Due Weightage Must Be Given To Intention Of Parties While Inserting Arbitration Clause- Calcutta High Court

The Calcutta High Court has held that a due weightage must be given to the intention of the parties while inserting arbitration clause.

The petitioner, in this case, had filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 for an injunction restraining the respondent i.e., Bharat Heavy Electricals Limited (BHEL) from invoking and encashing the performance bank guarantee issued by the Punjab and Sind Bank (P&S Bank) and the modified performance bank guarantee.

A Single Bench of Justice Moushumi Bhattacharya noted, “In the present case, the arbitration clause in the GCC and in the Work Order specifies that the seat of arbitration shall be Kolkata but clarifies that the seat will be the place from where the contract is issued. The latter part is within brackets. The ordinary and plain meaning of this clause with due weightage given to the intention of the parties while inserting this clause, post-amendment, cannot and would not point to any other construction besides holding that the parties intended to “seat” the arbitration at the place from where the contract is issued.”

The Bench said that the interpretation of an agreement involves principles of construction of contracts and is a matter of ascertainment of the meaning which the document would convey to a reasonable person having knowledge of the background which would reasonably be available to the parties in the situation in which they were at the time of the contract.

Advocate Sirsanya Bandopadhyay appeared on behalf of the petitioner while Advocates Rohit Das and Kishwar Rahman appeared on behalf of the respondents.

Factual Background -

The dispute arose out of a contract consisting of the arbitration agreement where the respondent i.e., BHEL urged that the seat of arbitration would be the place from where the contract was issued, namely, that the bracketed portion would get precedence. The petitioner on the other hand contended that the parties intended to mean the seat of arbitration to be in Kolkata and the bracketed portion was inserted only for the purpose of fixing the venue for the convenience of the parties/arbitrator.

The issue which fell for adjudication, on the point of maintainability, was whether the parties intended that the seat of arbitration would be the place where the contract was issued that is the Salt Lake City, Kolkata or the Courts in Kolkata in general. If the respondent was correct, then the High Court would be divested of its jurisdiction to hear the matter and the application would be relegated to the Commercial Court at Rajarhat.

The High Court in view of the above factual background observed, “The entire contract documents including the NIT and the correspondence between the parties including the termination letter specifies in a box at the bottom of each of the pages the place of issue of the contract which is “Power Sector Eastern Region (PSER), DJ-9/1, Salt Lake City, Kolkata – 700091” This is the place from where the tender has been issued.”

The Court added that the agreed seat of arbitration lies in that part of the metropolitan area of Kolkata which lies within the District of North 24 Parganas, that falls within the jurisdiction of the Commercial Court at Rajarhat and that the original territorial jurisdiction of the High Court at Calcutta will not be attracted in this case.

“The argument of the respondent of the non-maintainability of the present application succeeds”, also said the Court.

Accordingly, the High Court dismissed the application.

Cause Title- Harji Engineering Works Pvt. Ltd. v. Bharat Heavy Electricals Limited & Anr.

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