In a recent judgement of Big Charter Pvt Ltd vs Ezen Aviation Pty Ltd the High Court of Delhi has held that the parties' mere submission to the exclusive jurisdiction of a foreign court in an arbitration agreement does not take away the jurisdiction of Indian courts under Section 9 of the Arbitration and Conciliation Act in view of the proviso to Section 2(2).
The judgement was passed by a Single Judge Bench of Justice C. Hari Shankar in a plea filed by Big Charter Pvt. Ltd.
The dispute arises out of a lease agreement signed by the petitioner and the respondent in connection with the aircraft. The petitioner provided the scheduled air operator services and the respondent is the business and lease of aircraft. Upon a breach of the contract by the respondent, the petitioner invoked arbitration and moved to the Delhi High Court to seek for grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
A preliminary objection was raised by the respondent with respect to the territorial jurisdiction of the Delhi High Court to entertain the petition. The respondent claimed that the parties had decided the jurisdiction of the courts of Singapore according to the agreement signed by them. It was stated that the seat of arbitration was Singapore and the arbitration proceedings had to be conducted in accordance with the Arbitration Rules of the Singapore International Arbitration Centre (SIAC). On the contrary, the petitioner contended that of the petition will not be entertained by the court, the petitioner will be rendered remediless as far as the pre arbitral interim relief was concerned. The petitioner further contended that proviso to Section 2(2) conferred Section 9 jurisdiction on the High Court, even in respect of foreign seated arbitrations.
The High Court clarified that since the arbitration law in India is codified under the Arbitration and Conciliation Act, 1996, the issue of jurisdiction under Section 9 will be decided in accordance with the Act itself. It was stated, "Any reference to the UNCITRAL Model, or to any textual commentaries may, if at all, be justified only if there is any ambiguity in any of the provisions of the 1996 Act, which requires resolution."
The court acknowledged that the issue of the seat of jurisdiction, concurrent jurisdiction, and exclusion of jurisdiction have been decided in numerous previous cases such as Bharat Aluminium Co. vs Kaiser Aluminium Technical Services Inc, Swastik Gases Pvt Ltd vs Indian Oil Corporation Ltd, B E Siomese Von Staraburg Niedenthal vs Chhatisgarh Investment Ltd, Indus Mobile Distribution Pvt Ltd vs Datawind Innovations Pvt Ltd, Brahmani River Pellets Ltdvs Kamachi Industries Ltd, BGS SGS Soma JV vs NHPC Ltd and Mankastu Impex Pvt Ltd vs Airvisual Ltd. The court also delved into the amendments proposed by the 246th Law Commission Report and this was also discussed at length in the judgement.
The court expressed that with the presence of the proviso to Section 2(2) it cannot be said that once the “seat of arbitration” is fixed as Singapore, courts at Singapore would have exclusive jurisdiction to supervise the arbitral proceedings. It was stated that “With the introduction of this proviso, the fixation of Singapore as the “place” or the “seat” of arbitration would not, ipso facto, divest this Court of Section 9 jurisdiction. Such divestiture would occur only if there is an “agreement to the contrary”.
The respondent contended that the agreement to have Singapore as an exclusive jurisdiction was the ‘agreement to the contrary’. The court differed from this contention and opined that this could not be accepted on the ground that the courts in Singapore had no power to grant the relief under Section 9. It was noted by the court that the parties had entered into the lease agreement much after the introduction of the proviso in Section 2(2) in 2019 and yet, there was no specific clause to suggest to the contrary.
Deciding on the merits of the application, the court stated that for a grant of an interim relief three criteria have to be satisfied by the petitioner. This includes proving balance of convenience, irreparable loss, and the possibility of the frustration of arbitral proceedings if in case such relief was not granted.
The court affirmed that “A Section 9 court has also to be circumspect and should not take care not to entrench on the jurisdiction vested in the arbitrator by Section 17. Section 9, at the pre-arbitral stage, is, therefore, a provision in aid of the arbitral proceedings, intended to provide ad hoc protection, till Section 17 could be invoked "
The present petition was disposed of and the respondent was directed to deposit a sum of Rs. 4,30,00,00 with the Registry of High Court until further orders.