In its judgment in Brahmani River Pellets v Kamachi Industries, the Supreme Court held that when the parties agree to have the venue of arbitration at a particular place, only the high court with jurisdiction over that place can entertain the petition seeking appointment of arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996.
Disputes arose between the contracting parties regarding the price and payment terms of iron ore pellets after Brahmani, which is based in Odisha, did not deliver the goods to Kamachi, which is based in Tamil Nadu.
Kamachi claimed damages alleging that it had to procure the iron ore pellets from other sources at higher rates. Brahmani denied any liability on the ground that the contract was later modified and that Kamachi breached material terms of the contract. Kamachi invoked the arbitration clause, but Brahmani did not agree to the appointment of the arbitrator.
Even though the arbitration clause mentioned Bhubaneswar as the seat of arbitration, Kamachi approached Madras High Court under section 11(6) of the arbitration act for the appointment of an arbitrator. Madras High Court while appointing an arbitrator held that mere agreement on the seat of arbitration does not exclude the jurisdiction of courts outside such seat. The high court held that in the absence of any express clause excluding the jurisdiction of other courts, both Madras High Court and Orissa High Court will have jurisdiction over arbitration proceedings.
Brahmani appealed, challenging the judgment in the Supreme Court. The Supreme Court held that where the contract specifies the jurisdiction of the court at a particular place, only that court will have the jurisdiction to deal with the matter. The Supreme Court relied heavily on its 2013 ruling in Swastik Gases v Indian Oil, where it was said that while providing for a jurisdiction clause in the agreement, non-use of the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” is not decisive and does not make any material difference.
It is so because, for the construction of a jurisdiction clause in an arbitration agreement, the legal maxim, which means that expression of one is the exclusion of another, comes into play. By making a provision that the agreement is subject to the jurisdiction of the courts at Bhubaneswar, the parties have implicitly excluded the jurisdiction of other courts.
The dispute digest is compiled by Bhasin & Co, a corporate law firm based in New Delhi. The authors can be contacted at [email protected] Readers should not act on the basis of this information without seeking professional legal advice.