Indian courts cannot appoint arbitrator in matters where the seat of arbitration in outside India
The Hon’ble supreme court through a three judges bench comprising of HMJ R Banumathi, A S Bopanna, Hrishikesh Roy in MANKASTU IMPEX PRIVATE LIMITED V/S AIRVISUAL LIMITED 2020 has observed that
Facts
A petition has been filed under Section 11(6) of the Arbitration and Conciliation Act, 1996 read with Arbitration and Conciliation (Amendment) Act, 2015 read with the Appointment of Arbitrator by the Chief Justice of India Scheme, 1996 seeking appointment of a sole arbitrator under Clause 17.2 of the Memorandum of Understanding dated 12.09.2016 between petitioner-Company incorporated in India and respondent incorporated under the laws of Hong Kong.
Observation:
The Hon’ble Apex court held that the moment the seat (of arbitration) is designated, it is akin to an exclusive jurisdiction clause. The parties may choose a seat as a neutral venue through 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 attracted.
The Hon’ble Supreme Court of India further discussed the case BHARAT ALUMINIUM COMPANY V. KAISER ALUMINIUM TECHNICAL SERVICES INC, 2012 9 SCC 552 wherein in para (161) it was 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, then the Indian Courts cannot exercise supervisory jurisdiction over the award or pass interim orders. It would have therefore been necessary for the parties to incorporate Clause 17.3 that parties have agreed that a party may seek interim relief for which Delhi Courts would have jurisdiction.
In the present case where in arbitration clause the please of arbitration has been mentioned as Hong Kong hence the Indian courts would not have jurisdiction to appoint the arbitrator as the seat of arbitration is outside India.