ARB.P./78/2021 of ADAVYA PROJECTS PVT LTD Vs VISHAL STRUCTURALS PVT LTD

Signature Not Verified

*IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision: 24[th]November, 2021

+ARB.P. 78/2021

ADAVYA PROJECTS PVT LTD

..... Petitioner

Through:Mr. Saurabh Kirpal, Senior Advocatewith Ms. Simran Brar, Mr. SrisatyaMohanty, Ms. Tanima Gaur andMs. Ambika, Advocates.

versus

VISHAL STRUCTURALS PVT LTD

..... Respondent

Through:Mr. Susheel Joseph Cyriac, Advocate.

CORAM:HON'BLE MR. JUSTICE SANJEEV NARULA

J U M N T

[VIA HYBRID MODE]

SANJEEV NARULA, J (Oral):

1.The present petition under Section 11 (6) of the Arbitration andConciliation Act, 1996 [hereinafter “the Act”] has been filed seekingappointment of Sole Arbitrator for adjudication of disputes pertaining toLimited Liability Agreement dated 01[st]June, 2012 [hereinafter “LLPAgreement”] read with Supplementary LLP Agreement and Memorandumof Understanding both dated 29[th]January, 2013. The arbitration clause[Clause 40] contained in LLP Agreement, reads as follows: -

“Arbitration

40.Disputes or differences, if any, that may arise between partnersinter se and /or between the partner(s) and LLP hereto or theiraffiliates, assigns, successors, attorneys, administrators and allthoseclaimingthroughittouchingthesepresentsortheconstruction thereof or any clause or thing herein contained orotherwise or in any way relating to or concerning these presents orthe rights duties or liabilities of any of the partners hereto inconnection therewith the matters in such dispute or difference shallbe referred to' the arbitration in accordance with and subject to theprovisions of Arbitration and Conciliation Act, 1996 or to anystatutory modification or re-enactment thereof for the time being inforce. The venue of the Arbitration shall be decided by theArbitrator so appointed by mutual consent of both partners.”inter se and /or between the partner(s) and LLP hereto or theiraffiliates, assigns, successors, attorneys, administrators and allthoseclaimingthroughittouchingthesepresentsortheconstruction thereof or any clause or thing herein contained orotherwise or in any way relating to or concerning these presents orthe rights duties or liabilities of any of the partners hereto inconnection therewith the matters in such dispute or difference shallbe referred to' the arbitration in accordance with and subject to theprovisions of Arbitration and Conciliation Act, 1996 or to anystatutory modification or re-enactment thereof for the time being inforce. The venue of the Arbitration shall be decided by theArbitrator so appointed by mutual consent of both partners.”

2.Since there is no specified or defined ‘seat’/ ‘place’ of arbitration, acontroversy has arisen as to whether this Court has jurisdiction to entertainthe present petition.controversy has arisen as to whether this Court has jurisdiction to entertainthe present petition.

CONTENTIONS OF THE PARTIES

3.Mr. Susheel Joseph Cyriac, counsel for the Respondent [hereinafter“VSPL”] while admitting the existence of the arbitration agreement, objectsto the maintainability of the present petition by making the followingsubmissions: -“VSPL”] while admitting the existence of the arbitration agreement, objectsto the maintainability of the present petition by making the followingsubmissions: -

3.1The present proceedings stem from Clause 40 of LLP Agreement readwith the Memorandum of Understanding [hereinafter “MoU”] dated29[th]January, 2013 [hereinafter collectively referred to as “theAgreements”]. These Agreements were entered into for the purposesof creating Joint Venture LLP by the name of ‘Vishal CapricornEnergy Services LLP’ [hereinafter “VCES”]. The Agreements aswell as the Supplementary LLP Agreement were executed in Mumbai.The introductory paragraph of LLP Agreement stipulates that the‘Agreement of Limited Liability Partnership was made at Mumbai’.with the Memorandum of Understanding [hereinafter “MoU”] dated29[th]January, 2013 [hereinafter collectively referred to as “theAgreements”]. These Agreements were entered into for the purposesof creating Joint Venture LLP by the name of ‘Vishal CapricornEnergy Services LLP’ [hereinafter “VCES”]. The Agreements aswell as the Supplementary LLP Agreement were executed in Mumbai.The introductory paragraph of LLP Agreement stipulates that the‘Agreement of Limited Liability Partnership was made at Mumbai’.

Signature Not Verified

Furthermore, the MoU was stamped on Maharashtra Non-JudicialStamp, demonstrating that the execution took place at Mumbai andbesides VCES and VSPL have their offices at Navi Mumbai.

3.2Clause 40 of LLP Agreement is silent as to the ‘seat’ and ‘venue’ ofthe arbitration. The said clause stipulates that ‘venue’ of Arbitrationshall be decided by the Arbitrator so appointed by mutual consent ofboth partners. In order to determine the appropriate forum in absenceof any specified ‘venue’, in the instant case, the subject-matter doesnot fall under Sections 16-19 of the Code of Civil Procedure, 1908[hereinafter “CPC”], instead under Section 20 of CPC.the arbitration. The said clause stipulates that ‘venue’ of Arbitrationshall be decided by the Arbitrator so appointed by mutual consent ofboth partners. In order to determine the appropriate forum in absenceof any specified ‘venue’, in the instant case, the subject-matter doesnot fall under Sections 16-19 of the Code of Civil Procedure, 1908[hereinafter “CPC”], instead under Section 20 of CPC.3.3Reliance is placed upon the recent decision of this Court in AarkaSports Management Pvt. Ltd. v. Kalsi Buildcon Pvt. Ltd.[1], whereinthe Court has held that if the parties have not agreed on the ‘seat’ ofarbitration, it cannot confer jurisdiction to place wherein no part ofcause of action has arisen – what has to be examined is wheresubstantial part of the cause of action arose and the intention of theparties. Merely because of some miniscule part of cause of actionarose in Delhi (as in this instant case, some payment(s) were madefrom Delhi and some payment(s) were to be received in Delhi) wouldnot confer jurisdiction to the courts at Delhi. Further, it is abundantlyclear from plain reading of the Agreements, that the parties neverenvisioned that courts in Delhi shall have jurisdiction.Sports Management Pvt. Ltd. v. Kalsi Buildcon Pvt. Ltd.[1], whereinthe Court has held that if the parties have not agreed on the ‘seat’ ofarbitration, it cannot confer jurisdiction to place wherein no part ofcause of action has arisen – what has to be examined is wheresubstantial part of the cause of action arose and the intention of theparties. Merely because of some miniscule part of cause of actionarose in Delhi (as in this instant case, some payment(s) were madefrom Delhi and some payment(s) were to be received in Delhi) wouldnot confer jurisdiction to the courts at Delhi. Further, it is abundantlyclear from plain reading of the Agreements, that the parties neverenvisioned that courts in Delhi shall have jurisdiction.

3.4The parties intended to conduct their business in the jurisdiction ofMumbai. Section 2(1)(e) of the Act recognises this principle andhighlights that the court would mean court having jurisdiction toMumbai. Section 2(1)(e) of the Act recognises this principle andhighlights that the court would mean court having jurisdiction to

decide the questions forming the subject-matter of the arbitration ifthe same had been the subject-matter of suit.the same had been the subject-matter of suit.

3.5Since VSPL and VCES have their offices at Navi Mumbai, anyapplication/ petition arising from Clause 40 of LLP Agreement,including one under Section 11 of the Act must lie in Mumbai.Further,jurisdictionshouldalsovestinMumbaisincethedefendant(s) [viz. VSPL] resides, carries on business, or personallyworks for gain in Mumbai. Considering the nature of arrangement andthe fact that Agreements between the parties were executed inMumbai, undoubtedly jurisdiction would lie before the courts ofMumbai.application/ petition arising from Clause 40 of LLP Agreement,including one under Section 11 of the Act must lie in Mumbai.Further,jurisdictionshouldalsovestinMumbaisincethedefendant(s) [viz. VSPL] resides, carries on business, or personallyworks for gain in Mumbai. Considering the nature of arrangement andthe fact that Agreements between the parties were executed inMumbai, undoubtedly jurisdiction would lie before the courts ofMumbai.

3.6By approaching the courts at Delhi, the Petitioner [hereinafter“APL”] seeks to vest supervisory control over the arbitral process tothe courts at Delhi. APL seeks to prevent VSPL from approaching thecourts at Mumbai for any relief under Section 42 of the Act. Thiswould be detrimental to VSPL since all its assets and structures of theVCES and VSPL are located in Navi Mumbai.“APL”] seeks to vest supervisory control over the arbitral process tothe courts at Delhi. APL seeks to prevent VSPL from approaching thecourts at Mumbai for any relief under Section 42 of the Act. Thiswould be detrimental to VSPL since all its assets and structures of theVCES and VSPL are located in Navi Mumbai.

4.Per Contra, Mr. Saurabh Kirpal, Senior Counsel for APL controvertsthe contentions raised by VSPL and submits that jurisdiction would liebefore this Court and not the courts at Mumbai. His submissions aresummarized as follows: -the contentions raised by VSPL and submits that jurisdiction would liebefore this Court and not the courts at Mumbai. His submissions aresummarized as follows: -

4.1Clause 40 of LLP Agreement is silent as to the ‘place’ of arbitrationand hence, the principles under Sections 16-20 of CPC will apply todetermine the court of appropriate jurisdiction.and hence, the principles under Sections 16-20 of CPC will apply todetermine the court of appropriate jurisdiction.

1 MANU/DE/1347/2020.

Signature Not Verified

4.2Cause of action indisputably arose in Delhi on account of thefollowing facts: -following facts: -

(i)Discussions between representatives of APL and VSPL leading toexecution of the Agreements viz. LLP Agreement and MoU tookplace at the office of the APL that is located at New Delhi.execution of the Agreements viz. LLP Agreement and MoU tookplace at the office of the APL that is located at New Delhi.

(ii)MoU was signed by APL at Delhi, the making and place ofacceptance was at Delhi.acceptance was at Delhi.

(iii)VSPL was required to make payment to APL on account of the profitsaccrued to VCES from the ITF Project[2], the payments were to bereceived by APL in its bank account bearing No. 912020025211331at Axis Bank, Saket at New Delhi. The payments/ investments byAPL were made to VSPL from the aforementioned bank accountlocated at Delhi.accrued to VCES from the ITF Project[2], the payments were to bereceived by APL in its bank account bearing No. 912020025211331at Axis Bank, Saket at New Delhi. The payments/ investments byAPL were made to VSPL from the aforementioned bank accountlocated at Delhi.

(iv)APLreceivedpaymentsintoitsbankaccountbearingNo.912020025211331 at Axis Bank, Saket, New Delhi for anotherproject executed under the same LLP Agreement. APL has no bankaccount other than the one mentioned above. APL has also neverreceived payments from VSPL into any bank account except the onementioned above i.e., located at Delhi. Under the other two projects/MoUs under the same LLP Agreement, payments were made byVSPL to the bank a/c of APL at New Delhi. Payments for the project/MoU in dispute under LLP Agreement were also to be made at thebank account mentioned above, but VSPL defaulted in making such912020025211331 at Axis Bank, Saket, New Delhi for anotherproject executed under the same LLP Agreement. APL has no bankaccount other than the one mentioned above. APL has also neverreceived payments from VSPL into any bank account except the onementioned above i.e., located at Delhi. Under the other two projects/MoUs under the same LLP Agreement, payments were made byVSPL to the bank a/c of APL at New Delhi. Payments for the project/MoU in dispute under LLP Agreement were also to be made at thebank account mentioned above, but VSPL defaulted in making such

2 LLP Agreement was executed between the parties for carrying out work of “Augmentation of Storagecapacity of ITF by 40000 cum for creation of additional ullage for crude oil at ITF, Tenughat, Assam”[“ITF Project”].capacity of ITF by 40000 cum for creation of additional ullage for crude oil at ITF, Tenughat, Assam”[“ITF Project”].

payments.

4.3Reliance is placed upon the following judgments: BGS SGS Soma v.NHPC[3], ABC Laminart Pvt. Ltd. v. A.P. Agencies, Salem[4], Satyapalv. Slick Auto Accessories (P) Ltd. and Ors.[5], Aarka Sports (supra),L&T Finance Ltd. v. Manoj Pathak[6], Swastik Gases Pvt. Ltd. v.Indian Oil Corporation Ltd.[7], State of West Bengal v. AssociatedContractors[8], Sreenivasa Pulvarising Industries v. Jai Glass andChemicals Pvt. Ltd.[9], and Auto Movers v. Luminous PowerTechnologies Pvt. Ltd.[10].NHPC[3], ABC Laminart Pvt. Ltd. v. A.P. Agencies, Salem[4], Satyapalv. Slick Auto Accessories (P) Ltd. and Ors.[5], Aarka Sports (supra),L&T Finance Ltd. v. Manoj Pathak[6], Swastik Gases Pvt. Ltd. v.Indian Oil Corporation Ltd.[7], State of West Bengal v. AssociatedContractors[8], Sreenivasa Pulvarising Industries v. Jai Glass andChemicals Pvt. Ltd.[9], and Auto Movers v. Luminous PowerTechnologies Pvt. Ltd.[10].

4.4Affidavit-in-Reply, VSPL has not denied that payments were made byVSPL in New Delhi, despite the categorical stand of VSPL that theLLP Agreement did not specify where payments were to be made.VSPL in New Delhi, despite the categorical stand of VSPL that theLLP Agreement did not specify where payments were to be made.

ANALYSIS

5.Having heard the counsel and on perusal of material on record, theCourt is of the opinion that it is competent to entertain the present petition,for reasons discussed hereinafter.

6.In the normal course, once ‘seat’/ ‘place’ of arbitration has beenspecified, the same is akin to conferring exclusive jurisdiction for thepurpose of regulating arbitral proceedings arising out of the agreement(s)

3 (2020) 4 SCC 234.4 (1989) 2 SCC 163.

5 2014 SCC OnLine Del 998.6 2020 SCC OnLine Bom 177.6 2020 SCC OnLine Bom 177.

7 (2013) 9 SCC 32.

8 AIR 2015 SC 260.

9 AIR 1985 Cal 74.

10 2021 SCC OnLine Del 4387.

between the parties. In the instant case, Clause 40 of LLP Agreement issilent as to the ‘seat’ and ‘place’ of the arbitration. Thus, in absence of thedefined ‘place/seat’ of arbitration, the Court would rely on the principlesgoverning jurisdiction as provided in CPC viz. Sections 16 to 20.[11]In fact,on this proposition, the counsels are ad idem.

7.Now, the Court has to examine if any cause of action has arisenwithin the meaning of the provisions referred above. APL has argued that apart of cause of action has arisen in Delhi, in as much as some paymentswere made from Delhi and some payments were to be received in Delhi.VSPL, does not deny this assertion, but, contends that parties never intendedthat courts at New Delhi shall have jurisdiction and the subject-matter of thePetition does not fall within the ambit of Sections 16-19 of CPC andtherefore, Section 20 of CPC applies. To drive home this point, they refer tovarious aspects, as noted above and urge that court of competent jurisdictionin Mumbai alone can entertain the present Petition.

8.Section 20 of CPC deals with jurisdiction of the courts for institutionof suits on the basis of residence of defendant(s) or where cause of actionarises. The phrase ‘cause of action’ found in sub-clause (c) of Section 20 hasnot been specifically defined under CPC. However, there are sufficientjudicial pronouncements explaining the concept. The Supreme Court hasheld that the expression ‘cause of action’ is generally understood to meansituation(s) or state of fact(s) that entitles party to maintain an action in

11 See: BGS SGS Soma (supra) and Indus Mobile Distribution (P) Ltd. v. Data wind Innovations (P)Ltd., (2017) 7 SCC 678.Ltd., (2017) 7 SCC 678.

court of law. It is sometimes employed to convey the restricted ideas of factsor circumstances which constitute either the infringement or the basis of aright and no more. In wider and more comprehensive sense, it has beenused to denote the whole bundle of material facts, which plaintiff(s) mustprove in order to succeed.[12]In the context of contracts, the concept of ‘causeof action’ has been explained by the Supreme Court in ABC Laminart(supra). Relevant paragraph is reproduced as under: -

“In the matter of contract there may arise causes of action of variouskinds. In suit for damages for breach of contract the cause of actionconsists of the making of the contract, and of its breach, so that the suit maybe filed either at the place where the contract was made or at the placewhere it should have been performed and the breach occurred. The makingof the contract is part of the cause of action. suit on contract, therefore,can be filed at the place where it was made. The determination of the placewhere the contract was made is part of the Law of Contract. But making ofan offer on particular place does not form cause of action in suit fordamages for breach of contract. Ordinarily, acceptance of an offer and itsintimation result in contract and hence suit can be filed in court withinwhose jurisdiction the acceptance was communicated…”.

9.APL has demonstrated that VSPL was required to make payments toAPL on account of the profits accrued to VCES from the ITF Project, in theBank Account located at New Delhi. Thus, part of cause of action has arisenin Delhi. In BGS SGS SOMA (supra), the Apex Court held that where it isfound on facts of particular case that either no ‘seat’ is designated underthe agreement, or the so-called ‘seat’ is only convenient ‘venue’, thenthere may be several courts where part of the cause of action arises thatmay have jurisdiction. This is the rationale for the Court to rely uponSections 16-20 of CPC in such situation. Here, as noted above, the factsnarrated by APL indicate that part of cause of action has arisen in Delhi,

12 See: Om Prakash Srivastava v. Union of India, 2006 (6) SCC 207.

yet, VSPL wants that to be ignored, by arguing that this is insignificant anda minuscule part of cause of action. This proposition, premised on forumnon conveniens cannot be accepted. If for contractual disputes, thejurisdiction would lie in courts at Delhi, on the basis of cause of actionhaving arisen at Delhi – the concept cannot be applied selectively. LLPAgreement specifies the place of execution as ‘Mumbai’, and court ofcompetent jurisdiction of such location would certainly have jurisdiction,but that does not oust the jurisdiction of this Court. In fact, as noticed above,parties have chosen to remain silent on the ‘seat’ and ‘place’ of arbitrationand agreeing that the arbitrator would fix the venue.

10.Besides, the Court also finds merit in the contention advanced by Mr.Kirpal that it is well-established that where contract does not specify theplace of payment, the ‘debtor must seek creditor’, and therefore, suit forrecovery is maintainable at the place where the creditor resides or works forgain, particularly when part of the cause of action has arisen at that place[Section 20(c) of CPC].

11.The judgment of this Court Aarka Sports (supra) is not applicable inthe facts of the present case. In the said case, although the arbitration clausein the agreement therein provided that the jurisdiction shall vest exclusivelyin the courts of New Delhi, however, no ‘seat’ or ‘venue’ was provided.Respondent therein raised an objection that Delhi was neither the ‘seat’ ofarbitration nor any part of cause of action arose there. The Court held thatsince the parties had not agreed on the ‘seat’ of the arbitration under Section20(1) of the Act, the same shall be determined by the Arbitral Tribunal

under Section 20(2) of the Act. The Court held that jurisdiction would bedetermined within the meaning of Section 2(1)(e) of the Act read withSections 16-20 of CPC and declined to entertain the Petition holding that nocause of action arose at Delhi. In the instant case, as discussed above, part ofcause of action has arisen within the jurisdiction of this Court. Particularlysince VSPL does not deny having made payments to APL at Delhi.

CONCLUSION

12.In light of the aforesaid discussion, in absence of dedicated ‘seat’ ofarbitration, the question of jurisdiction shall have to be determined keepingin mind the provisions of Sections 2(1)(e) of the Act read with Sections 16-20 of CPC. Applying the provision of Sections 20(c) of CPC to the presentfacts, in view of undisputed fact that the payments were to be made byVSPL to APL at Delhi and certain payments have indeed, been made at NewDelhi, . it can be inferred that part of cause of action has arisen in Delhi andthus, this court would be competent to entertain the present petition.

13.In view of the foregoing, the present petition is allowed andaccordingly, Hon’ble Mr. Justice R.C. Chopra (Retd.) former Judge of thisCourt [Contact No.: [REDACTED]] is appointed as the Sole Arbitrator toadjudicate the disputes that are stated to have arisen between the parties outof the LLP Agreement dated 01[st]June, 2012 read with Supplementary LLPAgreement and MoU both dated 29[th]January, 2013.

14.The parties are directed to appear before the learned Sole Arbitrator asand when notified. This is subject to the learned Arbitrator making the

necessary disclosure under Section 12(1) of the Act and not being ineligibleunder Section 12(5) of the Act.

15.The learned Arbitrator shall fix his fee in consultation with parties.

16.It is clarified that the Court has not examined any of the claims of theparties and all rights and contentions on merits are left open. Both the partiesshall be free to raise their claims/ counter claims before the learnedArbitrator in accordance with law.

17.Accordingly, the present petition is allowed in the above terms.

NOVEMBER 24, 2021

SANJEEV NARULA, J