From ‘Venue’ to ‘Seat’ of Arbitration
The Supreme Court of India in M/S.INOX Renewables Ltd vs. Jayesh Electricals Ltd held that when parties decide to change the ‘venue/place of arbitration’ by a mutual agreement, the new venue/place becomes the ‘seat of arbitration’.
On 28th January, 2012 Gujarat Fluorochemicals Ltd (‘GFL’) and Jayesh Electricals Ltd. (‘Jayesh Electricals’) had entered into a purchase agreement. The arbitration clause of the said agreement stated that all the dispute(s) arising between the parties would be settled in Jaipur, Rajasthan and gave courts in Rajasthan exclusive jurisdiction over disputes arising out of the agreement.
Subsequently, GFL sold its business to Inox Renewables Ltd. (‘Inox’) by executing a business transfer agreement. The arbitration clause of the said agreement between Inox and GFL mentioned Vadodara, Gujarat as the venue of arbitration and gave courts at Vadodara exclusive jurisdiction.
Later, a dispute arose between Jayesh Electricals and Inox, wherein Jayesh Electricals filed an application under section 11 of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator in Gujarat High Court. The High court appointed a retired Judge as Sole Arbitrator to resolve the dispute between the parties. The Arbitration proceedings took place in Ahmedabad with the mutual consent of the parties despite Jaipur being the venue of arbitration. The award was passed in favor of Jayesh Electricals.
Inox challenged the decision of the Sole Arbitrator under section 34 of the Arbitration and Conciliation Act, 1996 Act before the Commercial Court at Ahmedabad. The Commercial Court at Ahmedabad dismissed the section 34 petition stating that exclusive jurisdiction is vested with the Court at Vadodara as per the Business Transfer Agreement.
GUJARAT HIGH COURT
Inox further challenged the decision of the Commercial Court at Ahmedabad before the High Court of Gujarat. The High Court of Gujarat affirmed the findings of the Commercial Court at Ahmedabad with respect to Ahmedabad not having jurisdiction to decide on the dispute between the parties. However, observed that the Courts at Jaipur, Rajasthan would have jurisdiction over the dispute and not the Court at Vadodara.
SUPREME COURT OF INDIA
Inox appealed to the Supreme Court of India wherein the Counsel for the Inox argued that Jayesh Electricals was not a party to the business transfer agreement between GFL and Inox, hence the said agreement was irrelevant in the present case. The Counsel for the Appellant (Inox) also contended that the venue of arbitration was shifted to Ahmedabad with mutual consent of parties as a result of which Ahmedabad Courts had exclusive Jurisdiction.
The Counsel for the Respondents (Jayesh Electricals) argued that the place of arbitration cannot be changed with a written agreement and therefore the Jurisdiction of courts at Jaipur was not affected. They also argued that only the place of Arbitration was shifted to Ahmedabad from Jaipur as per section 20(3) of the Arbitration and Conciliation Act,1996 as Ahmedabad was a convenient place for Arbitration.
The Hon’ble Supreme Court observed that the Arbitrator had recorded consent of both the parties to change the place of Arbitration from Jaipur to Ahmedabad and the same was not challenged by any party. The Court also observed that a written agreement was not necessary to shift the venue of the arbitration.
The Apex Court referred to its Judgment in BGS SGS Soma JV v. NHPC Ltd. and held that Ahmedabad acquired exclusive Jurisdiction when both the parties by mutual consent changed the venue of Arbitration and hence Jaipur was no more the seat of Arbitration. Therefore, the Ahmedabad Court had jurisdiction to deal with the Section 34 petition.
1) Pratik Jain - Managing Associate
2) Daminee Jain - Legal Intern
© N.C. Jain Advocate & Associates