There is no concurrent jurisdiction of two courts u/s 2(1)(e) of the A & C 1996 Act, namely, the court where the cause of action accrues and the court of the seat of arbitration: Delhi High Court
The Delhi High Court has passed a judgement on 29-01-2021 in the case of Aniket SA Investments LLC vs Janapriya Engineers Syndicate Pvt. Ltd. And Ors. COMMERCIAL APPEAL NO. 504 OF 2019. Justice S.J. Kathawalla and R.I. Chagla allowed the petition.
FACTS OF THE CASE
By this Appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 (“the Act”), the Appellant – Aniket SA Investments LLC (original Petitioner) has challenged an Order of the Learned Single Judge dated 22nd October 2019 (“the Impugned Order”). The Appellant has fled a Section 9 Petition under the Arbitration and Conciliation Act, 1996, seeking urgent interim reliefs in relation to a dispute arising out of a Securities Subscription and Shareholders Agreement.
The Appellant is a foreign investor and shareholder of Respondent No. 2 – Janapriya Townships Private Limited, a Special Purpose Vehicle or Joint Venture Company that is carrying out a real estate development project in Ameenpur Village, Medak District in Telangana. The other shareholder of Respondent No. 2 is Respondent No. 1 – Janapriya Engineers and Syndicate Private Limited. The Appellant, Respondent No. 1 and Respondent No. 2 have entered into a Share Subscription and Shareholders Agreement dated 21 st August 2008 (“the Agreement”). The Agreement appears to have been subsequently modifed. The Appellant, Respondent No. 1 and Respondent No. 2 have also entered into a Development Management Agreement on 2nd March 2009. According to Respondent Nos. 3 to 6, they are the promoters of Respondent No. 1.
Since disputes arose between the Appellant and the Respondents in relation to the implementation and execution of the real estate project, the Appellant issued a Notice of Default dated 19th March 2019 followed by a Notice to Respondent No. 1 exercising a Put Option under the Shareholders Agreement dated 8th July 2019, and fnally a Dispute Notice invoking arbitration dated 22 nd August 2019.
It is in this background that the Appellant fled the Petition under Section 9 of the Act (“Section 9 Petition”) in this Court.
In the background of rival contentions, the Learned Single Judge upheld the objection as to jurisdiction and dismissed the Section 9 Petition. There has been no adjudication on the merits of the matter by the learned Single Judge and even in this Appeal, no submissions are made on the merits of the matter. The only question, as regards which we have heard submissions, is as to the correctness of the Impugned Order in upholding the objection that this Court does not have jurisdiction.
The issue that arised before this Hon’ble court was whether the Impugned Order is correct in accepting the Respondents primary submission that paragraph 96 of BALCO, recognizes two courts as having concurrent jurisdiction under Section 2(1)(e) of the Act, namely, the court where the cause of action accrues and the court of the seat of arbitration?; or, whether a choice of seat of arbitration has the legal efect of conferring exclusive jurisdiction on the courts of that seat and no other court would have jurisdiction under the arbitration agreement?
The Hon’ble High Court took reliance on case of BGS SGS case where the arbitration provided that the arbitration proceedings shall be held at delhi/ Faridabad. The arbitration proceedings were in fact held at New Delhi where 71 sittings took place, and the award was rendered at New Delhi. A petition under Section 34 of the Act came to be fled in Faridabad and the Respondent thereto fled an application seeking a return of the petition to the appropriate court at New Delhi. That application was allowed by the Special Commercial Court at Gurugram. That order was challenged under Section 37 of the Act before the High Court of Punjab and Haryana, which delivered the judgment under challenge and held that the Petition under Section 34 of the Act was maintainable at Faridabad and Delhi was only a convenient venue where arbitral proceedings were held and not the seat. Therefore, it was held that Faridabad would have jurisdiction on the basis of the cause of action having arisen in part in Faridabad. It was in this context that the issue of jurisdiction of courts and choice of seat arose before the Supreme Court.
As stated above, the expression “Court” is defned in Section 2(1)(e) of the Act. The judgment in BALCO was previously understood by some High Courts (including the Impugned Order) to recognize concurrent jurisdiction of the ’cause of action’ court and the ‘seat’ court. However, the judgment in BALCO, on this point, has been fully explained by the Supreme Court in its decision in BGS SGS.
Court is of the opinion that in view of the Supreme Courts reading and understanding of Indus Mobile, in the case of BGS SGS, the Impugned Order was not correct in distinguishing Indus Mobile only because of the clauses in the agreement in Indus Mobile conferring exclusive jurisdiction on the same Court as that of the seat. As the Supreme Court clearly notes, Indus Mobile gives two separate reasons for its conclusion and the frst of them is that a choice of seat has the efect of conferring exclusive jurisdiction on the Court of the seat.
In light of the clear observations, fndings, and conclusions in the case of BGS SGS, we answer the issue, as framed by us above, in the negative, The Impugned Order is accordingly set aside and the Appeal is allowed.
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JUDGMENT REVIEWED BY ABHINAV CHATURVEDI