REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 5370-5371 OF 2017
(ARISING OUT OF SLP (CIVIL) NOS.27311-27312 OF 2016)
INDUS MOBILE DISTRIBUTION
PRIVATE LIMITED … APPELLANT
VERSUS
DATAWIND INNOVATIONS
PRIVATE LIMITED & ORS. … RESPONDENTS
J U D G M E N T
R.F. NARIMAN, J.
1. Leave granted.
2. The present appeals raise an interesting question as to whether, when
the seat of arbitration is Mumbai, an exclusive jurisdiction clause stating
that the courts at Mumbai alone would have jurisdiction in respect of
disputes arising under the agreement would oust all other courts including
the High Court of Delhi, whose judgment is appealed against.
3. The brief facts necessary to appreciate the controversy are that
Respondent No.1 is engaged in the manufacture, marketing and distribution
of Mobile Phones, Tablets and their accessories. Respondent No.1 has its
registered office at Amritsar, Punjab. Respondent No.1 was supplying goods
to the appellant at Chennai from New Delhi. The appellant approached
Respondent No.1 and expressed an earnest desire to do business with
Respondent No.1 as its Retail Chain Partner. This being the case, an
agreement dated 25.10.2014 was entered into between the parties. Clauses 18
and 19 are relevant for our purpose, and are set out hereinbelow:
“Dispute Resolution Mechanism:
Arbitration: In case of any dispute or differences arising between parties
out of or in relation to the construction, meaning, scope, operation or
effect of this Agreement or breach of this Agreement, parties shall make
efforts in good faith to amicably resolve such dispute.
If such dispute or difference cannot be amicably resolved by the parties
(Dispute) within thirty days of its occurrence, or such longer time as
mutually agreed, either party may refer the dispute to the designated
senior officers of the parties.
If the Dispute cannot be amicably resolved by such officers within thirty
(30) days from the date of referral, or within such longer time as mutually
agreed, such Dispute shall be finally settled by arbitration conducted
under the provisions of the Arbitration & Conciliation Act 1996 by
reference to a sole Arbitrator which shall be mutually agreed by the
parties. Such arbitration shall be conducted at Mumbai, in English
language.
The arbitration award shall be final and the judgment thereupon may be
entered in any court having jurisdiction over the parties hereto or
application may be made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be. The Arbitrator
shall have the power to order specific performance of the Agreement. Each
Party shall bear its own costs of the Arbitration.
It is hereby ‘agreed between the Parties that they will continue to perform
their respective obligations under this Agreement during the pendency of
the Dispute.
19. All disputes & differences of any kind whatever arising out of or in
connection with this Agreement shall be subject to the exclusive
jurisdiction of courts of Mumbai only.”
4. Disputes arose between the parties and a notice dated 25.9.2015 was
sent by Respondent No.1 to the appellant. The notice stated that the
appellant had been in default of outstanding dues of Rs.5 crores with
interest thereon and was called upon to pay the outstanding dues within 7
days. Clause 18 of the Agreement was invoked by Respondent No.1, and one
Justice H.R. Malhotra was appointed as the Sole Arbitrator between the
parties. By a reply dated 15.10.2015, the appellant objected to the
appointment of Justice Malhotra and asked Respondent No.1 to withdraw its
notice. By a further reply dated 16.10.2015, the averments made in the
notice were denied in toto.
5. Two petitions were then filed by Respondent No.1 – the first dated
September 2015, under Section 9 of the Arbitration and Conciliation Act,
1996 asking for various interim reliefs in the matter. By an order dated
22.9.2015, the Delhi High Court issued notice in the interim application
and restrained the appellant from transferring, alienating or creating any
third party interests in respect of the property bearing No.281, TK Road,
Alwarpet, Chennai-600018 till the next date of hearing. By an application
dated 28.10.2015, Respondent No.1 filed a Section 11 petition to appoint an
Arbitrator.
6. Both applications were disposed of by the impugned judgment. First
and foremost, it was held by the impugned judgment that as no part of the
cause of action arose in Mumbai, only the courts of three territories could
have jurisdiction in the matter, namely, Delhi and Chennai (from and to
where goods were supplied), and Amritsar (which is the registered office of
the appellant company). The court therefore held that the exclusive
jurisdiction clause would not apply on facts, as the courts in Mumbai would
have no jurisdiction at all. It, therefore, determined that Delhi being
the first Court that was approached would have jurisdiction in the matter
and proceeded to confirm interim order dated 22.9.2015 and also proceeded
to dispose of the Section 11 petition by appointing Justice S.N. Variava,
retired Supreme Court Judge, as the sole Arbitrator in the proceedings.
The judgment recorded that the conduct of the arbitration would be in
Mumbai.
7. Learned counsel on behalf of the appellant has assailed the judgment
of the Delhi High Court, stating that even if it were to be conceded that
no part of the cause of action arose at Mumbai, yet the seat of the
arbitration being at Mumbai, courts in Mumbai would have exclusive
jurisdiction in all proceedings over the same. According to him,
therefore, the impugned judgment was erroneous and needs to be set aside.
8. In opposition to these arguments, learned counsel for Respondent No.1
sought to support the judgment by stating that no part of the cause of
action arose in Mumbai. This being the case, even if the seat were at
Mumbai, it makes no difference as one of the tests prescribed by the Civil
Procedure Code, 1908, to give a court jurisdiction must at least be
fulfilled. None of these tests being fulfilled on the facts of the present
case, the impugned judgment is correct and requires no interference.
9. The relevant provisions of the Arbitration and Conciliation Act, 1996
are set out hereinbelow:
“2. Definitions. - (1) In this Part, unless the context otherwise requires,
-
(e) “Court” means the principal Civil Court of original jurisdiction in a
district, and includes the High Court in exercise of its ordinary original
civil jurisdiction, having, jurisdiction to decide the questions forming
the subject-matter of the arbitration if the same had been the subject-
matter of a suit, but does not include any civil court of a grade inferior
to such principal Civil Court, or any Court of Small Causes;
(2) This Part shall apply where the place of arbitration is in India.
20. Place of arbitration. – (1) The parties are free to agree on the place
of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of
arbitration shall be determined by the arbitral tribunal having regard to
the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral
tribunal may, unless otherwise agreed by the parties, meet at any place it
considers appropriate for consultation among its members, for hearing
witnesses, experts or the parties, or for inspection of documents, goods or
other property.
31. Form and contents of arbitral award. –
(4) The arbitral award shall state its date and the place of arbitration as
determined in accordance with section 20 and the award shall be deemed to
have been made at that place.”
10. The concept of juridical seat has been evolved by the courts in
England and has now been firmly embedded in our jurisprudence. Thus, the
Constitution Bench in Bharat Aluminium Co. v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552, has adverted to “seat” in some detail.
Paragraph 96 is instructive and states as under:-
“Section 2(1)(e) of the Arbitration Act, 1996 reads as under:
“2. Definitions.—(1) In this Part, unless the context otherwise requires—
(a)-(d)***
(e) ‘Court’ means the Principal Civil Court of Original Jurisdiction in a
district, and includes the High Court in exercise of its ordinary original
civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter
of a suit, but does not include any civil court of a grade inferior to such
Principal Civil Court, or any Court of Small Causes;”
We are of the opinion, the term “subject-matter of the arbitration” cannot
be confused with “subject-matter of the suit”. The term “subject-matter” in
Section 2(1)(e) is confined to Part I. It has a reference and connection
with the process of dispute resolution. Its purpose is to identify the
courts having supervisory control over the arbitration proceedings. Hence,
it refers to a court which would essentially be a court of the seat of the
arbitration process. In our opinion, the provision in Section 2(1)(e) has
to be construed keeping in view the provisions in Section 20 which give
recognition to party autonomy. Accepting the narrow construction as
projected by the learned counsel for the appellants would, in fact, render
Section 20 nugatory. In our view, the legislature has intentionally given
jurisdiction to two courts i.e. the court which would have jurisdiction
where the cause of action is located and the courts where the arbitration
takes place. This was necessary as on many occasions the agreement may
provide for a seat of arbitration at a place which would be neutral to both
the parties. Therefore, the courts where the arbitration takes place would
be required to exercise supervisory control over the arbitral process. For
example, if the arbitration is held in Delhi, where neither of the parties
are from Delhi, (Delhi having been chosen as a neutral place as between a
party from Mumbai and the other from Kolkata) and the tribunal sitting in
Delhi passes an interim order under Section 17 of the Arbitration Act,
1996, the appeal against such an interim order under Section 37 must lie to
the courts of Delhi being the courts having supervisory jurisdiction over
the arbitration proceedings and the tribunal. This would be irrespective of
the fact that the obligations to be performed under the contract were to be
performed either at Mumbai or at Kolkata, and only arbitration is to take
place in Delhi. In such circumstances, both the courts would have
jurisdiction i.e. the court within whose jurisdiction the subject-matter of
the suit is situated and the courts within the jurisdiction of which the
dispute resolution i.e. arbitration is located.” [para 96]
11. Paragraphs 98 to 100 have laid down the law as to “seat” thus:
“We now come to Section 20, which is as under:
“20. Place of arbitration.—(1) The parties are free to agree on the place
of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of
arbitration shall be determined by the Arbitral Tribunal having regard to
the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the Arbitral
Tribunal may, unless otherwise agreed by the parties, meet at any place it
considers appropriate for consultation among its members, for hearing
witnesses, experts or the parties, or for inspection of documents, goods or
other property.”
A plain reading of Section 20 leaves no room for doubt that where the place
of arbitration is in India, the parties are free to agree to any “place” or
“seat” within India, be it Delhi, Mumbai, etc. In the absence of the
parties' agreement thereto, Section 20(2) authorises the tribunal to
determine the place/seat of such arbitration. Section 20(3) enables the
tribunal to meet at any place for conducting hearings at a place of
convenience in matters such as consultations among its members for hearing
witnesses, experts or the parties.
The fixation of the most convenient “venue” is taken care of by Section
20(3). Section 20, has to be read in the context of Section 2(2), which
places a threshold limitation on the applicability of Part I, where the
place of arbitration is in India. Therefore, Section 20 would also not
support the submission of the extra-territorial applicability of Part I, as
canvassed by the learned counsel for the appellants, so far as purely
domestic arbitration is concerned.
True, that in an international commercial arbitration, having a seat in
India, hearings may be necessitated outside India. In such circumstances,
the hearing of the arbitration will be conducted at the venue fixed by the
parties, but it would not have the effect of changing the seat of
arbitration which would remain in India. The legal position in this regard
is summed up by Redfern and Hunter, The Law and Practice of International
Commercial Arbitration (1986) at p. 69 in the following passage under the
heading “The Place of Arbitration”:
“The preceding discussion has been on the basis that there is only one
‘place’ of arbitration. This will be the place chosen by or on behalf of
the parties; and it will be designated in the arbitration agreement or the
terms of the reference or the minutes of proceedings or in some other way
as the place or ‘seat’ of the arbitration. This does not mean, however,
that the Arbitral Tribunal must hold all its meetings or hearings at the
place of arbitration. International commercial arbitration often involves
people of many different nationalities, from many different countries. In
these circumstances, it is by no means unusual for an Arbitral Tribunal to
hold meetings—or even hearings—in a place other than the designated place
of arbitration, either for its own convenience or for the convenience of
the parties or their witnesses…. It may be more convenient for an Arbitral
Tribunal sitting in one country to conduct a hearing in another country—for
instance, for the purpose of taking evidence…. In such circumstances, each
move of the Arbitral Tribunal does not of itself mean that the seat of
arbitration changes. The seat of the arbitration remains the place
initially agreed by or on behalf of the parties.”
This, in our view, is the correct depiction of the practical considerations
and the distinction between “seat” [Sections 20(1) and 20(2)] and “venue”
[Section 20(3)]. We may point out here that the distinction between “seat”
and “venue” would be quite crucial in the event, the arbitration agreement
designates a foreign country as the “seat”/“place” of the arbitration and
also selects the Arbitration Act, 1996 as the curial law/law governing the
arbitration proceedings. It would be a matter of construction of the
individual agreement to decide whether:
(i) the designated foreign “seat” would be read as in fact only providing
for a “venue”/“place” where the hearings would be held, in view of the
choice of the Arbitration Act, 1996 as being the curial law, or
(ii) the specific designation of a foreign seat, necessarily carrying with
it the choice of that country's arbitration/curial law, would prevail over
and subsume the conflicting selection choice by the parties of the
Arbitration Act, 1996.” [paras 98 – 100]
12. In an instructive passage, this Court stated that an agreement as to
the seat of an arbitration is analogous to an exclusive jurisdiction clause
as follows:
“Thus, it is clear that the regulation of conduct of arbitration
and challenge to an award would have to be done by the courts of the
country in which the arbitration is being conducted. Such a court is then
the supervisory court possessed of the power to annul the award. This is in
keeping with the scheme of the international instruments, such as the
Geneva Convention and the New York Convention as well as the Uncitral Model
Law. It also recognises the territorial principle which gives effect to the
sovereign right of a country to regulate, through its national courts, an
adjudicatory duty being performed in its own country. By way of a
comparative example, we may reiterate the observations made by the Court of
Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)]
wherein it is observed that:
“It follows from this that a choice of seat for the arbitration must be a
choice of forum for remedies seeking to attack the award.”
(emphasis supplied)
In the aforesaid case, the Court of Appeal had approved the observations
made in A v. B [(2007) 1 All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237]
wherein it is observed that:
“… an agreement as to the seat of an arbitration is analogous to an
exclusive jurisdiction clause. Any claim for a remedy … as to the validity
of an existing interim or final award is agreed to be made only in the
courts of the place designated as the seat of arbitration.”
(emphasis supplied) [para 123]
13. The Constitution Bench’s statement of the law was further expanded in
Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1. After referring to
various English authorities in great detail, this Court held, following the
Constitution Bench, as follows:
“It is accepted by most of the experts in the law relating to international
arbitration that in almost all the national laws, arbitrations are anchored
to the seat/place/situs of arbitration. Redfern and Hunter on International
Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), in
Para 3.54 concludes that “the seat of the arbitration is thus intended to
be its centre of gravity”. In Balco [Bharat Aluminium Co. v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ)
810] , it is further noticed that this does not mean that all proceedings
of the arbitration are to be held at the seat of arbitration. The
arbitrators are at liberty to hold meetings at a place which is of
convenience to all concerned. This may become necessary as arbitrators
often come from different countries. Therefore, it may be convenient to
hold all or some of the meetings of the arbitration in a location other
than where the seat of arbitration is located. In Balco, the relevant
passage from Redfern and Hunter has been quoted which is as under: (SCC p.
598, para 75)
“75. … ‘The preceding discussion has been on the basis that there is only
one “place” of arbitration. This will be the place chosen by or on behalf
of the parties; and it will be designated in the arbitration agreement or
the terms of reference or the minutes of proceedings or in some other way
as the place or “seat” of the arbitration. This does not mean, however,
that the Arbitral Tribunal must hold all its meetings or hearings at the
place of arbitration. International commercial arbitration often involves
people of many different nationalities, from many different countries. In
these circumstances, it is by no means unusual for an Arbitral Tribunal to
hold meetings—or even hearings—in a place other than the designated place
of arbitration, either for its own convenience or for the convenience of
the parties or their witnesses…. It may be more convenient for an Arbitral
Tribunal sitting in one country to conduct a hearing in another country —
for instance, for the purpose of taking evidence…. In such circumstances
each move of the Arbitral Tribunal does not of itself mean that the seat of
arbitration changes. The seat of arbitration remains the place initially
agreed by or on behalf of the parties.’ (Naviera case [Naviera Amazonica
Peruana S.A. v. Compania Internacional De Seguros Del Peru, (1988) 1
Lloyd's Rep 116 (CA)] , Lloyd's Rep p. 121)”
(emphasis in original)
These observations have also been noticed in Union of India v. McDonnell
Douglas Corpn. [(1993) 2 Lloyd's Rep 48]” [para 134]
14. This Court reiterated that once the seat of arbitration has been
fixed, it would be in the nature of an exclusive jurisdiction clause as to
the courts which exercise supervisory powers over the arbitration. (See:
paragraph 138).
15. In Reliance Industries Ltd. v. Union of India, (2014) 7 SCC, 603,
this statement of the law was echoed in several paragraphs. This judgment
makes it clear that “juridical seat” is nothing but the “legal place” of
arbitration. It was held that since the juridical seat or legal place of
arbitration was London, English courts alone would have jurisdiction over
the arbitration thus excluding Part I of the Indian Act. (See: paragraphs
36, 41, 45 to 60 and 76.1 and 76.2). This judgment was relied upon and
followed by Harmony Innovation Shipping Limited v. Gupta Coal India Limited
and Another, (2015) 9 SCC 172 (See: paragraphs 45 and 48). In Union of
India v. Reliance Industries Limited and Others, (2015) 10 SCC 213, this
Court referred to all the earlier judgments and held that in cases where
the seat of arbitration is London, by necessary implication Part I of the
Arbitration and Conciliation Act, 1996 is excluded as the supervisory
jurisdiction of courts over the arbitration goes along with “seat”.
16. In a recent judgment in Eitzen Bulk A/S v. Ashapura Minechem Limited
and Another, (2016) 11 SCC 508, all the aforesaid authorities were referred
to and followed. Paragraph 34 of the said judgment reads as follows:
“As a matter of fact the mere choosing of the juridical seat of arbitration
attracts the law applicable to such location. In other words, it would not
be necessary to specify which law would apply to the arbitration
proceedings, since the law of the particular country would apply ipso jure.
The following passage from Redfern and Hunter on International
Arbitration contains the following explication of the issue:
“It is also sometimes said that parties have selected the procedural law
that will govern their arbitration, by providing for arbitration in a
particular country. This is too elliptical and, as an English court itself
held more recently in Breas of Doune Wind Farm it does not always hold
true. What the parties have done is to choose a place of arbitration in a
particular country. That choice brings with it submission to the laws of
that country, including any mandatory provisions of its law on arbitration.
To say that the parties have “chosen” that particular law to govern the
arbitration is rather like saying that an English woman who takes her car
to France has “chosen” French traffic law, which will oblige her to drive
on the right-hand side of the road, to give priority to vehicles
approaching from the right, and generally to obey traffic laws to which she
may not be accustomed. But it would be an odd use of language to say this
notional motorist had opted for “French traffic law”. What she has done is
to choose to go to France. The applicability of French law then follows
automatically. It is not a matter of choice.
Parties may well choose a particular place of arbitration precisely because
its lex arbitri is one which they find attractive. Nevertheless, once a
place of arbitration has been chosen, it brings with it its own law. If
that law contains provisions that are mandatory so far as arbitration are
concerned, those provisions must be obeyed. It is not a matter of choice
any more than the notional motorist is free to choose which local traffic
laws to obey and which to disregard.” [para 34]
17. It may be mentioned, in passing, that the Arbitration and
Conciliation Act, 1996 has been amended in 2015 pursuant to a detailed Law
Commission Report. The Law Commission specifically adverted to the
difference between “seat” and “venue” as follows:
“40. The Supreme Court in BALCO decided that Parts I and II of the Act are
mutually exclusive of each other. The intention of Parliament that the Act
is territorial in nature and sections 9 and 34 will apply only when the
seat of arbitration is in India. The seat is the “centre of gravity” of
arbitration, and even where two foreign parties arbitrate in India, Part I
would apply and, by 24 virtue of section 2(7), the award would be a
“domestic award”. The Supreme Court recognized the “seat” of arbitration to
be the juridical seat; however, in line with international practice, it was
observed that the arbitral hearings may take place at a location other than
the seat of arbitration. The distinction between “seat” and “venue” was,
therefore, recognized. In such a scenario, only if the seat is determined
to be India, Part I would be applicable. If the seat was foreign, Part I
would be inapplicable. Even if Part I was expressly included “it would only
mean that the parties have contractually imported from the Arbitration Act,
1996, those provisions which are concerned with the internal conduct of
their arbitration and which are not inconsistent with the mandatory
provisions of the [foreign] Procedural Law/Curial Law.” The same cannot be
used to confer jurisdiction on an Indian Court. However, the decision in
BALCO was expressly given prospective effect and applied to arbitration
agreements executed after the date of the judgment.
41. While the decision in BALCO is a step in the right direction and
would drastically reduce judicial intervention in foreign arbitrations, the
Commission feels that there are still a few areas that are likely to be
problematic.
(i) Where the assets of a party are located in India, and there is a
likelihood that that party will dissipate its assets in the near future,
the other party will lack an efficacious remedy if the seat of the
arbitration is abroad. The latter party will have two possible remedies,
but neither will be efficacious. First, the latter party can obtain an
interim order from a foreign Court or the arbitral tribunal itself and file
a civil suit to enforce the right created by the interim order. The interim
order would not be enforceable directly by filing an execution petition as
it would not qualify as a “judgment” or “decree” for the purposes of
sections 13 and 44A of the Code of Civil Procedure (which provide a
mechanism for enforcing foreign judgments). Secondly, in the event that the
former party does not adhere to the terms of the foreign Order, the latter
party can initiate proceedings for contempt in the foreign Court and
enforce the judgment of the foreign Court under sections 13 and 44A of the
Code of Civil Procedure. Neither of these remedies is likely to provide a
25 practical remedy to the party seeking to enforce the interim relief
obtained by it.
That being the case, it is a distinct possibility that a foreign party
would obtain an arbitral award in its favour only to realize that the
entity against which it has to enforce the award has been stripped of its
assets and has been converted into a shell company.
(ii) While the decision in BALCO was made prospective to ensure that hotly
negotiated bargains are not overturned overnight, it results in a situation
where Courts, despite knowing that the decision in Bhatia is no longer good
law, are forced to apply it whenever they are faced with a case arising
from an arbitration agreement executed pre-BALCO.
42.The above issues have been addressed by way of proposed Amendments to
sections 2(2), 2(2A), 20, 28 and 31.”
18. In amendments to be made to the Act, the Law Commission recommended
the following:
“Amendment of Section 20
12.In section 20, delete the word “Place” and add the words “Seat and
Venue” before the words “of arbitration”.
(i) In sub-section (1), after the words ”agree on the” delete the word
“place” and add words “seat and venue”
(ii) In sub-section (3), after the words “meet at any” delete the word
“place” and add word “venue”.
[NOTE: The departure from the existing phrase “place” of arbitration is
proposed to make the wording of the Act consistent with the international
usage of the concept of a “seat” of arbitration, to denote the legal home
of the arbitration. The amendment further legislatively distinguishes
between the “[legal] seat” from a “[mere] venue” of arbitration.]
Amendment of Section 31
17.In section 31
(i) In sub-section (4), after the words “its date and the” delete the word
“place” and add the word “seat”.”
19. The amended Act, does not, however, contain the aforesaid amendments,
presumably because the BALCO judgment in no uncertain terms has referred to
“place” as “juridical seat” for the purpose of Section 2(2) of the Act. It
further made it clear that Section 20(1) and 20 (2) where the word “place”
is used, refers to “juridical seat”, whereas in Section 20 (3), the word
“place” is equivalent to “venue”. This being the settled law, it was found
unnecessary to expressly incorporate what the Constitution Bench of the
Supreme Court has already done by way of construction of the Act.
20. A conspectus of all the aforesaid provisions shows that the moment
the seat is designated, it is akin to an exclusive jurisdiction clause. On
the facts of the present case, it is clear that the seat of arbitration is
Mumbai and Clause 19 further makes it clear that jurisdiction exclusively
vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code
of Civil Procedure which applies to suits filed in courts, a reference to
“seat” is a concept by which a neutral venue can be chosen by the parties
to an arbitration clause. The neutral venue may not in the classical sense
have jurisdiction – that is, no part of the cause of action may have arisen
at the neutral venue and neither would any of the provisions of Section 16
to 21 of the CPC be attracted. In arbitration law however, as has been
held above, the moment “seat” is determined, the fact that the seat is at
Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of
regulating arbitral proceedings arising out of the agreement between the
parties.
21. It is well settled that where more than one court has jurisdiction,
it is open for parties to exclude all other courts. For an exhaustive
analysis of the case law, see Swastik Gases Private Limited v. Indian Oil
Corporation Limited, (2013) 9 SCC 32. This was followed in a recent
judgment in B.E. Simoese Von Staraburg Niedenthal and Another v.
Chhattisgarh Investment Limited, (2015) 12 SCC 225. Having regard to the
above, it is clear that Mumbai courts alone have jurisdiction to the
exclusion of all other courts in the country, as the juridical seat of
arbitration is at Mumbai. This being the case, the impugned judgment is
set aside. The injunction confirmed by the impugned judgment will continue
for a period of four weeks from the date of pronouncement of this judgment,
so that the respondents may take necessary steps under Section 9 in the
Mumbai Court. Appeals are disposed of accordingly.
…………………………………..J.
(PINAKI CHANDRA GHOSE )
…….…………………………… J.
(R.F. NARIMAN)
New Delhi;
April 19, 2017.
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 5370-5371 OF 2017
(ARISING OUT OF SLP (CIVIL) NOS.27311-27312 OF 2016)
INDUS MOBILE DISTRIBUTION
PRIVATE LIMITED … APPELLANT
VERSUS
DATAWIND INNOVATIONS
PRIVATE LIMITED & ORS. … RESPONDENTS
J U D G M E N T
R.F. NARIMAN, J.
1. Leave granted.
2. The present appeals raise an interesting question as to whether, when
the seat of arbitration is Mumbai, an exclusive jurisdiction clause stating
that the courts at Mumbai alone would have jurisdiction in respect of
disputes arising under the agreement would oust all other courts including
the High Court of Delhi, whose judgment is appealed against.
3. The brief facts necessary to appreciate the controversy are that
Respondent No.1 is engaged in the manufacture, marketing and distribution
of Mobile Phones, Tablets and their accessories. Respondent No.1 has its
registered office at Amritsar, Punjab. Respondent No.1 was supplying goods
to the appellant at Chennai from New Delhi. The appellant approached
Respondent No.1 and expressed an earnest desire to do business with
Respondent No.1 as its Retail Chain Partner. This being the case, an
agreement dated 25.10.2014 was entered into between the parties. Clauses 18
and 19 are relevant for our purpose, and are set out hereinbelow:
“Dispute Resolution Mechanism:
Arbitration: In case of any dispute or differences arising between parties
out of or in relation to the construction, meaning, scope, operation or
effect of this Agreement or breach of this Agreement, parties shall make
efforts in good faith to amicably resolve such dispute.
If such dispute or difference cannot be amicably resolved by the parties
(Dispute) within thirty days of its occurrence, or such longer time as
mutually agreed, either party may refer the dispute to the designated
senior officers of the parties.
If the Dispute cannot be amicably resolved by such officers within thirty
(30) days from the date of referral, or within such longer time as mutually
agreed, such Dispute shall be finally settled by arbitration conducted
under the provisions of the Arbitration & Conciliation Act 1996 by
reference to a sole Arbitrator which shall be mutually agreed by the
parties. Such arbitration shall be conducted at Mumbai, in English
language.
The arbitration award shall be final and the judgment thereupon may be
entered in any court having jurisdiction over the parties hereto or
application may be made to such court for a judicial acceptance of the
award and an order of enforcement, as the case may be. The Arbitrator
shall have the power to order specific performance of the Agreement. Each
Party shall bear its own costs of the Arbitration.
It is hereby ‘agreed between the Parties that they will continue to perform
their respective obligations under this Agreement during the pendency of
the Dispute.
19. All disputes & differences of any kind whatever arising out of or in
connection with this Agreement shall be subject to the exclusive
jurisdiction of courts of Mumbai only.”
4. Disputes arose between the parties and a notice dated 25.9.2015 was
sent by Respondent No.1 to the appellant. The notice stated that the
appellant had been in default of outstanding dues of Rs.5 crores with
interest thereon and was called upon to pay the outstanding dues within 7
days. Clause 18 of the Agreement was invoked by Respondent No.1, and one
Justice H.R. Malhotra was appointed as the Sole Arbitrator between the
parties. By a reply dated 15.10.2015, the appellant objected to the
appointment of Justice Malhotra and asked Respondent No.1 to withdraw its
notice. By a further reply dated 16.10.2015, the averments made in the
notice were denied in toto.
5. Two petitions were then filed by Respondent No.1 – the first dated
September 2015, under Section 9 of the Arbitration and Conciliation Act,
1996 asking for various interim reliefs in the matter. By an order dated
22.9.2015, the Delhi High Court issued notice in the interim application
and restrained the appellant from transferring, alienating or creating any
third party interests in respect of the property bearing No.281, TK Road,
Alwarpet, Chennai-600018 till the next date of hearing. By an application
dated 28.10.2015, Respondent No.1 filed a Section 11 petition to appoint an
Arbitrator.
6. Both applications were disposed of by the impugned judgment. First
and foremost, it was held by the impugned judgment that as no part of the
cause of action arose in Mumbai, only the courts of three territories could
have jurisdiction in the matter, namely, Delhi and Chennai (from and to
where goods were supplied), and Amritsar (which is the registered office of
the appellant company). The court therefore held that the exclusive
jurisdiction clause would not apply on facts, as the courts in Mumbai would
have no jurisdiction at all. It, therefore, determined that Delhi being
the first Court that was approached would have jurisdiction in the matter
and proceeded to confirm interim order dated 22.9.2015 and also proceeded
to dispose of the Section 11 petition by appointing Justice S.N. Variava,
retired Supreme Court Judge, as the sole Arbitrator in the proceedings.
The judgment recorded that the conduct of the arbitration would be in
Mumbai.
7. Learned counsel on behalf of the appellant has assailed the judgment
of the Delhi High Court, stating that even if it were to be conceded that
no part of the cause of action arose at Mumbai, yet the seat of the
arbitration being at Mumbai, courts in Mumbai would have exclusive
jurisdiction in all proceedings over the same. According to him,
therefore, the impugned judgment was erroneous and needs to be set aside.
8. In opposition to these arguments, learned counsel for Respondent No.1
sought to support the judgment by stating that no part of the cause of
action arose in Mumbai. This being the case, even if the seat were at
Mumbai, it makes no difference as one of the tests prescribed by the Civil
Procedure Code, 1908, to give a court jurisdiction must at least be
fulfilled. None of these tests being fulfilled on the facts of the present
case, the impugned judgment is correct and requires no interference.
9. The relevant provisions of the Arbitration and Conciliation Act, 1996
are set out hereinbelow:
“2. Definitions. - (1) In this Part, unless the context otherwise requires,
-
(e) “Court” means the principal Civil Court of original jurisdiction in a
district, and includes the High Court in exercise of its ordinary original
civil jurisdiction, having, jurisdiction to decide the questions forming
the subject-matter of the arbitration if the same had been the subject-
matter of a suit, but does not include any civil court of a grade inferior
to such principal Civil Court, or any Court of Small Causes;
(2) This Part shall apply where the place of arbitration is in India.
20. Place of arbitration. – (1) The parties are free to agree on the place
of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of
arbitration shall be determined by the arbitral tribunal having regard to
the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral
tribunal may, unless otherwise agreed by the parties, meet at any place it
considers appropriate for consultation among its members, for hearing
witnesses, experts or the parties, or for inspection of documents, goods or
other property.
31. Form and contents of arbitral award. –
(4) The arbitral award shall state its date and the place of arbitration as
determined in accordance with section 20 and the award shall be deemed to
have been made at that place.”
10. The concept of juridical seat has been evolved by the courts in
England and has now been firmly embedded in our jurisprudence. Thus, the
Constitution Bench in Bharat Aluminium Co. v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552, has adverted to “seat” in some detail.
Paragraph 96 is instructive and states as under:-
“Section 2(1)(e) of the Arbitration Act, 1996 reads as under:
“2. Definitions.—(1) In this Part, unless the context otherwise requires—
(a)-(d)***
(e) ‘Court’ means the Principal Civil Court of Original Jurisdiction in a
district, and includes the High Court in exercise of its ordinary original
civil jurisdiction, having jurisdiction to decide the questions forming the
subject-matter of the arbitration if the same had been the subject-matter
of a suit, but does not include any civil court of a grade inferior to such
Principal Civil Court, or any Court of Small Causes;”
We are of the opinion, the term “subject-matter of the arbitration” cannot
be confused with “subject-matter of the suit”. The term “subject-matter” in
Section 2(1)(e) is confined to Part I. It has a reference and connection
with the process of dispute resolution. Its purpose is to identify the
courts having supervisory control over the arbitration proceedings. Hence,
it refers to a court which would essentially be a court of the seat of the
arbitration process. In our opinion, the provision in Section 2(1)(e) has
to be construed keeping in view the provisions in Section 20 which give
recognition to party autonomy. Accepting the narrow construction as
projected by the learned counsel for the appellants would, in fact, render
Section 20 nugatory. In our view, the legislature has intentionally given
jurisdiction to two courts i.e. the court which would have jurisdiction
where the cause of action is located and the courts where the arbitration
takes place. This was necessary as on many occasions the agreement may
provide for a seat of arbitration at a place which would be neutral to both
the parties. Therefore, the courts where the arbitration takes place would
be required to exercise supervisory control over the arbitral process. For
example, if the arbitration is held in Delhi, where neither of the parties
are from Delhi, (Delhi having been chosen as a neutral place as between a
party from Mumbai and the other from Kolkata) and the tribunal sitting in
Delhi passes an interim order under Section 17 of the Arbitration Act,
1996, the appeal against such an interim order under Section 37 must lie to
the courts of Delhi being the courts having supervisory jurisdiction over
the arbitration proceedings and the tribunal. This would be irrespective of
the fact that the obligations to be performed under the contract were to be
performed either at Mumbai or at Kolkata, and only arbitration is to take
place in Delhi. In such circumstances, both the courts would have
jurisdiction i.e. the court within whose jurisdiction the subject-matter of
the suit is situated and the courts within the jurisdiction of which the
dispute resolution i.e. arbitration is located.” [para 96]
11. Paragraphs 98 to 100 have laid down the law as to “seat” thus:
“We now come to Section 20, which is as under:
“20. Place of arbitration.—(1) The parties are free to agree on the place
of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of
arbitration shall be determined by the Arbitral Tribunal having regard to
the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the Arbitral
Tribunal may, unless otherwise agreed by the parties, meet at any place it
considers appropriate for consultation among its members, for hearing
witnesses, experts or the parties, or for inspection of documents, goods or
other property.”
A plain reading of Section 20 leaves no room for doubt that where the place
of arbitration is in India, the parties are free to agree to any “place” or
“seat” within India, be it Delhi, Mumbai, etc. In the absence of the
parties' agreement thereto, Section 20(2) authorises the tribunal to
determine the place/seat of such arbitration. Section 20(3) enables the
tribunal to meet at any place for conducting hearings at a place of
convenience in matters such as consultations among its members for hearing
witnesses, experts or the parties.
The fixation of the most convenient “venue” is taken care of by Section
20(3). Section 20, has to be read in the context of Section 2(2), which
places a threshold limitation on the applicability of Part I, where the
place of arbitration is in India. Therefore, Section 20 would also not
support the submission of the extra-territorial applicability of Part I, as
canvassed by the learned counsel for the appellants, so far as purely
domestic arbitration is concerned.
True, that in an international commercial arbitration, having a seat in
India, hearings may be necessitated outside India. In such circumstances,
the hearing of the arbitration will be conducted at the venue fixed by the
parties, but it would not have the effect of changing the seat of
arbitration which would remain in India. The legal position in this regard
is summed up by Redfern and Hunter, The Law and Practice of International
Commercial Arbitration (1986) at p. 69 in the following passage under the
heading “The Place of Arbitration”:
“The preceding discussion has been on the basis that there is only one
‘place’ of arbitration. This will be the place chosen by or on behalf of
the parties; and it will be designated in the arbitration agreement or the
terms of the reference or the minutes of proceedings or in some other way
as the place or ‘seat’ of the arbitration. This does not mean, however,
that the Arbitral Tribunal must hold all its meetings or hearings at the
place of arbitration. International commercial arbitration often involves
people of many different nationalities, from many different countries. In
these circumstances, it is by no means unusual for an Arbitral Tribunal to
hold meetings—or even hearings—in a place other than the designated place
of arbitration, either for its own convenience or for the convenience of
the parties or their witnesses…. It may be more convenient for an Arbitral
Tribunal sitting in one country to conduct a hearing in another country—for
instance, for the purpose of taking evidence…. In such circumstances, each
move of the Arbitral Tribunal does not of itself mean that the seat of
arbitration changes. The seat of the arbitration remains the place
initially agreed by or on behalf of the parties.”
This, in our view, is the correct depiction of the practical considerations
and the distinction between “seat” [Sections 20(1) and 20(2)] and “venue”
[Section 20(3)]. We may point out here that the distinction between “seat”
and “venue” would be quite crucial in the event, the arbitration agreement
designates a foreign country as the “seat”/“place” of the arbitration and
also selects the Arbitration Act, 1996 as the curial law/law governing the
arbitration proceedings. It would be a matter of construction of the
individual agreement to decide whether:
(i) the designated foreign “seat” would be read as in fact only providing
for a “venue”/“place” where the hearings would be held, in view of the
choice of the Arbitration Act, 1996 as being the curial law, or
(ii) the specific designation of a foreign seat, necessarily carrying with
it the choice of that country's arbitration/curial law, would prevail over
and subsume the conflicting selection choice by the parties of the
Arbitration Act, 1996.” [paras 98 – 100]
12. In an instructive passage, this Court stated that an agreement as to
the seat of an arbitration is analogous to an exclusive jurisdiction clause
as follows:
“Thus, it is clear that the regulation of conduct of arbitration
and challenge to an award would have to be done by the courts of the
country in which the arbitration is being conducted. Such a court is then
the supervisory court possessed of the power to annul the award. This is in
keeping with the scheme of the international instruments, such as the
Geneva Convention and the New York Convention as well as the Uncitral Model
Law. It also recognises the territorial principle which gives effect to the
sovereign right of a country to regulate, through its national courts, an
adjudicatory duty being performed in its own country. By way of a
comparative example, we may reiterate the observations made by the Court of
Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)]
wherein it is observed that:
“It follows from this that a choice of seat for the arbitration must be a
choice of forum for remedies seeking to attack the award.”
(emphasis supplied)
In the aforesaid case, the Court of Appeal had approved the observations
made in A v. B [(2007) 1 All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237]
wherein it is observed that:
“… an agreement as to the seat of an arbitration is analogous to an
exclusive jurisdiction clause. Any claim for a remedy … as to the validity
of an existing interim or final award is agreed to be made only in the
courts of the place designated as the seat of arbitration.”
(emphasis supplied) [para 123]
13. The Constitution Bench’s statement of the law was further expanded in
Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5 SCC 1. After referring to
various English authorities in great detail, this Court held, following the
Constitution Bench, as follows:
“It is accepted by most of the experts in the law relating to international
arbitration that in almost all the national laws, arbitrations are anchored
to the seat/place/situs of arbitration. Redfern and Hunter on International
Arbitration (5th Edn., Oxford University Press, Oxford/New York 2009), in
Para 3.54 concludes that “the seat of the arbitration is thus intended to
be its centre of gravity”. In Balco [Bharat Aluminium Co. v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ)
810] , it is further noticed that this does not mean that all proceedings
of the arbitration are to be held at the seat of arbitration. The
arbitrators are at liberty to hold meetings at a place which is of
convenience to all concerned. This may become necessary as arbitrators
often come from different countries. Therefore, it may be convenient to
hold all or some of the meetings of the arbitration in a location other
than where the seat of arbitration is located. In Balco, the relevant
passage from Redfern and Hunter has been quoted which is as under: (SCC p.
598, para 75)
“75. … ‘The preceding discussion has been on the basis that there is only
one “place” of arbitration. This will be the place chosen by or on behalf
of the parties; and it will be designated in the arbitration agreement or
the terms of reference or the minutes of proceedings or in some other way
as the place or “seat” of the arbitration. This does not mean, however,
that the Arbitral Tribunal must hold all its meetings or hearings at the
place of arbitration. International commercial arbitration often involves
people of many different nationalities, from many different countries. In
these circumstances, it is by no means unusual for an Arbitral Tribunal to
hold meetings—or even hearings—in a place other than the designated place
of arbitration, either for its own convenience or for the convenience of
the parties or their witnesses…. It may be more convenient for an Arbitral
Tribunal sitting in one country to conduct a hearing in another country —
for instance, for the purpose of taking evidence…. In such circumstances
each move of the Arbitral Tribunal does not of itself mean that the seat of
arbitration changes. The seat of arbitration remains the place initially
agreed by or on behalf of the parties.’ (Naviera case [Naviera Amazonica
Peruana S.A. v. Compania Internacional De Seguros Del Peru, (1988) 1
Lloyd's Rep 116 (CA)] , Lloyd's Rep p. 121)”
(emphasis in original)
These observations have also been noticed in Union of India v. McDonnell
Douglas Corpn. [(1993) 2 Lloyd's Rep 48]” [para 134]
14. This Court reiterated that once the seat of arbitration has been
fixed, it would be in the nature of an exclusive jurisdiction clause as to
the courts which exercise supervisory powers over the arbitration. (See:
paragraph 138).
15. In Reliance Industries Ltd. v. Union of India, (2014) 7 SCC, 603,
this statement of the law was echoed in several paragraphs. This judgment
makes it clear that “juridical seat” is nothing but the “legal place” of
arbitration. It was held that since the juridical seat or legal place of
arbitration was London, English courts alone would have jurisdiction over
the arbitration thus excluding Part I of the Indian Act. (See: paragraphs
36, 41, 45 to 60 and 76.1 and 76.2). This judgment was relied upon and
followed by Harmony Innovation Shipping Limited v. Gupta Coal India Limited
and Another, (2015) 9 SCC 172 (See: paragraphs 45 and 48). In Union of
India v. Reliance Industries Limited and Others, (2015) 10 SCC 213, this
Court referred to all the earlier judgments and held that in cases where
the seat of arbitration is London, by necessary implication Part I of the
Arbitration and Conciliation Act, 1996 is excluded as the supervisory
jurisdiction of courts over the arbitration goes along with “seat”.
16. In a recent judgment in Eitzen Bulk A/S v. Ashapura Minechem Limited
and Another, (2016) 11 SCC 508, all the aforesaid authorities were referred
to and followed. Paragraph 34 of the said judgment reads as follows:
“As a matter of fact the mere choosing of the juridical seat of arbitration
attracts the law applicable to such location. In other words, it would not
be necessary to specify which law would apply to the arbitration
proceedings, since the law of the particular country would apply ipso jure.
The following passage from Redfern and Hunter on International
Arbitration contains the following explication of the issue:
“It is also sometimes said that parties have selected the procedural law
that will govern their arbitration, by providing for arbitration in a
particular country. This is too elliptical and, as an English court itself
held more recently in Breas of Doune Wind Farm it does not always hold
true. What the parties have done is to choose a place of arbitration in a
particular country. That choice brings with it submission to the laws of
that country, including any mandatory provisions of its law on arbitration.
To say that the parties have “chosen” that particular law to govern the
arbitration is rather like saying that an English woman who takes her car
to France has “chosen” French traffic law, which will oblige her to drive
on the right-hand side of the road, to give priority to vehicles
approaching from the right, and generally to obey traffic laws to which she
may not be accustomed. But it would be an odd use of language to say this
notional motorist had opted for “French traffic law”. What she has done is
to choose to go to France. The applicability of French law then follows
automatically. It is not a matter of choice.
Parties may well choose a particular place of arbitration precisely because
its lex arbitri is one which they find attractive. Nevertheless, once a
place of arbitration has been chosen, it brings with it its own law. If
that law contains provisions that are mandatory so far as arbitration are
concerned, those provisions must be obeyed. It is not a matter of choice
any more than the notional motorist is free to choose which local traffic
laws to obey and which to disregard.” [para 34]
17. It may be mentioned, in passing, that the Arbitration and
Conciliation Act, 1996 has been amended in 2015 pursuant to a detailed Law
Commission Report. The Law Commission specifically adverted to the
difference between “seat” and “venue” as follows:
“40. The Supreme Court in BALCO decided that Parts I and II of the Act are
mutually exclusive of each other. The intention of Parliament that the Act
is territorial in nature and sections 9 and 34 will apply only when the
seat of arbitration is in India. The seat is the “centre of gravity” of
arbitration, and even where two foreign parties arbitrate in India, Part I
would apply and, by 24 virtue of section 2(7), the award would be a
“domestic award”. The Supreme Court recognized the “seat” of arbitration to
be the juridical seat; however, in line with international practice, it was
observed that the arbitral hearings may take place at a location other than
the seat of arbitration. The distinction between “seat” and “venue” was,
therefore, recognized. In such a scenario, only if the seat is determined
to be India, Part I would be applicable. If the seat was foreign, Part I
would be inapplicable. Even if Part I was expressly included “it would only
mean that the parties have contractually imported from the Arbitration Act,
1996, those provisions which are concerned with the internal conduct of
their arbitration and which are not inconsistent with the mandatory
provisions of the [foreign] Procedural Law/Curial Law.” The same cannot be
used to confer jurisdiction on an Indian Court. However, the decision in
BALCO was expressly given prospective effect and applied to arbitration
agreements executed after the date of the judgment.
41. While the decision in BALCO is a step in the right direction and
would drastically reduce judicial intervention in foreign arbitrations, the
Commission feels that there are still a few areas that are likely to be
problematic.
(i) Where the assets of a party are located in India, and there is a
likelihood that that party will dissipate its assets in the near future,
the other party will lack an efficacious remedy if the seat of the
arbitration is abroad. The latter party will have two possible remedies,
but neither will be efficacious. First, the latter party can obtain an
interim order from a foreign Court or the arbitral tribunal itself and file
a civil suit to enforce the right created by the interim order. The interim
order would not be enforceable directly by filing an execution petition as
it would not qualify as a “judgment” or “decree” for the purposes of
sections 13 and 44A of the Code of Civil Procedure (which provide a
mechanism for enforcing foreign judgments). Secondly, in the event that the
former party does not adhere to the terms of the foreign Order, the latter
party can initiate proceedings for contempt in the foreign Court and
enforce the judgment of the foreign Court under sections 13 and 44A of the
Code of Civil Procedure. Neither of these remedies is likely to provide a
25 practical remedy to the party seeking to enforce the interim relief
obtained by it.
That being the case, it is a distinct possibility that a foreign party
would obtain an arbitral award in its favour only to realize that the
entity against which it has to enforce the award has been stripped of its
assets and has been converted into a shell company.
(ii) While the decision in BALCO was made prospective to ensure that hotly
negotiated bargains are not overturned overnight, it results in a situation
where Courts, despite knowing that the decision in Bhatia is no longer good
law, are forced to apply it whenever they are faced with a case arising
from an arbitration agreement executed pre-BALCO.
42.The above issues have been addressed by way of proposed Amendments to
sections 2(2), 2(2A), 20, 28 and 31.”
18. In amendments to be made to the Act, the Law Commission recommended
the following:
“Amendment of Section 20
12.In section 20, delete the word “Place” and add the words “Seat and
Venue” before the words “of arbitration”.
(i) In sub-section (1), after the words ”agree on the” delete the word
“place” and add words “seat and venue”
(ii) In sub-section (3), after the words “meet at any” delete the word
“place” and add word “venue”.
[NOTE: The departure from the existing phrase “place” of arbitration is
proposed to make the wording of the Act consistent with the international
usage of the concept of a “seat” of arbitration, to denote the legal home
of the arbitration. The amendment further legislatively distinguishes
between the “[legal] seat” from a “[mere] venue” of arbitration.]
Amendment of Section 31
17.In section 31
(i) In sub-section (4), after the words “its date and the” delete the word
“place” and add the word “seat”.”
19. The amended Act, does not, however, contain the aforesaid amendments,
presumably because the BALCO judgment in no uncertain terms has referred to
“place” as “juridical seat” for the purpose of Section 2(2) of the Act. It
further made it clear that Section 20(1) and 20 (2) where the word “place”
is used, refers to “juridical seat”, whereas in Section 20 (3), the word
“place” is equivalent to “venue”. This being the settled law, it was found
unnecessary to expressly incorporate what the Constitution Bench of the
Supreme Court has already done by way of construction of the Act.
20. A conspectus of all the aforesaid provisions shows that the moment
the seat is designated, it is akin to an exclusive jurisdiction clause. On
the facts of the present case, it is clear that the seat of arbitration is
Mumbai and Clause 19 further makes it clear that jurisdiction exclusively
vests in the Mumbai courts. Under the Law of Arbitration, unlike the Code
of Civil Procedure which applies to suits filed in courts, a reference to
“seat” is a concept by which a neutral venue can be chosen by the parties
to an arbitration clause. The neutral venue may not in the classical sense
have jurisdiction – that is, no part of the cause of action may have arisen
at the neutral venue and neither would any of the provisions of Section 16
to 21 of the CPC be attracted. In arbitration law however, as has been
held above, the moment “seat” is determined, the fact that the seat is at
Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of
regulating arbitral proceedings arising out of the agreement between the
parties.
21. It is well settled that where more than one court has jurisdiction,
it is open for parties to exclude all other courts. For an exhaustive
analysis of the case law, see Swastik Gases Private Limited v. Indian Oil
Corporation Limited, (2013) 9 SCC 32. This was followed in a recent
judgment in B.E. Simoese Von Staraburg Niedenthal and Another v.
Chhattisgarh Investment Limited, (2015) 12 SCC 225. Having regard to the
above, it is clear that Mumbai courts alone have jurisdiction to the
exclusion of all other courts in the country, as the juridical seat of
arbitration is at Mumbai. This being the case, the impugned judgment is
set aside. The injunction confirmed by the impugned judgment will continue
for a period of four weeks from the date of pronouncement of this judgment,
so that the respondents may take necessary steps under Section 9 in the
Mumbai Court. Appeals are disposed of accordingly.
…………………………………..J.
(PINAKI CHANDRA GHOSE )
…….…………………………… J.
(R.F. NARIMAN)
New Delhi;
April 19, 2017.
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