Drb Infrastructure Private Limited vs. Mrs.Lishi Yapu

Facts

DRB Infrastructure Private Limited (Applicant) filed an Arbitration Application under Section 11(5) & (6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. The Applicant, engaged in infrastructure projects, entered into an agreement dated 12.12.2020 with Mrs. Lishi Yapu (Respondent) for hiring plant and machinery for a road project in Arunachal Pradesh. The agreement was effective for eleven months from 01.11.2020, with a monthly rent of Rs. 50,00,000/- plus GST, payable by the 5th of each month. The Respondent failed to pay the security deposit and defaulted in timely rent payments, accumulating arrears of Rs. 1,33,26,000/- between November 2020 and March 2021. The Applicant terminated the agreement on 07.04.2021. The Respondent refused to return the machinery. The Applicant's attempt to recover the machinery through an Advocate Commissioner appointed by the City Civil Court, Hyderabad, under Section 9 of the Act, was unsuccessful.

Held

The Court held that the Arbitration Application is allowed. The primary issue revolved around the jurisdiction of the High Court at Hyderabad to entertain the application under Section 11(6) of the Arbitration and Conciliation Act, 1996. The Court found the respondent's contention that Hyderabad lacked jurisdiction to be without merit. It reasoned that Clause 14 of the agreement explicitly designated 'Hyderabad' as both the seat and venue of arbitration. Citing the Supreme Court's decision in BRAHMANI RIVER PELLETS LIMITED, the Court emphasized that specifying the 'venue' of arbitration implies an intention to exclude other courts. Furthermore, the Court noted that the rental agreement itself was signed in Hyderabad, establishing that at least part of the cause of action arose within its jurisdiction. The Court distinguished the facts from RAVI RANJAN DEVELOPERS PVT. LTD. by highlighting that in this case, Hyderabad was agreed upon as the seat and venue, not merely a venue for sittings. Consequently, the High Court at Hyderabad was deemed to have inherent jurisdiction. The Court appointed Sri Justice G. Krishna Mohan, Retired High Court Judge, as the sole arbitrator to adjudicate the disputes.

Key Issues

1. Whether the High Court at Hyderabad has the inherent jurisdiction to entertain an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, when the agreement designates Hyderabad as the seat and venue of arbitration, despite the project site being in Arunachal Pradesh and the respondent's contention that no part of the cause of action arose in Hyderabad? Contentions: Petitioner/Applicant: Argued that Clause 14 of the agreement clearly states that 'Hyderabad' shall be the seat and venue of arbitration. Relied on the Supreme Court's decision in BRAHMANI RIVER PELLETS LIMITED's case, which held that where a contract specifies the venue of arbitration, it implies an intention to exclude all other courts, and the High Court where the venue is agreed upon has jurisdiction. Also contended that the rental agreement was signed in Hyderabad, thus part of the cause of action arose there. Respondent: Contended that Hyderabad is not a neutral venue and no part of the cause of action has arisen in Hyderabad, implying the High Court at Hyderabad lacks jurisdiction. Relied on the judgment in RAVI RANJAN DEVELOPERS PVT. LTD.'s case, which distinguished between the venue and seat of arbitration and held that the High Court lacked jurisdiction when Kolkata was only the venue and not the seat.