Facts of the Case

Lite Bite Foods Private Limited entered into a Concession Agreement dated 14 September 2018 with the Airports Authority of India (AAI) for developing, operating, maintaining and managing food and beverage outlets at Biju Patnaik International Airport, Bhubaneswar.

Subsequently, disputes arose after the petitioner alleged that AAI had wrongly adjusted refundable amounts against a supplementary bill which was later held to be without contractual basis in an earlier arbitral award. Although a substantial amount was refunded pursuant to the award, the petitioner claimed that an amount of ₹91,17,025.36 still remained unpaid.

The petitioner invoked the arbitration clause once again seeking adjudication of the remaining dispute. Since no arbitrator was appointed despite the arbitration notice, the petitioner approached the Calcutta High Court under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator.

Issues Involved

  • Whether the Calcutta High Court possessed territorial jurisdiction to entertain the application under Section 11 of the Arbitration and Conciliation Act, 1996.
  • Whether the venue specified in the arbitration clause constituted the juridical seat of arbitration.
  • Whether the petitioner's subsequent claims were barred by res judicata, constructive res judicata, issue estoppel or accord and satisfaction.
  • Whether such objections could be examined by the referral court at the stage of appointment of an arbitrator.

Petitioner's Arguments

  • The petitioner contended that despite the earlier arbitral award declaring the supplementary bill to be invalid, AAI failed to refund the entire amount that had been wrongly adjusted.
  • It argued that an amount of ₹91,17,025.36 remained outstanding and constituted a fresh arbitrable dispute.
  • The petitioner submitted that the arbitration clause designated Kolkata (Regional Headquarters of AAI) as the venue of arbitration, which in law amounted to the juridical seat of arbitration.
  • It further argued that unilateral appointment of an arbitrator by AAI was impermissible in view of the judgments in Perkins Eastman Architects DPC v. HSCC (India) Ltd. and Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV).
  • Since the respondent failed to appoint an arbitrator within the prescribed period, the Court should appoint an independent arbitrator under Section 11.

Respondent's Arguments

  • The Airports Authority of India challenged the maintainability of the petition by contending that only the courts at Bhubaneswar had territorial jurisdiction.
  • It argued that the petitioner had earlier approached the Orissa High Court for appointment of an arbitrator and therefore could not invoke the jurisdiction of the Calcutta High Court.
  • The respondent further contended that all disputes had already been adjudicated in the earlier arbitration proceedings.
  • According to AAI, the petitioner had accepted payment made pursuant to the arbitral award without protest and therefore the matter stood concluded.
  • It was also argued that the fresh claim was barred by res judicata, constructive res judicata, issue estoppel and the principle of accord and satisfaction.

Court Order / Findings

The Calcutta High Court allowed the petition and appointed a sole arbitrator.

The Court held that:

  • The arbitration clause provided that arbitration proceedings shall be held at the Regional Headquarters of AAI at Kolkata. In the absence of any contrary indication, the designated venue constituted the juridical seat of arbitration.
  • Once the seat of arbitration is designated, courts exercising supervisory jurisdiction over that seat alone have jurisdiction under Section 11.
  • The arbitration clause prevailed over the general jurisdiction clause contained elsewhere in the agreement.
  • Questions relating to res judicata, issue estoppel, constructive res judicata, accord and satisfaction, limitation and admissibility of claims involve factual examination and appreciation of evidence.
  • At the stage of Section 11 proceedings, the referral court is required only to examine the prima facie existence of a valid arbitration agreement and should not conduct a detailed adjudication on disputed factual issues.
  • Such objections are required to be decided by the arbitral tribunal itself.
  • Accordingly, the Court appointed Mr. Deepan Kumar Sarkar, Advocate, as the Sole Arbitrator to adjudicate the disputes between the parties.

Important Clarification

  • A contractual provision describing the arbitration proceedings as being "held" at a particular place ordinarily makes that place the juridical seat of arbitration unless the agreement clearly indicates otherwise.
  • The arbitration clause relating to the seat of arbitration prevails over a general jurisdiction clause governing other disputes arising under the agreement.
  • While exercising jurisdiction under Section 11 of the Arbitration and Conciliation Act, the Court only examines the existence of a valid arbitration agreement.
  • Defences relating to res judicata, accord and satisfaction, limitation and maintainability should ordinarily be decided by the arbitral tribunal and not by the referral court.
  • The decision reiterates the limited scope of judicial interference at the stage of appointment of an arbitrator.

Sections Involved

  • Section 11 – Arbitration and Conciliation Act, 1996
  • Section 12 – Arbitration and Conciliation Act, 1996

Link to Download the Order-https://mytaxexpert.co.in/uploads/1784627318_1784compressed.pdf

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