2025 (3) TMI 894 - SC - Indian Laws

Indian courts retain jurisdiction to appoint arbitrators under Section 11(6) despite foreign arbitration venue

DISORTHO S.A.S. Versus MERIL LIFE SCIENCES PRIVATE LIMITED

The SC held that Indian courts have jurisdiction to appoint arbitrators under Section 11(6) of the Arbitration and Conciliation Act, 1996, despite ... Jurisdiction of Indian Courts to appoint an arbitral panel under Section 11(6) of the Arbitration and Conciliation Act, 1996, given the conflicting clauses in the Distributor Agreement regarding jurisdiction and arbitration - HELD THAT:- The law governing the arbitration agreement, being Indian law, means that its validity, scope, and interpretation will be determined in accordance with Indian law. But which national courts—those in India or Colombia—exercise supervisory jurisdiction over the arbitration proceedings? Does the A&C Act apply to these arbitration proceedings? Upon a consistent reading of the Distributor Agreement, it is clear that only the courts in Gujarat, India, are referenced. While it is acknowledged that the venue for arbitration is Bogota, Colombia, and that the procedural rules of the Arbitration and Conciliation Centre at the Chambers of Commerce in Bogota are to apply, this does not diminish the supervisory powers of Indian courts, as explicitly outlined in Clause 16.5. The use of the premises at the Centre, or any other location designated by the Director of the Centre in Bogota, does not imply that Colombian law governs the arbitration agreement. Although Clause 18 specifies that the award shall conform to Colombian law, this provision pertains solely to the arbitration proceedings or the award matters. It does not override or diminish the effect of Clause 16.5, which clearly stipulates that Indian law shall govern the agreement and the related disputes. The legal implications of this would include the applicability of the A&C Act, and the appointment jurisdiction of Indian courts. We do not interpret the final portion of Clause 18 as undermining the legal impact of Clause 16.5. Therefore, the applicability of the A&C Act under Section 11(6) of the Arbitration and Conciliation Act affirmed. In accordance with Clause 16.5 and 18, the procedural rules of the arbitration would be the rules of the Conciliation and Arbitration Centre of the Chamber of Commerce of Bogota DC, with Bogota DC as the venue of arbitration. Conclusion - Indian law governs the arbitration agreement, and Indian courts have jurisdiction to appoint arbitrators under Section 11(6) of the A&C Act. The arbitration petition is allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:Whether the Indian courts have jurisdiction to appoint an arbitral panel under Section 11(6) of the Arbitration and Conciliation Act, 1996, given the conflicting clauses in the Distributor Agreement regarding jurisdiction and arbitration.Which law governs the arbitration agreement, given the choice of Indian law in Clause 16.5 and the arbitration venue in Bogota, Colombia, as per Clause 18Rs.How to resolve the conflict between the jurisdiction clause (Clause 16.5) and the arbitration clause (Clause 18) in the Distributor AgreementRs.Whether the arbitration proceedings should be governed by Indian law or Colombian lawRs.2. ISSUE-WISE DETAILED ANALYSISJurisdiction of Indian CourtsThe legal framework revolves around Section 11(6) of the Arbitration and Conciliation Act, 1996, which allows Indian courts to appoint arbitrators when parties fail to agree. The Court examined whether the jurisdiction clause in the Distributor Agreement (Clause 16.5) grants Indian courts the authority to appoint arbitrators, despite the arbitration venue being in Bogota, Colombia.The Court interpreted the jurisdiction clause as conferring exclusive jurisdiction to Indian courts over disputes arising from the agreement, including the appointment of arbitrators. The Court reasoned that the choice of Bogota as the arbitration venue does not negate the jurisdiction of Indian courts as outlined in Clause 16.5.Governing Law of the Arbitration AgreementThe Court analyzed the governing law of the arbitration agreement using the three-step test from Sulam'erica Cia, which involves examining express choice, implied choice, and the closest and most real connection.There was no explicit choice of law for the arbitration agreement in the Distributor Agreement. The Court found a strong presumption that the lex contractus, Indian law, governs the arbitration agreement. This presumption was not displaced by the choice of Bogota as the arbitration venue, as there were no other factors indicating a different governing law.Resolution of Conflicting ClausesThe Court applied principles from Milford Capital Holdings and Arnold v. Britton to interpret the conflicting clauses. The Court emphasized reading the contract as a whole and giving effect to all provisions unless they are manifestly inconsistent.The Court concluded that Clause 16.5, which grants jurisdiction to Indian courts, and Clause 18, which specifies Bogota as the arbitration venue, can coexist. The Court interpreted Bogota as the venue for arbitration proceedings, while Indian courts retain jurisdiction over the arbitration agreement and related disputes.Application of Law to FactsThe Court applied Indian law to determine the validity, scope, and interpretation of the arbitration agreement. It concluded that the A&C Act applies to the arbitration proceedings, and Indian courts have jurisdiction over the appointment of arbitrators.Treatment of Competing ArgumentsThe Court considered the argument that Bogota, as the arbitration venue, should imply Colombian law governs the arbitration agreement. However, the Court rejected this, stating that the venue choice does not override the jurisdiction and governing law stipulated in Clause 16.5.3. SIGNIFICANT HOLDINGSCore Principles EstablishedThe Court established that the law governing the arbitration agreement may differ from the law governing the contract. The presumption is that the lex contractus governs the arbitration agreement unless explicitly displaced by other factors.The Court reaffirmed that jurisdiction clauses in contracts must be given effect unless they are manifestly inconsistent with other provisions.Final Determinations on Each IssueThe Court determined that Indian law governs the arbitration agreement, and Indian courts have jurisdiction to appoint arbitrators under Section 11(6) of the A&C Act.The Court appointed Mr. Justice S.P. Garg as the sole arbitrator, with the arbitration to be governed by the rules of the Delhi International Arbitration Centre. The venue of arbitration will be mutually decided by the parties and the arbitrator.