Mankastu Impex Private Limited v. Airvisual Limited [Arbitration Petition No. 32 of 2018] - Synopsis
Team SoOLEGAL 29 Apr 2021

SUPREME COURT: “VENUE OF ARBITRATION” AND “SEAT OF ARBITRATION” CANNOT BE USED INTER-CHANGEABLY. 

Recently the Hon’ble Supreme Court in the case of Mankastu Impex Private Limited v. Airvisual Limited [Arbitration Petition No. 32 of 2018], observed that the two phrases “Seat of Arbitration” and “Place of Arbitration” cannot be used interchangeably. The Bench comprising Justice R. Banumati, AS Bopanna and Hrishikesh Roy observed 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 petitioner is a company incorporated in India and is engaged in the business of supplying air purifiers, air quality monitors, etc, whereas the respondent company is incorporated in Hong Kong and is the manufacturer of air quality monitors and air purifiers. Both the parties entered into an MoU through which the respondent agreed to give exclusive distributorship and sale of the product to the petitioner company for 5 years. However, the respondent company couldn’t supply any products as promised due to some circumstances.  

The most important clause of the Memorandum is Clause 17 which states 

“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 have the jurisdiction.

17.2 Any dispute, controversy, difference or claim arising out of 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. 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 relief, from a court having jurisdiction, before, during or after the pendency of any arbitration proceeding."

The Petitioner filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act) before the Hon'ble High Court of Delhi, seeking directions against the Respondent and the acquiring entity, IQAir AG, to honour the terms of the contract. Interim relief was granted though the petition was still pending. Another petition was filed under Section 11(6) for the appointment of the arbitrator. The issue arose regarding “venue of arbitration” and “seat of arbitration.”  

The petitioners contended that New Delhi has jurisdiction since the MoU is governed by Indian laws. It also added that Hong Kong is just a “venue” and not the juridical "seat". it relied on the Supreme Court case of Union of India v Hardy Exploration [(2019) 13 SCC 472], wherein, it was held that "venue" can become "seat" only if – no condition is postulated; if a condition precedent is attached to the term "place", the said condition has to be satisfied first for "venue" to be equivalent to a seat.

The Respondent contended that as per Clause 17.2 of the agreement, the place of arbitration is Hong Kong, which implies that the seat of arbitration is located outside India, hence the applicability of Part-II of the Act in the present dispute. 

To this, the Apex Court gave a lot of emphasis on the proviso added to Section 2(2) by the Amendment of 2015 to the Act. The Court also concluded as per the clause mentioned in the MoU that the parties have agreed that the arbitration will be seated in Hong Kong and that laws of Hong Kong shall govern the arbitration proceedings as well as have the power of judicial review over the arbitration award. Since the arbitration will be taken up by the International Commercial Arbitrations, and Part I does not apply to it, clause 17.3 has been added. 

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