REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.   5850       2019 (Arising out of SLP(C) No.15672 of 2019)

BRAHMANI RIVER PELLETS LIMITED                ...Appellant

VERSUS

KAMACHI INDUSTRIES LIMITED        …Respondent

                J U D G M E N T

R. BANUMATHI, J.

Leave granted.

2. 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

contains  the  clause  that  venue  of  arbitration  shall  be

Bhubaneswar,  is the question falling for  consideration in this

appeal.

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3. Brief facts which led to filing of this appeal are as under:-

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,

Odisha  and  destination  was  Chennai/Ennore  Ports,  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  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 contract was later modified

and that  the  respondent  breached the material  terms of  the

contract and this led to the dispute between the parties.  

4. 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.”

5. The respondent on 07.10.2016 invoked arbitration clause.

The  appellant  did  not  agree  for  the  appointment  of  the

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arbitrator.   Hence,  the  respondent  filed  petition  being  OP

No.398  of  2018  under  Section  11(6)  of  the  Arbitration  and

Conciliation Act,  1996 (for short  ‘the Act’)  before the Madras

High Court  on 24.01.2018 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 Seat of arbitration be Bhubaneswar and therefore,

only the Orissa High Court has exclusive jurisdiction to appoint

the arbitrator.   The Madras High Court  vide impugned order

appointed a former judge of the Madras High Court as the sole

arbitrator by holding that mere designation of “Seat” by parties

does not oust the jurisdiction of other courts other than at the

Seat of arbitration.  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.   Challenging the

impugned order, the appellant has preferred this appeal.

6. The learned counsel for the appellant submitted that when

the parties have agreed for a place/venue for arbitration, it gets

the status of Seat which is the juridical Seat and therefore only,

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the Orissa High Court will have the jurisdiction under the Act.

The  learned  counsel  submitted  that  the  Madras  High  Court

erred in assuming jurisdiction under Section 11(6) of the Act

despite  Bhubaneswar  being  the  Seat  of  arbitration.  In  this

regard,  reliance  was  placed  upon  Indus  Mobile  Distribution

Private  Limited  v.  Datawind  Innovations  Private  Limited  and

others (2017) 7 SCC 678,  Union of India v. Hardy Exploration

and  Production  (India)  Inc. (2018)  7  SCC  374  and  other

judgments.   It  was  contended  that  the  High  Court  erred  in

holding that clause (18) of the agreement does not outst the

jurisdiction of the courts other than the courts at the Seat of

arbitration  at  Bhubaneswar.   The  learned  counsel  submitted

that  the  High Court  erred in  not  applying the ratio  of  Indus

Mobile wherein  the  Supreme  Court  held  that  in  case  of

domestic arbitration where the parties have agreed at the Seat

of arbitration, the said court will have exclusive jurisdiction.  

7. Per  contra,  the  learned  counsel  for  the  respondent

submitted that since cause of action arose at both the places

i.e.  Bhubaneswar  and  Chennai,  both  Madras  High  Court  as

well  as  Orissa  High  Court  will  have  supervisory  jurisdiction.

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Reliance was placed upon para No. (96) of  Bharat Aluminium

Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC

552.  It was submitted that in domestic arbitration, unless the

parties tie themselves to an exclusive jurisdiction of the court in

the  agreement,  mere  mention  of  “venue”  as  a  place  of

arbitration will not confer exclusive jurisdiction upon that court.

It was urged that apart from mere mention of “venue” as place

of arbitration, there should be other concomitant circumstances

like  use  of  words  “alone”,  “exclusive”,  “only”  etc.  or  other

circumstances,  then  only  the  jurisdiction  of  the  other  court

which  otherwise  would  have  had  jurisdiction  would  stand

excluded.  Taking us through the impugned order, the learned

counsel  for  the  respondent  submitted  that  mere  expression

“venue of arbitration shall be Bhubaneswar will have no special

significance” and the High Court rightly exercised its jurisdiction

under Section 11 (6) of the Act in appointing the arbitrator.

8. We have carefully considered the submissions of both the

parties  and perused the impugned order  and the judgments

relied upon by the parties.

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9. As  per  Section  2(2)  of  the  Act,  arbitrations  which  take

place in India are governed by Part-I of the Act.  The “court”

which will have jurisdiction to decide the questions forming the

subject matter of arbitration is the “court” as defined by Section

2(1)(e) of the Act which reads as under:-

2.  Definitions.  – (1)  In  this  Part,  unless the context  otherwise

requires,-

……

(e)  “Court” means –

(i)  in  the  case  of  an  arbitration  other  than  international

commercial arbitration, the principal Civil Court of original

jurisdiction  in  a  district,  and  includes  the  High  Court  in

exercise  of  its  ordinary  original  civil  jurisdiction,  having

jurisdiction  to  decide the questions forming the subject-

matter of the arbitration if the same had been the subject-

matter of a suit, but does not include any Civil Court of a

grade inferior to such principal Civil Court, or any Court of

Small Causes;

(ii)   in  the case of  international  commercial  arbitration,  the

High  Court  in  exercise  of  its  ordinary  original  civil

jurisdiction,  having  jurisdiction  to  decide  the  questions

forming the subject-matter  of  the arbitration if  the same

had been the subject-matter of a suit, and in other cases,

a  High  Court  having  jurisdiction  to  hear  appeals  from

decree or courts subordinate to that High Court.

As  per  Section  2(2)  of  the  Act,  Part-I  would  apply  to  all

arbitration where the place of arbitration is in India. Section 2(1)

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(e) of the Act defines “court” with reference to Part-I of the Act

and would govern the place of arbitration.  

10. In BALCO, the issue arose before the Constitution Bench

was  as  to  whether  in  international  commercial  arbitrations

whose juridical  or  legal  Seat of  arbitration was outside India

whether the provisions of Part-I of the Act would be applicable

for grant of relief as held in Bhatia International v. Bulk Trading

S.A. and another (2002) 4 SCC 105.  The Constitution Bench in

BALCO held that “if the legal or juridical seat of arbitration is

outside India, then Part-I of the Arbitration and Conciliation Act,

1996 shall  be  inapplicable  to  such arbitrations;  and even in

case a clause in the arbitration agreement purports to apply

Part-I of the 1996 Act to an arbitration where the juridical seat

of arbitration is outside India, Part-I shall be inapplicable to the

extent  inconsistent  with  the  arbitration  law  of  the  seat  of

arbitration.”1

11. In  BALCO,  the court highlighted the distinction between

the “Seat” and “Venue” in the context of Section 20(3) of the

Act.   Section  20(3)  of  the  Act  allows  the  parties  to  hold

1 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552

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meetings,  proceedings and hearings at  any place agreed by

the  parties.   In  BALCO,  the  court  has  held  that  in  an

international  commercial  arbitration  “seated”  in  India,  parties

may by  mutual  agreement,  hold arbitral  proceedings outside

India.  This, however, would not have the effect of changing the

Seat of arbitration which would continue to remain in India.  The

court  then  envisages  a  situation  where  the  arbitration

agreement  designates  a  foreign  Seat  and  also  selects

Arbitration Act,  1996 as the law applicable to the conduct  of

arbitration proceedings and in such circumstances, hearing of

the  arbitration  conducted  at  the  venue  fixed  by  the  parties

would not have the effect of changing the Seat of arbitration

which would remain in India.  In para (100), the Supreme Court

held as under:-

“100. True, that in an international commercial arbitration, having

a seat in India, hearings may be necessitated outside India. In

such  circumstances,  the  hearing  of  the  arbitration  will  be

conducted at the venue fixed by the parties, but it would not have

the effect of changing the seat of arbitration which would remain

in  India.  The  legal  position  in  this  regard  is  summed  up  by

Redfern  and  Hunter,  The  Law  and  Practice  of  International

Commercial Arbitration (1986) at p. 69 in the following passage

under the heading “The Place of Arbitration”:

…….

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This,  in  our  view,  is  the  correct  depiction  of  the  practical

considerations and the distinction between “seat” [Sections 20(1)

and 20(2)] and “venue” [Section 20(3)]. We may point out here

that the distinction between “seat” and “venue” would be quite

crucial  in  the  event,  the  arbitration  agreement  designates  a

foreign country as the “seat”/“place” of the arbitration and also

selects the Arbitration Act, 1996 as the curial law/law governing

the arbitration proceedings. It would be a matter of construction

of the individual agreement to decide whether:

(i) the designated foreign “seat” would be read as in fact

only  providing  for  a  “venue”/“place”  where  the hearings

would be held, in view of the choice of the Arbitration Act,

1996 as being the curial law, OR

(ii) the specific designation of a foreign seat, necessarily

carrying  with  it  the  choice  of  that  country’s

arbitration/curial law, would prevail over and subsume the

conflicting selection choice by the parties of the Arbitration

Act, 1996.

Only if the agreement of the parties is construed to provide for

the “seat”/“place” of arbitration being in India — would Part I of

the Arbitration Act, 1996 be applicable. If the agreement is held

to  provide  for  a  “seat”/“place”  outside  India,  Part  I  would  be

inapplicable to the extent inconsistent with the arbitration law of

the  seat,  even  if  the  agreement  purports  to  provide  that  the

Arbitration Act, 1996 shall govern the arbitration proceedings.”

12. As pointed out earlier, Section 2(1)(e) of the Act defines

the “Court”  with  reference to  the term “subject-matter  of  the

suit”.  As per Section 2(1)(e) of the Act, if the “subject-matter of

the suit” is situated within the arbitral jurisdiction of two or more

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courts, the parties can agree to confine the jurisdiction in one of

the competent courts.  In para (96) of  BALCO,  the Supreme

Court held that the term “subject-matter” in Section 2(1)(e) of

the Act is to identify the court having supervisory control over

the  arbitral  proceedings.   The  Supreme Court  held  that  the

provisions  in  Section  2(1)(e)  of  the  Act  has  to  be  read  in

conjunction with Section 20 of the Act which give recognition to

the autonomy of the parties as to “place of arbitration”.  The

observations  in  para  No.  (96)  in  BALCO pertaining  to

arbitrations governed by Part-I of the Act i.e. where the “place

of arbitration” in India read as under:-

“96. …….We are of the opinion, the term “subject-matter of the

arbitration” cannot be confused with “subject-matter of the suit”.

The term “subject-matter” in Section 2(1)(e) is confined to Part I.

It  has a reference and connection with the process of dispute

resolution. Its purpose is to identify the courts having supervisory

control  over  the  arbitration  proceedings.  Hence,  it  refers  to  a

court  which  would  essentially  be  a  court  of  the  seat  of  the

arbitration process. In our opinion, the provision in Section 2(1)

(e) has to be construed keeping in view the provisions in Section

20  which  give  recognition  to  party  autonomy.  Accepting  the

narrow construction as projected by the learned counsel for the

appellants  would,  in  fact,  render  Section  20  nugatory.  In  our

view,  the  legislature  has  intentionally  given  jurisdiction  to  two

courts  i.e.  the  court  which  would  have  jurisdiction  where  the

cause of action is located and the courts where the arbitration

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takes  place.  This  was  necessary  as  on  many  occasions  the

agreement may provide for a seat of arbitration at a place which

would be neutral to both the parties. Therefore, the courts where

the  arbitration  takes  place  would  be  required  to  exercise

supervisory control over the arbitral process. For example, if the

arbitration is held in Delhi, where neither of the parties are from

Delhi, (Delhi having been chosen as a neutral place as between

a party from Mumbai and the other from Kolkata) and the tribunal

sitting in Delhi passes an interim order under Section 17 of the

Arbitration Act, 1996, the appeal against such an interim order

under Section 37 must lie to the courts of Delhi being the courts

having supervisory jurisdiction over the arbitration proceedings

and the tribunal. This would be irrespective of the fact that the

obligations  to  be  performed  under  the  contract  were  to  be

performed either at Mumbai or at Kolkata, and only arbitration is

to take place in Delhi.  In such circumstances, both the courts

would have jurisdiction i.e. the court within whose jurisdiction the

subject-matter of the suit  is  situated and the courts within the

jurisdiction  of  which  the  dispute  resolution  i.e.  arbitration  is

located.”

The above observations in para No. (96) is in the context that

on  many  occasions,  agreement  may  provide  for  a  seat  of

arbitration at a place which would be neutral to both the parties.

In  such  circumstances,  it  was  observed  that  the  two  courts

would  have  jurisdiction  that  is  the  court  within  whose

jurisdiction “subject-matter” of the suit is situated and the court

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within  the jurisdiction of  which the dispute resolution i.e.  the

“venue” of arbitration is located.

13. As per Section 20 of the Act, parties are free to agree on

the place of arbitration. Party autonomy has to be construed in

the context of parties choosing a court which has jurisdiction

out of two or more competent courts having jurisdiction.  This

has been made clear  in the three-Judges Bench decision in

Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd. (2013) 9 SCC

32.  In the said case, respondent-Indian Oil Corporation Limited

appointed  M/s.  Swastik  Gases  (P)  Ltd.  situated  at  Jaipur,

Rajasthan  as  their  consignment  agent.   The  dispute  arose

between  the  parties  as  huge  quantity  of  stock  of  lubricants

could  not  be  sold  by  the  applicant  and  they  could  not  be

resolved  amicably.   In  the  said  matter,  clause  18  of  the

agreement  between the parties  provided that  the agreement

shall be subject to the jurisdiction of the courts at Kolkata. The

appellant-Swastik invoked clause 18 – arbitration clause and

filed  application  under  Section  11(6)  of  the  Act  before  the

Rajasthan  High  Court  for  appointment  of  arbitrator.     The

respondent  contested the application  made by  Swastik  inter

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alia by raising the plea of lack of territorial jurisdiction of the

Rajasthan High Court  in  the  matter.   The plea of  Indian Oil

Corporation was that the agreement has been made subject to

jurisdiction of the courts at Kolkata and Rajasthan High Court

lacks the territorial  jurisdiction in  dealing with  the application

under Section 11(6) of the Act.  The designated judge held that

Rajasthan  High  Court  did  not  have  territorial  jurisdiction  to

entertain  the application  under  Section  11(6)  of  the  Act  and

gave  liberty  to  Swastik  to  file  the  arbitration  application  in

Calcutta High Court which order came to be challenged before

the Supreme Court.  Pointing out that the words like “alone”,

“only”, “exclusive” or “exclusive jurisdiction” have not been used

in the agreement and use of such words is not decisive and

non-use of such words does not make any material difference

as to the intention of  the parties by having clause 18 of  the

agreement that the courts at Kolkata shall have the jurisdiction,

the Supreme Court held as under:-

“31. In the instant case, the appellant does not dispute that part

of cause of action has arisen in Kolkata. What appellant says is

that  part  of  cause  of  action  has  also  arisen  in  Jaipur  and,

therefore, the Chief Justice of the Rajasthan High Court or the

designate  Judge  has  jurisdiction  to  consider  the  application

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made by the appellant for the appointment of an arbitrator under

Section 11. Having regard to Section 11(12)(b) and Section 2(e)

of  the  1996  Act  read  with  Section  20(c)  of  the  Code,  there

remains no doubt that the Chief Justice or the designate Judge

of the Rajasthan High Court has jurisdiction in the matter.  The

question  is,  whether  parties  by  virtue  of  Clause  18  of  the

agreement have agreed to exclude the jurisdiction of the courts

at Jaipur or, in other words, whether in view of Clause 18 of the

agreement, the jurisdiction of the Chief Justice of the Rajasthan

High Court has been excluded?

32. For answer to the above question, we have to see the effect

of the jurisdiction clause in the agreement which provides that

the agreement  shall  be subject  to  jurisdiction of  the courts  at

Kolkata. It is a fact that whilst providing for jurisdiction clause in

the  agreement  the  words  like  “alone”,  “only”,  “exclusive”  or

“exclusive jurisdiction” have not been used but this, in our view,

is not decisive and does not make any material difference. The

intention of the parties—by having Clause 18 in the agreement—

is clear and unambiguous that the courts at Kolkata shall have

jurisdiction which means that the courts at Kolkata alone shall

have jurisdiction. It is so because for construction of jurisdiction

clause, like Clause 18 in the agreement, the maxim    expressio

unius est exclusio alterius   comes into play as there is nothing to

indicate to the contrary. This legal maxim means that expression

of one is the exclusion of another. By making a provision that the

agreement is subject to the jurisdiction of the courts at Kolkata,

the  parties  have  impliedly  excluded  the  jurisdiction  of  other

courts. Where the contract specifies the jurisdiction of the courts

at a particular place and such courts  have jurisdiction to deal

with the matter, we think that an inference may be drawn that

parties intended to exclude all other courts. A clause like this is

not hit by Section 23 of the Contract Act at all. Such clause is

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neither forbidden by law nor it is against the public policy. It does

not offend Section 28 of the Contract Act in any manner.

33. The above view finds support from the decisions of this Court

in  Hakam Singh v. Gammon India Limited  (1971) 1 SCC 286,

A.B.C.  Laminart  Private  Limited  v.  A.B.C.  Agencies  (1989)  2

SCC 163, R.S.D.V. Finance Corporation Private Limited v. Shree

Vallabh  Glass  Works  Limited  (1993)  2  SCC  130,  Angile

Insulations v. Davy Ashomore India Limited  (1995) 4 SCC 153,

Shriram City Union Finance Corporation Limited v. Rama Mishra

(2002) 9 SCC 613, Hanil Era Textiles Limited v. Puromatic Filters

Private  Limited  (2004)  4  SCC  671  and  Balaji  Coke  Industry

Private Limited v. Maa Bhagwati Coke Gujarat Private Limited

(2009) 9 SCC 403.”  [underlining added]

14. In  Swastik, the Supreme Court held that clause like (18)

of the agreement will not be hit by Section 23 of the Contract

Act and it is not forbidden by law nor it is against public policy.

It was so held that as per Section 20 of the Act, parties are free

to choose the place of arbitration.  This “party autonomy” has to

be construed in the context of choosing a court out of two or

more courts having competent jurisdiction under Section 2(1)

(e) of the Act.

15. The inter-play between “Seat”  and “place of  arbitration”

came  up  for  consideration  in  the  case  of  Indus  Mobile

Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. and others

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(2017) 7 SCC 678.  After referring to BALCO, Enercon (India)

Limited and others  v.  Enercon GMBH and another  (2014)  5

SCC 1 and Reliance Industries Limited and another v. Union of

India (2014)  7  SCC  603 and  also  amendment  to  the  Act

pursuant  to  the  Law  Commission  Report,  speaking  for  the

Bench Justice Nariman held as under:-

“18. The amended Act, does not, however, contain the aforesaid

amendments,  presumably  because the  BALCO  (2012) 9 SCC

552 judgment in no uncertain terms has referred to “place” as

“juridical seat” for the purpose of Section 2(2) of the Act. It further

made  it  clear  that  Sections  20(1)  and  20(2)  where  the  word

“place”  is  used,  refers  to  “juridical  seat”,  whereas  in  Section

20(3), the word “place” is equivalent to “venue”. This being the

settled law, it was found unnecessary to expressly incorporate

what the Constitution Bench of the Supreme Court has already

done by way of construction of the Act.

19. A conspectus of all the aforesaid provisions shows that the

moment  the  seat  is  designated,  it  is  akin  to  an  exclusive

jurisdiction clause. On the facts of the present case, it is clear

that  the  seat  of  arbitration  is  Mumbai  and  Clause  19  further

makes it clear that jurisdiction exclusively vests in the Mumbai

courts.  Under  the  Law of  Arbitration,  unlike  the  Code of  Civil

Procedure which applies to suits filed in courts, a reference to

“seat” is a concept by which a neutral venue can be chosen by

the parties to an arbitration clause. The neutral venue may not in

the classical  sense have jurisdiction — that  is,  no part  of  the

cause of action may have arisen at the neutral venue and neither

would  any of  the provisions of  Sections 16 to  21 of  CPC be

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attracted. In arbitration law however, as has been held above,

the  moment  “seat”  is  determined,  the  fact  that  the  seat  is  at

Mumbai would vest Mumbai courts with exclusive jurisdiction for

purposes  of  regulating  arbitral  proceedings  arising  out  of  the

agreement between the parties.

20. It  is  well  settled  that  where  more  than  one  court  has

jurisdiction, it is open for the parties to exclude all other courts.

For an exhaustive analysis of the case law, see Swastik Gases

(P)  Ltd. v.  Indian Oil  Corpn.  Ltd.  (2013)  9  SCC 32 This  was

followed in a recent judgment in  B.E. Simoese Von Staraburg

Niedenthal v.  Chhattisgarh Investment Ltd.  (2015) 12 SCC 225

Having regard to the above, it is clear that Mumbai courts alone

have  jurisdiction  to  the  exclusion  of  all  other  courts  in  the

country,  as the juridical  seat  of  arbitration  is  at  Mumbai.  This

being  the  case,  the  impugned  judgment  is  set  aside.  …...”

[underlining added]

16. Where 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 parties intended to exclude all other

courts.  In the present case, the parties have agreed that the

“venue” of  arbitration shall  be at  Bhubaneswar.   Considering

the agreement of the parties having Bhubaneswar as the venue

of arbitration, the intention of the parties is to exclude all other

courts.   As held in  Swastik, non-use of words like “exclusive

jurisdiction”, “only”, “exclusive”, “alone” is not decisive and does

not make any material difference.

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17. 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.  Since

only Orissa High Court will have the jurisdiction to entertain the

petition filed under Section 11(6) of the Act, the impugned order

is liable to be set aside.

18. In  the  result,  the  impugned  order  of  the  Madras  High

Court in OP No.398 of 2018 dated 02.11.2018 is set aside and

this appeal is allowed.  The parties are at liberty to approach

the Orissa High Court seeking for appointment of the arbitrator.  

…………………………..J.                                                                   [R. BANUMATHI]

…………………………..J.                                                              [A.S. BOPANNA]

New Delhi; July 25, 2019

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