U. P. Industrial Consultants Limited vs Bank of Baroda

By the present Application, the Applicant is asking this Court to appoint a Sole Arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996. The Applicant says that the Respondent was required to appoint an Arbitrator, but even after notice from the Applicant, the Respondent did not appoint any Arbitrator.

The facts and circumstances because of which the present Application has been filed are stated below. The Applicant is a Corporate Business Correspondent (“CBC”). It provides services to different corporate bodies through its field-level Business Correspondents and Agents. The Applicant provides banking and financial inclusion services in remote and far away areas. The Respondent is a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. On 18th January 2021, the Applicant and the Respondent entered into a Business Correspondent Agreement dated 18th January 2021. This Agreement was valid up to 6th October 2023. Thereafter, on 27th September 2023, the parties extended the Agreement with renewed terms and conditions. The renewed Agreement came into effect from 7th October 2023 and was to remain for a period of three years. Under the said Agreement, the Applicant was to perform different services as a Business Correspondent. These services included customer enrolment, providing transaction facilities, mobilising deposits, creating awareness about products and services, loan follow-up and recovery, selling third-party financial products such as mutual funds, cash management services of the Bank and other connected services. The Applicant says that it provided the services as Corporate Business Correspondent to the satisfaction of the Respondent. Because of this, the Agreement was renewed on 27th September 2023 for another period of three years with effect from 7th October 2023. Thereafter, the Respondent Bank made allegations of misfeasance, fraud and financial misappropriation against one of the agents of the Applicant. The said agent was operating from one of the branch premises of the Respondent Bank at Mohan Road Branch, District Lucknow.

On 16th January 2026, the Complainant lodged an FIR. In the said FIR, allegations were made against one of the agents of the Applicant. Allegations were made against officials of the Respondent Bank in relation to alleged financial misfeasance and/or misappropriation of funds at the Mohan Road Branch, District Lucknow. Thereafter, the Respondent Bank placed a lien on Escrow Account No. 01880200001287 maintained with Bank of Baroda. According to the Applicant, this was done without giving any prior notice, without any adjudication, without any order of the Court and without any legally enforceable determination of liability. The Applicant therefore says that the said action was bad in law and could not be legally sustained. On 28th January 2026, the Applicant addressed a letter to the Respondent Bank requesting it to remove the freeze immediately. On 30th January 2026, the Applicant again sent an email to the Respondent requesting removal of the lien and defreezing of Escrow Account No. 01880200001287 maintained with Bank of Baroda. However, the Respondent did not give any response to these requests. The Business Correspondent Agreement dated 27th September 2023 contains an arbitration provision under Clause 13.2. According to the Applicant, a dispute arose between the parties because the Applicant's Escrow Account was allegedly frozen illegally and arbitrarily and the Respondent did not defreeze the said account even after repeated requests and representations.

On 16th March 2026, the Applicant, having no other option, invoked arbitration under Clause 13.2 of the Agreement by issuing a letter through its Advocate. On 24th March 2026, the Respondent, through its Advocate, refused to give consent for appointment of an Arbitrator. The Respondent stated that the determination made by the Bank was final and binding. According to the Applicant, this stand taken by the Respondent is illegal and cannot be sustained. The Applicant says that the Respondent has failed to resolve the dispute between the parties. Therefore, according to the Applicant, an Arbitrator is required to be appointed under the arbitration clause contained in the Business Correspondent Agreement. Hence, the present Application.

Learned Advocate for the Applicant submits that Clause 13.1 of the Business Correspondent Agreement dated 27th September 2023 provides that the Courts at Mumbai shall have jurisdiction in respect of any issue or dispute arising under the said Agreement or connected with the said Agreement. Therefore, according to the Applicant, this Court has jurisdiction to hear and decide the present Application. It is submitted that this Court has jurisdiction to entertain, hear and dispose of the present Application.

Learned Advocate for the Respondent prayed for dismissal of the present Application. He submitted that Clause 13.2(c) of the Agreement provides that the place of arbitration shall be at Baroda. He submitted that Clause 13.1 provides that the Courts at Mumbai shall have exclusive jurisdiction to deal with any issue arising out of the Agreement. According to him, this clause cannot give jurisdiction to this Court to entertain or decide an Application under Section 11 of the Arbitration and Conciliation Act, 1996.

I have considered the submissions made by the learned Advocates for the Applicant as well as the Respondent. The question which arises is whether this Court at Mumbai can entertain the present Application under Section 11 of the Arbitration and Conciliation Act, 1996, when Clause 13.2(c) of the Agreement says that “The place of arbitration shall be at Baroda.”

The Applicant has relied upon Clause 13.1 of the Agreement. According to the Applicant, this clause gives exclusive jurisdiction to the Courts at Mumbai. It is therefore submitted that even though Baroda is stated as the place of arbitration, the present Application under Section 11 can be filed before this Court. The Respondent has opposed this submission. According to the Respondent, Clause 13.2(c) fixes Baroda as the place of arbitration. Therefore, according to the Respondent, in view of the law laid down by the Supreme Court, the Courts at Baroda alone will have jurisdiction in relation to the arbitration proceedings, including the Application under Section 11.

Before considering the rival submissions, it is necessary to see what the parties have agreed in the Agreement. Clause 13.1 provides as follows:

Clause 13.2(c), on the other hand, provides:

Both these clauses form part of the same Agreement. Therefore, both have to be read together. The Court cannot give meaning to one clause by ignoring the other clause.

The Applicant is correct to the extent that Clause 13.1 says that “the courts in Mumbai shall have the exclusive jurisdiction”. These words are clear. They do provide for exclusive jurisdiction of the Mumbai Courts. Therefore, the submission made by the Applicant cannot be said to have no basis. The Agreement does contain an express clause in favour of the Mumbai Courts. But this does not decide the matter. It is necessary to see what effect Clause 13.2(c) has when the proceeding before the Court is connected with the arbitration agreed between the parties. The present Application is an Application under Section 11 seeking appointment of an Arbitrator because the parties have not been able to appoint the Arbitrator by mutual consent.

Clause 13.2 is separately headed “ARBITRATION”. Under Clause 13.2(a), the parties have first agreed to make efforts to settle the dispute by informal negotiations for 30 days. Thereafter, Clause 13.2(b) provides:

Immediately thereafter, Clause 13.2(c) states:

Therefore, while making the specific arrangement for arbitration, the parties fixed the place of arbitration at Baroda. The Agreement does not say that only one hearing or one meeting is to take place at Baroda. The words used are “The place of arbitration shall be at Baroda.”

The judgment of the Supreme Court in BGS SGS SOMA JV v. NHPC, reported in (2020) 4 SCC 234, explains the effect of selecting the seat of arbitration. In paragraph 38, the Supreme Court has observed:

This observation is important for deciding the present question. It shows that when parties select the seat of arbitration, such selection has an effect upon the jurisdiction of the Courts. Ordinarily, the Courts at the seat will have jurisdiction over the arbitration proceedings.

The Supreme Court has again explained this position in paragraph 57 of BGS SGS SOMA JV. It has stated:

Therefore, if Baroda is found to be the seat of arbitration, the normal legal consequence would be that the Courts at Baroda alone will have supervisory jurisdiction over the arbitration proceedings.

The Applicant may submit that the Agreement uses the word “place” and not the word “seat”. This submission needs to be considered. The Supreme Court in BGS SGS SOMA JV has explained that the words used in the arbitration agreement have to be understood by reading the arbitration clause as a whole and by considering the intention of the parties. In paragraph 82, the Supreme Court held:

The Supreme Court has stated in the same paragraph:

Thus, merely because the Agreement uses the words “place of arbitration” and does not use the word “seat”, it cannot straightaway be said that Baroda is only a convenient place for conducting hearings. The complete agreement and the words used in it have to be considered.

In the present case, there is more than a simple mention of Baroda. Clause 13.2 is the arbitration clause. It deals with the manner in which disputes are to be resolved through arbitration. In the same clause, after providing that the dispute shall be referred to a Sole Arbitrator, the parties have stated that “The place of arbitration shall be at Baroda.” There is no other wording in Clause 13.2 which says that Baroda is only a place where meetings or hearings may be held for convenience. This position becomes clearer from the distinction made by the Supreme Court in BGS SGS SOMA JV. The Supreme Court has observed that where an agreement merely says that the Tribunal may “meet or have witnesses, experts or the parties” at a particular place, it may show that the place is only a venue. But the position can be different when the arbitration proceedings themselves are connected with that place. In the present Agreement, it is not stated that the Tribunal will merely meet at Baroda or that hearings may conveniently be conducted there. The Agreement says that “The place of arbitration shall be at Baroda.”

The judgment of the Supreme Court in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., referred to in BGS SGS SOMA JV, supports this understanding. In that case, the agreement stated that the “venue” of arbitration would be at Bhubaneswar. The Supreme Court held:

The Court held:

This judgment is important in the present matter because it concerns jurisdiction under Section 11. It shows that where the arbitration clause fixes a place or venue of arbitration and, after reading the agreement, that place is found to be the seat, the Application under Section 11 has to be filed before the Court having jurisdiction over that seat.

Learned Advocate for the Applicant has relied upon Clause 13.1. I have considered this submissio. Clause 13.1 cannot be treated as if it has no meaning. It gives exclusive jurisdiction to the Mumbai Courts in respect of issues arising out of the Agreement. However, while considering this clause, it cannot be ignored that Clause 13.2 is a specific provision relating to arbitration and, in that specific arbitration clause, the parties have separately fixed the place of arbitration at Baroda. There is a difference between an ordinary proceeding arising from the Agreement and a proceeding which concerns the arbitration process. Clause 13.1 can operate in relation to proceedings arising under the Agreement where the question of jurisdiction is otherwise to be decided by the Courts. But when the parties have agreed in Clause 13.2(c) that the place of arbitration shall be Baroda, the question concerning the arbitration and its supervision has to be considered with reference to that specific provision.

If the interpretation suggested by the Applicant is accepted, Clause 13.2(c) will lose its proper meaning. The parties have expressly stated “The place of arbitration shall be at Baroda.” If Mumbai was still intended to have supervisory jurisdiction over the arbitration, there could have been some words in the arbitration clause showing that Baroda was only a venue and Mumbai was intended to be the seat. There are no such words in the Agreement. On the contrary, Clause 13.2(c) is connected with the other provisions concerning arbitration. Clause 13.2(b) provides for reference of the dispute to a Sole Arbitrator. Clause 13.2(c) then fixes the place of arbitration. Clause 13.2(d) provides that the arbitral procedure shall be conducted in English and that the procedural law shall be Indian law. Clause 13.2(e) deals with the finality and enforcement of the award. Therefore, Clause 13.2 contains the arrangement made by the parties for the arbitration process.

The Applicant may rely upon the principle that when more than one Court otherwise has jurisdiction, the parties can select one Court to have exclusive jurisdiction. This principle is not disputed. The Supreme Court has referred to the Hakam Singh principle in BGS SGS SOMA JV. But this principle has to be applied according to the facts of the case. Here, the parties have separately and fixed the place of arbitration at Baroda.

The Supreme Court has explained the position in paragraph 58 of BGS SGS SOMA JV as follows:

The above principle does not assist the Applicant in the present case. Here, the arbitration clause does not designate Mumbai as the seat. It provides that the place of arbitration shall be at Baroda. Clause 13.1 refers to Mumbai in the general jurisdiction clause. Therefore, the present Agreement is different from a case where Mumbai is fixed as the seat of arbitration and another clause gives jurisdiction to the Mumbai Courts.

The judgment of the Supreme Court in Enercon (India) Ltd. does not change this conclusion. That judgment explains that in a proper case the venue and seat may be different. The Supreme Court stated in paragraph 135:

The above judgment does not mean that whenever a place is mentioned in an Agreement, that place must be treated only as a venue. The intention of the parties has to be understood from the Agreement. In the present case, there are no sufficient words showing that Baroda was intended only to be a convenient place for hearings. The Agreement says “The place of arbitration shall be at Baroda.” This provision is followed by other provisions dealing with the arbitration procedure. Therefore, when the Agreement is read as a whole, Baroda has to be treated as the seat of arbitration.

The Applicant has submitted that Clause 13.1 uses the words “exclusive jurisdiction” in relation to the Mumbai Courts. I have considered this submission. There is no doubt that the words “exclusive jurisdiction” are important. However, these words in the general jurisdiction clause cannot be read separately in a manner which makes the specific provision in Clause 13.2(c) concerning the place of arbitration ineffective. In my view, both provisions have to be given their proper meaning. Clause 13.1 deals with jurisdiction of the Courts. Clause 13.2 deals with arbitration and fixes Baroda as the place of arbitration. The specific provision concerning arbitration has to be given effect. If Clause 13.1 is read in the wide manner suggested by the Applicant, the words “The place of arbitration shall be at Baroda” would have very little meaning.

The Applicant has relied upon the words “any Issue arising out of this Agreement” used in Clause 13.1. These words are wide and I have considered them. But these words alone cannot decide the seat of arbitration. The present Application is under Section 11 and seeks appointment of the arbitral tribunal. It is connected with the arbitration mechanism agreed by the parties. Therefore, while deciding the territorial jurisdiction of the Court in such a proceeding, the specific clause fixing the place of arbitration becomes important.

The judgment in BGS SGS SOMA JV, particularly paragraph 82, requires the Court to see whether the place mentioned in the Agreement is the seat. On the facts of the present Agreement, I find that it is. The Agreement does not say that only hearings are to be conducted at Baroda. It says in clear words:

There is no other important provision which shows that Baroda was intended only as a convenient venue and not as the seat of arbitration. Once Baroda is treated as the seat of arbitration, the legal consequence follows from BGS SGS SOMA JV. The Supreme Court has stated in paragraph 57 that “the choosing of a ‘seat’ amounts to the choosing of the exclusive jurisdiction of the courts at which the ‘seat’ is located.” Therefore, the Courts at Baroda alone would ordinarily have supervisory jurisdiction over the arbitration proceedings arising from the Agreement.

Clause 13.1 therefore cannot be relied upon for giving territorial jurisdiction to this Court in the present Application under Section 11. This finding does not mean that Clause 13.1 has no legal effect. It will continue to apply to matters which properly fall within that clause. However, when the matter concerns appointment of the arbitral tribunal and is connected with the arbitration, the seat fixed under Clause 13.2(c) has to govern the question of territorial jurisdiction.

The arbitration clause states that the arbitral procedure shall be governed by Indian law and, at the same time, states that the place of arbitration shall be Baroda. The parties have therefore connected the arbitration process with Baroda. The Supreme Court, while referring to Enercon (India) Ltd., has explained that arbitration proceedings are ordinarily anchored to the seat. In paragraph 134, it was observed:

When the present Agreement is read as a whole, the place selected by the parties for the arbitration is Baroda.

I have considered whether the use of the word “place” instead of “seat” creates enough uncertainty to treat Mumbai as the seat of arbitration. In my considered view, it does not. BGS SGS SOMA JV requires the Court to look at the substance of the agreement and the intention of the parties. Here the words are specific. The Agreement says that “The place of arbitration shall be at Baroda.” Nothing in the arbitration clause says that Baroda is only the place where hearings may be held. Therefore, the intention of the parties can be understood from the words used in the Agreement. In view of the above discussion, I am unable to accept the submission of the learned Advocate for the Applicant that Clause 13.1 gives this Court jurisdiction to entertain the present Application under Section 11. The objection raised by the Respondent regarding territorial jurisdiction therefore succeeds.

It is necessary to make clear that this Court has not examined or decided the actual dispute between the parties. The finding in the present Application is limited to the question whether this Court has territorial jurisdiction to entertain the Application under Section 11.

The objection raised by the Respondent is accepted. The present Application cannot be entertained by this Court for want of territorial jurisdiction. The Application therefore deserves to be dismissed on this ground.

In view of the foregoing discussion, and upon overall assessment of the material record, the following order is passed: