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Browse Law School Education ADR: Arbitration Important Arbitration Cases

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Now let’s start with our next case which is Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., which is a 2019, Supreme Court case.

BRIEF FACTS:

Now let me start with the brief facts of the case.

The appellant entered into an agreement with the respondent for sale of 40,000 WMT (Wet Metric Tonne) of Iron Ore Pellets on FOB terms and payment was to be made by Letter of Credit in Bhubaneswar. The loading port was Dhamra Port, Bhadrak in Odisha and destination was Chennai/Ennore Ports in Tamil Nadu. 

Dispute arose between the parties regarding the price and payment terms and the appellant did not deliver the goods to the respondent. The respondent then claimed for damages alleging that it had to procure the Iron Ore Pellets from other sources at higher rates. The appellant denied any liability to pay damages on the ground that the contract was later modified, and that the respondent breached the material terms of the contract and this led to the dispute between the parties.

Clause 18 of the agreement between the parties contains an arbitration clause which reads as under:-

“18. Arbitration shall be under Indian Arbitration and Conciliation Law 1996 and the Venue of Arbitration shall be Bhubaneswar.”

The respondent on 07 October, 2016 invoked arbitration clause. The appellant did not agree for the appointment of the arbitrator. Hence, the respondent filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the Madras High Court on 24 January 2018 for appointment of sole arbitrator. The appellant contested the petition challenging the jurisdiction of the Madras High Court on the ground that the parties have agreed that the Seat of arbitration shall be in Bhubaneswar and therefore, only the Orissa High Court has exclusive jurisdiction to appoint the arbitrator. The High Court held that in absence of any express clause excluding jurisdiction of other courts, both the Madras High Court and the Orissa High Court will have jurisdiction over the arbitration proceedings. The appellant then challenged the impugned order.

ISSUE:

So what were the issues at hand in this case?

Whether the Madras High Court could exercise jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996 despite the fact that the agreement contained a clause that the venue of arbitration shall be Bhubaneswar?

HELD: 

Now what did the Supreme Court hold in this case?

The Supreme Court held thatwhere the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and the parties intended to exclude all other courts. In this present case, the parties have agreed that the “venue” of arbitration shall be at Bhubaneswar. Considering the agreement of the parties having Bhubaneswar as their venue of arbitration, the intention of the parties is to exclude all other courts.

The Court relied on the case of Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., (2013) 9 SCC 32, which is a 2013 Supreme Court case, wherein it was held that non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does not make any material difference.

The Supreme Court therefore heldthat when the parties have agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act and that only Orissa High Court will have the jurisdiction to entertain the petition filed under Section 11(6) of the Act. 

RATIO: 

The Supreme Court has paralleled the legal effect of “seat of arbitration” with “venue” in domestic arbitration. The Supreme Court held that agreement between the parties constitutes their intent to exclude all other courts from exercising jurisdiction.

In my next video, we’ll talk about the famous BCCI v. Kochi Cricket Pvt. Ltd. case.

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