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Friday, April 28, 2017

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.= 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.- 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.

                                 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.

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