calcutta high court

Calcutta High Court: A single bench comprising of Shekhar B. Saraf, J., held that when in an agreement, there exist a clause conferring ‘exclusive jurisdiction' upon a court other than the court declared as ‘venue', the court having exclusive jurisdiction will be considered as a ‘Contrary Indicia' and therefore, will consider as the seat of arbitration. The Court held that the venue or the place of arbitration will be Kolkata would only be the venue or the place of arbitration, but the seat of arbitration would be Mumbai, therefore, only the Courts in Mumbai would have the jurisdiction over the arbitration.

Factual Matrix

In the instant matter, the petitioners entered a demerger and amalgamated into petitioner 1, who carries a business related to designing home and offices online. The petitioner 2 and the respondents entered MRA (Master Rental Agreement) the terms of which were honoured by the petitioner 1 after the amalgamation and issued a bank guarantee. The respondent directed the petitioner 2 to send the rental payments to SREI in part. The bank guarantee was reduced after the request of SREI. SREI again requested the bank to reduce the guarantee but before that the Respondent invoked the Bank guarantee. The petitioners sent two legal notices to the respondent to invoke the arbitration clause in the MRA to which they received no satisfactory reply. The petitioner 1 preferred the instant application under Section 11 of the Arbitration and Conciliation Act, 1996 (the Act) for appointment of an arbitrator to resolve the disputes that have arisen between the parties.

Petitioner's Contentions

The petitioners contended that MRA has provided the clause and place for arbitration in case of dispute between the parties. It was contended further that the venue of the arbitration should be considered as seat of arbitration and giving the courts of Mumbai should not be considered as ‘contrary indicia'. The petitioners also contended that the courts of Kolkata will have jurisdiction over the matter of arbitration and the courts of Mumbai may have jurisdiction regarding the subject matter of the agreement. The petitioners stated that the current matter of dispute regarding bank guarantee falls under the scope of arbitration.

Respondent's Contentions

The respondent challenged the jurisdiction of this Court to entertain the present petition and argued that the exclusive jurisdiction in the matter falls with the court of Mumbai. The respondent contended that the Specific Forum Selection Clause overrides the arbitration clause. The respondent further contended that as per the MRA, the court of Mumbai have exclusive jurisdiction which restricts Kolkata to be venue of arbitration, not the seat of arbitration. Moreover, it was also argued that the dispute in the case is beyond the scope of arbitration.

Moot Point

  1. Whether this Court have jurisdiction to entertain present petition?

  2. Whether the invocation of bank guarantee is within the purview of the arbitration clause?

Court's Observation

The Court observed that the Courts should adopt harmonious rule of construction while interpreting two conflicting clauses in an agreement. The Court stated “Contractual interpretation necessitates taking into consideration all clauses and relevant factors to propound the proper intention between the parties. The rule of harmonious construction must be applied so that a panoramic meaning can be given to any agreement.”

The Court observed that if there is a separate clause specifying that ‘arbitration' or ‘arbitration proceedings' are to be held at a place, then that place would be the one designated as the ‘seat of the arbitration'. But in case of ‘contrary indicia' other clauses must be read to decide the ‘venue' and ‘seat' of the arbitration.

While distinguishing the judgment of the Supreme Court in Mankatsu Impex (P) Ltd. v. Airvisual Ltd., (2020) 5 SCC 399, where the Court held the venue to be the seat despite the presence of a contrary jurisdiction clause, the Court observed that the abovementioned judgment was in relation to an international commercial arbitration where the agreement stated that seat of arbitration was Hong Kong and the Courts in Delhi will have exclusive jurisdiction for the purpose of injunctive relief only.

While relying upon ISGEC Heavy Engineering Ltd. v. Indian Oil Corpn. Ltd., 2020 SCC OnLine Del 1788 and Cravants Media (P) Ltd. v. Jharkhand State Cooperative Milk Food Federation (P) Ltd., 2021 SCC OnLine Del 5350, the Court observed that that the ‘venue' is merely the convenient place of arbitration and not the seat, when the “courts of another place have been granted the exclusive jurisdiction” and the place having exclusive jurisdiction is ‘contrary indicia'.

Court's Verdict

While dismissing the present application on the ground of want of jurisdiction, the Court held that in the light of facts and circumstance of the instant matter, the jurisdiction given to the Courts of Mumbai is ‘contrary indicia', therefore, this court does not have jurisdiction to entertain the present petition and therefore cannot decide the issue whether the invocation of bank guarantee is within the purview of the arbitration clause.

[Homevista Decor & Furnishing (P) Ltd. v. Connect Residuary (P) Ltd., 2023 SCC OnLine Cal 1405, order dated 08-06-2023]

*Judgment by Justice Shekhar B. Saraf,

Advocates who appeared in this case :

Mr. Krishnaraj Thaker, Ms. Saptarshi Banerjee, Ms. Namrata Basu and Ms. Sreenita Ghosh Thaker, Counsel for the Petitioners

Mr. Sanjay Kumar Baid and Mr. Rishab Karnani, Counsel for the Respondents

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