This article is written by Devasmitha Dinesh, pursuing Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Introduction

Arbitration occupies a place in ADR as a process that ensures party autonomy and least court intervention. However, it still becomes the final resort for the parties to approach the Courts in case of any relief when the Tribunal also seems lost or unable to grant such relief due to valid reasons. The Arbitration and Conciliation Act, 1996 in Section 2(e) defines “court” in the context of International Commercial Arbitration as well as other arbitrations, which are usually perceived to be domestic arbitrations.

Barminco Indian Underground Mining LLP v. Hindustan Zinc Limited (2020) was a case dealt by the Rajasthan High Court in July 2020, where a significant question of jurisdiction of the court to entertain interim relief application under Section 9 of the Arbitration and Conciliation Act, 1996 was decided. This article tries to briefly state the facts of the case, the issues and the decision of the court which held the application to be not maintainable, coupled with the reasoning of the court. This was a peculiar judgement tailored to meet the instant needs of the parties and it specifically states that the reasoning would not be binding on the court which decides a similar application.

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Deciding the maintainability of an interim-relief application

Section 2(1)(e) of the Arbitration and Conciliation Act, 1996 says that in the case of arbitration other than International Commercial Arbitration, the Principal Civil Court of original jurisdiction in a district as well as the High Court in the exercise of its ordinary original civil jurisdiction, both of which have jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, come under the ambit of “court”. It does not include any Civil Court subordinate to such Principal Civil Court, or any Small Cause Courts. In the case of International Commercial Arbitration, the word “court” encompasses the High Court having ordinary original civil jurisdiction to decide the questions forming the subject matter of the arbitration, had been the subject-matter of a suit, and the one having jurisdiction to hear appeals from decrees of courts inferior to such High Court.

In Barminco Indian Underground Mining LLP v. Hindustan Zinc Limited (2020), the Rajasthan High Court decided the substantial question of maintainability of an Interim relief application under Section 9 before the Rajasthan High Court.  There arose a substantial question regarding the jurisdiction of the court to entertain the application mentioned above. The court conducted a deep study into the definition of court as laid down in the Arbitration and Conciliation Act, 1996, so as to arrive at a conclusion. This case motivates us to study the inner meaning of the various provisions in the Arbitration and Conciliation Act, 1996 and interpret them to resolve issues that seem to leave no chance for an answer.

Facts of the case

Barminco Indian Underground Mining LLP(Applicant) is a limited liability partnership, registered under the Limited Liability Partnership Act, 2008. It is one of the world’s largest hard rock underground mining services companies, with operations in Australia, North America and Africa. It had entered into a contract with Hindustan Zinc Limited (Respondent), which is India’s largest and world’s second-largest zinc-lead miner. It has facilities in places like Rampura Agucha, Chanderiya, Dariba, Kayad and Zawar in the state of Rajasthan. This particular contract was signed for the supply of services of the applicant for the development of the Rampura Agucha Mine of the respondent. The applicant had raised several invoices during their course of work, which was duly paid by the respondent. However, the invoices for February, 2020 and March, 2020 and the claim raised under the “force majeure” and “change in law clauses” of the contract was not paid. 

The respondent sought re-negotiation of the terms of the contract as it felt the contract was financially unviable and requested the applicant to reduce the scope of work by 50%. The applicant refused to accept the pleas of the respondent. Hence, vide a letter dated 19.04.2020, the respondent unilaterally terminated the contract, which would be in effect from 01.05.2020, alleging that the applicant had failed to honour Clause 15.3 of the contract. Thereafter, an unpaid amount of Rs.32,17,30,998/- was demanded by the applicant towards the work already done from January, 2020 to April, 2020. A claim of Rs.49.69 crores was raised by the respondent vide its letter dated 29.04.2020, as a counterblast. A Section 9 application seeking injunction, to prevent the respondent from invoking its bank guarantee of Rs 5 crores, was filed by the applicant before the High Court of Rajasthan.

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Issues raised

The counsel for the respondent questioned the maintainability of the application based on four reasons. Firstly, it alleges the applicant to have concealed the fact that it was an Indian incorporated company. Secondly, he contended that the applicant made no attempts to settle the dispute amicably, which was a condition expressly provided in the arbitration agreement. Thirdly, the applicant’s apprehension of the respondent invoking the bank guarantee was the reason behind the application for interim relief. Since the reason ceased to exist, the counsel contended that the interim order is vacated. Finally, the jurisdiction of the High Court was also questioned, based on several provisions of the Arbitration and Conciliation Act, 1996.

It was the last issue that has caught the attention of the fraternity who are associated with the arbitration, Jurisdiction of the High Court to entertain an application for interim relief, in the backdrop of arbitration between two Indian parties who had chosen Singapore as the Seat and venue to resolve the dispute by invoking the SIAC (Singapore International Arbitration Centre) Institutional rules. Only the observations regarding this issue are highlighted in this article.

Observations of the Hon’ble High Court of Rajasthan

The Rajasthan High Court relied on several precedents to look into the issue. 

  1. The applicant company falls under the definitions of “body corporate” and “limited liability partnership”, as provided under Section 2(1)(d) and 2(1)(n) of the Limited Liability Partnership Act of 2008. Hence, it is clearly an Indian company. The respondent is incorporated in India. The two parties have chosen a foreign Seat (here, Singapore). 
  2. The Arbitration and Conciliation Act, 1996 in Section 2(1)(f) defines International commercial arbitration as an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties is an individual who is national of, or habitually resident in, any country other than India, or a body corporate which is incorporated in any country other than India, or an association or a body of individuals whose central management and control are exercised in any country other than India, or the government of a foreign country. 
  3. Considering the above party-centric definition, the arbitration between the parties do not fall under the purview of International commercial arbitration. Hence, the respondent’s contention that application for interim relief before the High Court of Rajasthan holds true when read along with Section 2(1)(e) and 2(1)(f) of the Arbitration and Conciliation Act, 1996. Despite the Seat being a foreign country, the parties are both Indians and hence this does not fall under “International Commercial Arbitration”.
  4. The definition clause is preceded by a caveat that they apply for Part I of the Arbitration and Conciliation Act, 1996 unless the context otherwise requires. The court, after employing an extraction from the book ‘Principles of Statutory Interpretation’ by Justice G.P. Singh, states that any departure from the plain words of a statute is permissible when there is a clear and gross balance of anomaly, and the language of the statute is capable of being modified to remove the anomaly, inter alia. 
  5. The definition clause is assumed to be applicable to the complete statute, and not any selected parts of it. Hence, Sections 2(1)(e) and 2(1)(f) applies to the whole of the Arbitration and Conciliation Act, 1996. 
  6. This is a special case where the arbitration cannot be termed domestic because the Seat is a foreign country. It is not International Commercial Arbitration either and hence is other than International Commercial Arbitration whose award is considered a foreign award. Therefore, either the principal Civil Court of original jurisdiction in a district or the High Court having ordinary original civil jurisdiction can entertain any petitions and applications arising out of this arbitration. Original civil jurisdiction is not conferred upon Rajasthan High Court, but only appellate jurisdiction conferred by the Rajasthan High Court Ordinance, 1949. The court also relied on the Commercial Court Act, 2015, whose Section 10(3) states that all arbitration matters are required to be dealt with by the Commercial Court of the District, as the parties were dealing with a commercial dispute. 
  7. The High Court of Rajasthan has no commercial division. Hence, the court held that this application would lie before the Commercial Court of Udaipur, which is the competent Commercial Court, having territorial jurisdiction to deal with the disputes of this instant case.

Conclusion

This case entails one of the several nuances of choosing a foreign seat when the parties are both Indians. Here, the place-centric aspect of International Commercial Arbitration has been overlooked, and the nation-centric aspect has been considered. The issue regarding jurisdiction of the Court is one which can create a lot of uncertainty, given the ambiguity inherent in the provisions of the Arbitration and Conciliation Act, 1996 regarding the same. In this instant case, the provisions of not just the Arbitration and Conciliation Act, 1996 but the Commercial Courts Act have also been incorporated. The High Court of Rajasthan has carefully delved into the depths of the Arbitration and Conciliation Act, 1996 to rescue the parties of the tricky trap set by the wordings of the provisions of the same. Considering Rule 10 and Rule 10-A of Order VII of the Code of Civil Procedure, 1908, the application filed by the applicant was returned and the parties were asked to appear before the Commercial Court of Udaipur upon filing the returned application or a fresh application.

References

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