Holding

Clause 17.2 makes Hong Kong the seat of arbitration, rendering Section 11 inapplicable and Indian courts without jurisdiction to appoint the arbitrator.

Summary

The petitioner, Mankastu Impex Private Limited, an Indian distributor of air‑quality monitors, entered into a Memorandum of Understanding with AirVisual Limited, a Hong Kong company, appointing it as exclusive distributor in India. After AirVisual was acquired by IQAir AG, which refused to honour the MoU, the petitioner invoked the arbitration clause and sought interim relief under Section 9 of the Arbitration Act, while also filing a petition under Section 11(6) for appointment of a sole arbitrator. The dispute centered on whether Clause 17.2 of the MoU made Hong Kong the seat of arbitration, thereby rendering Section 11 inapplicable, and whether the Indian courts could entertain the petition for arbitrator appointment. The Court held that the phrase “arbitration administered in Hong Kong” unequivocally indicated Hong Kong as the seat, so the arbitration is an international commercial arbitration seated outside India. Consequently, Part I of the Act does not apply, Section 11 is excluded by the 2015 amendment, and Indian courts lack jurisdiction to appoint the arbitrator or grant interim relief. The petition under Section 11(6) was therefore dismissed, with the petitioner directed to approach the Hong Kong International Arbitration Centre if desired.

Issues considered

Whether Clause 17.2 of the MoU designates Hong Kong as the seat of arbitration.
Whether Section 11(6) of the Arbitration and Conciliation Act, 1996 is applicable to an international commercial arbitration seated outside India.
Whether Indian courts have jurisdiction to appoint an arbitrator or grant interim relief when the seat is outside India.

Legislation cited

Appointment of Arbitrator by the Chief Justice of India Scheme, 1996
Arbitration and Conciliation Act, 1996s. 11, s. 2(1)(f), s. 2(2), s. 27, s. 37, s. 9
Arbitration and Conciliation (Amendment) Act, 2015

Subjects

ArbitrationSeat of arbitrationInternational commercial arbitrationSection 11Section 2(2) provisoInterim reliefJurisdictionHong KongIndia

Judgment

[2020] 4 S.C.R. 565 565

MANKASTU IMPEX PRIVATE LIMITED A
v.
AIRVISUAL LIMITED
(Arbitration Petition (Civil) No. 32 of 2018)
MARCH 05, 2020 B
[R. BANUMATHI, A. S. BOPANNA
AND HRISHIKESH ROY, JJ.]
Arbitration and Conciliation Act, 1996 – ss.9, 11 –
International Commercial Arbitration seated outside India –
C
Petitioner-company (incorporated in India) is in the business of
supply of air purifiers, air quality monitors etc. – Respondent-
company (incorporated in Hong Kong) is in the business of
manufacture, sale of air quality monitors, air quality information –
Memorandum of Understanding (MoU) entered into between the
parties – Respondent agreed to sell to the petitioner the complete D
line of it’s air quality monitors products for onward sale and
appointed it as an exclusive distributor for the products for sale
within India – Petitioner received a letter from CEO of one IQAir
AG inter alia stating that IQAir AG has acquired all technology,
associated assets of the respondent and that it will not assume any
E
of respondent’s contracts or legal obligations – Petitioner eventually
issued notice invoking arbitration clause in Clause 17 of the MoU
– Filed petition u/s.9 seeking directions against respondent and
IQAir AG to honour the terms and conditions of the MoU – Pending
– Present petition filed u/s.11(6) seeking appointment of Sole
Arbitrator u/Clause 17 – Held: Words in Clause 17.1 do not suggest F
that the seat of arbitration is in New Delhi – Clause 17.2 of the
MoU stipulates that the dispute arising out of or relating to it shall
be referred to and finally resolved by the arbitration administered
in Hong Kong – Words in Clause 17.2 that “arbitration administered
in Hong Kong” is an indicia that the seat of arbitration is at Hong
G
Kong – Once the parties have chosen “Hong Kong” as the place of
arbitration to be administered in Hong Kong, laws of Hong Kong
would govern the arbitration – 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
H
565
566 SUPREME COURT REPORTS [2020] 4 S.C.R.

A interim orders, thus in the present case in order to enable the parties
to avail interim relief, Clause 17.3 that parties have agreed that
they may seek interim relief for which Delhi Courts would have
jurisdiction, appears to have been added – Since the arbitration is
seated at Hong Kong, the petition filed by the petitioner u/s.11(6) is
not maintainable and is dismissed – Open to the petitioner to
B
approach Hong Kong International Arbitration Centre for
appointment of arbitrator, if they so desire – Arbitration and
Conciliation Amendment Act, 2015.
Arbitration and Conciliation Act, 1996 – s.2(1)(f) –
International Commercial Arbitration – Factors to be fulfilled for –
C Held: Three factors ought to be fulfilled-(i) arbitration; (ii)
considered as commercial under the laws in force in India; and (iii)
at least one of the parties is national or habitual resident in any
country other than India.
Arbitration and Conciliation Act, 1996 – Proviso to s.2(2) &
D ss.9, 27, 37 – Held: By 2015 Amendment Act, a proviso has been
added to s.2(2) as per which, certain provisions of Part-I of the Act
i.e. ss.9, 27, 37(1)(a) and 37(3) have been made applicable to
“International Commercial Arbitrations” even if the place of
arbitration is outside India – Arbitration and Conciliation
E Amendment Act, 2015.
Arbitration and Conciliation Act, 1996 – International
Commercial Arbitration seated outside India – Proviso to s.2(2),
s.11 – Applicability of s.11 – Held: s.11 is not included in proviso to
s.2(2) and thus, it has no application to International Commercial
F Arbitrations seated outside India – Arbitration and Conciliation
Amendment Act, 2015.
Dismissing the petition, the Court
HELD: 1.1 As per Section 2(1)(f) of the Arbitration and
Conciliation Act, 1996, to be an “International Commercial
G Arbitration”, three factors ought to be fulfilled-(i) arbitration; (ii)
considered as commercial under the laws in force in India; and
(iii) at least one of the parties is national or habitual resident in
any country other than India. As per Section 2(2), Part-I shall
apply where the place of arbitration is in India. If the
H
MANKASTU IMPEX PRIVATE LIMITED v. 567
AIRVISUAL LIMITED

“International Commercial Arbitration” is seated in India, then A
Part-I of the Act shall apply. [Paras 15, 16][574-C-D]
1.2 Significance of the seat of arbitration is that it determines
the applicable law when deciding the arbitration proceedings and
arbitration procedure as well as judicial review over the arbitration
award. The situs is not just about where an institution is based or B
where the hearings will be held. But it is all about which court
would have the supervisory power over the arbitration
proceedings. “Seat of arbitration” and “venue of arbitration”
cannot be used inter-changeably. Mere expression “place of
arbitration” cannot be the basis to determine the intention of the
parties that they have intended that place as the “seat” of C
arbitration. The intention of the parties as to the “seat” should
be determined from other clauses in the agreement and the
conduct of the parties. On a plain reading of the arbitration
agreement, it is clear that the reference to Hong Kong as “place
of arbitration” is not a simple reference as the “venue” for the D
arbitral proceedings; but a reference to Hong Kong is for final
resolution by arbitration administered in Hong Kong. Clause 17.2
of the MoU stipulates that the dispute arising out of or relating
to MoU including the existence, validity, interpretation, breach
or termination thereof or any dispute arising out of or relating to
it shall be referred to and finally resolved by the arbitration E
administered in Hong Kong. The words in Clause 17.2 that
“arbitration administered in Hong Kong” is an indicia that the
seat of arbitration is at Hong Kong. Once the parties have chosen
“Hong Kong” as the place of arbitration to be administered in
Hong Kong, laws of Hong Kong would govern the arbitration. F
The Indian courts have no jurisdiction for appointment of the
arbitrator. 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 G
may seek interim relief for which Delhi Courts would have
jurisdiction. By the Amendment Act, 2015 (w.e.f. 23.10.2015), a
proviso has been added to Section 2(2) of the Act as per which,
certain provisions of Part-I of the Act i.e. Sections 9- interim
H
568 SUPREME COURT REPORTS [2020] 4 S.C.R.

A relief, 27- court’s assistance for evidence, 37(1)(a)- appeal against
the orders and Section 37(3) have been made applicable
to “International Commercial Arbitrations” even if the place of
arbitration is outside India. Section 11 is not included in the
proviso and accordingly it has no application to “International
Commercial Arbitrations” seated outside India. [Paras 19-23,
B
25][575-F-G; 576-A, D-G; 578-H; 579-A-B]
1.3 The words in Clause 17.1 do not suggest that the seat
of arbitration is in New Delhi. 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
C 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. [Para
D 26][579-F-H]
Bharat Aluminium Company v. Kaiser Aluminium
Technical Services Inc. (BALCO) (2012) 9 SCC 552 :
[2012] 12 SCR 327 – followed.
Enercon (India) Limited and others v. Enercon GMBH
E and another (2014) 5 SCC 1 : [2014] 2 SCR 855; Eitzen
Bulk A/S v. Ashapura Minechem Ltd. and another (2016)
11 SCC 508 : [2016] 2 SCR 634; Indus Mobile
Distribution (P) Ltd. v. Datawind Innovations (P) Ltd.
and others (2017) 7 SCC 678 : [2017] 4 SCR 744 –
F relied on.
Union of India v. Hardy Exploration and Production
(India) INC (2018) 7 SCC 374 : [2018] 5 SCR 662;
BGS SGS SOMA JV v. NHPC Ltd. 2019 (17) SCALE
369; Chandra Prakash and others v. State of U.P and
G another (2002) 4 SCC 234 : [2002] 2 SCR 913 –
referred to.
Case Law Reference
[2018] 5 SCR 662 referred to Para 9
2019 (17) SCALE 369 referred to Para 11
H
MANKASTU IMPEX PRIVATE LIMITED v. 569
AIRVISUAL LIMITED

[2012] 12 SCR 327 followed Para 12 A
[2002] 2 SCR 913 referred to Para 13
[2014] 2 SCR 855 relied on Para 19
[2016] 2 SCR 634 relied on Para 23
[2017] 4 SCR 744 relied on Para 24 B
CIVIL ORIGINAL JURISDICTION: Arbitration Petition (Civil)
No. 32 of 2018.
Petition under Section 11(6) of the Arbitration and Conciliation
Act, 1996 read with the Arbitration and Conciliation (Amendment) Act,
C
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.
Ritin Rai, Sr.Adv., Vikas Dutta, Ujjwal Nagaich, Siddharth Silwal,
O. P. Bhadani, Ms. Kritika Bhardwaj, Siddhartha Jha, Ms. Gunjan Mathur,
D
Advs. for the appearing parties.
The Judgment of the Court was delivered by
R. BANUMATHI, J.
1. This petition has been filed under Section 11(6) of the Arbitration
and Conciliation Act, 1996 read with Arbitration and Conciliation E
(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. F
2. Brief facts of the case relevant for the purposes of this petition
are as under:-
The petitioner-company incorporated in India conducts business
under the brand name “Atlanta Healthcare” and is in the business of air
quality management and supply of air purifiers, car purifiers, anti-pollution G
masks and air quality monitors. The respondent is a company incorporated
under the laws of Hong Kong and is in the business of manufacture and
sale of air quality monitors as well as air quality information. A
Memorandum of Understanding (MoU) dated 12.09.2016 was entered
into between the parties under which the respondent agreed to sell to
H
570 SUPREME COURT REPORTS [2020] 4 S.C.R.

A the petitioner the complete line of the respondent’s air quality monitors
products for onward sale. As per the terms of the agreement, the
petitioner was appointed as an exclusive distributor for the products for
sale within India. Additionally, non-exclusive rights were given to the
petitioner qua distribution for sales in Sri Lanka, Bangladesh and Nepal.
This agreement was to continue for a period of five years from the
B
starting date, which date was to commence from the date of delivery of
the first lot of Air Quality monitors in India, i.e. 03.10.2016 or 01.11.2016,
whichever was later. As per the petitioner, it has spent approximately
Rs.17,00,000/- in promoting and creating a brand value for the products
in India. Further the petitioner spent Rs. 9,00,000/- towards promoting
C the products at over fifteen business events such as Indo-German Natural
Health Fair, India International Trade Fair, etc.
3. On 14.10.2017, the petitioner received an e-mail from one
Mr. Charl Cater of IQAir AG (Proposed respondent No.2) informing
the petitioner that the respondent is a part of IQAir AG. Attached to the
D e-mail was a letter dated 13.10.2017 by the CEO of IQAir AG stating
that IQAir AG has acquired all technology and the associated assets of
the respondent. Further, the product of AirVisual Node has been
discontinued and the IQAir AG is in the process of relaunching a new
and improved version which will be rebranded as IQAir AirVisual Pro.
The letter also stated that IQAir AG will not assume any contracts or
E legal obligations of the respondent and will work on a case to case basis
with resellers to negotiate new contracts and that the IQAir AirVisual
products will be made available under separate dealer agreements.
4. The petitioner sent reply dated 15.10.2017, invoking the terms
of MoU with the respondent as per which the petitioner holds exclusive
F rights for sale of AirVisual Products for five years within the territory of
India. Further the petitioner stated as per the terms of the MoU, in the
event of any take out/buy out or change in shareholding of the entity, it
was obligatory on the part of the respondent to ensure that the party
taking over the business/assets shall honour the contract on the same
G terms and conditions and it is a deemed presumption that the acquisition
of business/assets of the respondent has been done keeping in view the
existing liabilities and obligations.
5. On 31.10.2017, the petitioner sent an e-mail to the respondent
and IQAir AG seeking Proforma Invoice to enable it to issue purchase
H orders. In reply, it was reiterated by IQAir AG that they have not
MANKASTU IMPEX PRIVATE LIMITED v. 571
AIRVISUAL LIMITED [R. BANUMATHI, J.]

assumed any legal obligations of the respondent. However, they offered A
to supply IQAir branded AirVisual Pro to the petitioner under a new
non-exclusive arrangement with a new wholesale price of USD 172 per
unit as against the original price of USD 110 per unit agreed upon between
the petitioner and the respondent. The petitioner thereafter sent several
e-mails but no response was received. On 08.12.2017, the petitioner
B
issued a notice invoking the arbitration clause provided in Clause 17 the
MoU. The petitioner also proposed the name of Hon’ble Justice RC
Chopra as the arbitrator, subject to consent of the respondent and IQAir
AG.
6. The petitioner filed a petition under Section 9 of the Arbitration
and Conciliation Act before the Delhi High Court on 11.12.2017 seeking C
directions against the respondent and IQAir AG to honour the terms and
conditions of the MoU dated 12.09.2016 and to allow the petitioner to
continue acting as the authorised distributor for the sale of all products in
terms of the MoU and to injunct the respondent and IQAir AG from
terminating the MoU and from entering into any contract with third parties D
for products which are the subject matter of the MoU. Vide interim
order dated 28.02.2018, the High Court restrained the respondent from
selling any of its products in India. The petition filed under Section 9 of
the Act by the petitioner is still pending before the High Court.
7. In response to the petitioner’s notice dated 08.12.2017, invoking E
the arbitration clause, IQAir vide its letter dated 15.12.2017, under its
asset purchase agreement with the respondent, it has not assumed any
contractual and legal obligations and that the terms of the MoU were
not enforceable against IQAir AG. The respondent also sent its reply
dated 05.01.2018 to the notice dated 08.12.2017 stating that Clause 17
of the MoU provides for arbitration administered and seated in Hong F
Kong. The respondent averred that should the petitioner wish to resolve
the dispute by arbitration, they should refer the dispute to an arbitration
institution in Hong Kong. Further, it was stated that the respondent did
not agree to ad hoc arbitration but clearly agreed to administered
arbitration in Hong Kong. It was in this backdrop, the petitioner filed G
petition under Section 11(6) of the Arbitration and Conciliation Act seeking
appointment of Sole Arbitrator under Clause 17 of the MoU.
8. According to the petitioner, the proposed arbitration between
the Petitioner and the respondent being an arbitration between a company
registered in India under the Companies Act, 1956 and the respondent – H
572 SUPREME COURT REPORTS [2020] 4 S.C.R.

A a body corporate which is incorporated under the laws of Hong Kong, is
an “International Commercial Arbitration” as per Section 2(1)(f) of the
Arbitration and Conciliation Act, 1996 having seat of arbitration in Delhi.
In terms of Section 11(6) read with Section 11(9), the petitioner therefore
seeks appointment of arbitrator.
B 9. Mr. Vikas Dutta, learned counsel for the petitioner submitted
that Clause 17.1 of the MoU 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. As to the decision in the case of Union
C of India v. Hardy Exploration and Production (India) INC (2018) 7
SCC 374, the learned counsel for the petitioner has contended that the
ratio of the judgment clearly postulates that a “venue” can become a
“seat” only if – (i) no other condition is postulated; (ii) if a condition
precedent is attached to the term “place”, the said condition/indicia has
D to be satisfied first for “venue” to be equivalent to “seat”. It was submitted
that in view of clear Clause 17.1 where the parties have clearly 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.
E 10. Mr. Ritin Rai, learned Senior counsel for the respondent has
submitted that as per Clause 17.2 of the MoU entered into between the
parties, 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
F 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
G application to the present dispute. The learned Senior counsel submitted
that the petitioner is required to approach the Hong Kong International
Arbitration Centre and the Indian Courts have no jurisdiction to entertain
the petition for appointment of arbitrator.
11. On behalf of the respondent, much reliance was placed upon
H BGS SGS SOMA JV v. NHPC Ltd. 2019 (17) SCALE 369 to contend
MANKASTU IMPEX PRIVATE LIMITED v. 573
AIRVISUAL LIMITED [R. BANUMATHI, J.]

that the expression “arbitration proceedings” would make it clear that A
the “venue” is really the “seat of arbitration proceedings” as the aforesaid
expression does not include just one or more single or part hearing but
the arbitration proceedings as a whole including making of the award at
that place. It was submitted that in the present case, the word
“administered” used in Clause 17.2 of the MoU between the parties
B
clearly shows that the parties have agreed that the arbitration between
the parties would be seated in Hong Kong.
12. In BGS Soma, the expression used was “….arbitration
proceedings shall be held at New Delhi/Faridabad”. In BGS Soma,
the three-Judges Bench of the Supreme Court held that in all the three
appeals by the parties, proceedings were held at New Delhi and the C
awards were also signed at New Delhi and not in Faridabad. The learned
Bench held that in the absence of contrary expression expressed by the
parties, it leads to the conclusion that the parties have chosen New Delhi
as the seat of arbitration under Section 20(1) of the Arbitration Act. In
BGS Soma, the Bench held that the judgment in Hardy Exploration is D
contrary to the decision of the Constitution Bench judgment of this Court
in Bharat Aluminium Company v. Kaiser Aluminium Technical
Services Inc. (2012) 9 SCC 552 (BALCO) and therefore, cannot be
considered good law.
13. Learned counsel for the petitioner has contended that Hardy E
Exploration and BGS Soma, both being by the three-Judges Bench,
declaration by the later Bench that Hardy Exploration is not a god law,
may not tantamount to an overriding of Hardy Exploration. It was
submitted that when both the judgments were by Bench of equal strength,
it was not open to the Bench rendering the decision in BGS Soma to hold
that the decision in Hardy Exploration was incorrect and the learned F
Bench in BGS Soma ought to have referred the matter to larger Bench.
To substantiate the contention, the learned counsel for the petitioner has
referred to Chandra Prakash and others v. State of U.P and another
(2002) 4 SCC 234 wherein this Court held that the doctrine of binding
precedent is of utmost importance in the administration of judicial system G
as it promotes certainty and consistency in judicial decisions. However,
considering Clause 17 of the MoU in the present case and the definite
clauses therein and in the facts and circumstances of the case, we are
not inclined to go into the question on the correctness of BGS Soma or
otherwise.
H
574 SUPREME COURT REPORTS [2020] 4 S.C.R.

A 14. The question falling for consideration in the present case is, in
view of Clause 17.2 of the MoU whether the parties have agreed that
the seat of arbitration is at Hong Kong and whether this Court lacks
jurisdiction to entertain the present petition filed under Section 11 of the
Arbitration and Conciliation Act, 1996.
B 15. The petitioner is a company incorporated in India; whereas
the respondent is a company incorporated under the laws of Hong Kong.
Section 2(1)(f) of the Act defines “International Commercial Arbitration”.
As per Section 2(1)(f), to be an “International Commercial Arbitration”,
three factors ought to be fulfilled – (i) arbitration; (ii) considered as
commercial under the laws in force in India; and (iii) at least one of the
C parties is national or habitual resident in any country other than India. In
the present case, since the respondent is a company incorporated under
the laws of Hong Kong, we are concerned with “International Commercial
Arbitration”.
16. As per Section 2(2), Part-I shall apply where the place of
D arbitration is in India. If the “International Commercial Arbitration” is
seated in India, then Part-I of the Act shall apply. The interpretation of
Section 2(2) of the Act was considered by the Constitution Bench in
BALCO, wherein it was held that Part-I of the Act would have no
application to “International Commercial Arbitrations” held outside India.
E In para (194) of the judgment, it was held as under:-
“194. …..Section 2(2) makes a declaration that Part I of the
Arbitration Act, 1996 shall apply to all arbitrations which take
place within India. We are of the considered opinion that Part I of
the Arbitration Act, 1996 would have no application to international
F commercial arbitration held outside India. Therefore, such awards
would only be subject to the jurisdiction of the Indian courts when
the same are sought to be enforced in India in accordance with
the provisions contained in Part II of the Arbitration Act, 1996.
……”

G 17. In the present case, Clause 17 of the MoU is a relevant clause
governing the law and dispute resolution. Clause 17 reads as under:-
17. Governing Law and Dispute Resolution
17.1 This MoU is governed by the laws of India, without regard
to its conflicts of laws provisions and courts at New Delhi shall
H have the jurisdiction.
MANKASTU IMPEX PRIVATE LIMITED v. 575
AIRVISUAL LIMITED [R. BANUMATHI, J.]

17.2 Any dispute, controversy, difference or claim arising out of A
or relating to this MoU, including the existence, validity,
interpretation, performance, breach or termination thereof or any
dispute regarding non-contractual obligations arising out of or
relating to it shall be referred to and finally resolved by arbitration
administered in Hong Kong.
B
The place of arbitration shall be Hong Kong.
The number of arbitrators shall be one. The arbitration proceedings
shall be conducted in English language.
17.3 It is agreed that a party may seek provisional, injunctive, or
equitable remedies, including but not limited to preliminary injunctive C
relief, from a court having jurisdiction, before, during or after the
pendency of any arbitration proceeding.
18. The learned counsel for the petitioner has submitted that a
perusal of Clause 17.1 of the MoU makes it clear that the petitioner and
the respondent have only agreed that the proper law of the contract to D
be laws of India and the MoU is clearly silent on the proper law and the
curial law of the arbitration and therefore, Clause 17.1 would govern the
proper law and the curial law. According to the petitioner, there is no
express or implied exclusion either in Clause 17 or under the entire MoU
of the non-applicability of the laws of India and/or the applicability of the E
laws of Hong Kong or any other country. Contention of the petitioner is
that in the absence of the clear stipulation as to the proper law and curial
law of the arbitration, laws of India should be taken as the proper law
and curial law under the MoU and under no circumstances, the terms in
Clause 17.1 of the MoU be undermined or diluted.
F
19. The seat of arbitration is a vital aspect of any arbitration
proceedings. Significance of the seat of arbitration is that it determines
the applicable law when deciding the arbitration proceedings and
arbitration procedure as well as judicial review over the arbitration award.
The situs is not just about where an institution is based or where the
hearings will be held. But it is all about which court would have the G
supervisory power over the arbitration proceedings. In Enercon (India)
Limited and others v. Enercon GMBH and another (2014) 5 SCC 1,
the Supreme Court held that “the location of the Seat will determine
the courts that will have exclusive jurisdiction to oversee the
arbitration proceedings. It was further held that the Seat normally
H
carries with it the choice of that country’s arbitration/curial law”.
576 SUPREME COURT REPORTS [2020] 4 S.C.R.

A 20. It is well-settled that “seat of arbitration” and “venue of
arbitration” cannot be used inter-changeably. It has also been established
that mere expression “place of arbitration” cannot be the basis to
determine the intention of the parties that they have intended that place
as the “seat” of arbitration. The intention of the parties as to the “seat”
should be determined from other clauses in the agreement and the conduct
B
of the parties.
21. In the present case, the arbitration agreement entered into
between the parties provides Hong Kong as the place of arbitration.
The agreement between the parties choosing “Hong Kong” as the place
of arbitration by itself will not lead to the conclusion that parties have
C chosen Hong Kong as the seat of arbitration. The words, “the place of
arbitration” shall be “Hong Kong”, have to be read along with Clause
17.2. Clause 17.2 provides that “….any dispute, controversy, difference
arising out of or relating to the MoU “shall be referred to and
finally resolved by arbitration administered in Hong Kong…..”. On
D a plain reading of the arbitration agreement, it is clear that the reference
to Hong Kong as “place of arbitration” is not a simple reference as the
“venue” for the arbitral proceedings; but a reference to Hong Kong is
for final resolution by arbitration administered in Hong Kong. The
agreement between the parties that the dispute “shall be referred to
and finally resolved by arbitration administered in Hong Kong”
E clearly suggests that the parties have agreed that the arbitration be seated
at Hong Kong and that laws of Hong Kong shall govern the arbitration
proceedings as well as have power of judicial review over the arbitration
award.
22. As pointed out earlier, Clause 17.2 of the MoU stipulates that
F the dispute arising out of or relating to MoU including the existence,
validity, interpretation, breach or termination thereof or any dispute arising
out of or relating to it shall be referred to and finally resolved by the
arbitration administered in Hong Kong. The words in Clause 17.2 that
“arbitration administered in Hong Kong” is an indicia that the seat of
G arbitration is at Hong Kong. Once the parties have chosen “Hong Kong”
as the place of arbitration to be administered in Hong Kong, laws of
Hong Kong would govern the arbitration. The Indian courts have no
jurisdiction for appointment of the arbitrator.
23. Observing that when the parties have chosen a place of
H arbitration in a particular country, that choice brings with it submission to
MANKASTU IMPEX PRIVATE LIMITED v. AIRVISUAL 577
LIMITED [R. BANUMATHI, J.]

the laws of that country, in Eitzen Bulk A/S v. Ashapura Minechem A
Ltd. and another (2016) 11 SCC 508, it was held as under:-
“34.As a matter of fact the mere choosing of the juridical seat of
arbitration attracts the law applicable to such location. In other
words, it would not be necessary to specify which law would
apply to the arbitration proceedings, since the law of the particular B
country would apply ipso jure. The following passage from
Redfern and Hunter on International Arbitration contains the
following explication of the issue:
“It is also sometimes said that parties have selected the
procedural law that will govern their arbitration, by providing C
for arbitration in a particular country. This is too elliptical and,
as an English court itself held more recently in Breas of Doune
Wind Farm it does not always hold true. What the parties have
done is to choose a place of arbitration in a particular country.
That choice brings with it submission to the laws of that country,
including any mandatory provisions of its law on arbitration. D
To say that the parties have “chosen” that particular law to
govern the arbitration is rather like saying that an English
woman who takes her car to France has “chosen” French
traffic law, which will oblige her to drive on the right-hand side
of the road, to give priority to vehicles approaching from the E
right, and generally to obey traffic laws to which she may not
be accustomed. But it would be an odd use of language to say
this notional motorist had opted for “French traffic law”. What
she has done is to choose to go to France. The applicability of
French law then follows automatically. It is not a matter of
choice. F

Parties may well choose a particular place of arbitration
precisely because its lex arbitri is one which they find attractive.
Nevertheless, once a place of arbitration has been chosen, it
brings with it its own law. If that law contains provisions that
are mandatory so far as arbitration are concerned, those G
provisions must be obeyed. It is not a matter of choice any
more than the notional motorist is free to choose which local
traffic laws to obey and which to disregard.”” [Underlining
added]
H
578 SUPREME COURT REPORTS [2020] 4 S.C.R.

A 24. In the context of domestic arbitration, holding that once the
“Seat” is determined, only that jurisdictional court would have exclusive
jurisdiction, in Indus Mobile Distribution (P) Ltd. v. Datawind
Innovations (P) Ltd. and others (2017) 7 SCC 678, it was held as
under:-
B “19. A conspectus of all the aforesaid provisions shows that the
moment the seat is designated, it is akin to an exclusive jurisdiction
clause. On the facts of the present case, it is clear that the seat of
arbitration is Mumbai and Clause 19 further makes it clear that
jurisdiction exclusively vests in the Mumbai courts. Under the
Law of Arbitration, unlike the Code of Civil Procedure which
C applies to suits filed in courts, a reference to “seat” is a concept
by which a neutral venue can be chosen by the parties to 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
D provisions of Sections 16 to 21 of CPC be attracted. In arbitration
law however, as has been held above, the moment “seat” is
determined, the fact that the seat is at Mumbai would vest Mumbai
courts with exclusive jurisdiction for purposes of regulating arbitral
proceedings arising out of the agreement between the parties.”
[Underlining added]
E
25. Clause 17.1 of the MoU stipulates that the MoU is governed
by the laws of India and the courts at New Delhi shall have jurisdiction.
The interpretation to Clause 17.1 shows that the substantive law governing
the substantive contract are the laws of India. The words in Clause 17.1
“without regard to its conflicts of laws provisions and courts at
F New Delhi shall have the jurisdiction” has to be read along with
Clause 17.3 of the agreement. As per Clause 17.3, the parties have
agreed that the party may seek provisional, injunctive or equitable
remedies from a court having jurisdiction before, during or after the
pendency of any arbitral proceedings. In para (161) in BALCO (2012) 9
G SCC 552, this Court 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
H
MANKASTU IMPEX PRIVATE LIMITED v. AIRVISUAL 579
LIMITED [R. BANUMATHI, J.]

have therefore been necessary for the parties to incorporate Clause A
17.3 that parties have agreed that a party may seek interim relief for
which Delhi Courts would have jurisdiction. In this regard, we may usefully
refer to the insertion of proviso to Section 2(2) of the Arbitration Act,
1996 by Amendment Act, 2015. By the Amendment Act, 2015 (w.e.f.
23.10.2015), a proviso has been added to Section 2(2) of the Act as per
B
which, certain provisions of Part-I of the Act i.e. Sections 9 – interim
relief, 27 – court’s assistance for evidence, 37(1)(a) – appeal against
the orders and Section 37(3) have been made applicable to “International
Commercial Arbitrations” even if the place of arbitration is outside India.
Proviso to Section 2(2) of the Act reads as under:-
“2. Definitions.- C

……..
(2) This Part shall apply where the place of arbitration is in India:
Provided that subject to an agreement to the contrary, the provisions
of sections 9, 27 and clause (a) of sub-section (1) and sub- D
section (3) of section 37 shall also apply to international commercial
arbitration, even if the place of arbitration is outside India, and an
arbitral award made or to be made in such place is enforceable
and recognised under the provisions of Part II of this Act.”
It is pertinent to note that Section 11 is not included in the proviso E
and accordingly, Section 11 has no application to “International
Commercial Arbitrations” seated outside India.
26. 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 F
the arbitration be administered in Hong Kong. The words in Clause 17.1
do not suggest that the seat of arbitration is in New Delhi. 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
G
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.
H
580 SUPREME COURT REPORTS [2020] 4 S.C.R.

A 27. In the result, Arbitration Petition No.32 of 2018 filed by the
petitioner seeking appointment of an arbitrator under Section 11(6) of
the Act is dismissed. It is however open to the petitioner to approach
Hong Kong International Arbitration Centre for appointment of the
arbitrator, if they so desire.
B
Divya Pandey Petition dismissed.

C

D

E

F

G

H