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Case Reviews, The Law

Quippo construction equipment limited V/S Janardan Nirman Pvt. Ltd.

In this case, it was observed by the court that the arbitration agreements clearly provided the place of conduction of the arbitration proceedings to be New Delhi, therefore only courts of New Delhi can exercise supervisory jurisdiction over the proceedings.

By: Pooja Mujumdar, ILS Law College, Pune.

Bench: Uday Umesh Lalit, Dinesh Maheshwari

Advocates: Mr. Akshat Hansaria, Mr. Tushar Bhatnagar, Mr. Surya Prakash

FACTS: 

  • The case dealt with disputes arising out of four ‘equipment rental agreements’ entered between the claimant company and the respondent company. The arbitration clause of the first agreement which was entered between the parties on 1.8.2010 conferred exclusive jurisdiction to the courts of New Delhi to decide any disagreement arising out of the agreement. 
  • It further mentioned New Delhi to be the place of arbitration. Following this, two more agreements of the same kind were entered between the parties for supply of more equipment. The final agreement was entered between the parties on 14.4.11 which conferred exclusive jurisdiction to the courts of Kolkata to deal with any dispute arising out of the agreement.

A default with respect to payment was made and it invoked the arbitration clause. It provided that the appointment of the arbitrator would be made in accordance with the ‘Construction Industry Arbitration Association Rules.

  • In its reply to the notice of arbitration the respondent denied existence of any agreement between the parties and filed a title suit at the Court of Civil Judge (Junior Division), Sealdah praying for a permanent injunction restraining the claimant from relying on the arbitration clause. 
  • At the interim stage, the trial court passed the restraint order putting a stay on the arbitration proceedings. Meanwhile, the claimants appealed against the order and also filed an application under S.5 read with S.8 of the Arbitration and Conciliation Act, 1996 at the trial court. The trial court observed that the dispute clearly fell under the scope of the arbitration clause and referred the parties to arbitration. 
  • A common ex-parte arbitral award was passed in favour of the claimants. This was challenged by the respondent before the Calcutta High Court, which got dismissed on ground of lack of jurisdiction. The Alipore court marked that the jurisdiction to entertain a S.34 petition under the Act is conferred on the courts of the place where the arbitration is usually conducted, these courts are also known as ‘courts exercising supervisory jurisdiction’ over the arbitration proceedings. 

In this case, it was observed by the court that the arbitration agreements clearly provided the place of conduction of the arbitration proceedings to be New Delhi, therefore only courts of New Delhi can exercise supervisory jurisdiction over the proceedings.

  • A revision petition was filed against this order before the Calcutta High Court which was also dismissed on the ground of existence of alternative remedy u/s 37. After which, an appropriate petition was filed by the respondents before the Calcutta High Court by which the order passed by the Alipore court upholding the award was dismissed and the case was restored back to the court of Additional District Judge Alipore. This order was brought to challenge before the Supreme Court.

ISSUES:

  1. Whether a party has to object to the arbitral proceedings after the decision if it did not before at any stage raise an objection?
  2. Whether the parties who have not objected to the seat and jurisdiction of the arbitrator at any stage are said to be waived off their rights?
  3. Importance of place of arbitration in domestic arbitration. 

ARGUMENTS FOR QUIPPO CONSTRUCTION:

Janardan filed an appeal under S.37 of the Act before the Calcutta High Court, which was allowed in 2019. The High Court noted that since the parties, as evident from the cause title of the appeal under S.37 of the Act, were agreeable to the jurisdiction of the Alipore Court in the proceedings, it directed the Alipore Court to adjudicate the dispute. Quippo Construction thereafter filed a Special Leave Petition before the Supreme Court.

ARGUMENTS FOR JANARDAN:

Janardan submitted that since Kolkata was the venue for the arbitration in one of the agreements, every arbitration agreement should be considered separately.

It depended on the judgment of the Supreme Court in DuroFelguera S.A. v. Gangavaram Port Ltd. where there were six arbitral agreements, and each was subject to a separate and independent arbitral proceeding. 

ANALYSIS AND CONCLUSION:

To summarize, the Apex Court in light of S.4 read with S.16 of the Act held that any objection with relation to jurisdiction of arbitrator or seat of arbitration has to be raised before the arbitral tribunal in conformity with S.16 of the Act, after which it would be considered that parties have waived off their right to object to arbitral proceedings.

In the instant case, the Apex Court held that the Hon’ble Calcutta High Court had blundered in setting aside the award.

The court also further made it clear any objection with respect to place of arbitration or scope of authority of arbitrator cannot be raised by the respondents in any further proceedings in any forum with respect to independency of arbitral agreements, the Apex Court said that in the instant case, the four arbitral agreements forming a series had common characteristics, like all of them dealt with ‘Domestic arbitration’, the manner of appointment of arbitrator in all the four agreements were similar, thus the Apex Court found a thread of similarity between all the four arbitral agreements and did not see any harm in allowing for composite reference. It is important to note here that the entire independency of arbitral agreements issue, was discussed by the Apex court.

It would have been much better for sake of clarity on this question of law, if the Hon’ble Lordships would have shed some light on it as an independent question of law, going little beyond the precedents presented before the court.

While deciding on this issue, the court has also made an observation that in case of domestic arbitrations the curial law as well as the substantive law are one and the same in contrast to ‘International Commercial Arbitration’, where curial law and substantive law might be different. 

Supreme Court in this case also explains why venue in a domestic commercial arbitration under the Act does not have the same significance as it does for international commercial arbitrations thus seriously limiting the ability of opportunistic parties to engage in forum shopping.

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