TaxTMI 
TaxTMI 
2024 (11) TMI 393
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........................................................................... 21 D. ANALYSIS ........................................................................................................... 21 i. The Notional Doctrine of Concurrent Jurisdiction and Applicability of Part I of the Arbitration & Conciliation Act, 1996. ................................................ 24 a. Pre-BALCO Regime.............................................................................................. 26 b. Post BALCO Regime. ........................................................................................... 43 ii. Criterion or Test for Determination of Seat of Arbitration: Conflict of 'Venue' versus 'Seat' of Arbitration. .......................................................................... 56 a. Closest Connection Test - Place of Arbitration to be ascertained by the Law governing the Arbitration Agreement and not the Place of Arbitration..... ................ 56 b. The Shashoua Principle - 'Venue' to be construed as 'Seat' ............................... 71 iii. Whether the Seat of Arbitration in the underlying Distributorship Agreement is in India?....
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....d by the respondent no. 1 and the same was executed by the parties in Kabul, Afghanistan. As per the terms of the aforesaid agreement, the petitioner herein became the authorized distributor of the respondent's products including mobile handsets and was granted a non- exclusive right to market and distribute the same under its own account in the territory of Afghanistan as allotted and delineated under the said agreement. 4. Before proceeding further, it would be apposite to first highlight some of the salient features of the aforesaid Distributorship Agreement which are relevant to the case at hand. Under the terms of the aforesaid Distributorship Agreement, it is stipulated that all payments shall be made by the distributor in full before the physical delivery of the products, and it further specifies that the mode of such payment shall be through a letter of credit (L/C). The Distributorship Agreement further provides that no additions or modifications made to the aforesaid agreement shall be binding unless it is in writing and is duly signed by the authorized representatives of the parties. Additionally, the said Distributorship Agreement defines a 'supplementary agreement' ....
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....hip Agreement inter-alia stipulates that the said agreement will be governed by the laws of UAE and subject to the non-exclusive jurisdiction of the Dubai Courts. The said Distributorship Agreement also contains an arbitration clause which states that any dispute or difference pertaining to the said agreement or arising therefrom shall be resolved through arbitration alone, the venue of the arbitration shall be Dubai, UAE and that the arbitration shall be subject to the UAE Arbitration & Conciliation rules. The relevant clauses are reproduced hereunder: - "26. DISPUTE RESOLUTION In the event of any dispute or difference arising out of the Agreement, its validity, applicability, then the same shall be referred to the arbitration. The arbitration shall be subject to UAE Arbitration and Conciliation rules made there under. The venue of arbitration shall be Dubai, UAE. 27. LAW AND JURISDICTION This Agreement shall be governed by and construed in accordance with the laws of UAE and shall be subject to the non- exclusive jurisdiction of the Dubai Courts." 6. Pursuant to the aforesaid Distributorship Agreement several transactions took place between ....
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....n 23.10.2012, the respondents vide an email informed the petitioner company that since the accounts of Micromax Informatics FZE & M/s Micromax India are separate, the credit balance lying in its favour in the respondent no. 1's account cannot be directly adjusted for the invoices raised by the respondent no. 2. It further stated that, the petitioner company should first make payment to the respondent no. 2 towards the invoices that have been raised, and thereafter, the respondent no. 1 company would remit the outstanding credit balance to the petitioner. The relevant portion of the respondent's email dated 23.10.2012 is reproduced below: - "Dt. 23.10.2012 Subject: Account Statement Dear Sir, Kindly note that from Arif Azim we need to receive USD 109500 for sales made in MMX India and Need to pay USD 190625 in respect of advance received respect of sale to be made in FZE. Both these accounts are of separate Cos. Hence we should first receive payment of MMX India account; then let Micromax FZE pay to Arif. Regards, Anita" 11. On 15.01.2013, the petitioner made the requisite payment of $109,500/- (USD One hundred nine thousand f....
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....y-Eight Thousand Four Hundred Twenty- Five) with interest @24% p.a. as per the terms agreed in the Distributorship Agreement and nominated Shri. V. Giri and Shri. R. Basant, Senior Advocate as its nominee arbitrators and called upon the respondents to accordingly appoint an arbitrator either from the above suggested panel or any other suitable name within 28-days from receipt of the said notice. 16. It is material to note that in the aforesaid notice of invocation dated 14.09.2022, the petitioner further alluded that in the Distributorship Agreement more particularly Clause 27 the parties had not designated a specific court to the exclusion of all other courts to adjudicate the dispute, thus no exclusive jurisdiction had been conferred by the parties upon any particular court. It further stated that, as the cause of action had concurrently both in Afghanistan and India, the petitioner expressed its preference to resolve the dispute through arbitration administered under the jurisdiction of the courts in India. 17. Since no reply to the aforesaid notice of invocation of arbitration was elicited from either of the respondents, the present petition came to be filed by the petiti....
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....tion of the individual agreement to decide, whether the designated foreign "seat" would be read as in fact only providing a "venue"/"place" where the hearings would be held; and in the present case on hand, given the choice of UAE Arbitration and Conciliation Rules as being the curial law and the venue at Dubai, will not dictate what the governing or controlling law would be when the 2nd part of clause 27 reiterates the parties' autonomy in deciding/choosing the seat by expressly stating its intention that "This agreement shall be subject to the non-exclusive jurisdiction of the Dubai Courts". Regard being to other clauses in the agreement, this clause has been incorporated to avoid conflicts related to the jurisdictions of courts and confer jurisdiction on other courts too, it is submitted. (Emphasis supplied). 5. At the outset, be it kindly noted that, the relied upon decision by the respondent to oust the jurisdiction of Indian courts in Mankatsu Impex Private Limited vs Airvisual Limited 2010 (5) SCC 399 is misplaced as it was a case of exclusive jurisdiction in terms conferred by the agreement. A clause therein like Cl.17.2 which provides "the place of arbitration....
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.... conjoint reading of the following 6 clauses in the agreement with a supplementary agreement executed by Micromax Inc. (Non-signatory parent Co.) in the form of two emails forming its integral part (Pages 37 to 54) would negate the contra plea of the respondents as to the jurisdiction of Indian courts. (i) Clause 26 Clause 27 deals with Dispute Resolution; law and jurisdiction. Quote.." Cl. 26. Dispute Resolution In the event of any dispute or difference arising out of the agreement, its validity, applicability, then the same shall be referred to arbitration. The arbitration shall be subject to UAE Arbitration and conciliation rules made there under. The venue of arbitration shall be Dubai, UAE. Cl. 27. Law and jurisdiction This shall be governed by and construed in accordance with the laws of UAE and shall be subject to the non-exclusive jurisdiction of the Dubai Courts." ....Unquote 8. Petitioner submits that Clause 27 preserved the party's autonomy in allowing the concerned parties to choose their seat/jurisdiction. The second part of jurisdictional Cl. 27 discloses the intention - an agreement by itself- to opt out of Dubai court'....
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....s that "supervisory control over the arbitral proceedings" is not exclusively given to Dubai courts by the 2nd part of Clause 27 and the party's autonomy is thus preserved. 12. 2nd submission. The Bi-party Agreement executed between the petitioner and a foreign company in Kabul was altered by invoking the Group of Companies doctrine by a non-signatory to the agreement. In terms, the agreement has become a tri- partite agreement where a non-signatory to the original agreement directed the petitioner to make a direct payment of $109500 to India by changing the original invoice raised by a party to the agreement. Submission is, 2nd part of Cl.27 envisages a jurisdictional situation as had happened subsequently by the conduct of parties. 12.1 A jurisdiction clause is suggestive of control. In the context of this particular case, the Dubai Courts would have no real control or supervisory jurisdiction over the arbitral process, in as much as, this supplementary agreement further reiterates the party's autonomy of choosing the juridical seat of Arbitration in consonance with 2nd part of Cl.27 in which case, a reference to the "venue" cannot be treated as the "sea....
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....en below: Date: 11 December, 2012 Dear Ali Bhai, Please find attached your debit balance to Micromax, India. Also sending a credit balance statement from FZE, Would appreciate if you can make the mentioned payment to India and we remit credit balance to you back from FZE. Thanks Vikas" (Page 52 of the Paper book) "Date 11 December, 2012 Dear Ali Bhai, This is about $190K that we owe back to your firm from FZE. Would appreciate if we can resolve the accounts at the fastest. Thanks Vikas" (Page 54 of the Paper book) Final submission- Mere expression of venue of arbitration will not entail that the parties intended it to be the seat. The intention of the parties- keeping intact Party autonomy - has to be determined from other clauses of the Agreement and the conduct of the parties." ii. Submissions on behalf of the Respondent. 19. Mr. Mudit Sharma the learned counsel appearing for the petitioner in his written submissions has stated thus: - "WRITTEN SUBMISSIONS ON BEHALF OF THE RESPONDENTS "M/S MICROMAX FZE (UAE)" I. PETITION NOT MAINTAINABLE AND THIS HON'BLE COUR....
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....e party should be an individual or a body corporate in India and the arbitration agreement should compulsorily provide for seat of Arbitration in India. Admittedly neither of the Parties are individuals or body corporates in India nor the Distributor Agreement provides for arbitration seat in India. 9. Reliance is placed on the two Judgements of this Hon'ble Court: i. "Mankatsu Impex Private Limited Vs. Airvisual Ltd., (2020) 5 SCC 399"; relevant Paras being Para 20 at Page 406; Para 25 at Page 408 and Para 26 and Para 27 at Page 409 and ii. "BGS SGS Soma JV Vs. NHPC Limited, (2020) 4 SCC 234"; relevant Paras being Paras 61, 62 and 67 at are Page 242). 10. It is further submitted that the use of "non-exclusive jurisdiction of Dubai Courts" in Distributor Agreement did not ever envisage jurisdiction of Courts outside UAE and in no manner whatsoever the "Courts of India". The word "non- exclusive: has been used in the context that jurisdiction of other Courts in UAE may not be restricted. 11. Invoking of the provisions under section 11 of the Act; would tantamount to re-writing the terms of the Distributor Agreement and taking away parties....
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.... the parties. In view of the above, it is most respectfully prayed that the present Petition may kindly be dismissed." C. ISSUES FOR DETERMINATION 20. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the following questions of law fall for our consideration: - I. Whether, the present petition under Section 11 of the Act, 1996 is maintainable? II. Whether, Part I of the Act, 1996 is applicable to the arbitration clause contained in the Distributorship Agreement dated 09.11.2010? III. What is the seat of the arbitration in terms of the Distributorship Agreement dated 09.11.2010? D. ANALYSIS 21. It is necessary to delve into the history of the law of arbitration in India. Prior to the 1996 Act, three Acts governed the law of Arbitration in India - the Arbitration (Protocol and Convention) Act, 1937, which gave effect to the Geneva Convention, the Arbitration Act, 1940 (for short, the "Act, 1940"), which dealt with domestic awards, and the Foreign Awards (Recognition and Enforcement) Act, 1961 (for short, the "Act, 1961") which gave effect to the New York Convention of 1958 and wh....
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....itral 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." 26. A cursory reading of the aforesaid provision would reveal that it is a replication of Article 20 of the UNCITRAL Model Law whereunder, the place or seat of arbitration has been given pride and primacy. However, despite the aforesaid inclusion, the legislature retained the definition of "court" from the Act, 1940 in Section 2(e) of the Act, 1996 with a minor tweak that instead of any civil court of the lowest grade competent to entertain the subject-matter, now only the principal civil court or the High Court of original jurisdiction which is competent to entertain the subject- matter shall have jurisdiction. Due to this, the concept of juridical seat of the arbitral proceedings and its interrelationship with the jurisdiction of courts in respect of arbitral proc....
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....e Act, 1940 are significant insofar as the Act, 1996 is concerned. In the aforesaid case, the question before this Court was whether the Act, 1940 was applicable to the arbitration agreement between the parties therein. This Court held as follows: - (i) First, it held that the choice of law governing the arbitration agreement i.e., the lex arbitri would determine which system of law would be applicable. It observed that since the arbitration agreement therein was to be governed by Indian laws, the Act, 1940 would be applicable to such arbitration proceedings. The relevant observations read as under: - "2. The National Thermal Power Corporation (the 'NTPC') appeals from the judgment of the Delhi High Court in FAO (OS) No. 102 of 1990 dismissing the NTPC's application filed under Sections 14, 30 and 33 of the Arbitration Act, 1940 (No. X of 1940) to set aside an interim award made at London by a tribunal constituted by the International Court of Arbitration of the International Chamber of Commerce (the "ICC Court") in terms of the contract made at New Delhi between the NTPC and the respondent - the Singer Company (the 'singer') for the supply of equipment, erect....
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.... necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and the contract being most intimately associated with India, the proper law of arbitration and the competent courts are both exclusively Indian [...] xxx 54. The Delhi High Court was wrong in treating the award in question as a foreign award. The Foreign Awards Act has no application to the award by reason of the specific exclusion contained in Section 9 of that Act. The award is governed by the laws in force in India, including the Arbitration Act, 1940. Accordingly, we set aside the impugned judgment of the Delhi High Court and direct that Court to consider the appellant's application on the merits in regard to which we express no views whatsoever. The appeal is allowed in the above terms. We do not, however, make any order as to costs." (Emphasis supplied) (ii) Secondly, the Court held that where the parties have agreed to two distinct choices of law, one governing the arbitration agreement and the other governing ....
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.... International Chamber of Commerce Arbitration, 2nd edn. (1990).] To such an extent the appropriate courts of the seat of arbitration, which in the present case are the competent English courts, will have jurisdiction in respect of procedural matters concerning the conduct of arbitration. But the overriding principle is that the courts of the country whose substantive laws govern the arbitration agreement are the competent courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to matters of procedure. All other matters in respect of the arbitration agreement fall within the exclusive competence of the courts of the country whose laws govern the arbitration agreement. [See Mustil & Boyd, Commercial Arbitration, 2nd edn.; Allen Redfern and Martin Hunter, Law & Practice of International Commercial Arbitration, 1986; Russel on Arbitration, 20th edn. (1982); Cheshire & North's Private International Law, 11th edn. (1987).]" (Emphasis supplied) 30. Thus, this Court for the first time in NTPC (supra) laid down the Doctrine of Concurren....
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.... The 1940 Act applies to it and, by reason of Section 14(2) thereof, the courts in India are entitled to receive the award made by the second respondent. We must add in the interests of completeness that it is not the case of the appellant that the High Court at Bombay lacked the territorial jurisdiction to do so." (Emphasis supplied) (ii) Secondly, it reiterated that, where the parties have chosen both the law governing the arbitration agreement i.e., lex arbitri and the law governing the arbitrator's procedure and conduct thereof i.e., the curial law, it would confer concurrent jurisdiction whereby the competent courts under the curial law will have jurisdiction to administer the procedure of arbitration and the competent courts under the law governing the arbitration agreement will have jurisdiction to administer the performance of such agreement and the arbitrability of the dispute including the enforcement or setting aside of an award pursuant to such agreement. It further observed that the court administering the curial law will only have the jurisdiction to administer the conduct of such arbitration or reference. As soon as the arbitration concludes the curial la....
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....find support for the conclusion in the extracts from Mustill and Boyd which we have quoted earlier. Where the law governing the conduct of the reference is different from the law governing the underlying arbitration agreement, the court looks to the arbitration agreement to see if the dispute is arbitrable, then to the curial law to see how the reference should be conducted, "and then returns to the first law in order to give effect to the resulting award". (Emphasis supplied) 32. The aforesaid Doctrine of Concurrent Jurisdiction in Arbitration was further expanded by this Court in Bhatia International v. Bulk Trading S.A. reported in (2002) 4 SCC 105, wherein this Court examined the scope of Section 2(2) viz-a-viz Section 2(1)(e) & (f) of the Act, 1996 and held that Part I of the said Act applies to both (i) domestic arbitrations that take place in India and (ii) international commercial arbitrations that take place outside India. It held that unless the arbitration agreement states to the contrary, even if the seat or place of arbitration is outside India, the national courts in India will have concurrent jurisdiction in terms of Section 2(1)(e) along with the courts situat....
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....ction if an international commercial arbitration takes place outside India. Courts in India would have jurisdiction even in respect of an international commercial arbitration. As stated above, an ouster of jurisdiction cannot be implied. An ouster of jurisdiction has to be express." (Emphasis supplied) (ii) Secondly, this Court observed that Section 2 sub-section (2) of the Act, 1996 nowhere specifies that Part I will "only" apply where the place of arbitration is in India, nor does it provide that Part I shall not apply where the place of arbitration is not in India. Thus, by not specifically providing in black and white, whether Part I of the Act, 1996 would apply to international commercial arbitrations held outside India, the legislature's intention appears to be to allow the parties the freedom to choose whether Part I or any of its provisions therein would apply or not by an express or implied agreement. The relevant observations read as under: - "21. Now let us look at sub-sections (2), (3), (4) and (5) of Section 2. Sub-section (2) of Section 2 provides that Part I would apply where the place of arbitration is in India. To be immediately noted, that it is not....
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....tween sub-section (2) of Section 2 and sub-sections (4) and/or (5) of Section 2." (Emphasis supplied) Thus, this Court held that Part I of the Act, 1996 would apply to all arbitrations. Where such arbitration is held in India, the provisions of Part I would be compulsorily applicable, and parties may deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India the provisions of Part I would apply unless the parties by agreement, express or implied, exclude all or any of its provisions. In that case the laws or rules agreed upon by the parties would prevail. Any provision, in Part I, which is contrary to or excluded by that law or rules will not apply. The operative portion reads as under: - "32. To conclude, we hold that the provisions of Part I would apply to all arbitrations and to all proceedings relating thereto. Where such arbitration is held in India the provisions of Part I would compulsorily apply and parties are free to deviate only to the extent permitted by the derogable provisions of Part I. In cases of international commercial arbitrations held out of India provision....
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....rated that the Court concluded: 26. ... Thus Section 44 (in Chapter I) and Section 53 (in Chapter II) define foreign awards, as being awards covered by arbitrations under the New York Convention and the Geneva Convention respectively. Part II then contains provisions for enforcement of 'foreign awards' which necessarily would be different. For that reason special provisions for enforcement of foreign awards are made in Part II. To the extent that Part II provides a separate definition of an arbitral award and separate provisions for enforcement of foreign awards, the provisions in Part I dealing with these aspects will not apply to such foreign awards. It must immediately be clarified that the arbitration not having taken place in India, all or some of the provisions of Part I may also get excluded by an express or implied agreement of parties. But if not so excluded the provisions of Part I will also apply to 'foreign awards'. The opening words of Sections 45 and 54, which are in Part II, read 'notwithstanding anything contained in Part I'. Such a non obstante clause had to be put in because the provisions of Part I apply to Part II." xxx 31. On close scrutiny....
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....hnical Services (P) Ltd. v. W.S. Atkins Rail Ltd., reported in (2008) 10 SCC 308, this Court reiterated that Part I of the Act, 1996 applies to both domestic and international arbitrations, notwithstanding the provisions of Section 2(2) of the said Act and irrespective of whether the seat of arbitration is in India or not. It further observed that the courts of the country, whose substantive laws govern the arbitration agreement, are competent courts in respect of all matters arising under the arbitration agreement, and the jurisdiction exercised by the courts of the seat of arbitration is merely concurrent and not exclusive and strictly limited to the matter of procedure. Thus, an application under Section 11 for appointment of arbitrator in India was held to be maintainable though the seat of arbitration was in England. The relevant observations read as under: - "16. The submissions made on behalf of Bhatia International were accepted by this Court upon a finding that, although, Section 2(2) of the Arbitration and Conciliation Act, 1996, provides that Part I of the Act would apply where the place of arbitration is in India, it did not provide that Part I would not apply ....
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.... case is the fact that in Bhatia International [(2002) 4 SCC 105] this Court laid down the proposition that notwithstanding the provisions of Section 2(2) of the Arbitration and Conciliation Act, 1996, indicating that Part I of the said Act would apply where the place of arbitration is in India, even in respect of international commercial agreements, which are to be governed by the laws of another country, the parties would be entitled to invoke the provisions of Part I of the aforesaid Act and consequently the application made under Section 11 thereof would be maintainable. 37. The decision in Bhatia International case [(2002) 4 SCC 105 has been rendered by a Bench of three Judges and governs the scope of the application under consideration, as it clearly lays down that the provisions of Part I of the Arbitration and Conciliation Act, 1996, would be equally applicable to international commercial arbitrations held outside India, unless any of the said provisions are excluded by agreement between the parties expressly or by implication, which is not so in the instant case." (Emphasis supplied) b. Post BALCO Regime. 36. The correctness of the decision in Bhatia Inte....
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....lsion, whilst interpreting an Act or a provision in the Act. xxx 67. We are unable to accept the submission of the learned counsel for the appellants that the omission of the word "only" from Section 2(2) indicates that applicability of Part I of the Arbitration Act, 1996 is not limited to the arbitrations that take place in India. We are also unable to accept that Section 2(2) would make Part I applicable even to arbitrations which take place outside India. In our opinion, a plain reading of Section 2(2) makes it clear that Part I is limited in its application to arbitrations which take place in India. We are in agreement with the submissions made by the learned counsel for the respondents, and the interveners in support of the respondents, that Parliament by limiting the applicability of Part I to arbitrations which take place in India has expressed a legislative declaration. It has clearly given recognition to the territorial principle. Necessarily therefore, it has enacted that Part I of the Arbitration Act, 1996 applies to arbitrations having their place/seat in India. xxx 70. [...] Therefore, the Arbitration Act, 1996 consolidates the law on domestic a....
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....upplied) (ii) Secondly, this court rejected the contention that the Act, 1996 is 'subject-matter centric' and not exclusively 'seat centric'. It observed that the words "subject-matter of the arbitration" and "subject-matter of the suit" occurring in Section 2(1)(e) should not be conflated as the former confers jurisdiction on the basis of cause of action while the latter confers jurisdiction on the basis of "place of arbitration", thus, the Act, 1996 is not merely 'subject-matter centric'. It observed that although the legislature by use of the words "subject-matter of arbitration" in addition to "subject-matter of the suit" under Section 2(1)(e) has conferred jurisdiction to two-courts i.e., the court of jurisdiction over the cause of action and the court of the seat of the arbitration process, yet the expression "subject-matter of suit" occurring in Section 2(1)(e) is confined only to Part I of the Act, 1996, and thus, wherever it is found that the seat or place of arbitration is outside India, Part I would be inapplicable and the jurisdiction then will be "exclusively seat centric". In other words, where the seat of arbitration is outside India, only those courts situa....
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....gatory. 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 ci....
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....le to arbitrations that take place in India and as such the decision of this Court in Bhatia International (supra) and Venture Global (supra) are no longer a good law. However, to avoid the chaos that might ensue upon arbitrations agreements and proceedings thereto which are already underway pursuant to the ratio of Bhatia International (supra) and Venture Global (supra), this Court held that the law declared by it will only apply prospectively to all arbitration agreements that have been executed on or after 06.09.2012 i.e., the date of pronouncement. This Court ultimately summed up its findings with the following conclusions reproduced below: - "Conclusion 194. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted the Uncitral Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards woul....
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....nternational (supra). It observed that Bhatia International (supra) itself had held that Part I of the Act, 1996 will not apply if it has been excluded expressly or by necessary implication. It said that the position of law that emerges from a conjoint reading of BALCO (supra) and Bhatia International (supra) is that where the court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part I of the Arbitration Act, 1996 would be excluded by necessary implication and the doctrine of concurrent jurisdiction will not apply irrespective of whether the arbitration agreement pre-dates BALCO (supra) or not. The relevant observations read as under: - "13. It can be seen that this Court in Singer case did not give effect to the difference between the substantive law of the contract and the law that governed the arbitration. Therefore, since a construction of Section 9(b) of the Foreign Awards Act led to the aforesaid situation and led to the doctrine of concurrent jurisdiction, the 1996 Act, while enacting Section 9(a) of the repealed Foreign Awards Act, 1961, in Section 51 thereof, was careful enoug....
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....hatia International. 18. It is important to note that in para 32 of Bhatia International itself this Court has held that Part I of the Arbitration Act, 1996 will not apply if it has been excluded either expressly or by necessary implication. Several judgments of this Court have held that Part I is excluded by necessary implication if it is found that on the facts of a case either the juridical seat of the arbitration is outside India or the law governing the arbitration agreement is a law other than Indian law. ... xxx 21. The last paragraph of BALCO judgment has now to be read with two caveats, both emanating from para 32 of Bhatia International itself - that where the Court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part I of the Arbitration Act, 1996 would be excluded by necessary implication. Therefore, even in the cases governed by the Bhatia principle, it is only those cases in which agreements stipulate that the seat of the arbitration is in India or on whose facts a judgment cannot be reached on the seat of the arbitration as being outside India that would....
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....rned by Indian laws. Thus, now the only question that remains to be answered in the present case is whether the seat of arbitration designated under the aforesaid Distributorship Agreement is in India, if not, whether the arbitration agreement could be said to be governed by the Indian laws? ii. Criterion or Test for Determination of Seat of Arbitration: Conflict of 'Venue' versus 'Seat' of Arbitration. 41. Before proceeding further with the analysis, it would be apposite to first understand what is the criterion or test for determining the 'seat' or place of arbitration. a. Closest Connection Test - Place of Arbitration to be ascertained by the Law governing the Arbitration Agreement and not the Place of Arbitration. 42. The "closest connection test" is a legal principle used to determine which law governs an arbitration agreement when the parties have not expressly chosen a governing law or where there is a conflict between the choice of law by the parties. This test seeks to identify the jurisdiction that has the closest relationship with the subject-matter in question or simplicter the dispute between the parties by identifying which system of law has the closest an....
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.... or the substantive law governing the contract. Where the proper law of the contract is expressly chosen by the parties then such law must, in the absence of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract. In other words, if the proper law of the contract is expressly chosen and the arbitration agreement forms part and parcel of such contract, then the substantive law of such contract will govern the arbitration agreement, and by its extension the place of arbitration. The relevant observations read as under: - "24. The validity, effect and interpretation of the arbitration agreement are governed by its proper law. Such law will decide whether the arbitration clause is wide enough to cover the dispute between the parties. Such law will also ordinarily decide whether the arbitration clause binds the parties even when one of them alleges that the contract is void, or voidable or illegal or that such contract has been discharged by breach or frustration. (See Heyman v. Darwins Ltd.) The proper law of arbitration will also decide whether the arbitrat....
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....nt, the courts endeavour to impute an intention by identifying the legal system with which the transaction has its closest and most real connection. xxx 16. Where the parties have not expressly or impliedly selected the proper law, the courts impute an intention by applying the objective test to determine what the parties would have as just and reasonable persons intended as regards the applicable law had they applied their minds to the question.7 The Judge has to determine the proper law for the parties in such circumstances by putting himself in the place of a "reasonable man". He has to determine the intention of the parties by asking himself how a just and reasonable person would have regarded the problem" [...] 17. For this purpose the place where the contract was made, the form and object of the contract, the place of performance, the place of residence or business of the parties, reference to the courts having jurisdiction and such other links are examined by the courts to determine the system of law with which the transaction has its closest and most real connection." (Emphasis supplied) (iii) Lastly, the choice of place of arbitration or se....
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....on of the parties." (Emphasis supplied) 45. Accordingly, this Court in NTPC (supra) held that since the proper law governing the contract was expressly stipulated to be the laws in force in India and because the parties had specifically accepted the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract it meant that the law governing the arbitration agreement would be same as the proper law governing the contract which contained the relevant arbitration clause. It further observed that since London had no significant connection with the contract or the parties except being a neutral place that had been chosen only because of the rules of the International Chamber of Commerce, it held that, the stipulation of such rules merely governed the procedure and conduct of the arbitration and could not in any manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts that governed the main contract including the arbitration clause that formed part and parcel of the main contract. The aforesaid relevant observations read as under: - "26. [...]Where, however, the parties have, as in the instant case, stipula....
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....the jurisdiction of the competent courts and the laws in force in India is totally inconsistent with the agreement between the parties. 51. In sum, it may be stated that the law expressly chosen by the parties in respect of all matters arising under their contract, which must necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and the contract being most intimately associated with India, the proper law of arbitration and the competent courts are both exclusively Indian, while matters of procedure connected with the conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to the extent that such rules are not in conflict with the public policy and the mandatory requirements of the proper law and of the law of the place of arbitration. The Foreign Awards Act, 1961 has no application to the award in question which has been made on an arbitration agreement governed by the law of India. xxx 53. All substantive rights arising under the agreem....
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....est, held that the place with the closest and most real connection with the arbitration agreement and the law of arbitration was India and not London. The relevant observations read as under: - "98. We find much substance in the submissions of Mr Nariman that there are very strong indicators to suggest that the parties always understood that the seat of arbitration would be in India and London would only be the "venue" to hold the proceedings of arbitration. We find force in the submission made by the learned Senior Counsel for the appellants that the facts of the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of the Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters III, IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even Dr Singhvi had submitted that Chapters III, IV, V and VI would apply if the seat of arbitration is in India. By choosing that P....
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....ion in London" or expressions similar thereto. The same cannot be equated with the term "venue of arbitration proceedings shall be in London". Arbitration in London can be understood to include venue as well as seat; but it would be rather stretching the imagination if "venue of arbitration shall be in London" could be understood as "seat of arbitration shall be London", in the absence of any other factor connecting the arbitration to London. In spite of Dr Singhvi's seemingly attractive submission to convince us, we decline to entertain the notion that India would not be the natural forum for all remedies in relation to the disputes, having such a close and intimate connection with India. In contrast, London is described only as a venue which Dr Singhvi says would be the natural forum. xxx 135. In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London. In an international commercial arbitration, venue can often be different from the seat of arbitration. In such circumstances, the hearing of the arbitration will be conducted at the venue fix....
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....ited Kingdom". It provided that the arbitration proceedings should be conducted in English in accordance with the ICC Rules and that the governing law of the shareholders' agreement itself would be the law of India. The claimants made an application to the High Court in New Delhi seeking interim measures of protection under Section 9 of the Indian Arbitration Act, 1996, prior to the institution of arbitration proceedings. Following the commencement of the arbitration, the defendant and the joint venture company raised a challenge to the jurisdiction of the Arbitral Tribunal, which the panel heard as a preliminary issue. The Tribunal rejected the jurisdictional objection. xxx 131. Upon consideration of the entire matter, it was observed in Sulamérica that "In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England". It was thereafter concluded by the High Court that the English law is the proper law of the agreement to arbitrate. xxx 133. We also do not find any merit in the submission of Dr Singhvi that ....
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....e defendant, I consider that there is great force in this. The defendant submits however that as "venue" is not synonymous with "seat", there is no designation of the seat of the arbitration by clause 14.4 and, in the absence of any designation, when regard is had to the parties' agreement and all the relevant circumstances, the juridical seat must be in India and the curial law must be Indian law. 27. In my judgment, in an arbitration clause which provides for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that the venue of the arbitration shall be London, United Kingdom does amount to the designation of a juridical seat. The parties have not simply provided for the location of hearings to be in London for the sake of convenience and there is indeed no suggestion that London would be convenient in itself, in the light of the governing law of the Shareholders Agreement, the nature and terms of that agreement and the nature of the disputes which were likely to arise and which did in fact arise (although the first claimant is resident in the UK). 28. The defendant relies upon the nature o....
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....rbitration agreement as the seat of the arbitration or, having regard to the parties' agreement and all the relevant circumstances, it is the seat to be determined in accordance with the final fall back provision of section 3 of the Arbitration Act." (Emphasis supplied) 51. In Roger Shashoua (2) v. Mukesh Sharma reported in (2017) 14 SCC 722 this Court held that the test that was applied in NTPC (supra) was no longer a good law in view of the repeal of Section 9(b) of the Act, 1961. It further, held that the principle enunciated in Roger Shashoua (1) had been expressly approved by the 5-Judge Bench decision of this Court in BALCO (supra). Accordingly, this Court applying the Shashoua Principle held that the mention of London in the arbitration agreement was not merely as a location but as a juridical seat. The relevant observations read as under: - "46. As stated earlier, in Shashoua Cooke, J., in the course of analysis, held that "London arbitration" is a well-known phenomenon which is often chosen by foreign nationals with a different law, such as the law of New York, governing the substantive rights of the parties and it is because of the legislative framework....
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....clined to think, as we are obliged to, that the Shashoua principle has been accepted in Balco as well as Enercon (India) Ltd. on proper ratiocination and, therefore, the submission advanced on this score by Mr Chidambaram, learned Senior Counsel for the respondent, is repelled. xxx 72. It is worthy to note that the arbitration agreement is not silent as to what law and procedure is to be followed. On the contrary, Clause 14.1. lays down that the arbitration proceedings shall be in accordance with the Rules of Conciliation and Arbitration of ICC. In Enercon (India) Ltd., the two-Judge Bench referring to Shashoua case accepted the view of Cooke, J. that the phrase "venue of arbitration shall be in London, UK" was accompanied by the provision in the arbitration clause or arbitration to be conducted in accordance with the Rules of ICC in Paris. The two-Judge Bench accepted the Rules of ICC, Paris which is supranational body of Rules as has been noted by Cooke, J. and that is how it has accepted that the parties have not simply provided for the location of hearings to be in London. To elaborate, the distinction between the venue and the seat remains. But when a court finds t....
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....n having been interpreted in a particular manner by the English courts and the said interpretation having gained acceptation by this Court, the inescapable conclusion is that the courts in India have no jurisdiction." (Emphasis supplied) 52. This Court in its decision in BGS SGS SOMA JV v. NHPC LTD., reported in (2020) 4 SCC 234 held that wherever in the arbitration agreement there is designation of a place of arbitration as 'venue' of the 'arbitral proceedings', then such place effectively is the 'seat' of arbitration. This is because, the expression 'arbitral proceedings' does not refer to individual hearings but rather the whole arbitration process including the making of the award. It further held that where the parties have anchored the arbitral proceedings to one fixed location or place, it would indicate that the parties intended such place to be the seat of arbitration. It held that where the place designated as venue in the arbitration agreement is coupled with there being no other significant contrary indicia that such place is merely a venue, then such place would be construed as the 'seat' of the arbitral proceedings. This Court also added that the international c....
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....on only one place; ii. Such place must have anchored the arbitral proceedings i.e., the arbitral proceedings must have been fixed to that place alone without any scope of change; iii. There must be no other significant contrary indicia to show that the place designated is merely the venue and not the seat. Where the aforesaid conditions are fulfilled, then the place that has been designated as 'venue' can be construed as the 'seat' of arbitration. It is clarified that, while applying the aforesaid test, it must be borne in mind that where a supranational body of rules has been stipulated in an arbitration agreement or clause, such stipulation is not to be regarded as a contrary indicium, such stipulation does not mean that no seat has been designated rather such stipulation is a positive indicia that the place so designated is actually the 'seat'. 54. The aforesaid test was approvingly applied by this Court in Mankastu Impex Private Ltd. v. Airvisual Ltd. reported in (2020) 5 SCC 399 and it was held that where the reference to a place in the arbitration agreement is not simply as "venue" and rather a reference as place for final resolution by arbitration, su....
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....of Hong Kong would govern the arbitration. The Indian courts have no jurisdiction for appointment of the arbitrator." (Emphasis supplied) iii. Whether the Seat of Arbitration in the underlying Distributorship Agreement is in India? 55. Now coming to the facts of the present case, Clause 26 of the aforesaid Distributorship Agreement stipulates that the arbitration shall be subject to UAE Arbitration and Conciliation rules. The aforesaid arbitration clause further designates only one place i.e., Dubai, UAE as the venue of arbitration. 56. In view of the law laid down by this Court in BGS SGS SOMA (supra), since only one place has been designated in the arbitration clause, and such place has been categorically fixed inasmuch as there is no scope for the place designated as venue to change in terms of Clause 26, and furthermore, the said clause has explicitly stipulated that the curial law would be the UAE Arbitration and Conciliation rules and there being no other contrary indicia let alone a significant contrary indicia, we are of the considered opinion that the Dubai, UAE has not been designated merely as a venue but rather as the juridical seat of arbitration in terms o....
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....er held that where more than one court has jurisdiction, it is open for the parties to exclude all other courts and choose to submit to the jurisdiction of one court alone. The relevant observations read as under: - "19. 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 Sections 16 to 21 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 arbit....
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....lkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner. xxx 55. It will be seen from the above decisions that except in A.B.C. Laminart [A.B.C. Laminart (P) Ltd. v. A.P. Agencies, (1989) 2 SCC 163] where this Court declined to exclude the jurisdiction....
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....a nor is the arbitration agreement governed by Indian laws. Since Part I of the Act, 1996 is inapplicable, the parties cannot confer any jurisdiction to a court which otherwise has no jurisdiction even if such conferment is permissible as per the Distributorship Agreement. 64. Clause 27 of the aforesaid Distributorship Agreement reads as follows: "This Agreement shall be governed by and construed in accordance with the laws of UAE and shall be subject to the non-exclusive jurisdiction of the Dubai Courts". The expression "non-exclusive jurisdiction of the Dubai Courts" occurring in the said clause cannot be singled out and construed devoid of its context. The said clause provides the law governing the entire Distributorship Agreement and the stipulation that it shall be subject to the non-exclusive jurisdiction of the Dubai Court only relates to the substantive agreement and not the arbitration agreement contained in the preceding clause. The said clause can at best be construed to stipulate that any substantive part pertaining to such agreement which might not fall within the scope of 'disputes' covered under Clause 26 i.e.., those disputes which are not arbitrable bet....
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....ate to decide the dispute the courts can decline its jurisdiction or stay the proceedings before it in favour of a more suitable forum for the interests of all the parties and the ends of justice. The relevant observations read as under: - "The existence of a non-exclusive jurisdiction clause is a factor, but it is not conclusive. It must be weighed alongside other considerations of convenience and connection to determine the appropriate forum. The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e., in which the case may be tried more suitably for the interests of all the parties and the ends of justice. The principle of forum non conveniens allows discretion to stay proceedings in favor of a clearly more appropriate forum unless justice requires the case to proceed in the chosen forum due to special circumstances. If the court concludes at the end of stage one that there is another clearly more appropriate forum, it will ordinarily grant a stay unless ....
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.... perpetuated; and (c) the principle of comity - respect for the court in which the commencement or continuance of action/proceeding is sought to be restrained - must be borne in mind. (2) In a case where more forums than one are available, the court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum (forum conveniens) having regard to the convenience of the parties and may grant anti-suit injunction in regard to proceedings which are oppressive or vexatious or in a forum non- conveniens. (3) Where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein in regard to exclusive or non-exclusive jurisdiction of the court of choice of the parties are not determinative but are relevant factors and when a question arises as to the nature of jurisdiction agreed to between the parties the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case. (4) A court of natural jurisdiction will not normally grant anti-suit injunction against a defendant before it where parties have agreed to s....
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....pressive or vexatious lies on the party contending the same, yet the choice of forum by the other party is not decisive, and that it is for the court to determine whether the proceedings before it might be an inconvenience to the interests of the parties or less appropriate for the subject-matter in question. 70. Thus, even if it is assumed that Clause 27 of the aforesaid Distributorship Agreement conferred concurrent jurisdiction to both the courts in UAE and the other courts and thus, the petitioner herein was well-within its right to approach this Court in terms of the non-exclusive jurisdiction clause for the purpose of appointment of arbitrator, this Court can decline to exercise its jurisdiction if there exists a more appropriate forum. As discussed in the foregoing paragraphs, the seat of arbitration in terms of the aforesaid Distributorship Agreement is Dubai, UAE, both the law governing the contract and the curial law are the laws of UAE, the respondent no. 1 herein with whom the petitioner's credit account lies is also situated in Dubai, even the venue of arbitration is Dubai, thus by all reasons of logic the more appropriate forum suitable for appointment of arbitrato....
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....other significant contrary indicia to show otherwise, such place would be the 'seat' of arbitration even if it is designated in the nomenclature of 'venue' in the arbitration agreement. (vii) Where the curial law of a particular place or supranational body of rules has been stipulated in an arbitration agreement or clause, such stipulation is a positive indicium that the place so designated is actually the 'seat', as more often than not the law governing the arbitration agreement and by extension the seat of the arbitration tends to coincide with the curial law. (viii) Merely because the parties have stipulated a venue without any express choice of a seat, the courts cannot sideline the specific choices made by the parties in the arbitration agreement by imputing these stipulations as inadvertence at the behest of the parties as regards the seat of arbitration. Deference has to be shown to each and every choice and stipulations made by the parties, afterall the courts are only a conduit or means to arbitration, and the sum and substance of the arbitration is derived from the choices of the parties and their intentions contained in the arbitration agreement. It is ....