A petition under Sec 11 is not maintainable in International Commercial Arbitration, when seat is outside India; SC.

Supreme Court of India

Justice R Banumathi, Justice A S Bopanna & Justice Hrishikesh Roy

The SC {MANKASTU IMPEX PRIVATE LIMITED v. AIRVISUAL LIMITED} holds that the words in Clause 17.1 “without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” do not take away or dilute the intention of the parties in Clause 17.2 that the arbitration be administered in Hong Kong. It was held that the words in Clause 17.1 do not suggest that the seat of arbitration is in New Delhi. It was held that since Part-I is not applicable to “International Commercial Arbitrations”, in order to enable the parties to avail the interim relief, Clause 17.3 appears to have been added. It was also held that the words “without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” in Clause 17.1 is to be read in conjunction with Clause 17.3. It was held that since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act is not maintainable and the petition is liable to be dismissed.

Accordingly, Arbitration Petition No.32 of 2018 filed by the petitioner seeking appointment of an arbitrator under Section 11(6) of the Act was dismissed. It was held that it is however open to the petitioner to approach Hong Kong International Arbitration Centre for appointment of the arbitrator, if they so desire.

The SC further held:

"25. Clause 17.1 of the MoU stipulates that the MoU is governed by the laws of India and the courts at New Delhi shall have jurisdiction. The interpretation to Clause 17.1 shows that the substantive law governing the substantive contract are the laws of India. The words in Clause 17.1 “without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction” has to be read along with Clause 17.3 of the agreement. As per Clause 17.3, the parties have agreed that the party may seek provisional, injunctive or equitable remedies from a court having jurisdiction before, during or after the pendency of any arbitral proceedings. In para (161) in BALCO (2012) 9 SCC 552, this Court held that “…..on a logical and schematic construction of Arbitration Act, 1996, the Indian Courts do not have the power to grant interim measures when the seat of arbitration is outside India….”. If the arbitration agreement is found to have seat of arbitration outside India, then the Indian Courts cannot exercise supervisory jurisdiction over the award or pass interim orders. It would have therefore been necessary for the parties to incorporate Clause 17.3 that parties have agreed that a party may seek interim relief for which Delhi Courts would have jurisdiction. In this regard, we may usefully refer to the insertion of proviso to Section 2(2) of the Arbitration Act, 1996 by Amendment Act, 2015. By the Amendment Act, 2015 (w.e.f. 23.10.2015), a proviso has been added to Section 2(2) of the Act as per which, certain provisions of Part-I of the Act i.e. Sections 9 – interim relief, 27 – court’s assistance for evidence, 37(1)(a) – appeal against the orders and Section 37(3) have been made applicable to “International Commercial Arbitrations” even if the place of arbitration is outside India. Proviso to Section 2(2) of the Act reads as under:-

“2. Definitions.- …….. (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 subsection (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.”

It is pertinent to note that Section 11 is not included in the proviso and accordingly, Section 11 has no application to “International Commercial Arbitrations” seated outside India."

 In the present case, the petition had been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 read with Arbitration and Conciliation (Amendment) Act, 2015 read with the Appointment of Arbitrator by the Chief Justice of India Scheme, 1996 seeking appointment of a sole arbitrator under Clause 17.2 of the Memorandum of Understanding dated 12.09.2016 between petitioner-Company incorporated in India and respondent incorporated under the laws of Hong Kong - which petition came to be dismissed by the SC in view of aforesaid.