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2020 (3) TMI 302

..... ong and whether this Court lacks jurisdiction to entertain the present petition filed under Section 11 of the Arbitration and Conciliation Act, 1996? HELD THAT:- It is well-settled that “seat of arbitration” and “venue of arbitration” cannot be used inter-changeably. It has also been established that mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “seat” of arbitration. The intention of the parties as to the “seat” should be determined from other clauses in the agreement and the conduct of the parties. In the present case, the arbitration agreement entered into between the parties provides Hong Kong as the place of arbitration. The agreement between the parties choosing “Hong Kong” as the place of arbitration by itself will not lead to the conclusion that parties have chosen Hong Kong as the seat of arbitration - On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as “place of arbitration” is not a simple reference as the “venue” for the arbitral proceed .....

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..... of this petition are as under:- The petitioner-company incorporated in India conducts business under the brand name Atlanta Healthcare and is in the business of air quality management and supply of air purifiers, car purifiers, anti-pollution masks and air quality monitors. The respondent is a company incorporated under the laws of Hong Kong and is in the business of manufacture and sale of air quality monitors as well as air quality information. A Memorandum of Understanding (MoU) dated 12.09.2016 was entered into between the parties under which the respondent agreed to sell to the petitioner the complete line of the respondent s air quality monitors products for onward sale. As per the terms of the agreement, the petitioner was appointed as an exclusive distributor for the products for sale within India. Additionally, non-exclusive rights were given to the petitioner qua distribution for sales in Sri Lanka, Bangladesh and Nepal. This agreement was to continue for a period of five years from the starting date, which date was to commence from the date of delivery of the first lot of Air Quality monitors in India, i.e. 03.10.2016 or 01.11.2016, whichever was later. As per the petiti .....

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..... received. On 08.12.2017, the petitioner issued a notice invoking the arbitration clause provided in Clause 17 the MoU. The petitioner also proposed the name of Hon ble Justice RC Chopra as the arbitrator, subject to consent of the respondent and IQAir AG. 6. The petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act before the Delhi High Court on 11.12.2017 seeking directions against the respondent and IQAir AG to honour the terms and conditions of the MoU dated 12.09.2016 and to allow the petitioner to continue acting as the authorised distributor for the sale of all products in terms of the MoU and to injunct the respondent and IQAir AG from terminating the MoU and from entering into any contract with third parties for products which are the subject matter of the MoU. Vide interim order dated 28.02.2018, the High Court restrained the respondent from selling any of its products in India. The petition filed under Section 9 of the Act by the petitioner is still pending before the High Court. 7. In response to the petitioner s notice dated 08.12.2017, invoking the arbitration clause, IQAir vide its letter dated 15.12.2017, under its asset purchase agreeme .....

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..... is applicable and hence, prayed for appointment of sole arbitrator. 10. Mr. Ritin Rai, learned Senior counsel for the respondent has submitted that as per Clause 17.2 of the MoU entered into between the parties, the place of arbitration shall be Hong Kong. Since the place of arbitration is outside India, Section 11 of the Arbitration and Conciliation Act has no application to the present dispute. The learned Senior counsel submitted that the expression used in Clause 17.2 which provides the place of arbitration shall be Hong Kong , in addition to also providing that all disputes arising out of the MoU shall be referred to and finally resolved and administered in Hong Kong clearly shows that the parties have agreed that the arbitration between the parties would be seated in Hong Kong and therefore, Part-I is not applicable and Section 11 has no application to the present dispute. The learned Senior counsel submitted that the petitioner is required to approach the Hong Kong International Arbitration Centre and the Indian Courts have no jurisdiction to entertain the petition for appointment of arbitrator. 11. On behalf of the respondent, much reliance was placed upon BGS SGS SOMA JV .....

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..... ein and in the facts and circumstances of the case, we are not inclined to go into the question on the correctness of BGS Soma or otherwise. 14. The question falling for consideration in the present case is, in view of Clause 17.2 of the MoU whether the parties have agreed that the seat of arbitration is at Hong Kong and whether this Court lacks jurisdiction to entertain the present petition filed under Section 11 of the Arbitration and Conciliation Act, 1996. 15. The petitioner is a company incorporated in India; whereas the respondent is a 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 as commercial under the laws in force in India; and (iii) at least one of the parties is national or habitual resident in any country other than India. In the present case, since the respondent is a company incorporated under the laws of Hong Kong, we are concerned with International Commercial Arbitration . 16. As per Section 2(2), Part-I shall apply where the place of arbitration .....

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..... the curial law. According to the petitioner, there is no express or implied exclusion either in Clause 17 or under the entire MoU of the non-applicability of the laws of India and/or the applicability of the laws of Hong Kong or any other country. Contention of the petitioner is that in the absence of the clear stipulation as to the proper law and curial law of the arbitration, laws of India should be taken as the proper law and curial law under the MoU and under no circumstances, the terms in Clause 17.1 of the MoU be undermined or diluted. 19. The seat of arbitration is a vital aspect of any arbitration proceedings. Significance of the seat of arbitration is that it determines the applicable law when deciding the arbitration proceedings and arbitration procedure as well as judicial review over the arbitration award. The situs is not just about where an institution is based or where the hearings will be held. But it is all about which court would have the supervisory 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 determine the courts that will have e .....

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..... be administered in Hong Kong, laws of Hong Kong would govern the arbitration. The Indian courts have no jurisdiction for appointment of the arbitrator. 23. Observing that when the parties have chosen a place of arbitration in a particular country, that choice brings with it submission to the laws of that country, in Eitzen Bulk A/S v. Ashapura Minechem Ltd. and another (2016) 11 SCC 508, it was held as under:- 34. As a matter of fact the mere choosing of the juridical seat of arbitration attracts the law applicable to such location. In other words, it would not be necessary to specify which law would apply to the arbitration proceedings, since the law of the particular country would apply ipso jure. The following passage from Redfern and Hunter on International Arbitration contains the following explication of the issue: It is also sometimes said that parties have selected the procedural law that will govern their arbitration, by providing for arbitration in a particular country. This is too elliptical and, as an English court itself held more recently in Breas of Doune Wind Farm it does not always hold true. What the parties have done is to choose a place of arbitration in a parti .....

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..... 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. [Underlining added] 25. Clause 17.1 of the MoU stipulates that the MoU is governed by the laws of India and the courts at New Delhi shall have jurisdiction. The interpretation to Clause 17.1 shows that the substantive law governing the substantive contract are the laws of India. The words in Clause 17.1 without regard to its conflicts of laws provisions and courts at New Delhi shall have the jurisdiction has to be read along with Clause 17.3 of the agreement. As per Clause 17.3, the parties have agreed that the party may seek provisional, injunctive or equitable remedies from a court having jurisdiction before, during or after the pendency of any arbitral proceedings. In para (161) in BALCO (2012) 9 SCC 552, this Court held that …..on a logical and schematic construction of Arbitration Act, 1996, the Indian Courts do not have the power to grant interim measures when the seat of arbitration is outside India…. . If the arbitration agreement is found to have seat of arbitration outside India, the .....

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