BIG CHARTER PRIVATE LIMITED v. EZEN AVIATION PTY. LTD. & ORS.

Court: High Court of Delhi

Bench: HON'BLE MR. JUSTICE C.HARI SHANKAR

Judgment date: 2020-10-23

Case summary

High Court of Delhi judgment dated 2020-10-23. BIG CHARTER PRIVATE LIMITED v. EZEN AVIATION PTY. LTD. & ORS. Read the judgment and case details on LawSphereX.

Judgment text

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI th Reserved on : 27 May,2020 rd Pronounced on: 23 October,2020 + O. M. P. (I) (COMM. ) 112/2020 BIG CHARTER PRIVATE LIMITED ..... Petitioner Through Mr. Gautaum Narayan, Ms. Asmita Singh and Mr. Aditya Nair, Advs. versus EZEN AVIATION PTY. LTD. & ORS. ..... Respondents Through Mr. Arvind Kamath, Sr. Adv. With Mr. Pashant Popat, Mr. Nikit Bala, Ms. Karishma Naghnoor, Mr. Pai Amit, Mr. Rahat Bansal and Mr. Souvik Majumdar, Advs. CORAM: HON'BLE MR. JUSTICE C. HARI SHANKAR J U D G E M E N T % 1. This petition, preferred under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the 1996 Act”) seeks certain pre-arbitration interim reliefs. 2. The consent, of learned Counsel appearing for the petitioner as well as the respondent, ad idem, to final disposal of the present OMP, on the basis of arguments advanced and written submissions filed, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P.

(I) (COMM. ) 112/2020 Page 1 of 117 Signing Date:24. 10. 2020 18:07:19 without any further pleadings being brought on record, stands specifically noted. Accordingly, this judgement disposes of the OMP. Factual Backdrop 3. The petitioner provides scheduled air operator services, under the name “Flybig”. The respondents are engaged in the business and lease of aircrafts, and other associated activities. Respondent No. 1 is one of the group companies of Respondent No 2. Respondent No. 2 was running his business, in India, through Respondent No. 1. 4. The aircraft, forming subject matter of the present controversy – which was an ATR 72-500, bearing Manufacturer Serial Number (MSN) 688 – was owned by Respondent No 1. 5. The petitioner proposed to lease the aforesaid aircraft (hereinafter referred to as “the aircraft”) from Respondent No 1.

The following communications ensued, between the petitioner and the respondent, prior to issuance of the Letter of Intent: th (i) On 24 July, 2019, the respondent wrote, to the petitioner, acknowledging the desire, of the petitioner, to lease st the MSN 688 aircraft, with effect from 1 October, 2019, for a period of 3 years. Lease rent was fixed at ₹ 37 lakhs per month, plus 5% GST, for the first 18 months, and ₹ 40 lakhs per month, plus 5% GST for the remaining 18 months. Additionally, the letter noted that the petitioner would have to Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 2 of 117 Signing Date:24. 10. 2020 18:07:19 pay Maintenance Reserves, to the respondent, @ US $400 per flying cycle/flying hour.

th (ii) On 19 August, 2019, the respondent wrote, to the petitioner, requiring the petitioner to communicate with the Directorate General of Civil Aviation (DGCA) and enquire regarding the progress of the application, submitted for import of the aforesaid aircraft. th (iii) The petitioner responded, on the same day, i. e. 19 August, 2019, stating that its main concern was regarding the issuance of a No Objection Certificate (NOC) by the DGCA. (iv) To this, the respondent replied, again on the very same th day, i. e. 19 August, 2019, stating that the aircraft would be issued with a valid Certificate of Airworthiness (CoA). nd 6. On 2 September, 2019, a Letter of Intent (hereinafter referred to as “LOI”) was issued by the respondent to the petitioner, containing, inter alia, the following covenants: (i) The petitioner would accept the aircraft with a valid CoA issued by the Isle of Man Aircraft Registry (IOMAR).

(ii) It was the petitioner’s responsibility to ensure that the aircraft was registered with the DGCA, showing the respondent as the owner/lessor, and the petitioner as its operator/lessee. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 3 of 117 Signing Date:24. 10. 2020 18:07:19 (iii) The term of lease was to commence with the delivery of the aircraft, and was to continue for 36 months. (iv) The schedule of payment of lease rent was set out, along with the covenant that the petitioner would have to pay applicable Maintenance Reserves, as per the aircraft’s monthly utilisation, for every flight hours/flight cycle of usage. The LOI also set out the deposits that were required to be made by the petitioner, and the stages at which they were required to be made.

(v) Failure, on the part of the petitioner, to lease the aircraft, after execution of the Lease Agreement (to be executed subsequently), would entitle the petitioner to refund of the Security Deposit, less three months’ rent. If, however, failure to lease the aircraft was owing to any fault of the respondent, or owing to regulatory issues, the petitioner would be entitled to a complete refund of Security Deposit. (vi) The aircraft was required to be maintained by the petitioner, at all times, as airworthy, in accordance with all applicable legislation/Airworthiness Directives and mandatory guidelines issued by the DGCA or by any other governmental authority. (vii) The Final Lease Agreement, as and when executed between the petitioner and the respondent, would supersede the LOI. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 4 of 117 Signing Date:24. 10. 2020 18:07:19 7. Clause 20 of the LOI stipulated as under: “20.

Governing Law: This Proposal and the underlying documents for the contemplated transaction shall be governed by the laws of India without regard to conflict of laws principles. Lessee and Lessor agree to submit to the exclusive jurisdiction of the courts located in Singapore with regard to any claim of matter arising under or in connection with this Proposal or the Lease Documentation. The English-language shall be used in all documents and proceedings. ” th 8. On 7 September, 2019, the respondent wrote to the petitioner, stating that it was confident of working with the DGCA to get the CoA issued for the aircraft. th 9. On 12 November, 2019, a Lease Deed was executed, between the petitioner and the respondent. According to the petitioner, this Lease Deed was superseded by a subsequent Lease Deed, executed on th 9 December, 2019.

The respondent, however, refutes the submission, by pointing out that the Schedules to the Lease Deed th dated 9 December, 2019, were not signed by the parties. For the purposes of this judgement, it would hardly matter whether one refers to the clauses of the first, or the second Lease Deed. Having said that, I am inclined to agree with the submission, of Mr. Gautam Narayan, th learned Counsel for the petitioner, that the Lease Deed dated 9 th December, 2019 did, in fact, supersede the Lease Deed dated 12 November, 2019, and that the absence of signatures on the schedules to the later Lease Deed cannot be regarded as fatal, especially as they Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 5 of 117 Signing Date:24. 10. 2020 18:07:19 th are identical to the Schedules of the Lease Deed dated 12 November, 2019, which were duly signed by both the parties. rd 10.

On 23 November, 2019, the Certificate of Registration (COR) of the aircraft, as issued by the IOMAR, was supplied, by the respondent to the petitioner. st 11. On 1 December, 2019, the specifications of the aircraft were forwarded, by the respondent to the petitioner. The petitioner rd responded, on 3 December 2019, pointing out that the aircraft did not have a Cockpit Door Surveillance System (CDSS) installed, and that this would obstruct obtaining of approval from the DGCA. It was, therefore, requested that CDSS be installed on the aircraft. The th respondent replied, on 6 December, 2019, undertaking to deliver the aircraft as per the European Aviation Standards Authority (EASA) standards, with a valid COA. 12. NOC, for import of the aircraft, was granted, by the DGCA, on th 9 December, 2019.

It was, however, stipulated that the aircraft could not be used for commercial operations unless it was compliant with the requirements of the Civil Aviation Requirements (CAR) issued by the DGCA. th 13. On 9 December, 2019, a second Lease Agreement (which, according to the petitioner, superseded the Lease Agreement dated th 12 November, 2019 supra) was executed between the petitioner and respondent. The petition avers that, though the Schedules to the said second Lease Agreement, could not be signed by both parties, the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 6 of 117 Signing Date:24. 10. 2020 18:07:19 th parties were ad idem that the Schedules to the Lease Deed dated 12 November, 2019 were to be treated as a part of the Lease Deed dated th 9 December, 2019. The Lease Deed stipulated that the aircraft th would be delivered, for a period of 36 months commencing 15 December, 2019. Clause 4.

1 required the petitioner to ensure registration of the aircraft with the DGCA, with the respondent shown as owner/lessor and the petitioner as operator/lessee, for which the respondent undertook to provide all necessary documentation. Possession of the aircraft was to be with the petitioner, whereas right, title and interest in the aircraft was, as per Clause 5 of the Lease Deed, to vest with the respondent. Clause 6 required the respondent to deliver, and the petitioner to accept, the aircraft, with a current and valid COR, issued by the IOMAR. Acceptance of the aircraft was, as per Clause 6. 2, to be by way of execution of a Delivery Acceptance Certificate, in accordance with Schedule II to the Lease Deed. Clause 7 provided for the modes of termination of the Lease Deed, whereas Clause 8 stipulated the rent payable, and the date from which it would be payable. 14.

The petition avers that the petitioner had paid, to the respondent, US $ 336,000 towards Security Deposit, Lease Rent, till th 15 March, 2020, totalling US $ 112,000, and US $ 26,000 towards the CDSS Kit. th 15. On 4 March, 2020, the petitioner wrote to the respondent, requiring for confirmation of the final date, by which the aircraft th would be delivered. The respondent replied, on 5 March, 2020, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 7 of 117 Signing Date:24. 10. 2020 18:07:19 alleging that delay in delivery of the aircraft was because of the delay, on the part of the petitioner, in finalising the painting, design, etc. , for th the livery of the aircraft. The petitioner responded, on 5 March, 2020 itself, stating that painting was the responsibility of the respondent, and pointing out that the painting vendor had never interacted with the petitioner. Certain defects, which remained in the aircraft, were also pointed out.

The petitioner, additionally, submitted that it had paid for the CDSS, and sought the status of the installation thereof. th 16. On 9 March, 2020, the respondent wrote to the petitioner, stating that, as the petitioner had “unilaterally terminated” the Lease Agreement, till further communication from the respondent, no modification/work on the aircraft was to be carried out by the petitioner. Chagrined at the said communication, the petitioner th responded, on the same day, i. e. 9 March, 2020, categorically denying any termination, of the Lease Agreement, by it. Rather, it was submitted, the respondent had reneged on its commitments under the Lease Agreement, despite timely payments having been made by the petitioner.

The request, for handing over, of the aircraft, with all necessary documents, was reiterated, emphasising, additionally, the fact that CDSS was required to be installed in the aircraft, and that the respondent was also required to provide necessary support towards acquiring of the COR and COA from the DGCA. The petitioner put the respondent on notice, further, that, if the DGCA were to reject the request for issuance of COA because of the age of the aircraft (as the policy of the DGCA did not allow import and utilisation, for carriage Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 8 of 117 Signing Date:24. 10. 2020 18:07:19 of passengers, of an aircraft which was over 18 years of age), the respondent would be required to return, to the petitioner, all amounts paid by it, along with the cost for ferrying the aircraft. The aircraft was, it may be pointed out, manufactured in June 2002. 17.

Further communications, largely to the same extent, followed, th nd from the petitioner to the respondent, on 11 March 2020 and 22 March, 2020. In the latter communication, the petitioner pointed out that, during oral discussions, the respondent had made it clear that it had no intention to deliver the aircraft to the petitioner. In the circumstances, the petitioner called on the respondent to refund, to the petitioner, an amount of ₹ 5,31,000/–, stated to be due from the st respondent. This was followed by a reminder, on 1 April, 2020. nd 18. On 2 April, 2020, the respondent addressed a detailed communication, to the petitioner, asserting that the aircraft had been th ferried to Hyderabad on 29 November, 2019, and was ready for st inspection and acceptance by the petitioner on 1 December, 2019, as per the terms of the Lease Agreement. Obtaining COR and COA, it was further asserted, was the responsibility of the petitioner, and not of the respondent.

The communication alleged default, on the part of the petitioner, in payment of Security Deposit and Advance Lease Rent, as per the terms of the Lease Agreement. The delay in completion of the work, as desired by the petitioner, on the aircraft, it was further alleged, continued owing to the internal decision-making process of the petitioner. This delay, according to the communication, continued till March, 2020. The petitioner, it was alleged, became Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 9 of 117 Signing Date:24. 10. 2020 18:07:19 st liable to pay Maintenance Reserves, to the respondent, w. e. f. 1 th February, 2020. Thereafter, vide email dated 5 March, 2020, it was alleged that the petitioner had unilaterally terminated the Lease Agreement, thereby obviating the necessity of any termination notice having to be issued by the respondent.

In these circumstances, it was alleged that the petitioner was liable to pay ₹ 19,20,460/–, to the respondent. th 19. Vide a reply email dated 10 April, 2020, the petitioner denied the assertion, of the respondent, that the Lease Deed had been terminated by the petitioner. On the other hand, it was alleged, the respondent had failed to perform its obligations under the Lease Deed, which included delivery of the aircraft with a valid CoA. The demand, for refund of US $ 5,30,000 was reiterated. 20. No response was received, from Respondent No. 1 to the said email, resulting in a Notice of Dispute, under Clause 23. 2 of the Lease Deed, being issued by the petitioner, calling on Respondent No. 1 to resolve the dispute by negotiation, being issued by the petitioner. The th respondent replied, vide letter dated 29 April, 2020, levying various allegations against the petitioner.

The petitioner emphasises the fact that, even in this communication, the respondent did not seek to submit that it had, in fact, delivered the aircraft with requisite documentation. 21. Further communications, from the petitioner to the respondent th th on 12 May, 2020, and from Respondent No. 1 on 20 May, 2020, to the petitioner; the petitioner, however, avers that the conduct of the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 10 of 117 Signing Date:24. 10. 2020 18:07:19 respondent puts paid to any chance of the dispute, between the petitioner and the respondent, being amicably settled. Asserting that there has been a clear and undeniable breach, by Respondent No. 1 of the Lease Deed, the petitioner has moved this Court, under Section 9 of the 1996 Act. 22. The invocation of Section 9 has been sought to be justified on the ground that Respondent No.

1 is located in Australia and that, therefore, if the interests of the petitioner are not secured, it would become nearly impossible to enforce any award, even if the petitioner were to succeed in arbitral proceedings. Additionally, it is asserted that the website of Respondent No. 1 indicates that an ATR 72-500 aircraft, similar to the aircraft in issue, has been advertised for sale. 23. The petitioner asserts that the contention, of Respondent No. 1, that the petitioner had terminated the Lease Deed, is not borne out by the record, and is being used as a ploy to cover the breach of its contractual obligations and defend the withholding of amounts, paid by the petitioner, and which are, allegedly, refundable to it. The total amount of US $ 530,000, it is submitted, has become payable to the petitioner by the respondent. The petitioner asserts that it has a good prima facie case and that the balance of convenience and special equities are overwhelmingly in its favour.

Denial of interim relief, as sought in the petition, it is further asserted, would result in irreparable injury to the petitioner. 24. The petition prays for Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 11 of 117 Signing Date:24. 10. 2020 18:07:19 (i) a restraint, against the respondents creating any third party interest/right/title on the aircraft, or from selling, transferring or encumbering the aircraft in any manner, (ii) a restraint, against the respondents, from taking the aircraft out of India, and (iii) a direction, to the respondents, to deposit US $ 530,000 (equivalent to ₹ 4,01,05,736/–) in an escrow account. 25. I have heard Mr. Gautam Narayan, learned Counsel for the petitioner, and Mr. Arvind Kamath, learned Senior Counsel for the respondent, at length. Rival Submissions and Findings Re. Territorial Jurisdiction 26. A preliminary objection was raised, by Mr.

Arvind Kamath, learned Senior Counsel for the respondents, to the effect that this Court did not have the territorial jurisdiction to deal with this petition. As the objection goes to the root of the competence, of this Court, to entertain the petition on merits, it is necessary to examine this objection, before proceeding further, if necessary. 27. Clauses 22 and sub-clauses 23. 1 to 23. 4 of the Lease Deed, which are relevant, may be reproduced as under: “22. GOVERNING LAW AND JURISDICTION Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 12 of 117 Signing Date:24. 10. 2020 18:07:19 22. 1 This Deed shall be governed by and construed in accordance with the laws of Singapore without giving effect to its choice of laws. The Parties shall submit to the exclusive jurisdiction of the courts of Singapore. 23. DISPUTE RESOLUTION 23.

1 The following provisions shall apply in the event of any dispute or differences between the Parties arising out of or relating to the lease of the Aircraft and this Deed (the “Dispute”). 23. 2 A Dispute will be deemed to arise when one Party has any issue, difference, or demands action or alleges inaction, damage, injury or loss or serves on the other Party a notice stating the nature of such Dispute (“Notice of Dispute”). The Parties hereto agree that they will use all reasonable efforts to resolve between themselves, any Disputes through negotiations. 23. 3 Any Disputes and differences whatsoever arising under or in connection with this Deed (including the enforcement of the rights, duties, powers and obligations conferred under this Deed) which are not settled by the Parties through negotiations, after the period of (15) fifteen days from the service of the Notice of Dispute, shall be referred to a sole arbitrator mutually appointed by the Parties. 23.

4 The arbitration proceedings shall be in accordance with the Arbitration Rules of the Singapore International Arbitration Centre or any statutory modification or re-enactment thereof for the time being in force. All proceedings shall be conducted in English and the daily transcript of the proceedings shall be prepared in English. The seat of arbitration shall be in Singapore. ” (Emphasis supplied) 28. The contractual position that emerges, thus, is that (i) the petitioner and respondent have agreed to subject themselves to the jurisdiction of courts at Singapore, (ii) the seat of arbitration is Singapore, and (iii) the arbitration proceedings are to be in accordance Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 13 of 117 Signing Date:24. 10. 2020 18:07:19 with the Arbitration Rules of the Singapore International Arbitration Centre (SIAC). 29. Mr.

Kamath submits that, the petitioner and the respondent having agreed to submit themselves to the jurisdiction of the courts at Singapore, this Court is proscribed from entertaining the present matter. 30. In this context, it is also appropriate to reproduce Section 2(2) and 20 of the 1996 Act, thus: “(2) This Part shall apply where the place of arbitration is in India: Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.

” “International commercial arbitration” is defined, in clause (f) of Section 2 of the 1996 Act, thus: “(f) “international commercial arbitration” means an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least 1 of the parties is – (i) an individual who is a national of, or habitually resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other than India; or Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 14 of 117 Signing Date:24. 10. 2020 18:07:19 (iii) an association or a body of individuals whose central management and control is exercised in any country other than India; or (iv) the Government of a foreign country;” 31.

That the arbitration, to which the rival claims between the petitioner and the respondent may be subjected, conforms to the definition of “international commercial arbitration”, is not in dispute. 32. The proviso to Section 2(2) is categorical and unequivocal. It provides that, irrespective of the location of the place of arbitration Part I of the 1996 Act – which includes Section 9 – would apply to all international commercial arbitrations, subject to an agreement to the contrary. In the present case, Clause 23. 4 of the Lease Agreement fixes both the place, as well as the seat, of arbitration, as Singapore. The arbitration being an international commercial arbitration, the proviso to Section 2(2) would make Part I of the 1996 Act applicable, subject to agreement to the contrary. All that is to be seen is, therefore, whether, in the present case, there is any agreement, between the parties, which renders the proviso to Section 2(2) inapplicable. 33. Mr.

Kamath submits that the second sentence, in Clause 22. 1 of the Lease Agreement, constitutes such an “agreement to the contrary”. 34. Mr. Kamath submits, further, that no part of the cause of action th arose in Delhi. The Lease Deed dated 9 December, 2019, he points out, did not contain any Schedules and could not, therefore, be Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 15 of 117 Signing Date:24. 10. 2020 18:07:19 regarded as a Lease Deed at all as, without the Schedules, it would be th meaningless and incomplete. The Lease Deed dated 12 November, 2019 was executed at Vietnam. Mr. Kamath submits that the contention, of the petitioner, that there was consensus, ad idem, between the petitioner and the respondent, regarding the Schedules to th the Lease Deed dated 12 November, 2019 having to be read as part th of the Lease Deed dated 9 December, 2019, he submits, was a matter of evidence. Besides, points out Mr.

Kamath, the petitioner and Respondent No. 2 were located in Mumbai, and Respondent No. 1 was located in Australia. 35. Expanding on his initial submission that Clause 22. 1 of the Lease Agreement resulted in ouster of jurisdiction of this Court, to entertain the present petition, Mr. Kamath emphasises the omission of the word “express”, in the proviso to Section 2(2) of the 1996 Act, denoting a departure by the legislature, to that extent, from the recommendation of the Law Commission. The ouster of jurisdiction, as contemplated by the proviso to Section 2(2) does not, therefore, he submits, need to be “express”; it can also be implied. 36. Mr. Kamath also submits that the petitioner is not without a remedy in Singapore, and invites attention, in this context, to Section 12A of the International Arbitration Act, which empowers the Court to order interim measures. 37. In response to the objection, of Mr.

Kamath, to the territorial jurisdiction of this Court to adjudicate on the present petition, Mr. Gautam Narayan advanced the following submissions: Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 16 of 117 Signing Date:24. 10. 2020 18:07:19 (i) The aircraft was located at Hyderabad. It was required to be registered with the DGCA, and operated in accordance with the Aircraft Act, 1934, Aircraft Rules, 1937 and the CAR issued by the DGCA. The most efficacious remedy, available to the petitioner was, therefore, by means of recourse to the jurisdiction of this Court under Section 9 of the 1996 Act. (ii) The proviso to Section 2(2) conferred Section 9 jurisdiction on this Court, even in respect of foreign seated arbitrations. This proviso was introduced, pursuant to the th recommendations of the 246 Report of the Law Commission, intended to prevent dissipation of assets located in India. Mr.

Gautam Narayan took me through the relevant passages of the said Report. (iii) Meaningful provisional relief, such as attachment of the defendant’s properties, could be granted only by the Court within whose territorial jurisdiction the properties were located, and not by a foreign Court, which may have jurisdiction over the situs of the arbitral proceedings. For this purpose, Mr. Gautam Narayan referred to certain passages from “International Commercial Arbitration” by Gary Born. (iv) Articles 9 and 17J of the UNCITRAL Model also vested jurisdiction, in Courts outside the seat of arbitration, to grant interim relief. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 17 of 117 Signing Date:24. 10. 2020 18:07:19 (v) Apropos Clause 22. 1 of the Lease Agreement, Mr.

Gautam Narayan submitted that the exclusive jurisdiction, vested with Courts at Singapore, by the said Clause, was with respect to the application of the governing law of the Lease Deed and adjudication of disputes pertaining to substantive rights and obligations of the parties under the Lease Deed, or proceedings ancillary thereto. In his submission, the clause had no application to grant of interim relief even before the constitution of the arbitral tribunal. (vi) The jurisdiction of the Court, in such a case, would have to be decided on the basis of the curial law governing the conduct of the arbitral proceedings which, according to Clause 23. 4 of the Lease Agreement, was the SIAC Rules, 2016. Rule 30. 3 of the SIAC Rules permitted parties to approach any judicial authority for interim relief, before the constitution of the Tribunal, and not merely judicial authorities located in Singapore.

(vii) Singaporean law permitted interim measures to be granted by Courts only after commencement of the arbitration. For this purpose, Mr. Gautam Narayan drew my attention to Section 12A of the International Arbitration Act. Rule 3. 1 of the SIAC Rules was also cited, in this context, which provides that an arbitration would commence only after service of a notice of arbitration. Accepting the contention of the respondent would, therefore, in Mr. Narayan’s submission result in rendering the petitioner remediless, in that it would not Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 18 of 117 Signing Date:24. 10. 2020 18:07:19 be able to seek, or obtain, a pre-arbitration injunction from any forum. (viii) Courts in Singapore could not provide any efficacious alternative remedy. Mr. Gautam Narayan relied, in this context, on the judgement of the Singapore Court of Appeal in Maldives 1 Airport Co. Ltd v.

GMR Male International Airport Pte Ltd 2 and SSL International plc v. TTK LIG Ltd , which denied interim relief in cases in which an unacceptable degree of supervision in a foreign land would be involved. (ix) Courts in Singapore exercised the jurisdiction, to secure assets located abroad only if they had in personam jurisdiction over the parties, i. e. where the parties had presented themselves before Courts in Singapore. For this purpose, Mr. Gautam Narayan relied on Five Ocean Corporation v. Cingler Ship Pte 3 Ltd . As such, without first approaching the SIAC, it was not possible for the petitioner to petition the Courts at Singapore. (x) Section 12A of the International Arbitration Act did not apply at the pre-arbitration stage. Mr. Gautam Narayan relies, 1 for this purpose, on the decision in Maldives Airport Co. Ltd .

He also placed reliance on the judgement, of a Division Bench 1 (2013) SGCA 16 (2011) EWCA Civ 1170 (2015) SGHC 311 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 19 of 117 Signing Date:24. 10. 2020 18:07:19 of the High Court of Andhra Pradesh in National Aluminium 4 Co Ltd v. Gerald Metals . Mr. Gautam Narayan also placed reliance on the judgements of this Court in Raffles Design International India Pvt Ltd v. Educomp 5 Professional Education Ltd and Naval Gent Maritime Ltd v. 6 Shivnath Rai Harnarain (I) Ltd and the judgement of the High Court of Bombay in Heligo Charters Pvt Ltd v. Aircon Feibars 7 FZE . 38. Apropos the submission, of Mr. Kamath, that the Lease Deed, th dated 9 December, 2019, was not valid, Mr. Gautam Narayan draws attention to Clause 32 thereof, which terminated all prior agreements or understandings, pertaining to matters covered by the said Lease Deed, except with regard to any accrued rights thereunder.

Analysis 39. In the first place, it is necessary to emphasise that the issue to be addressed does not really concern the ease, or difficulty, in prosecuting the present claim in Singapore though, to a limited extent, this aspect may have to be factored into consideration. Essentially, though, we are not concerned, here, with the availability of an alternative remedy. What is pleaded, by Mr. Kamath, and needs to be addressed, is the competence of this Court to adjudicate on the present 4 (2004) 2 Arb LR 382 (DB) 5 234 (2 016) DLT 349 2000 (54) DRJ 639 (2018) 5 AIR Bom R 317 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 20 of 117 Signing Date:24. 10. 2020 18:07:19 petition. The respondent contends that this Court does not possess the jurisdiction to hear this matter and is, essentially, therefore, coram non judice.

Jurisdiction is always a matter of competence, in that want of jurisdiction renders a judicial authority incompetent to adjudicate on a claim. A plea of alternate remedy, on the other hand, involves an element of discretion. Alternate remedy is never a bar to adjudication of the claim, especially in original civil jurisdiction. If this Court does not have jurisdiction to entertain this petition, it cannot assume such jurisdiction merely because the petitioner has no other remedy available with it. For this reason, the plea, of Mr. Gautam Narayan, that, were this Court to decline to entertain the present petition, the petitioner would be rendered remediless, insofar as its prayer for pre-arbitral interim relief is concerned, has necessarily to cede place to the fundamental question of whether this Court possesses, or does not possess, jurisdiction to deal with the matter. 40. Having said that, the submissions of Mr.

Gautam Narayan, on the possibility of obtaining interim relief, from a Singaporean court, do assume some relevance, as the discussion hereinafter would reveal. 41. The fundamental issue to be addressed is, therefore, whether this Court has the jurisdiction to hear and decide the present case, and not whether the petitioner has any other alternate, or efficacious, remedy available with it. The plea of alternate remedy predicates the existence of jurisdiction and, consequently, the existence of a remedy before the Court which has been petitioned. There can be no question Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 21 of 117 Signing Date:24. 10. 2020 18:07:19 of an alternate remedy, if the remedy that has been invoked itself does not exist, in the first place. 42. I do not deem it necessary, however, to refer to the commentary on “International Commercial Arbitration” by Gary Born, or to Articles 19 and 17J of the UNCITRAL Model.

Arbitration law, in India, is codified, in the form of the 1996 Act. Jurisdiction, in a Court, to adjudicate a petition under Section 9 of the 1996 Act, must, therefore, emanate from the 1996 Act itself. Any reference to the UNCITRAL Model, or to any textual commentaries may, if at all, be justified only if there is any ambiguity in any of the provisions of the 1996 Act, which requires resolution. 43. The provision, in the 1996 Act, which most fundamentally impacts the issue at hand is, unquestionably, Section 2(2). One has, however, also to take note of the definition of “Court”, as contained in clause (e) of Section 2(1), as the 1996 Act empowers “the Court” to pass orders of interim measure of protection.

Section 2(1)(e) defines “Court” in the following words: “(e) “Court” means – (i) in the case of an arbitration other than an international commercial arbitration, the principal Civil Court of original jurisdiction in the district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration is the same had been the subject-matter of the suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes; Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 22 of 117 Signing Date:24. 10.

2020 18:07:19 (ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original 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, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;” (Emphasis supplied) 44. The issue of the situs of jurisdiction, concurrent jurisdiction, and exclusion of jurisdiction, in Courts, to entertain petitions under Sections 9, 11, 34 and 36, of the 1996 Act, have been the subject matter of consideration in numerous decisions of the Supreme Court. One of the most illuminating expositions, which traces the entire precedential history on the issue is, perhaps, to be found in the Keynote speech delivered by Hon’ble Mr.

Justice Rohinton Fali Nariman, at the GAR Live India 2020 seminar, which, fortunately, is available in the virtual public domain, and makes for rewarding viewing, by any student of law, and for compulsory viewing by every student of arbitration law. The disciplinary protocols of judgement writing, however, inhibit me from relying on the said address, while penning this decision. Turning, therefore, to the black-and-white precedents, of the Supreme Court, on the issue, the entire law may, in my view, be comprehensively understood by the study of seven judgements, namely (in chronological order) Bharat Aluminium Co. 8 v. Kaiser Aluminium Technical Services Inc. (hereinafter referred to as “BALCO”), Swastik Gases Pvt Ltd v. Indian Oil Corporation (2012) 9 SCC 552 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 23 of 117 Signing Date:24. 10. 2020 18:07:19 9 Ltd , B. E. Siomese Von Staraburg Niedenthal v.

Chhatisgarh 10 Investment Ltd , Indus Mobile Distribution Pvt Ltd v. Datawind 11 Innovations Pvt Ltd , Brahmani River Pellets Ltd. v. Kamachi 12 13 Industries Ltd , BGS SGS Soma JV v. NHPC Ltd and Mankastu 14 Impex Pvt. Ltd. v. Airvisual Ltd . th Precedential Analysis and the 246 Report of the Law Commission of India 8 45. BALCO : 8 45. 1 BALCO , rendered by a Constitution Bench, emanated from Section 2(2) of the 1996 Act, prior to the insertion, in the said sub- Rule, of the proviso thereto. Section 2(2), as it stood at that time, therefore, made the provisions of Part I of the 1996 Act applicable “where the place of arbitration is in India”. There was a difference, in the views of the Hon’ble Judges constituting a two-Judge Bench, resulting in the appeals, before it, being directed to be placed before 15 the Hon’ble Chief Justice, for being listed before another Bench .

The appeal was placed before a 3-Judge bench which, vide its order dated st 16 1 November, 2011 , directed that the matter be placed before a Constitution Bench. Thus, came to be delivered the judgement in 8 BALCO . 9 (2013) 9 SCC 32 10 (2015) 12 SCC 225 11 (2017) 7 SCC 678 12 2019 SCC OnLine SC 929 13 (2020) 4 SCC 234 14 2020 SCC OnLine SC 301 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. , (2012) 9 SCC 649 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. , (2012) 9 SCC 648 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 24 of 117 Signing Date:24. 10. 2020 18:07:19 8 45. 2 The facts, in BALCO , are only briefly noted in the judgement, as the issue referred to the Constitution Bench was purely legal. An nd agreement, dated 22 April, 1993, was executed, between BALCO and Kaiser Aluminium Technical Services Inc. , for installation of a computer-based system for shelter modernisation.

The agreement contained the following clauses: “17. 1 Any dispute or claim arising out of or relating to this Agreement shall be in the first instance, endeavour to be settled amicably by negotiation between the parties hereto and failing which the same will be settled by arbitration pursuant to the English Arbitration Law and subsequent amendments thereto. 17. 2 The arbitration proceedings shall be carried out by two arbitrators, one appointed by BALCO and one by KATSI chosen freely and without any bias. The Court of Arbitration shall be held wholly in London, England and shall use the English language and the proceeding. The findings and award of the Court of Arbitration shall be final and binding upon the parties. … ***** 22. Governing Law – This agreement will be governed by the prevailing law of India and in case of Arbitration, the English law shall apply. ” The above process, held the Supreme Court, made it apparent that the governing law, of the agreement, i. e.

the substantive law, was the prevailing law of India, but the lex fori for the arbitration would be English law. 45. 3 Disputes arose, between the parties, which were referred to arbitration, held in England. The Arbitral Tribunal rendered two Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 25 of 117 Signing Date:24. 10. 2020 18:07:19 th th awards, dated 10 and 12 November, 2002. Applications, for setting aside the award, were preferred, by BALCO, under Section 34 of the 1996 Act, before the learned District Judge, Bilaspur. The learned th District Judge dismissed the applications vide order dated 20 July, 2004. BALCO challenged the dismissal by way of appeals before the High Court of Chhattisgarh. The appeals were also dismissed, by a th Division Bench of the High Court, vide order dated 10 August, 2005, holding that they were not maintainable. BALCO appealed to the Supreme Court. 45.

4 Tagged, with the BALCO appeal, was the appeal in Bharti 17 Shipyard Ltd v. Ferrostaal AG which, however, dealt with an application under Section 9 of the 1996 Act. The facts, in this case, also deserve to be noticed. Bharti Shipyard Ltd. (hereinafter referred to as “BSL”) entered into to shipbuilding contracts with Ferrostaal AG (hereinafter referred to as “FAG”), whereunder BSL was to construct vessels and deliver them to FAG. BSL and FAG agreed to settlement of the dispute, by arbitration, under the Rules of the London Maritime Arbitrators Association (LMAA), in London. Two requests, for arbitration of the disputes which arose between them, were submitted by FAG, in accordance with the rules of the LMAA. 45. 5 During the pendency thereof, FAG filed applications, under Section 9 of the 1996 Act, seeking injunction against encashment of bank guarantees, issued under the contracts.

The learned District Judge, Mangalore, granted ex parte ad interim injunction, against SLP (C) 27824/2011 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 26 of 117 Signing Date:24. 10. 2020 18:07:19 encashment of the bank guarantee and, later, vide judgement dated th 14 January, 2011, allowed the application under Section 9. The judgement of the learned District Judge was, however, set aside by the th High Court, vide judgement dated 9 September, 2011. BSL appealed to the Supreme Court. 45. 6 Among the issues, framed by the Supreme Court as arising for its consideration, were the following: “10. 1 What is meant by the place of arbitration as found in Sections 2(2) and 20 of the Arbitration Act, 1996? ***** 10. 3 Does Section 2(2) bar the application of Part I of the Arbitration Act, 1996 (“Part I” for brevity) to arbitrations where the place is outside India? ” 45.

7 The Supreme Court overruled, at the very outset, its earlier 18 decisions in Bhatia International v. Bulk Trading S. A. and Venture 19 Global Engineering v. Satyam Computer Services Ltd and, thereafter, proceeded to address the issues framed by it, thus: (i) The debate, before the Supreme Court, revolved around the absence of the word “only” in Section 2(2) of the 1996 Act. The provision stated that Part I “shall apply where the place of arbitration is in India”, and not that Part I “shall apply only where the place of arbitration is in India”. As the Supreme Court paraphrased the controversy (in para 63 of the report), (2002) 4 SCC 105 (2008) 4 SCC 190 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 27 of 117 Signing Date:24. 10.

2020 18:07:19 “the crucial difference between the views expressed by the appellants on the one hand and the respondents on the other hand is as to whether the absence of the word “only” in Section 2(2) clearly signifies that Part I of the Arbitration Act, 1996 would compulsorily apply in the case of arbitrations held in India, or would it signify that the Arbitration Act, 1996 would be applicable only in cases where the arbitration takes place in 17 India. ” Bhatia International and Venture Global 18 Engineering held that Part I would apply to all arbitrations held outside India, unless the parties, by agreement, excluded the applicability of any or all of the provisions of Part I. The Constitution Bench expressed its disagreement with the said enunciation, and held (in para 67 of the report) that “a plain reading of Section 2(2) makes it clear that Part I is limited in its application to arbitrations which take place in India”.

(ii) The Supreme Court went on to hold, further, that the “seat of the arbitration” was the “centre of gravity” thereof. At the same time, it is clarified that the arbitral proceedings were not required, necessarily, to be conducted at the “seat of arbitration”, as the arbitrators were at liberty to hold meetings at different, convenient, locations. The law governing the arbitration was, however, it was held, normally the “law of the seat or place where the arbitration is held” (in para-76 of the report). The Constitution Bench went on to approve the theory, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 28 of 117 Signing Date:24. 10.

2020 18:07:19 20 postulated in Redfern and Hunter on International Arbitration , that “the concept that an arbitration is governed by the law of the place in which it is held, which is the ‘seat’ (or ‘forum’ or locus arbitri) of the arbitration, is well established in both the theory and practice of international arbitration. Reliance was also placed on the Geneva Protocol, 1923, which stated that the arbitral procedure, including the Constitution of the Arbitral Tribunal, would be governed by the will of the parties and by the law of the country in whose territory the arbitration takes place. (iii) The omission of the word “only” in Section 2(2) of the 1996 Act, it was held, did not detract from the territorial scope of the application of Part I thereof. Accordingly, it was held (in para 78 of the report) that Part I would not apply to arbitrations which did not take place in India.

To make matters clearer, the Constitution Bench went on to say, in para 79 of the report, “with the submission made by Mr. Aspi Chenoy that Section 2(2) is an express parliamentary declaration/recognition that Part I of the Arbitration Act, 1996 applies to arbitration having their place/seat in India and does not apply to arbitrations seated in foreign territories”. Yet again, in paras 80 and 81 of the report, it was held that “the provisions have to be read as limiting the applicability of Part I to arbitrations which take Blackaby, Partasides, Redfern and Hunter (Eds. ), Redfern and Hunter on International Arbitration th (5 Edn,Oxford University Press, Oxford/New York 2009). Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 29 of 117 Signing Date:24. 10. 2020 18:07:19 place in India” and “Section 2(2) merely reinforces the limits of operation of the Arbitration Act, 1996 to India”.

(iv) The Constitution Bench also went on to examine Section 2(1)(e), and the impact, thereof, on the above position. Having extracted the clause, the Supreme Court went on, in para 97 of the report, to hold that “Section 2(1)(e) being purely jurisdictional in nature can have no relevance to the question whether Part I applies to arbitrations which take place outside India”. (v) The Constitution Bench went on, thereafter, to underscore the importance of the distinction between the “seat” and the “venue” of the arbitration, in the context of international commercial arbitration, in para 100 of the report, in the following words: “True, that in an international commercial arbitration, having a seat in India, hearings may be necessitated outside India. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but it would not have the effect of changing the seat of arbitration which would remain in India.

The legal position in this regard is summed up by Redfern and Hunter, The Law and Practice of International Commercial Arbitration (1986) at p. 69 in the following passage under the heading “The Place of Arbitration”: “The preceding discussion has been on the basis that there is only one “place” of arbitration. This will be the place chosen by or on behalf of the parties; and it will be designated in the arbitration agreement or the terms of the reference or the minutes of proceedings or in Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 30 of 117 Signing Date:24. 10. 2020 18:07:19 some other way as the place or “seat” of the arbitration. This does not mean, however, that the Arbitral Tribunal must hold all its meetings or hearings at the place of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries.

In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings – or even hearings – in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses…. It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country – for instance, for the purpose of taking evidence…. In such circumstances, each move of the Arbitral Tribunal does not of itself mean that the seat of arbitration changes. The seat of the arbitration remains the place initially agreed by or on behalf of the parties. ” This, in our view, is the correct depiction of the practical considerations and the distinction between “seat” [Sections 20(1) and 20(2)] and “venue” [Section 20(3)].

We may point out here that the distinction between “seat” and “venue” would be quite crucial in the event, the arbitration agreement designates a foreign country as the “seat”/“place” of the arbitration and also select the Arbitration Act, 1996 as the curial law/law governing the arbitration proceedings. It would be a matter of construction of the individual agreement to decide whether: (i) The designated foreign “seat” would be read as in fact only providing for a “venue”/“place” where the hearings would be held, in view of the choice of the Arbitration Act, 1996 as being the curial law, OR (ii) Whether the specific designation of a foreign seat, necessarily carrying with it the choice of that country's arbitration/curial law, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 31 of 117 Signing Date:24. 10. 2020 18:07:19 would prevail over and subsume the conflicting selection choice by the parties of the Arbitration Act, 1996.

Only if the agreement of the parties is construed to provide for the “seat”/“place” of arbitration being in India – would Part I of the Arbitration Act, 1996 be applicable. If the agreement is held to provide for a “seat”/“place” outside India, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement purports to provide that the Arbitration Act, 1996 shall govern the arbitration proceedings. ” (Underscoring supplied; Italics in original) (vi) The resulting position was crystallised, in paras 116 and 117 of the report, thus: “116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that country relating to the conduct and supervision of arbitrations will apply to the proceedings. 117.

It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat/place of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable Indian Courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English Procedural Law/curial law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat/place in India. ” (Underscoring supplied; Italics in original) Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 32 of 117 Signing Date:24. 10.

2020 18:07:19 (vii) The Constitution Bench went on to hold, in para 123 of the report, that it was “clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted”. Such a court, alone, it was held, was the “supervisory court possessed of the power to annul the award”. (viii) Thereafter, from para 155 of the report, the Supreme Court addressed, squarely, the issue of “interim measures, etc. by the Indian courts where the seat of arbitration is outside India” – precisely the issue which arises in the present case. The very first submission, advanced to support the existence of jurisdiction, in Indian courts, to grant interim relief, under Section 9, even where the seat of arbitration was outside India, was the precise submission urged by Mr. Gautam Narayan before me, i. e.

, “that in such circumstances, the parties would be left remediless” as “no application for interim relief would be available under Section 9 of the Arbitration Act, 1996, in an arbitration seated outside India”. The Constitution Bench was, therefore, exhorted to hold that “courts in India have the jurisdiction to take necessary measures for preservation of assets and/or to prevent dissipation of assets”, even in such cases. The enunciation of the law, to the said effect, in Bhatia 17 International was, it was submitted, correct. Section 9, it was submitted, was required to be distinguished from Section 34, as grant of interim relief under Section 9 did not interfere with the final award. It was also contended that “annulment of the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 33 of 117 Signing Date:24. 10.

2020 18:07:19 award under Section 34 would have extra territorial operation whereas Section 9 being entirely asset focused, would be intrinsically territory focused and intra-territorial in its operation” (as recorded in para 155 of the report). The Constitution Bench, in clear, categorical in unmistakable terms, rejected the submission, holding (in para 156 of the report) that “it would be wholly undesirable for this Court to declare by process of interpretation that Section 9 is a provision which falls neither in Part I not Part II”. Observing that “schematically, Section 9 was placed in Part I” of the 1996 Act, the Constitution Bench held that it could not be treated as sui generis, or granted a special status. Observing that Part I of the 1996 Act had already been held, by it, not to apply to foreign seated arbitrations, the Constitution Bench also observed that Part II did not contain any provision similar to Section 9.

Thus, it was held, “on a logical and schematic construction of the Arbitration Act, 1996, the Indian courts do not have the power to grant interim measures when the seat of arbitration is outside India” (in para 157 of the report). The “arbitral proceedings”, to which Section 9 refers, it was held, “cannot relate to arbitration which takes place outside India”. The Constitution Bench went on to declare, unequivocally, in para 158 of the report, “that the provision contained in Section 9 is limited in its application to arbitrations which take place in India” and that holding otherwise “would be to do violence to the policy of the territoriality declared in Section 2(2) of the Arbitration Act, 1996”. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 34 of 117 Signing Date:24. 10.

2020 18:07:19 (ix) The Constitution Bench also went on to address the grievance that exclusion, of Section 9, to foreign seated arbitrations, would result in great hardship to parties who were in need of interim measures, by tellingly observing thus (in paras 163 and 164 of the report): “163. In our opinion, the aforesaid judgment in Reliance Industries Ltd. [(2002) 1 All ER (Comm) 59 : (2002) 1 Lloyd's Rep 645] does not lead to the conclusion that the parties were left without any remedy. Rather the remedy was pursued in England to its logical conclusion. Merely because the remedy in such circumstances may be more onerous from the viewpoint of one party is not the same as a party being left without a remedy. Similar would be the position in cases where parties seek interim relief with regard to the protection of the assets.

Once the parties have chosen voluntarily that the seat of the arbitration shall be outside India, they are impliedly also understood to have chosen the necessary incidents and consequences of such choice. We, therefore, do not find any substance in the submissions made by the learned counsel for the appellants, that if applicability of Part I is limited to arbitrations which take place in India, it would leave many parties remediless. 164. If that be so, it is a matter to be redressed by the legislature. ” (Emphasis supplied) No consideration of sympathy, at the petitioner being rendered “remediless” can operate to confer jurisdiction, on this Court, if no such jurisdiction exists under the statutory dispensation in force. In deciding the sustainability of the objection, of Mr. Kamath, to the territorial jurisdiction of this Court to entertain the present proceedings, therefore, the difficulty in obtaining Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM.

) 112/2020 Page 35 of 117 Signing Date:24. 10. 2020 18:07:19 relief from Singaporean courts cannot be the determinative factor, though it does play a role, as would become more apparent from the discussion hereinafter. 8 45. 8 Thus, in BALCO , the Constitution Bench of the Supreme Court held, in unmistakable terms, that Section 2(2) of the 1996 Act resulted in complete exclusion of jurisdiction, of courts in India, in respect of foreign seated arbitrations, even for the purpose of obtaining interim reliefs, whether at the pre-arbitral stage or otherwise, and also went on to clarify that this position was not affected by Section 2(1)(e). 9 46. Swastik Gases : 46. 1 This decision was concerned, essentially, with the scope of an “exclusive jurisdiction” clause, engrafted in the agreement between the parties. It did not involve any international commercial arbitration. 46.

2 The dispute between the parties arose out of an agreement, th dated 13 October, 2002, whereby Swastik Gases (hereinafter referred to as “Swastik”) was appointed as the consignment agent of IOCL, for marketing lubricants at Jaipur. Disputes arose in November, 2003, th which could not be amicably resolved. On 25 August, 2008, Swastik sent a notice, to IOCL, invoking the arbitration clause in the agreement, and naming a retired Judge of the High Court of Rajasthan as its arbitrator. IOCL was requested to nominate a corresponding Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 36 of 117 Signing Date:24. 10. 2020 18:07:19 arbitrator, from its side. On failure, of IOCL, to do so, Swastik petitioned the High Court, under Section 11 of the 1996 Act. 46.

3 IOCL contested the petition on the ground that the High Court of Rajasthan lacked territorial jurisdiction to adjudicate the lis, as the agreement was subject to jurisdiction of courts at Kolkata. The High Court agreed with IOCL and dismissed the petition, of Swastik, on the ground of jurisdiction. Swastik appealed to the Supreme Court. 46. 4 Admittedly, Clause 18 in the agreement between Swastik and IOCL, which provided for “Jurisdiction”, postulated that “the agreement shall be subject to jurisdiction of the courts at Kolkata”. Even so, Swastik contended, before the Supreme Court, that the jurisdiction of courts at Jaipur was not ousted, as the major part of the cause of action had arisen within such jurisdiction. 46.

5 The Supreme Court held that, in view of Section 2(1)(e) of the 1996 Act, read with Section 20 of the Code of Civil Procedure, 1908 (CPC), “there remains no doubt that the Chief Justice of the designated Judge of the Rajasthan High Court has jurisdiction in the matter”. Even so, it noted (in para 31 of the report), “the question is, whether parties by virtue of Clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of Clause 18 of the agreement, the jurisdiction of the Chief Justice of the Rajasthan High Court has been excluded”. The Supreme Court proceeded to answer the question, thus (in para 22 of the report): Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 37 of 117 Signing Date:24. 10.

2020 18:07:19 “For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties – by having Clause 18 in the agreement – is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expression unius est exclusion 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 forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner. ” (Emphasis supplied) 46. 6 The Supreme Court, therefore, concurred with the judgement of the High Court of Rajasthan and dismissed the appeal, preserving liberty, with the appellant, to approach the High Court of Calcutta. th 47. The 246 Report of the Law Commission of India 8 47.

1 In the wake of BALCO , and the concerns expressed therein, th the Law Commission, in its 246 Report, tendered in August, 2014, Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 38 of 117 Signing Date:24. 10. 2020 18:07:19 suggested extensive amendments to the 1996 Act. Paras 40 to 42 of the Report merit reproduction, thus: “40. The Supreme Court in BALCO decided that Parts I and II of the Act are mutually exclusive of each other. The intention of Parliament that the Act is territorial in nature and sections 9 and 34 will apply only when the seat of arbitration is in India. The seat is the “centre of gravity” of arbitration, and even where two foreign parties arbitrate in India, Part I would apply and, by virtue of Section 2(7), the award would be a “domestic award”.

The Supreme Court recognized the “seat” of arbitration to be the juridical seat; however, in line with international practice, it was observed that the arbitral hearings may take place at a location other than the seat of arbitration. The distinction between “seat” and “venue” was, therefore, recognized. In such a scenario, only if the seat is determined to be India, Part I would be applicable. If the seat was foreign, Part I would be inapplicable. Even if Part I was expressly included “it would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the [foreign] Procedural Law/Curial Law. ” The same cannot be used to confer jurisdiction on an Indian Court. However, the decision in BALCO was expressly given prospective effect and applied to arbitration agreements executed after the date of the judgment. 41.

While the decision in BALCO is a step in the right direction and would drastically reduce judicial intervention in foreign arbitrations, the Commission feels that there are still a few areas that are likely to be problematic. (i) Where the assets of a party are located in India, and there is a likelihood that that party will dissipate its assets in the near future, the other party will lack an efficacious remedy if the seat of the arbitration is abroad. The latter party will have two possible remedies, but neither will be efficacious. First, the latter party can obtain an interim order from a foreign Court or the arbitral tribunal itself and file a civil suit to enforce the right created by the interim order. The Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 39 of 117 Signing Date:24. 10.

2020 18:07:19 interim order would not be enforceable directly by filing an execution petition as it would not qualify as a “judgment” or “decree” for the purposes of Sections 13 and 44A of the Code of Civil Procedure (which provide a mechanism for enforcing foreign judgments). Secondly, in the event that the former party does not adhere to the terms of the foreign Order, the latter party can initiate proceedings for contempt in the foreign Court and enforce the judgment of the foreign Court under sections 13 and 44A of the Code of Civil Procedure. Neither of these remedies is likely to provide a practical remedy to the party seeking to enforce the interim relief obtained by it. That being the case, it is a distinct possibility that a foreign party would obtain an arbitral award in its favour only to realize that the entity against which it has to enforce the award has been stripped of its assets and has been converted into a shell company.

(ii) While the decision in BALCO was made prospective to ensure that hotly negotiated bargains are not overturned overnight, it results in a situation where Courts, despite knowing that the decision in Bhatia is no longer good law, are forced to apply it whenever they are faced with a case arising from an arbitration agreement executed pre-BALCO. 42. The above issues have been addressed by way of proposed Amendments to Sections 2(2), 2(2A), 20, 28 and 31. ” 47. 2 The following amendments, suggested by the Law Commission Report, are significant: (i) Section 2(1)(e) which, as it stood then, read as under: “(e) “Court” means the principal Civil Court of original jurisdiction in the district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM.

) 112/2020 Page 40 of 117 Signing Date:24. 10. 2020 18:07:19 same had been the subject-matter of the suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes”. The Law Commission Report recommended amendment of Section 2(1)(e), by the addition of the words “in the case of an arbitration other than international commercial arbitration”, before the words “the principal Civil Court of original jurisdiction” in sub-section (i), and insertion of sub- section (ii), specific to international commercial arbitration. These changes would become apparent from the amended Section 2(1)(e), which already stands reproduced in para 43 supra. (ii) The Law Commission Report also contains the following recommendations, for amendments in Section 2 of the 1996 Act: “(v) In sub-section (1), after clause (h), insert clause “(hh) “seat of the arbitration” means the juridical seat of the arbitration”.

[NOTE: This definition of “seat of arbitration” is incorporated so as to make it clear that “seat of arbitration” is different from the venue of arbitration. Section 20 has also been appropriately modified. ] (vi) In sub-section (2), add the word “only” after the words “shall apply” and delete the word “place” and insert the word “seat” in its place. [NOTE: this amendment ensures that an Indian Court can only exercise jurisdiction under Part I where the seat of the arbitration is in India. To this extent, it overrules Bhatia International v. Bulk Trading S. A. and Anr. , (2002) 4 SCC 105, and re-enforce the “seat centricity” principle of Bharat Aluminium Company Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 41 of 117 Signing Date:24. 10. 2020 18:07:19 and Ors. etc. v. Kaiser Aluminium Technical Service, Inc.

, (2012) 9 SCC 552] Also insert the following proviso “Provided that, subject to an express agreement to the contrary, the provisions of sections 9, 27, 37(1)(a) and 37 (3) shall also apply to international commercial arbitration even if the seat of arbitration is outside India, if an award made, or that which might be made, in such place would be enforceable and recognised under Part II of this Act. [NOTE: This proviso ensures that an Indian Court can exercise jurisdiction with respect to these provisions even where the seat of the arbitration is outside India. ]” (iii) Additionally, the Law Commission Report also suggested certain amendments, in Sections 20 and 31 of the 1996 Act: “Amendment of Section 20 12. In Section 20, delete the word “Place” and add the words “Seat and Venue” before the words “of arbitration”. (i) In sub-section (1), after the words “agree on the” delete the word “place” and add words “seat and venue”.

(ii) In sub-section (3), after the words “meet at any” delete the word “place” and add word “venue”. [NOTE: The departure from the existing phrase “place” of arbitration is proposed to make the wording of the Act consistent with the international usage of the concept of a “seat” of arbitration, to denote the legal home of the arbitration. The amendment further legislatively distinguishes between the “[legal] seat” from a, “[mere] venue” of arbitration. ] Amendment of Section 31 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 42 of 117 Signing Date:24. 10. 2020 18:07:19 17. In Section 31 (i) In sub-section (4), after the words “its date and the” delete the word “place” and add the word “seat”. ” These recommendations, for amendment of Sections 20 and 31 were, however, not accepted, and the provisions remained inviolate. 47.

3 While the recommendation, qua Section 2(1)(e), was accepted and implemented, and the clause was amended accordingly, the amendments relating to Section 2(2) were not accepted in toto. While a proviso was added, to the said sub-section, the proposal to add, after the words “shall apply”, the word “only”, was not implemented. Similarly, the word “express”, as contained in the proposed proviso to Section 2(2), did not figure in the proviso as it ultimately came to be inserted vide the Arbitration and Conciliation (Amendment) Act, 2016 (hereinafter referred to as “the 2016 Amendment Act”). What impact these deviations have, when compared with the original recommendations of the Law Commission, would become more apparent from the discussion that follows hereinafter. 10 48. B. E. Siomese Von Staraburg Niedenthal 48. 1 In the context of the controversy before me, this judgement, though brief, assumes considerable importance.

An agreement, for raising mines, located in Goa, was executed, between the appellant (hereinafter referred to as “BES”) and the respondent (hereinafter Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 43 of 117 Signing Date:24. 10. 2020 18:07:19 referred to as “CIL”), whereunder CIL was the exclusive purchaser of ore, mined by BES. Clause 13 of the raising agreement expressly stipulated that “the courts at Goa shall have exclusive jurisdiction”. Disputes arose, resulting in CIL filing an application, under Section 9 of the 1996 Act, for interim protection, in the Court of the District Judge, Raipur. BES questioned the jurisdiction of the District Judge, Raipur, to adjudicate the lis, on the ground that the mines were located in Goa, the agreement was executed in Goa and the second respondent was residing at Goa. CIL contended, per contra, that the working of the company was at Raipur and that the cause of action also arose in Raipur.

The District Judge, Raipur, rejected the objection of BES. Aggrieved thereby, BES appealed to the Chhattisgarh High Court. The High Court directed the District Judge to decide the Section 9 application, along with the objection regarding territorial jurisdiction, afresh. BES appealed to the Supreme Court. 9 48. 2 Placing reliance on the passage, from Swastik Gases Pvt Ltd , extracted in para 46. 5 supra, the Supreme Court held that Clause 13 of the raising agreement ousted the jurisdiction of the District Judge, Raipur, and conferred exclusive jurisdiction on the courts at Goa. The judgement of the High Court was, therefore, set aside. 11 49. Indus Mobile Distribution Pvt Ltd 49. 1 Datawind Innovations Pvt. Ltd. (hereinafter referred to as “DIPL”), the respondent in this case, was supplying goods to the appellant (who would be referred to, hereinafter, as “Indus”). DIPL Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM.

) 112/2020 Page 44 of 117 Signing Date:24. 10. 2020 18:07:19 was located in New Delhi, and Indus was located at Chennai. An th agreement, dated 25 October, 2014, was executed between them. Clause 18 of the agreement provided for resolution of disputes, which could not be settled amicably, by arbitration, to be conducted at Mumbai, in accordance with the 1996 Act. Clause 19 stipulated that “all disputes and differences of any kind whatever arising out of or in connection with (the) agreement shall be subject to the exclusive jurisdiction of courts of Mumbai only”. th 49. 2 Disputes arose, resulting in the issuance of a notice, dated 25 September, 2015, from DIPL to Indus, invoking Clause 18 of the agreement and appointing Justice H. R. Malhotra, a retired Judge of this Court, as Sole arbitrator. Indus objected to the appointment of th Justice Malhotra, vide its reply dated 15 October, 2015. 49.

3 DIPL moved two petitions before this Court, one under Section 9, seeking certain pre-arbitral interim reliefs, and another under Section 11, for appointment of an arbitrator. Both the petitions were rd 21 disposed of, vide judgement dated 3 June, 2016 . An objection, raised by Indus, to the maintainability of the Section 9 petition before this Court, was rejected, holding that the “exclusive jurisdiction clause”, i. e. Clause 19, in the agreement between the parties, would not apply on facts, as no part of the cause of action had arisen within the jurisdiction of any court in Mumbai. In other words, this Court was of the opinion that the parties could not, by an exclusive jurisdiction clause, confer jurisdiction on a court, within the Datawind Innovations (P) Ltd v. Indus Mobile Distribution (P) Ltd, 2016 SCC OnLine Del 3744 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 45 of 117 Signing Date:24. 10.

2020 18:07:19 jurisdiction of which no part of the cause of action had arisen. This Court opined that only courts of Delhi, Chennai or Amritsar, would have jurisdiction in the matter and that, therefore, the petitioner had correctly filed the Section 9 petition in this Court. This Court nd proceeded to confirm the interim order dated 22 September, 2015 and also disposed of the Section 11 petition, by appointing Justice S. N. Variava, a learned retired Judge of the Supreme Court, as the sole arbitrator. 49. 4 Indus challenged this judgement, before the Supreme Court. 8 The Supreme Court quoted extensively from BALCO , and reproduced, with approval, the following passage from the judgement 22 8 of the Court of Appeal, England, in A v. B (on which BALCO , too, relied): “... an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy ...

as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of arbitration. ” 49. 5 The Supreme Court endorsed the view, earlier expressed in 23 Enercon (India) Ltd v. Enercon GmBH , that “once the seat of arbitration has been fixed, it would be in the nature of an exclusive jurisdiction clause as to the courts which exercise supervisory powers over the arbitration”. (2007) 1 All ER (Comm) 591 (2014) 5 SCC 1 Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 46 of 117 Signing Date:24. 10. 2020 18:07:19 49. 6 The Supreme Court, thereafter, went on to note the th recommendations, of the 246 Law Commission, and the amendments proposed by it.

In para 18 of the report, the Supreme Court rationalised the decision, of the Legislature, not to amend Sections 20 and 31 of the 1996 Act, as proposed by the Law Commission, thus: “The amended Act, does not, however, contain the aforesaid amendments, presumably because the BALCO judgment in no uncertain terms has referred to “place” as “juridical seat” for the purpose of Section 2(2) of the Act. It further made it clear that Section 20(1) and 20 (2) where the word “place” is used, refers to “juridical seat”, whereas in Section 20 (3), the word “place” is equivalent to “venue”. This being the settled law, it was found unnecessary to expressly incorporate what the Constitution Bench of the Supreme Court has already done by way of construction of the Act. ” 49. 7 The concluding paras 19 and 20 of the report, in Indus Mobile 11 Distribution , are of significance: “19.

A conspectus of all the aforesaid provisions shows that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. On the facts of the present case, it is clear that the seat of arbitration is Mumbai and Clause 19 further makes it clear that jurisdiction exclusively vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code of Civil Procedure which applies to suits filed in courts, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties to an arbitration clause. The neutral venue may not in the classical sense have jurisdiction – that is, no part of the cause of action may have arisen at the neutral venue and neither would any of the provisions of Section 16 to 21 of the Code of Civil Procedure be attracted.

In arbitration law however, as has been held above, the moment “seat” is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties. Signature Not Verified Digitally Signed By:SUNIL SINGH NEGI O. M. P. (I) (COMM. ) 112/2020 Page 47 of 117 Signing Date:24. 10. 2020 18:07:19 20. It is well settled that where more than one court has jurisdiction, it is open for parties to exclude all other courts. For an exhaustive analysis of the case law, see Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. , (2013) 9 SCC 32. This was followed in a recent judgment in B. E. Simoese Von Staraburg Niedenthal v. Chhattisgarh Investment Ltd. , (2015) 12 SCC 225. Having regard to the above, it is clear that Mumbai courts alone have jurisdiction to the exclusion of all other courts in the country, as the juridical seat of arbitration is at Mumbai.

This being the case, the impugned judgment is set aside. The injunction confirmed by the impugned judgment will continue for a period of four weeks from the date of pronouncement of this judgment, so that the respondents may take necessary steps under Section 9 in the Mumbai Court. The appeals are disposed of accordingly. ” (Emphasis s

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