragraph would assist the case of
the respondent and not the petitioner.

18. Mr.Patil, learned counsel appearing for the petitioner in rejoinder
tried to distinguish the judgment of this Court in case of
Chandrakant P. Sanghvi Ors. (supra) on the ground that the
subject matter of dispute in the said matter was in Pune and the
parties were also staying at Pune. The petitioner in that matter had
also filed the proceedings at Pune. He also made an attempt to
distinguish the judgment of the Supreme Court in case of Enercon
(India) Ltd. Ors. (supra). He submits that in the case of Enercon
(India) Ltd. Ors. (supra) the Supreme Court had considered the
venue in an international commercial arbitration which does not apply
to the facts of this case. The Supreme Court had considered as to
what would be curial law in the facts of that case which would not
apply to the facts of this case.

REASONS AND CONCLUSIONS :

19. It is not in dispute that Selling Agency Agreement was
stamped at Mumbai and was signed by the petitioner at Pune. The
petitioner has its registered office at Pune, whereas the respondent
herein has its registered office at Mumbai. Under the said Selling
Agency Agreement, the petitioner was granted exclusive agency by
the respondent for various States, including Maharashtra. The
petitioner has not disputed that under the said Selling Agency
Agreement, the petitioner had carried out various transactions outside
the territorial jurisdiction of this Court and in different parts of
Maharashtra. It is thus clear that part of cause of action had arisen at
Pune and part of cause of action had arisen at Mumbai. Clause 8 of
the said Selling Agency Agreement provides for an arbitration
agreement. Clause 8.3 of the arbitration Selling Agency Agreement
provides that all proceedings in such arbitration shall be held in Pune,
Maharashtra and not elsewhere.

20. A perusal of the correspondence exchanged between the
Indian Merchant’s Chamber and the parties thereto clearly indicates
that the Indian Merchants’ Chamber vide their letter dated 8th April,
2014 had invited the attention of the parties to clause 8.3 of the
Selling Agency Agreement which provided that all the proceedings in
arbitration shall be held in Pune. The attention of the parties were
also invited to clauses 31 and 32 of the Rules of the Court of
Arbitration of Indian Merchants’ Chamber which provided that any
travelling and other expenses incurred by the arbitrator and Registrar
for attending the arbitration hearing in a city other then the place of
residence shall have to be reimbursed to them.

21. The parties were conveyed that in that situation if the
arbitrator has to travel, he shall be paid travelling expenses by air or
rail or car at actuals and also out of pocket expenses at actuals for
boarding, lodging and local transport subject to a maximum of
Rs.12,000/- in Pune. The venue charges to be paid in Pune will also
have to be shared equally by both the parties. The parties were
informed that Indian Merchants’ Chamber did not have any facilities
of venue at Pune and parties will have to mutually select the venue
at Pune for arbitration proceedings. The parties were accordingly
informed that both the parties at this stage may agree if they wish to
have the arbitration proceedings in Mumbai and in that event the
venue for arbitration proceedings will be made available by Indian
Merchants’ Chamber at Churchgate, Mumbai.

22. A perusal of the letter dated 6th May, 2014 addressed by
the Indian Merchants’ Chamber to both the parties indicates that by
the said letter the Indian Merchants’ Chamber had invited the
attention of both the parties to the letter dated 8th April, 2014 in which
it was mentioned that both the parties at that stage may agree if they
want to have the arbitration proceedings in Mumbai instead at Pune
and if the arbitration proceedings were to be held in Mumbai, both the
parties will have to agree and modify clause 8.3 of the Selling Agency
Agreement dated 22nd January, 2010 to the effect that “all
proceedings in such arbitration shall be held in Mumbai instead in
Pune.”

23. The petitioner through its advocate’s letter dated 18th June,
2014 to the Indian Merchants’ Chamber informed the Indian
Merchants’ Chamber that the parties had agreed that the location of
the arbitration would be Pune however, the parties wish to mutually
modify the place of arbitration clause in the arbitration agreement and
gives consent to change the location of arbitration to Mumbai. By
their advocate’s letter dated 7th July, 2014 the respondent to the
Indian Merchants’ Chamber informed that the parties in the above
matter have consented to change the venue from Pune to Mumbai
as the same was convenient to both the parties and accordingly the
provision of paragraph 8.3 of Selling Agency Agreement dated 22nd
January, 2010 in regard to the venue of arbitration be regarded as
null and void. By the said letter, the respondent had specifically
requested the Indian Merchants’ Chamber to take the said letter on
record in regard to the change of venue of arbitration from Pune to
Mumbai and appoint an arbitrator accordingly. There is no dispute
that the Indian Merchants’ Chamber accordingly appointed the
learned sole arbitrator from Mumbai who held various meetings at
Mumbai.

24. A perusal of the arbitral award and particularly paragraph 1
thereof clearly indicates that the learned arbitrator had clearly
recorded about the communication of the parties to the office of the
Indian Merchants’ Chamber that notwithstanding the provision in
arbitration clause to the effect that the venue of the arbitration shall
be at Pune, the parties had agreed to Mumbai, being the venue and
accordingly the learned arbitrator had entered upon a reference on
14th August, 2014.

25. A conjoint reading of all the correspondence referred to
above, indicates that both the parties had agreed to change the
venue from Pune to Mumbai being convenient to both the parties in
view of various suggestions given by the Indian Merchants’
Chamber. A perusal of the correspondence addressed by the Indian
Merchants’ Chamber clearly indicates that the suggestion of the
Indian Merchants’ Chamber was only to change the venue from Pune
to Mumbai and to modify clause 8.3 of the Selling Agency Agreement
which specifically provided that all proceedings in such arbitration
shall be held in Pune, Maharashtra and not elsewhere. Both the
parties were thus ad-idem that the venue of the arbitral proceedings
which was fixed under clause 8.3 of the Selling Agency Agreement in
Pune was changed to Mumbai. There was neither any suggestion by
the Indian Merchants’ Chamber to modify any other sub-clause of
clause 8 of the Selling Agency Agreement nor the parties entered into
any other writing thereof amending other sub-clause of clause 8 and
more particularly clause 8.6. I am thus not inclined to accept the
submission of the learned counsel for the petitioner that the parties
had changed the seat / place of arbitration from Pune to Mumbai and
thus this Court had supervisory jurisdiction to entertain, try and
dispose of the arbitral proceedings conducted at Mumbai. The
petitioner could not produce any other agreement before this Court in
support of the contention that clause 8.6 of the Selling Agency
Agreement was amended by the parties.

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26. Insofar as the judgment of the Division Bench of this Court
in case of Vachaspati Sharma (supra) relied upon by the learned
counsel for the petitioner is concerned, the Division Bench in the said
judgment has held that exclusive jurisdiction must be strictly
construed. A clause of such a nature at the highest can apply where
two or more Courts have jurisdiction or subject matter of the suit in
which case it is open for the parties to confer exclusive jurisdiction on
any one of Courts. The Division Bench thereafter, interpreted clause
34 of the agreement in that matter and held that the said clause did
not apply to the arbitration petition under section 34 for setting aside
the arbitral award. In my view, the judgment of the Division Bench of
this Court in the case of Vachaspati Sharma (supra) would not assist
the case of the petitioner but assist the case of the respondent.

27. Admittedly in this case, it is not the case of the petitioner
that the entire cause of action had arisen at Mumbai. The petitioner
has also not disputed that part of cause of action had arisen at Pune.
Since two Courts had concurrent jurisdiction to entertain, try and
dispose of the arbitration proceedings, parties by consent can confer
the jurisdiction on one of such two Courts which in this case the
parties agreed to confer jurisdiction in Courts in Pune.

28. A perusal of the correspondence referred to aforesaid and
the award rendered by the learned arbitrator clearly indicates that the
parties in this case had decided to change the venue from Pune to
Mumbai and the same could not be considered as the seat or place
of arbitration. Since the parties had agreed to change the venue from
Pune to Mumbai except clause 8.3 of the Selling Agency Agreement,
there was no other change in the provisions of the said agreement
conferring jurisdiction on Courts at Mumbai. This Court has
considered this aspect in detail in the judgment of this Court in case
of Chandrakant P. Sanghvi Ors. (supra) delivered on 22nd
December, 2015 which, in my view applies to the facts of this case.

29. Insofar as the judgment of this Court in case of Konkola
Copper Mines (PLC) (supra) relied upon by the learned counsel for
the petitioner is concerned. A perusal of the said judgment indicates
that the parties had agreed in the arbitration agreement that the place
of arbitration would be in Mumbai, whereas in this case the parties
have not agreed that the place of arbitration shall be at Mumbai, but
had agreed that the venue of arbitration was shifted from Pune to
Mumbai. The judgment of the Division Bench of this Court in case of
Konkola Copper Mines (PLC) (supra) in my view, does not apply
to the facts of this case and would not assist the case of the
petitioner.

30. Insofar as the judgment of the Supreme Court in case of
Bharat Aluminium Company (supra) relied upon by the petitioner is
concerned, the Supreme Court in case of Harmony Innovation
Shipping Limited (supra) after adverting to the judgment in case of
Bhatia International vs. Bulk Trading S.A. (2002) 4 SCC 105 and
the judgment of the Supreme Court in case of Bharat Aluminium
Company (supra) has held that the principles laid down by the
Supreme Court in case of Bharat Aluminium Company (supra)
applied with prospective effect and not retrospective effect.

31. A perusal of the record further indicates that the petitioner
had not controverted the contents of the letter dated 7th July, 2014
addressed by the respondent to the Indian Merchant’s Chamber that
the parties had given a consent to change the venue from Pune to
Mumbai, as the same was convenient to both the parties and
accordingly the provision of paragraph 8.3 of the Selling Agency
Agreement dated 22nd January, 2010 in regard to the venue was
recorded as null and void. The said letter addressed by the
respondent in my view was in consonance with the suggestion made
by the Indian Merchant’s Chamber. Both the parties had accordingly
accepted the said suggestion made by the Indian Merchant’s
Chamber and had changed the venue from Pune to Mumbai. This
fact is also clear from the arbitral award made by the learned
arbitrator and more particularly in paragraph 1 recording
communication received by the Indian Merchant’s Chamber from the
parties that notwithstanding a provision in the arbitration clause to the
effect that the venue of arbitration shall be Pune, the parties had
agreed to Mumbai being the venue.

32. A perusal of this arbitration petition filed by the petitioner
and more particularly paragraph 17 clearly indicates that it is the case
of the petitioner itself that the venue of the arbitral proceedings was
Mumbai. In the entire petition, the petitioner has not challenged the
award on the ground that the learned arbitrator had wrongly recorded
that the parties had communicated to the office of the Indian
Merchant’s Chamber that notwithstanding a provision in the
arbitration clause to the effect that the venue of arbitration shall be
Pune, the parties had agreed to Mumbai being the venue. In my view,
the petitioner therefore, cannot be allowed to urge now that what was
agreed between the parties in the correspondence exchanged
between the parties inter-se and with the Indian Merchant’s Chamber
that the suit / place of arbitration was changed from Pune to Mumbai
and not the venue of arbitration from Pune to Mumbai. In my view,
this submission of the petitioner is contrary to the agreement arrived
at between the parties by correspondence for change of venue from
Pune to Mumbai and also contrary to their own submission made in
paragraph 17 of the arbitration petition. The submission of the
learned counsel for the petitioner is thus devoid of merits and is
accordingly rejected. In my view, this Court has thus no territorial
jurisdiction to entertain, try and dispose of the present arbitration
petition. In my view, the only appropriate Court in Pune will have
jurisdiction to entertain, try and dispose of the present petition.

33. I therefore, pass the following order :-
a). Arbitration Petition No.1457 of 2015 is dismissed as
without jurisdiction. No order as to costs.

(R.D. DHANUKA, J.)

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