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Arbitration and Conciliation Act has no Application on International Commercial Arbitrations: SC

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The Supreme Court on Thursday while dismissing a petition filed under the Arbitration and Conciliation Act of 1996 held that Arbitration and Conciliation Act has no application on International Commercial Arbitrations which is seated outside India.

The Bench comprising of Justice R. Banumathi, Justice A.S Bopanna and Justice Hrishikesh Roy  in its judgement dismissed the Petition filed by Mankastu Private Limited filed against Airvisual Limited under Section 11(6) of the Arbitration and Conciliation Act, 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.

Mr. Vikas Dutta, learned counsel for the petitioner submitted that Clause 17.1 of the MoU signed between parties clearly stipulates that the MoU is governed by the laws of India and the courts at New Delhi have the jurisdiction. It was submitted that the petitioner and the respondent have only agreed Hong Kong as the “Venue” of arbitration and Hong Kong is not the juridical seat of the arbitration. It was submitted that in view of Clause 17.1 where the parties have agreed that the MoU has to be governed by the laws of India and the courts at New Delhi would have the jurisdiction, Part-I of the Act is applicable and hence, prayed for appointment of sole arbitrator.

Mr. Ritin Rai, learned Senior counsel for the respondent submitted that as per Clause 17.2 of the MoU, 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.

It was held that the words in Clause 17.1 “without regard to its conflicts of laws, provisions and courts at New Delhi shall have the jurisdiction” do not take away or dilute the intention of the parties in Clause 17.2 that the arbitration be administered in Hong Kong. Since Part-I is not applicable to “International Commercial Arbitrations”, in order to enable the parties to avail the interim relief, Clause 17.3 appears to have been added. The words “without regard to its conflicts of laws, provisions and courts at New Delhi shall have the jurisdiction” in Clause 17.1 is to be read in conjunction with Clause 17.3. Since the arbitration is seated at Hong Kong, the petition filed by the petitioner under Section 11(6) of the Act is not maintainable and the petition is liable to be dismissed.

In the result, Arbitration Petition, seeking appointment of an arbitrator under Section 11(6) of the Act was dismissed leaving it open to the petitioner to approach Hong Kong International Arbitration Centre for appointment of the arbitrator.

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