This blog delves into the crucial legal analysis by the court regarding the concept of ‘juridical seat’ and its connection to court jurisdiction in arbitration proceedings. Understanding how the chosen seat of arbitration influences court jurisdiction is essential for legal practitioners and arbitrators alike. Stay informed about the latest developments in arbitration law with this insightful read.
Facts
- A Section 34 petition was filed by the Appellant in Ahmedabad which was resisted by the Respondent citing the business transfer agreement.
- Commercial Court at Ahmedabad ruled in favor of Respondent based on clauses 9.11 and 9.12 of the business transfer agreement, stating Vadodara courts have exclusive jurisdiction.
- High Court mentioned arbitration clause in the purchase order and ‘exclusive jurisdiction clause’ for courts in Rajasthan, directing appropriate court as Jaipur.
- Despite this, High Court upheld Ahmedabad Court’s decision and dismissed the Special Civil Application filed by the Appellant.
- Appellant argued based on purchase order where the business transfer agreement designated Vadodara as the seat for arbitration and exclusive jurisdiction.
- Appellant filed Special Civil Application No 9536 of 2019 against the decision.
- Future interest was awarded at 15% from the date of the award till the date of payment.
- Respondent awarded Rs. 38,97,150/-
- Interest of Rs. 31,32,650 on awarded amount from 10 March, 2017 till the date of the award
- Quantified costs of Rs. 2,81,000/-
Also Read: Court’s Jurisdiction in Re-appraising Arbitrator’s Findings
Analysis
- Amendment provision states that if either party fails to appoint an arbitrator within sixty days, the arbitrator appointed by the other party becomes the sole arbitrator
- The arbitration clause is specified in clause 8.5 of the purchase order
- Disputes and differences are to be settled through arbitration as outlined in the contract
- The concept of ‘juridical seat’ of the arbitral proceedings is crucial and is now required to be specified in arbitral awards as per the Arbitration Act, 1996.
- The Arbitration Act, 1996 narrows down the definition of ‘court’ to principal civil court and the High Court in their original civil jurisdiction.
- In an International context, the designated ‘venue’ often signifies the ‘seat’ of the arbitral proceedings, especially when supranational rules govern the arbitration.
- A mutually agreed ‘seat’ of arbitration implies exclusive jurisdiction of courts at that ‘seat’ over the arbitral process.
- The case discussed illustrates how the chosen ‘seat’ becomes an exclusive jurisdiction clause, leading to the courts at that location having exclusive jurisdiction over the arbitration.
- The change of seat in arbitration proceedings must be by mutual agreement and specified in writing, as seen in the Videocon case.
- The designation of a ‘seat’ in an arbitration clause signifies that the particular location is not just a ‘venue’ but the juridical seat of the entire arbitral proceedings.
- The designation of ‘venue’ in an arbitration clause is often interpreted as the ‘seat’ of the arbitral proceedings if the expression ‘arbitration proceedings’ is used.
- The High Court exercises exclusive jurisdiction over international commercial arbitrations held in India, even without any part of the cause of action arising within its jurisdiction.
- The concept of ‘juridical seat’ and its connection to court jurisdiction regarding arbitral proceedings had to be clarified through case-based development following international practices.
- The arbitrator, by mutual consent of the parties, shifted the venue/place of arbitration to Ahmedabad, making it the seat of arbitration with exclusive jurisdiction for courts in Ahmedabad.
- The respondent’s counsel argued that such a shift requires a written agreement, citing legal precedents.
- Reference was made to the BGS SGS case where it was concluded that any shift in venue must be supported by a written agreement between the parties.
- Arguments were presented emphasizing that the exclusive jurisdiction vested in the courts of Rajasthan indicates that Jaipur remained the seat of arbitration despite the venue shift to Ahmedabad.
- The arbitrator’s finding suggested that the shift in venue was for convenience under Section 20(3) of the Arbitration and Conciliation Act, with the seat remaining at Jaipur.
- The High Court of Gujarat at Ahmedabad appointed a sole arbitrator for the dispute between the parties as per the arbitration agreement.
- The order by the High Court of Gujarat specified the appointment of a sole arbitrator, Shri C.K. Buch, to resolve the disputes arising from the contract dated 28.01.2012.
- The impugned judgment is set aside due to various reasons.
- The shift of ‘venue’ from Jaipur to Ahmedabad is considered a shifting of the seat of arbitration, not just a change in meeting location.
- Once the seat of arbitration is mutually changed to Ahmedabad, exclusive jurisdiction shifts to the courts in Ahmedabad.
- The jurisdiction of courts in Rajasthan was based on the seat being Jaipur, so the change to Ahmedabad also alters the court jurisdiction.
- Clause 8.5 of the Purchase Order must be read in conjunction with the seat of arbitration clause to understand jurisdiction clearly.
Also Read: Contrary Directions in Issuance of Letter of Intent
Decision
- Arbitration venue is Jaipur with three arbitrators appointed.
- Execution proceedings stayed until Section 34 petition is disposed, subject to variation by forum in Ahmedabad.
- The High Court of Gujarat at Ahmedabad dismissed the appeal by Inox Renewables Ltd. against the order of the Commercial Court, Ahmedabad.
- Purchase order between Gujarat Fluorochemicals Ltd. and Jayesh Electricals Ltd. for power transformers at wind farms.
- Arbitrators have full powers to review and revise decisions.
- Deposit of Rs.40,00,000/- by the Appellant in the Court.
- Decisions of the majority of the arbitrators are final and binding.
- Appeal granted and disposed with referral to courts at Ahmedabad for Section 34 petition resolution.
Also Read: Application for Stay in Civil Suit Rejected: Court’s Legal Analysis
Case Title: M/S. INOX RENEWABLES LTD. Vs. JAYESH ELECTRICALS LTD. (2021 INSC 251)
Case Number: C.A. No.-001556-001556 / 2021
