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Supreme Court: The place of Arbitration in Domestic Arbitration has no significance unlike in International Commercial Arbitration

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As per the facts of Quippo Construction Equipment Limited v. Janardan Nirman Pvt. Limited, the Appellant deals in the business of providing equipment for infrastructure activities and had entered into multiple agreements with the Respondent for renting out Piling Rigs.

Amongst the General Terms and Conditions appended to the agreements the dispute resolution clause provided for settlement of disputes through arbitration governed by the Construction Industry Arbitration Association (CIAA) Rules and Regulations.

The arbitration clause also provided for the appointment of a sole arbitrator and the governing law to be the Arbitration and Conciliation Act, 1996 (“Act”). However, in one of the agreements, the Courts of Kolkata was granted the exclusive jurisdiction and in another, the courts and tribunals at New Delhi were given the exclusive jurisdiction.

The Respondent failed to make payments on the submission of the monthly bills made according to the terms of the contract. Upon issuing a notice to the Respondent, the Appellant referred the dispute to arbitration according to the dispute resolution clause contained in the contract. A sole arbitrator was appointed and the proceedings were commenced in New Delhi. In response to the same, the Respondent denied the very existence of the contract and applied under Secs. 5 & 8 of the Act, in Court of Civil Judge, Kolkata.

The Arbitrator adjourned the proceedings pending suit before the Trial Court. However, the Trial Court rejected the application and the Arbitrator passed an ex-parte award holding that the Appellant was entitled to receive the payment from the Respondent. The Respondent applied under Sec. 34 of the Act for setting aside of the award. The same was rejected and a revision petition was filed, which was also dismissed for lack of maintainability. However, the Calcutta High Court allowed the appropriate petition filed by the Respondent hence the present appeal.

Arguments before the Court:

The Appellant submitted that the Respondent all the while denying the existence of the agreements filed an application before the Civil Court which was rejected and having attained finality the Respondent failed to take part in the arbitral proceedings. Moreover, only while challenging the award under Sec. 34 did the Respondent raised arguments against the venue of the arbitration. Having chosen not to raise any objection in the arbitral proceedings the Respondent had waived their right to challenge the award on the ground of jurisdiction of the arbitrator and the venue of the arbitration.

The Respondent, on the contrary, relied on the principle of party autonomy and contended that the agreements must be considered independently. If the venue if agreed to be Kolkata the same has to be appreciated.

Court’s View:

The settled position of the law as laid down in Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd., (2002) 2 SCC 388, is that the arbitral tribunal has the authority to rule on its jurisdiction as laid down in Sec. 16 of the Act. A challenge to the arbitrator’s jurisdiction can be made under Sec. 16 without prejudice to the party’s participation in the arbitral proceedings. Thus, if a party chooses not to object to the jurisdiction of the arbitral tribunal there will be deemed wavier under Sec. 4 of the Act.

Moreover, concerning the arbitral venue, the Respondent relied on M/S Duro Felguera S.A. v. M/S Gangavaram Port Ltd., (2017) 9 SCC 729, which like the instant was concerned with respect to multiple agreements, but the dispute was an international commercial arbitration with seat in Hyderabad. In the instant case, the arbitration is domestic and the seat or venue of the arbitration does not imply the law applicable to the arbitration proceedings or the substantive law. Unlike in international commercial arbitration, where the ‘place of arbitration’ determine the applicable curial law, ‘place of arbitration’ has least or no significance in determining the law. Irrespective of the venue of the arbitration, the substantive law remains the law of India and the curial law is the Arbitration and Conciliation Act, 1996.

Court’s Decision:

The Court held that the Respondent was precluded from raising any submission or objection as to the venue of arbitration and that the High Court erred in setting aside the award and the appeal was allowed. is now on Telegram. Follow us for regular legal updates and judgements from the court. Follow us on Google News, InstagramLinkedInFacebook & Twitter. You can also subscribe for our Weekly Email Updates. You can also contribute stories like this and help us spread awareness for a better society. Submit Your Post Now.

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