Barminco Indian Underground Mining Services LLP v. Hindustan Zinc Limited

Citation                                            SLP(C) No. 8843/2020
Year of the Case                              2020
Appellant                                         General Manager
                                                          Indian Underground Mining Services LLP
Respondent                                      Hindustan Zinc Limited
Bench/Judges                                   Dinesh Mehta
Acts Involved                                   Arbitration and Conciliation Act, 1996
Important Sections                          Section 2(1)(i), Section 2(1)(ii), Section 9 of the
                                                          Arbitration and Conciliation Act, 1996

This is the very recent case dealing with the maintainability of the application before the High Court concerning the Arbitration and Conciliation Act, 1996 that regulates the domestic arbitration in India. To make arbitration a more preferable mode of settlement of disputes related to commercial transactions and for making India a hub of international commercial arbitrations, this act was amended in 2015 and then later in 2019.

The main issue of this case was the determination of the appropriate court to entertain the application under Section 9 arising out of the foreign seated arbitration proceedings where both the parties of the case are Indian entities. This issue was answered by a single bench of the Rajasthan High Court on 20th July 2020.

Introduction

The contract signed between the companies mentioned that any disputes or differences arising should be amicably settled first by way of a meeting of senior management representatives and if not settled within a period of twenty-one days from the date of commencement of the meeting, the dispute shall be referred and resolved by Singapore International Arbitration Centre (“SIAC”). So, the petitioners claimed this to be “international commercial arbitration” having the jurisdiction of the High Court to decide its subject matter. The court, in this case, observed that the “international commercial arbitration” as given under the Section 2(1)(f) of the act is a nationality centric definition which clearly expresses that for an arbitration to be treated as international commercial arbitration, the agreement has to have at least one foreign party but as both the parties are Indian entities, the arbitration does not qualify as “international commercial arbitration”.

Background and Facts of the Case

The Barminco Indian Underground Mining Services is a Limited Liability Company registered under the Limited Liability Partnership Act, 2008. On 11th March 2019, the petitioner entered into a contract with the respondent to provide the services for the development of Rampura Mine. According to the petitioner, it had deployed its resources, machinery, and manpower intending to perform the work awarded to it. During the course of performance of the work, the petitioner raised many invoices which were duly paid by the respondent but the invoices for the month of February and March 2020 and the claim raised under the “Change in Law Clauses” and “Force Majeure” of the contract was not paid.

As per the application, citing that the contract in question was “financially unviable”, the respondent sought the re-negotiation of the terms of the contract and requested the petitioner to reduce the scope of work by 50%. Because the petitioner refused to accept this offer, the respondent via a letter dated 19.04.2020 unilaterally terminated the contract w.e.f. 01.05.2020 alleging that the petitioner failed to honor clause 15(3) of the contract. The petitioner demanded the unpaid amount towards the work already done from the month of January 2020 to April 2020. The respondent objected this as not to be maintainable before the High Court as it is not an international commercial arbitration and should come under the principal civil court of original jurisdiction as per Section 2(1)(e)(i) of the Arbitration and Conciliation Act, 1996.

Issue under Consideration

Which court would be relevant to entertain a Section 9 application arising out of a foreign seated arbitration proceeding as both the parties to the dispute are Indian entities?

Arguments By The Parties

Concerning the proposition as to whether this application under Section 9 of the Act will lie before this High Court (Rajasthan High Court) or before the Principal Civil Court, the counsel on behalf of the petitioners argued that since the parties have chosen Singapore as the seat of Arbitration, the arbitration cannot be said to be a domestic arbitration governed by Part-I of the Act of 1996. The learned counsel submitted that since Part-I is applicable only when the place of arbitration is in India, the whole of Part-I will not apply in the present case as the place of Arbitration is in Singapore. Therefore, the counsel argued that the High Court of Rajasthan at Jodhpur has proper territorial jurisdiction.

The Counsel on behalf of the respondents said that both the companies are body corporates that are incorporated in India and no endeavors were taken to settle the dispute amicably or through negotiation in the senior representatives meeting. So, the matter does not come under “international commercial arbitration”.  Having proved that the arbitration in question is not an International Commercial Arbitration, the counsel drew the court’s attention towards the provisions contained in clause 2(1)(e) of the act particularly sub-clause (ii), and argued that an application under Section 9 lies before the High Court only in the case of International Commercial Arbitration. He emphasized that as this arbitration is purely domestic, the proper jurisdiction lies with the “Principal Civil Court” as per sub-clause (i) and not before the High Court as claimed by the appellants.

Related Provisions

This case mainly revolves around Section 2(1)(i) and Section 2(1)(ii) of the Arbitration and Conciliation Act, 1996. Section 2(1)(i) talks about the jurisdiction of all the arbitrations other than the international commercial arbitration i.e. about the domestic arbitration while Section 2(1)(ii) talks about the jurisdiction of the international commercial arbitration. The whole case discusses this issue of whether this arbitration belongs to domestic arbitration or international commercial arbitration. One of the important provisions discussed in the case was also Section 9 which talks about the interim measures provided by the court under which the appellant had filed the given application.

Related Cases

Learned counsel on behalf of the appellants relied upon the judgment of MP High Court in the case of Sassan Power Limited v. North American Coal Corporation India Pvt. Ltd[1]. And the judgment of Delhi High Court in the case of GMR Energy Limited v. Doosan Power Systems India Pvt. Ltd[2] to prove that the arbitration in question is an International Commercial Arbitration and the application under Section 9 of the Act will lie before the High Court.

In support of the arguments presented by the counsel on behalf of the respondents, the cases that were cited were TDM Infrastructure Pvt. Ltd. v. UE Development India Private Limited[3]; M/s Larsen & Toubro Ltd. v. Mumbai Metropolitan Region[4]; P.T.C. Techno Pvt. Ltd. v. Samsung India Electronics Pvt. Ltd.[5] and submitted that based on these enunciations made by the Hon’ble Supreme Court in the above judgments, the contract, and arbitration in question are not International Commercial Arbitration and thus the jurisdiction does not lie before the High Court.

Judgment

The court accepted the objection related to the maintainability of the application and held that the Rajasthan High Court is not endowed with the jurisdiction to hear and entertain the present application under Section 9 of the Act of 1996. The jurisdiction to hear this application, as per clause 2(1) (e) of the Act of 1996 read along with Section 10(3) of the Commercial Courts Act, 2015 vests in the commercial court, Udaipur. Keeping up with the spirit of the provisions of Rule10 and 10-A of Order VII of the Code of Civil Procedure, the application filed by the appellant Barminco Indian Underground Mining Services LLP was hereby ordered to be returned to it.

The court also said that both the parties should appear before the commercial court, Udaipur on 31.07.2020. The appellant has to either file a new application or the application which would be returned to it by 31.07.2020. The appellant will be required to pay the requisite court fee. The concerned court will now fix the next date with the consent of the parties as per the convenience and hear the application or consider the prayer for interim relief as deemed expedient.

FAQs

What Level Of Court Is Allowed To Assist In The Domestic Arbitration?

As per Section 2(1)(i), every subject-matter related to arbitration other than international commercial arbitration will come under the jurisdiction of the principal civil court of original jurisdiction of the district.

What Level Of Court Is Allowed To Assist In The International Commercial Arbitration?

As per Section 2(1)(ii), in the case of international commercial arbitration, the jurisdiction on the subject matters of arbitration lies with the High Court of original civil jurisdiction.

Which Authority In This Case Will Arbitrate On The Given Matter?

As the contract signed between the parties beforehand mentioned the arbitration center of Singapore in case of any disputes and differences. So, the arbitration finally will be done by this foreign bench only but then the courts in India can assist in the subject matter related to the dispute but ultimately then it will be arbitrated by the Arbitration center in Singapore.

Why Arbitration Is A More Preferred Mode Of Payment In Commercial Transactions?

Arbitration is more preferred than the judicial method of dispute resolution because it is not hectic and slow like court procedures. Arbitration ensures that the dispute is resolved within the minimum time with very few procedures to follow. That’s why it is often used by the company to save time, energy, and money.

References

[i]https://indiankanoon.org/doc/45310630/

[ii]http://www.lawwarriors.co.in/latest-judgments-on-arbitration-and-conciliation-act-1996/

[iii]https://www.indiacode.nic.in/show-data?actid=AC_CEN_3_46_00004_199626_1517807323919&orderno=2

[iv]https://www.argus-p.com/uploads/blog_article/download/1598096290_Significant_Judgments_on_Arbitration_and_Conciliation_Act,_1996_-_May,_2020_to_July,_2020.pdf


[1] 2015 SCC MP 1747

[2] 2017 SCC Del 11625

[3] [(2008) 14 SCC 271];

[4] [(2019) 2 SCC 271]

[5] [2019 SCC Allahabad 3881

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