MANKASTU IMPEX PRIVATE LIMITED versus AIRVISUAL LIMITED

[2020] 4 S.C.R. 565

MANKASTU IMPEX PRIVATE LIMITED

AIRVISUAL LIMITED

(Arbitration Petition (Civil) No. 32 of 2018)

MARCH 05, 2020

[R. BANUMATHI, A. S. BOPANNAAND HRISHIKESH ROY, JJ.]

Arbitration and Conciliation Act, 1996 – ss.9, 11 –International Commercial Arbitration seated outside India –Petitioner-company (incorporated in India) is in the business ofsupply of air purifiers, air quality monitors etc. – Respondent-company (incorporated in Hong Kong) is in the business ofmanufacture, sale of air quality monitors, air quality information –Memorandum of Understanding (MoU) entered into between theparties – Respondent agreed to sell to the petitioner the completeline of it’s air quality monitors products for onward sale andappointed it as an exclusive distributor for the products for salewithin India – Petitioner received letter from CEO of one IQAirAG inter alia stating that IQAir AG has acquired all technology,associated assets of the respondent and that it will not assume anyof respondent’s contracts or legal obligations – Petitioner eventuallyissued notice invoking arbitration clause in Clause 17 of the MoU– Filed petition u/s.9 seeking directions against respondent andIQAir AG to honour the terms and conditions of the MoU – Pending– Present petition filed u/s.11(6) seeking appointment of SoleArbitrator u/Clause 17 – Held: Words in Clause 17.1 do not suggestthat the seat of arbitration is in New Delhi – Clause 17.2 of theMoU stipulates that the dispute arising out of or relating to it shallbe referred to and finally resolved by the arbitration administeredin Hong Kong – Words in Clause 17.2 that “arbitration administeredin Hong Kong” is an indicia that the seat of arbitration is at HongKong – Once the parties have chosen “Hong Kong” as the place ofarbitration to be administered in Hong Kong, laws of Hong Kongwould govern the arbitration – If the arbitration agreement is foundto have seat of arbitration outside India, then the Indian Courtscannot exercise supervisory jurisdiction over the award or pass

Ainterim orders, thus in the present case in order to enable the partiesto avail interim relief, Clause 17.3 that parties have agreed thatthey may seek interim relief for which Delhi Courts would havejurisdiction, appears to have been added – Since the arbitration isseated at Hong Kong, the petition filed by the petitioner u/s.11(6) isnot maintainable and is dismissed – Open to the petitioner toBapproach Hong Kong International Arbitration Centre forappointment of arbitrator, if they so desire – Arbitration andConciliation Amendment Act, 2015.

Arbitration and Conciliation Act, 1996 – s.2(1)(f) –International Commercial Arbitration – Factors to be fulfilled for –CHeld: Three factors ought to be fulfilled-(i) arbitration; (ii)considered as commercial under the laws in force in India; and (iii)at least one of the parties is national or habitual resident in anycountry other than India.

Arbitration and Conciliation Act, 1996 – Proviso to s.2(2) &Dss.9, 27, 37 – Held: By 2015 Amendment Act, proviso has beenadded to s.2(2) as per which, certain provisions of Part-I of the Acti.e. ss.9, 27, 37(1)(a) and 37(3) have been made applicable to“International Commercial Arbitrations” even if the place ofarbitration is outside India – Arbitration and ConciliationEAmendment Act, 2015.

Arbitration and Conciliation Act, 1996 – InternationalCommercial Arbitration seated outside India – Proviso to s.2(2),s.11 – Applicability of s.11 – Held: s.11 is not included in proviso tos.2(2) and thus, it has no application to International CommercialArbitrations seated outside India – Arbitration and ConciliationFAmendment Act, 2015.

Dismissing the petition, the Court

HELD: 1.1 As per Section 2(1)(f) of the Arbitration andConciliation Act, 1996, to be an “International CommercialGArbitration”, three factors ought to be fulfilled-(i) arbitration; (ii)considered as commercial under the laws in force in India; and(iii) at least one of the parties is national or habitual resident inany country other than India. As per Section 2(2), Part-I shallapply where the place of arbitration is in India. If the

“International Commercial Arbitration” is seated in India, thenPart-I of the Act shall apply. [Paras 15, 16][574-C-D]

1.2 Significance of the seat of arbitration is that it determinesthe applicable law when deciding the arbitration proceedings andarbitration procedure as well as judicial review over the arbitrationaward. The situs is not just about where an institution is based orwhere the hearings will be held. But it is all about which courtwould have the supervisory power over the arbitrationproceedings. “Seat of arbitration” and “venue of arbitration”cannot be used inter-changeably. Mere expression “place ofarbitration” cannot be the basis to determine the intention of theparties that they have intended that place as the “seat” ofarbitration. The intention of the parties as to the “seat” shouldbe determined from other clauses in the agreement and theconduct of the parties. On plain reading of the arbitrationagreement, it is clear that the reference to Hong Kong as “placeof arbitration” is not simple reference as the “venue” for thearbitral proceedings; but reference to Hong Kong is for finalresolution by arbitration administered in Hong Kong. Clause 17.2of the MoU stipulates that the dispute arising out of or relatingto MoU including the existence, validity, interpretation, breachor termination thereof or any dispute arising out of or relating toit shall be referred to and finally resolved by the arbitrationadministered in Hong Kong. The words in Clause 17.2 that“arbitration administered in Hong Kong” is an indicia that theseat of arbitration is at Hong Kong. Once the parties have chosen“Hong Kong” as the place of arbitration to be administered inHong Kong, laws of Hong Kong would govern the arbitration.The Indian courts have no jurisdiction for appointment of thearbitrator. If the arbitration agreement is found to have seat ofarbitration outside India, then the Indian Courts cannot exercisesupervisory jurisdiction over the award or pass interim orders.It would have therefore been necessary for the parties toincorporate Clause 17.3 that parties have agreed that partymay seek interim relief for which Delhi Courts would havejurisdiction. By the Amendment Act, 2015 (w.e.f. 23.10.2015), aproviso 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

Arelief, 27- court’s assistance for evidence, 37(1)(a)- appeal againstthe orders and Section 37(3) havebeenmadeapplicableto “International Commercial Arbitrations” even if the place ofarbitration is outside India. Section 11 is not included in theproviso and accordingly it has no application to “InternationalCommercial Arbitrations” seated outside India. [Paras 19-23,B25][575-F-G; 576-A, D-G; 578-H; 579-A-B]

1.3 The words in Clause 17.1 do not suggest that the seatof arbitration is in New Delhi. Since Part-I is not applicable to“International Commercial Arbitrations”, in order to enable theparties to avail the interim relief, Clause 17.3 appears to haveCbeen added. The words “without regard to its conflicts of lawsprovisions and courts at New Delhi shall have the jurisdiction” inClause 17.1 is to be read in conjunction with Clause 17.3. Sincethe arbitration is seated at Hong Kong, the petition filed by thepetitioner under Section 11(6) of the Act is not maintainable. [ParaD26][579-F-H]

Bharat Aluminium Company v. Kaiser AluminiumTechnical Services Inc. (BALCO) (2012) 9 SCC 552 :[2012] 12 SCR 327 – followed.

Enercon (India) Limited and others v. Enercon GMBHEand another (2014) 5 SCC 1 : [2014] 2 SCR 855; EitzenBulk A/S v. Ashapura Minechem Ltd. and another (2016)11 SCC 508 : [2016] 2 SCR 634; Indus MobileDistribution (P) Ltd. v. Datawind Innovations (P) Ltd.and others (2017) 7 SCC 678 : [2017] 4 SCR 744 –relied on.F

Union of India v. Hardy Exploration and Production(India) INC (2018) 7 SCC 374 : [2018] 5 SCR 662;BGS SGS SOMA JV v. NHPC Ltd. 2019 (17) SCALE369; Chandra Prakash and others v. State of U.P andGanother (2002) 4 SCC 234 : [2002] 2 SCR 913 –referred to.

Case Law Reference

[2018] 5 SCR 662referred toPara 92019 (17) SCALE 369referred toPara 11H

CIVIL ORIGINAL JURISDICTION: Arbitration Petition (Civil)No. 32 of 2018.

Petition under Section 11(6) of the Arbitration and ConciliationAct, 1996 read with the Arbitration and Conciliation (Amendment) Act,2015 read with the Appointment of Arbitrator by the Chief Justice ofIndia Scheme, 1996 seeking appointment of Sole Arbitrator under Clause17.2 of the Memorandum of Understanding dated 12.09.2016.

Ritin Rai, Sr.Adv., Vikas Dutta, Ujjwal Nagaich, Siddharth Silwal,O. P. Bhadani, Ms. Kritika Bhardwaj, Siddhartha Jha, Ms. Gunjan Mathur,Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. BANUMATHI, J.

1. This petition has been filed under Section 11(6) of the Arbitrationand Conciliation Act, 1996 read with Arbitration and Conciliation(Amendment) Act, 2015 read with the Appointment of Arbitrator by theChief Justice of India Scheme, 1996 seeking appointment of solearbitrator under Clause 17.2 of the Memorandum of Understanding dated12.09.2016 between petitioner-Company incorporated in India andrespondent-incorporated under the laws of Hong Kong.

2. Brief facts of the case relevant for the purposes of this petitionare as under:-

The petitioner-company incorporated in India conducts businessunder the brand name “Atlanta Healthcare” and is in the business of airquality management and supply of air purifiers, car purifiers, anti-pollutionmasks and air quality monitors. The respondent is company incorporatedunder the laws of Hong Kong and is in the business of manufacture andsale of air quality monitors as well as air quality information. AMemorandum of Understanding (MoU) dated 12.09.2016 was enteredinto between the parties under which the respondent agreed to sell to

Athe petitioner the complete line of the respondent’s air quality monitorsproducts for onward sale. As per the terms of the agreement, thepetitioner was appointed as an exclusive distributor for the products forsale within India. Additionally, non-exclusive rights were given to thepetitioner qua distribution for sales in Sri Lanka, Bangladesh and Nepal.This agreement was to continue for period of five years from theBstarting date, which date was to commence from the date of delivery ofthe first lot of Air Quality monitors in India, i.e. 03.10.2016 or 01.11.2016,whichever was later. As per the petitioner, it has spent approximatelyRs.17,00,000/- in promoting and creating brand value for the productsin India. Further the petitioner spent Rs. 9,00,000/- towards promotingCthe products at over fifteen business events such as Indo-German NaturalHealth Fair, India International Trade Fair, etc.

3. On 14.10.2017, the petitioner received an e-mail from oneMr. Charl Cater of IQAir AG (Proposed respondent No.2) informingthe petitioner that the respondent is part of IQAir AG. Attached to theDe-mail was letter dated 13.10.2017 by the CEO of IQAir AG statingthat IQAir AG has acquired all technology and the associated assets ofthe respondent. Further, the product of AirVisual Node has beendiscontinued and the IQAir AG is in the process of relaunching newand improved version which will be rebranded as IQAir AirVisual Pro.The letter also stated that IQAir AG will not assume any contracts orElegal obligations of the respondent and will work on case to case basiswith resellers to negotiate new contracts and that the IQAir AirVisualproducts will be made available under separate dealer agreements.

4. The petitioner sent reply dated 15.10.2017, invoking the termsof MoU with the respondent as per which the petitioner holds exclusiveFrights for sale of AirVisual Products for five years within the territory ofIndia. Further the petitioner stated as per the terms of the MoU, in theevent of any take out/buy out or change in shareholding of the entity, itwas obligatory on the part of the respondent to ensure that the partytaking over the business/assets shall honour the contract on the sameGterms and conditions and it is deemed presumption that the acquisitionof business/assets of the respondent has been done keeping in view theexisting liabilities and obligations.

5. On 31.10.2017, the petitioner sent an e-mail to the respondentand IQAir AG seeking Proforma Invoice to enable it to issue purchaseHorders. In reply, it was reiterated by IQAir AG that they have not

assumed any legal obligations of the respondent. However, they offeredto supply IQAir branded AirVisual Pro to the petitioner under newnon-exclusive arrangement with new wholesale price of USD 172 perunit as against the original price of USD 110 per unit agreed upon betweenthe petitioner and the respondent. The petitioner thereafter sent severale-mails but no response was received. On 08.12.2017, the petitionerissued notice invoking the arbitration clause provided in Clause 17 theMoU. The petitioner also proposed the name of Hon’ble Justice RCChopra as the arbitrator, subject to consent of the respondent and IQAirAG.

6. The petitioner filed petition under Section 9 of the Arbitrationand Conciliation Act before the Delhi High Court on 11.12.2017 seekingdirections against the respondent and IQAir AG to honour the terms andconditions of the MoU dated 12.09.2016 and to allow the petitioner tocontinue acting as the authorised distributor for the sale of all products interms of the MoU and to injunct the respondent and IQAir AG fromterminating the MoU and from entering into any contract with third partiesfor products which are the subject matter of the MoU. Vide interimorder dated 28.02.2018, the High Court restrained the respondent fromselling any of its products in India. The petition filed under Section 9 ofthe Act by the petitioner is still pending before the High Court.7. In response to the petitioner’s notice dated 08.12.2017, invokingthe arbitration clause, IQAir vide its letter dated 15.12.2017, under itsasset purchase agreement with the respondent, it has not assumed anycontractual and legal obligations and that the terms of the MoU werenot enforceable against IQAir AG. The respondent also sent its replydated 05.01.2018 to the notice dated 08.12.2017 stating that Clause 17of the MoU provides for arbitration administered and seated in HongKong. The respondent averred that should the petitioner wish to resolvethe dispute by arbitration, they should refer the dispute to an arbitrationinstitution in Hong Kong. Further, it was stated that the respondent didnot agree to ad hoc arbitration but clearly agreed to administeredarbitration in Hong Kong. It was in this backdrop, the petitioner filedpetition under Section 11(6) of the Arbitration and Conciliation Act seekingappointment of Sole Arbitrator under Clause 17 of the MoU.

8. According to the petitioner, the proposed arbitration betweenthe Petitioner and the respondent being an arbitration between companyregistered in India under the Companies Act, 1956 and the respondent –

Aa body corporate which is incorporated under the laws of Hong Kong, isan “International Commercial Arbitration” as per Section 2(1)(f) of theArbitration and Conciliation Act, 1996 having seat of arbitration in Delhi.In terms of Section 11(6) read with Section 11(9), the petitioner thereforeseeks appointment of arbitrator.B9. Mr. Vikas Dutta, learned counsel for the petitioner submittedthat Clause 17.1 of the MoU clearly stipulates that the MoU is governedby the laws of India and the courts at New Delhi have the jurisdiction. Itwas submitted that the petitioner and the respondent have only agreedHong Kong as the “Venue” of arbitration and Hong Kong is not thejuridical seat of the arbitration. As to the decision in the case of UnionCof India v. Hardy Exploration and Production (India) INC (2018) 7SCC 374, the learned counsel for the petitioner has contended that theratio of the judgment clearly postulates that “venue” can become a“seat” only if – (i) no other condition is postulated; (ii) if conditionprecedent is attached to the term “place”, the said condition/indicia hasDto be satisfied first for “venue” to be equivalent to “seat”. It was submittedthat in view of clear Clause 17.1 where the parties have clearly agreedthat the MoU has to be governed by the laws of India and the courts atNew Delhi would have the jurisdiction, Part-I of the Act is applicableand hence, prayed for appointment of sole arbitrator.

E10. Mr. Ritin Rai, learned Senior counsel for the respondent hassubmitted that as per Clause 17.2 of the MoU entered into between theparties, the place of arbitration shall be Hong Kong. Since the place ofarbitration is outside India, Section 11 of the Arbitration and ConciliationAct has no application to the present dispute. The learned Senior counselsubmitted that the expression used in Clause 17.2 which provides “theFplace of arbitration shall be Hong Kong”, in addition to also providingthat “all disputes arising out of the MoU shall be referred to and finallyresolved and administered in Hong Kong” clearly shows that the partieshave agreed that the arbitration between the parties would be seated inHong Kong and therefore, Part-I is not applicable and Section 11 has noGapplication to the present dispute. The learned Senior counsel submittedthat the petitioner is required to approach the Hong Kong InternationalArbitration Centre and the Indian Courts have no jurisdiction to entertainthe petition for appointment of arbitrator.

11. On behalf of the respondent, much reliance was placed uponHBGS SGS SOMA JV v. NHPC Ltd. 2019 (17) SCALE 369 to contend

that the expression “arbitration proceedings” would make it clear thatthe “venue” is really the “seat of arbitration proceedings” as the aforesaidexpression does not include just one or more single or part hearing butthe arbitration proceedings as whole including making of the award atthat place. It was submitted that in the present case, the word“administered” used in Clause 17.2 of the MoU between the partiesclearly shows that the parties have agreed that the arbitration betweenthe parties would be seated in Hong Kong.

12. In BGS Soma, the expression used was “….arbitrationproceedings shall be held at New Delhi/Faridabad”. In BGS Soma,the three-Judges Bench of the Supreme Court held that in all the threeappeals by the parties, proceedings were held at New Delhi and theawards were also signed at New Delhi and not in Faridabad. The learnedBench held that in the absence of contrary expression expressed by theparties, it leads to the conclusion that the parties have chosen New Delhias the seat of arbitration under Section 20(1) of the Arbitration Act. InBGS Soma, the Bench held that the judgment in Hardy Exploration iscontrary to the decision of the Constitution Bench judgment of this Courtin Bharat Aluminium Company v. Kaiser Aluminium TechnicalServices Inc. (2012) 9 SCC 552 (BALCO) and therefore, cannot beconsidered good law.

13. Learned counsel for the petitioner has contended that HardyExploration and BGS Soma, both being by the three-Judges Bench,declaration by the later Bench that Hardy Exploration is not god law,may not tantamount to an overriding of Hardy Exploration. It wassubmitted that when both the judgments were by Bench of equal strength,it was not open to the Bench rendering the decision in BGS Soma to holdthat the decision in Hardy Exploration was incorrect and the learnedBench in BGS Soma ought to have referred the matter to larger Bench.To substantiate the contention, the learned counsel for the petitioner hasreferred to Chandra Prakash and others v. State of U.P and another(2002) 4 SCC 234 wherein this Court held that the doctrine of bindingprecedent is of utmost importance in the administration of judicial systemas it promotes certainty and consistency in judicial decisions. However,considering Clause 17 of the MoU in the present case and the definiteclauses therein and in the facts and circumstances of the case, we arenot inclined to go into the question on the correctness of BGS Soma orotherwise.

A14. The question falling for consideration in the present case is, inview of Clause 17.2 of the MoU whether the parties have agreed thatthe seat of arbitration is at Hong Kong and whether this Court lacksjurisdiction to entertain the present petition filed under Section 11 of theArbitration and Conciliation Act, 1996.B15. The petitioner is company incorporated in India; whereas

B15. The petitioner is company incorporated in India; whereasthe respondent is company incorporated under the laws of Hong Kong.Section 2(1)(f) of the Act defines “International Commercial Arbitration”.As per Section 2(1)(f), to be an “International Commercial Arbitration”,three factors ought to be fulfilled – (i) arbitration; (ii) considered ascommercial under the laws in force in India; and (iii) at least one of theCparties is national or habitual resident in any country other than India. Inthe present case, since the respondent is company incorporated underthe laws of Hong Kong, we are concerned with “International CommercialArbitration”.16. As per Section 2(2), Part-I shall apply where the place ofDarbitration is in India. If the “International Commercial Arbitration” isseated in India, then Part-I of the Act shall apply. The interpretation ofSection 2(2) of the Act was considered by the Constitution Bench inBALCO, wherein it was held that Part-I of the Act would have noapplication to “International Commercial Arbitrations” held outside India.EIn para (194) of the judgment, it was held as under:-

“194. …..Section 2(2) makes declaration that Part I of theArbitration Act, 1996 shall apply to all arbitrations which takeplace within India. We are of the considered opinion that Part I ofthe Arbitration Act, 1996 would have no application to internationalFcommercial arbitration held outside India. Therefore, such awardswould only be subject to the jurisdiction of the Indian courts whenthe same are sought to be enforced in India in accordance withthe provisions contained in Part II of the Arbitration Act, 1996.……”

G17. In the present case, Clause 17 of the MoU is relevant clausegoverning the law and dispute resolution. Clause 17 reads as under:-

17. Governing Law and Dispute Resolution

17.1 This MoU is governed by the laws of India, without regardto its conflicts of laws provisions and courts at New Delhi shallHhave the jurisdiction.

17.2 Any dispute, controversy, difference or claim arising out ofor relating to this MoU, including the existence, validity,interpretation, performance, breach or termination thereof or anydispute regarding non-contractual obligations arising out of orrelating to it shall be referred to and finally resolved by arbitrationadministered in Hong Kong.

The place of arbitration shall be Hong Kong.

The number of arbitrators shall be one. The arbitration proceedingsshall be conducted in English language.

17.3 It is agreed that party may seek provisional, injunctive, orequitable remedies, including but not limited to preliminary injunctiverelief, from court having jurisdiction, before, during or after thependency of any arbitration proceeding.

18. The learned counsel for the petitioner has submitted that aperusal of Clause 17.1 of the MoU makes it clear that the petitioner andthe respondent have only agreed that the proper law of the contract tobe laws of India and the MoU is clearly silent on the proper law and thecurial law of the arbitration and therefore, Clause 17.1 would govern theproper law and the curial law. According to the petitioner, there is noexpress or implied exclusion either in Clause 17 or under the entire MoUof the non-applicability of the laws of India and/or the applicability of thelaws of Hong Kong or any other country. Contention of the petitioner isthat in the absence of the clear stipulation as to the proper law and curiallaw of the arbitration, laws of India should be taken as the proper lawand curial law under the MoU and under no circumstances, the terms inClause 17.1 of the MoU be undermined or diluted.

19. The seat of arbitration is vital aspect of any arbitrationproceedings. Significance of the seat of arbitration is that it determinesthe applicable law when deciding the arbitration proceedings andarbitration procedure as well as judicial review over the arbitration award.The situs is not just about where an institution is based or where thehearings will be held. But it is all about which court would have thesupervisory power over the arbitration proceedings. In Enercon (India)Limited and others v. Enercon GMBH and another (2014) 5 SCC 1,the Supreme Court held that “the location of the Seat will determinethe courts that will have exclusive jurisdiction to oversee thearbitration proceedings. It was further held that the Seat normallycarries with it the choice of that country’s arbitration/curial law”.

A20. It is well-settled that “seat of arbitration” and “venue ofarbitration” cannot be used inter-changeably. It has also been establishedthat mere expression “place of arbitration” cannot be the basis todetermine the intention of the parties that they have intended that placeas the “seat” of arbitration. The intention of the parties as to the “seat”should be determined from other clauses in the agreement and the conductBof the parties.

21. In the present case, the arbitration agreement entered intobetween the parties provides Hong Kong as the place of arbitration.The agreement between the parties choosing “Hong Kong” as the placeof arbitration by itself will not lead to the conclusion that parties haveCchosen Hong Kong as the seat of arbitration. The words, “the place ofarbitration” shall be “Hong Kong”, have to be read along with Clause17.2. Clause 17.2 provides that “….any dispute, controversy, differencearising out of or relating to the MoU “shall be referred to andfinally resolved by arbitration administered in Hong Kong…..”. OnDa plain reading of the arbitration agreement, it is clear that the referenceto Hong Kong as “place of arbitration” is not simple reference as the“venue” for the arbitral proceedings; but reference to Hong Kong isfor final resolution by arbitration administered in Hong Kong. Theagreement between the parties that the dispute “shall be referred toand finally resolved by arbitration administered in Hong Kong”Eclearly suggests that the parties have agreed that the arbitration be seatedat Hong Kong and that laws of Hong Kong shall govern the arbitrationproceedings as well as have power of judicial review over the arbitrationaward.

22. As pointed out earlier, Clause 17.2 of the MoU stipulates thatFthe dispute arising out of or relating to MoU including the existence,validity, interpretation, breach or termination thereof or any dispute arisingout of or relating to it shall be referred to and finally resolved by thearbitration administered in Hong Kong. The words in Clause 17.2 that“arbitration administered in Hong Kong” is an indicia that the seat ofGarbitration is at Hong Kong. Once the parties have chosen “Hong Kong”as the place of arbitration to be administered in Hong Kong, laws ofHong Kong would govern the arbitration. The Indian courts have nojurisdiction for appointment of the arbitrator.

23. Observing that when the parties have chosen place ofHarbitration in particular country, that choice brings with it submission to

the laws of that country, in Eitzen Bulk A/S v. Ashapura MinechemLtd. and another (2016) 11 SCC 508, it was held as under:-

“34.As matter of fact the mere choosing of the juridical seat ofarbitration attracts the law applicable to such location. In otherwords, it would not be necessary to specify which law wouldapply to the arbitration proceedings, since the law of the particularcountry would apply ipso jure.The following passage fromRedfern and Hunter on International Arbitration contains thefollowing explication of the issue:

“It is also sometimes said that parties have selected theprocedural law that will govern their arbitration, by providingfor arbitration in particular country. This is too elliptical and,as an English court itself held more recently in Breas of DouneWind Farm it does not always hold true. What the parties havedone is to choose place of arbitration in particular country.That choice brings with it submission to the laws of that country,including any mandatory provisions of its law on arbitration.To say that the parties have “chosen” that particular law togovern the arbitration is rather like saying that an Englishwoman who takes her car to France has “chosen” Frenchtraffic law, which will oblige her to drive on the right-hand sideof the road, to give priority to vehicles approaching from theright, and generally to obey traffic laws to which she may notbe accustomed. But it would be an odd use of language to saythis notional motorist had opted for “French traffic law”. Whatshe has done is to choose to go to France. The applicability ofFrench law then follows automatically. It is not matter ofchoice.

Parties may well choose particular place of arbitrationprecisely because its lex arbitri is one which they find attractive.Nevertheless, once place of arbitration has been chosen, itbrings with it its own law. If that law contains provisions thatare mandatory so far as arbitration are concerned, thoseprovisions must be obeyed. It is not matter of choice anymore than the notional motorist is free to choose which localtraffic laws to obey and which to disregard.”” [Underliningadded]

A24. In the context of domestic arbitration, holding that once the“Seat” is determined, only that jurisdictional court would have exclusivejurisdiction, in Indus Mobile Distribution (P) Ltd. v. DatawindInnovations (P) Ltd. and others (2017) 7 SCC 678, it was held asunder:-

B“19. conspectus of all the aforesaid provisions shows that themoment the seat is designated, it is akin to an exclusive jurisdictionclause. On the facts of the present case, it is clear that the seat ofarbitration is Mumbai and Clause 19 further makes it clear thatjurisdiction exclusively vests in the Mumbai courts. Under theLaw of Arbitration, unlike the Code of Civil Procedure whichCapplies to suits filed in courts, reference to “seat” is conceptby which neutral venue can be chosen by the parties to anarbitration clause. The neutral venue may not in the classical sensehave jurisdiction — that is, no part of the cause of action mayhave arisen at the neutral venue and neither would any of theDprovisions of Sections 16 to 21 of CPC be attracted. In arbitration

law however, as has been held above, the moment “seat” isdetermined, the fact that the seat is at Mumbai would vest Mumbaicourts with exclusive jurisdiction for purposes of regulating arbitral”proceedings arising out of the agreement between the parties.[Underlining added]

25. Clause 17.1 of the MoU stipulates that the MoU is governedby the laws of India and the courts at New Delhi shall have jurisdiction.The interpretation to Clause 17.1 shows that the substantive law governingthe substantive contract are the laws of India. The words in Clause 17.1“without regard to its conflicts of laws provisions and courts atFNew Delhi shall have the jurisdiction” has to be read along withClause 17.3 of the agreement. As per Clause 17.3, the parties haveagreed that the party may seek provisional, injunctive or equitableremedies from court having jurisdiction before, during or after thependency of any arbitral proceedings. In para (161) in BALCO (2012) 9GSCC 552, this Court held that “…..on logical and schematicconstruction of Arbitration Act, 1996, the Indian Courts do not havethe power to grant interim measures when the seat of arbitration isoutside India….”. If the arbitration agreement is found to have seat ofarbitration outside India, then the Indian Courts cannot exercisesupervisory jurisdiction over the award or pass interim orders. It would

have therefore been necessary for the parties to incorporate Clause17.3 that parties have agreed that party may seek interim relief forwhich Delhi Courts would have jurisdiction. In this regard, we may usefullyrefer 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), proviso has been added to Section 2(2) of the Act as perwhich, certain provisions of Part-I of the Act i.e. Sections 9 – interimrelief, 27 – court’s assistance for evidence, 37(1)(a) – appeal againstthe orders and Section 37(3) have been made applicable to “InternationalCommercial 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 provisionsof sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercialarbitration, even if the place of arbitration is outside India, and anarbitral award made or to be made in such place is enforceableand recognised under the provisions of Part II of this Act.”

It is pertinent to note that Section 11 is not included in the provisoand accordingly, Section 11 has no application to “InternationalCommercial Arbitrations” seated outside India.

26. The words in Clause 17.1 “without regard to its conflicts oflaws 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 thatthe arbitration be administered in Hong Kong. The words in Clause 17.1do not suggest that the seat of arbitration is in New Delhi. Since Part-Iis not applicable to “International Commercial Arbitrations”, in order toenable the parties to avail the interim relief, Clause 17.3 appears to havebeen added. The words “without regard to its conflicts of lawsprovisions and courts at New Delhi shall have the jurisdiction” inClause 17.1 is to be read in conjunction with Clause 17.3. Since thearbitration is seated at Hong Kong, the petition filed by the petitionerunder Section 11(6) of the Act is not maintainable and the petition isliable to be dismissed.

580SUPREME COURT REPORTS

[2020] 4 S.C.R.

A27. In the result, Arbitration Petition No.32 of 2018 filed by thepetitioner seeking appointment of an arbitrator under Section 11(6) ofthe Act is dismissed. It is however open to the petitioner to approachHong Kong International Arbitration Centre for appointment of thearbitrator, if they so desire.

Divya Pandey

Petition dismissed.