Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1556 OF 2021
(Arising out of SLP (C) No.29161 of 2019)
M/S. INOX RENEWABLES LTD. … Appellant(s)
VERSUS
JAYESH ELECTRICALS LTD. … Respondent(s)
J U D G M E N T
R.F. Nariman, J.
1. Leave granted.
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2. The present appeal arises out of the impugned judgment dated 9 October, 2019
passed by the High Court of Gujarat at Ahmedabad in which Special Civil Application
No. 9536 of 2019 filed by the appellant, Inox Renewables Ltd. [“ Appellant ”] against the
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order dated 25 April, 2019 passed by the Commercial Court, Ahmedabad was
dismissed, holding that the courts at Jaipur, Rajasthan would be the courts in which the
Section 34 petition could be filed.
3. The facts of the case are as follows :
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A purchase order dated 28 January, 2012 was entered into between M/s
Gujarat Fluorochemicals Ltd. [“ GFL ”] and the respondent herein, Jayesh Electricals
Ltd. [“ Respondent ”] for the manufacture and supply of power transformers at wind
Signature Not Verified
Digitally signed by
GULSHAN KUMAR
ARORA
Date: 2021.04.15
16:32:28 IST
Reason:
farms. The arbitration clause is contained in clause 8.5 of the purchase order which
reads as follows :-
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“8.5 All the dispute[s] and differences if any shall be settled
by arbitration in the manner hereinafter provided.
Arbitration shall be conducted by three arbitrators; one
each to be nominated by you and the owner and third to
be appointed as an umpire by both the [arbitrators] in
accordance to the Arbitration and Conciliation Act, 1996.
In case either party fails to appoint an arbitrator within
sixty days after receipt of notice from the other party
invoking the arbitration clause, the arbitrator appointed
by the party invoking the arbitration clause shall become
the sole arbitrator to conduct the arbitration.
The venue of the arbitration shall be Jaipur.
The decisions of the majority of the arbitrators shall be
final and binding on both the parties. The arbitrators
may from time to time with the consent of all the parties:
extend the time for making the award. In the event of
any of the arbitrators dying, neglecting, resigning or
being unable to act for any reason, it shall be lawfully
binding for the party concerned to nominate another
arbitrator in place to the outgoing arbitrator.
The arbitrator shall have full powers to review and/or
revise any decision, opinion, direction, certification or
valuation in accordance with the agreement and neither
party shall be limited in proceedings before such
arbitration to the evidence or arguments for the purpose
of obtaining the said decision.
During settlement of disputes and arbitration
proceedings, both parties shall be obliged to carry out
their respective obligations under the agreement.
In the event of arbitrators’ award being not acceptable to
either party, the parties shall be free to seek lawful
remedies under the law of India and the jurisdiction for
the same shall be courts in the State of Rajasthan.”
4. A slump sale of the entire business of GFL took place in favour of the Appellant.
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This took place by way of a business transfer agreement dated 30 March, 2012
executed between the Appellant and GFL to which the Respondent was not a party.
Clause 9.11 and 9.12 of this business transfer agreement designated Vadodara as the
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seat of the arbitration between the parties, vesting the courts at Vadodara with
exclusive jurisdiction qua disputes arising out of the agreement.
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5. On an application being filed by the Respondent on 5 September, 2014, under
Section 11 of the Arbitration and Conciliation Act, 1996, to appoint an arbitrator under
the purchase order, the High Court of Gujarat at Ahmedabad passed the following order
:-
“Learned advocate for the parties jointly submitted that matter
be referred for arbitration of sole arbitrator. I request Shri C.K.
Buch (retired Judge of this Court) to act as a sole arbitrator to
resolve the disputes arising between the parties arising out [of
a] contract dated 28.01.2012.”
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6. Pursuant thereto, the learned arbitrator passed an award dated 28 July, 2018 in
which the Respondent was awarded as sum of Rs. 38,97,150/- plus Rs. 31,32,650 as
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interest on the awarded amount from 10 March, 2017 till the date of the award plus
Rs. 2,81,000/- as quantified costs. Future interest was awarded at 15% from the date
of award till the date of payment. A Section 34 petition was filed by the Appellant in
Ahmedabad which was resisted by the Respondent referring to the business transfer
agreement and stating that the courts at Vadodara alone have jurisdiction. The
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Commercial Court at Ahmedabad vide judgment and order dated 25 April, 2019,
accepted the case of the Respondent by referring to clauses 9.11 and 9.12 of the
business transfer agreement and stated that the courts at Vadodara alone would have
exclusive jurisdiction, the Ahmedabad courts not being vested with such jurisdiction.
7. The Appellant filed Special Civil Application No. 9536 of 2019 against the
aforesaid order. The High Court referred to the arbitration clause contained in the
purchase order as well as what it termed as the “exclusive jurisdiction clause” qua the
courts in Rajasthan and then held that even assuming that Ahmedabad would have
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jurisdiction, if one is to go by clause 8.5 of the purchase order, exclusive jurisdiction
being vested in the courts at Rajasthan, the appropriate court would be the court at
Jaipur. However, despite this finding, it found no error in the Ahmedabad Court’s
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decision dated 25 April, 2019 and dismissed the Special Civil Application.
8. Shri Sachin Datta, learned Senior Counsel appearing on behalf of the Appellant,
drew our attention to the purchase order and argued that the business transfer
agreement not being between the Appellant and the Respondent was irrelevant in the
present case as was correctly held by the impugned judgment. However, the impugned
judgment failed to consider that the arbitrator had recorded in the arbitral award that the
venue/place of arbitration was shifted by mutual consent to Ahmedabad, as a result of
which, the place of arbitration or seat of arbitration became Ahmedabad, resulting in
courts at Ahmedabad having exclusive jurisdiction and relied heavily upon this Court’s
judgment in the case of BSG SGS SOMA JV vs. NHPC Limited, (2020) 4 SCC 234
[“ BGS SGS ”].
9. Shri Purvish Jitendra Malkan, learned counsel appearing on behalf of the
Respondent, argued in support of the impugned judgment. He relied upon the judgment
in Videocon Industries Limited vs. Union of India & Anr., (2011) 6 SCC 161
[“ Videocon ”] and Indus Mobile Distribution Private Limited vs. Datawind
Innovations Private Limited, (2017) 7 SCC 678 [“ Indus Mobile ”] for the proposition
that even if the place of arbitration is shifted by mutual agreement, it cannot be so done
without a written agreement between the parties. In any event, he argued that the
vesting of exclusive jurisdiction with the courts at Rajasthan, being independent from
the arbitration clause stating that the arbitration is to be held at Jaipur, would indicate
that the courts at Rajasthan alone would have exclusive jurisdiction. He also argued
that the arbitrator’s finding that the venue was shifted by mutual consent from Jaipur to
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Ahmedabad has reference only to Section 20(3) of the Arbitration and Conciliation Act,
1996 as Ahmedabad was in reality a convenient place for the arbitration to take place,
the seat of the arbitration always remaining at Jaipur.
10. Having heard learned counsel for both parties, it is first necessary to set out
what the learned arbitrator has held in the award with respect to the venue/place of the
arbitration. In para 12.3, the learned arbitrator holds thus :-
“12.3 There is no controversy as to the constitution of the
Tribunal between the parties and the parties have agreed to
get their dispute resolved by a sole arbitrator. As per
arbitration agreement, the venue of the arbitration was to be
Jaipur. However, the parties have mutually agreed,
irrespective of a specific clause as to the [venue, that the
place] of the arbitration would be at Ahmedabad and not at
Jaipur. The proceedings, thus, have been conducted at
Ahmedabad on constitution of the Tribunal by the learned
Nominee Judge of the Hon’ble High Court of Gujarat.”
11. What is clear, therefore, as per this paragraph is that by mutual agreement,
parties have specifically shifted the venue/place of arbitration from Jaipur to
Ahmedabad. This being so, is it not possible to accede to the argument made by
learned counsel for the Respondent that this could only have been done by written
agreement and that the arbitrator’s finding would really have reference to a convenient
venue and not the seat of arbitration.
12. In BGS SGS (supra), this Court, after an exhaustive review of the entire case
law, concluded thus :
“32. It can thus be seen that given the new concept of
“juridical seat” of the arbitral proceedings, and the importance
given by the Arbitration Act, 1996 to this “seat”, the arbitral
award is now not only to state its date, but also the place of
arbitration as determined in accordance with Section 20.
However, the definition of “court” contained in Section 2(1)(c)
of the Arbitration Act, 1940, continued as such in the
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Arbitration Act, 1996, though narrowed to mean only principal
civil court and the High Court in exercise of their original
ordinary civil jurisdiction. Thus, the concept of juridical seat of
the arbitral proceedings and its relationship to the jurisdiction
of courts which are then to look into matters relating to the
arbitral proceedings - including challenges to arbitral awards -
was unclear, and had to be developed in accordance with
international practice on a case by case basis by this Court.
xxx xxx xxx
48. The aforesaid amendment carried out in the definition of
“Court” is also a step showing the right direction, namely, that
in international commercial arbitrations held in India, the High
Court alone is to exercise jurisdiction over such proceedings,
even where no part of the cause of action may have arisen
within the jurisdiction of such High Court, such High Court not
having ordinary original jurisdiction. In such cases, the “place”
where the award is delivered alone is looked at, and the High
Court given jurisdiction to supervise the arbitration
proceedings, on the footing of its jurisdiction to hear appeals
from decrees of courts subordinate to it, which is only on the
basis of territorial jurisdiction which in turn relates to the
“place” where the award is made. In the light of this important
change in the law, Section 2(1)(e)(i) of the Arbitration Act,
1996 must also be construed in the manner indicated by this
judgment.
49. Take the consequence of the opposite conclusion, in the
light of the facts of a given example, as follows. New Delhi is
specifically designated to be the seat of the arbitration in the
arbitration clause between the parties. Part of the cause of
action, however, arises in several places, including where the
contract is partially to be performed, let us say, in a remote
part of Uttarakhand. If concurrent jurisdiction were to be the
order of the day, despite the seat having been located and
specifically chosen by the parties, party autonomy would
suffer, which BALCO specifically states cannot be the case.
Thus, if an application is made to a District Court in a remote
corner of the Uttarakhand hills, which then becomes the court
for the purposes of Section 42 of the Arbitration Act, 1996
where even Section 34 applications have then to be made, the
result would be contrary to the stated intention of the parties -
as even though the parties have contemplated that a neutral
place be chosen as the seat so that the courts of that place
alone would have jurisdiction, yet, any one of five other courts
in which a part of the cause of action arises, including courts
in remote corners of the country, would also be clothed with
jurisdiction. This obviously cannot be the case. If, therefore,
the conflicting portion of the judgment of BALCO in para 96 is
kept aside for a moment, the very fact that parties have
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chosen a place to be the seat would necessarily carry with it
the decision of both parties that the courts at the seat would
exclusively have jurisdiction over the entire arbitral process.
xxx xxx xxx
53. In Indus Mobile Distribution (P) Ltd. , after clearing the air
on the meaning of Section 20 of the Arbitration Act, 1996, the
Court in para 19 (which has already been set out
hereinabove) made it clear that the moment a seat is
designated by agreement between the parties, it is akin to an
exclusive jurisdiction clause, which would then vest the courts
at the “seat” with exclusive jurisdiction for purposes of
regulating arbitral proceedings arising out of the agreement
between the parties.
xxx xxx xxx
82. On a conspectus of the aforesaid judgments, it may be
concluded that whenever there is the designation of a place of
arbitration in an arbitration clause as being the “venue” of the
arbitration proceedings, the expression “arbitration
proceedings” would make it clear that the “venue” is really the
“seat” of the arbitral proceedings, as the aforesaid expression
does not include just one or more individual or particular
hearing, but the arbitration proceedings as a whole, including
the making of an award at that place. This language has to be
contrasted with language such as “tribunals are to meet or
have witnesses, experts or the parties” where only hearings
are to take place in the “venue”, which may lead to the
conclusion, other things being equal, that the venue so stated
is not the “seat” of arbitral proceedings, but only a convenient
place of meeting. Further, the fact that the arbitral proceedings
“shall be held” at a particular venue would also indicate that
the parties intended to anchor arbitral proceedings to a
particular place, signifying thereby, that that place is the seat
of the arbitral proceedings. This, coupled with there being no
other significant contrary indicia that the stated venue is
merely a “venue” and not the “seat” of the arbitral
proceedings, would then conclusively show that such a clause
designates a “seat” of the arbitral proceedings. In an
International context, if a supranational body of rules is to
govern the arbitration, this would further be an indicia that “the
venue”, so stated, would be the seat of the arbitral
proceedings. In a national context, this would be replaced by
the Arbitration Act, 1996 as applying to the “stated venue”,
which then becomes the “seat” for the purposes of arbitration.
xxx xxx xxx
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98. However, the fact that in all the three appeals before us
the proceedings were finally held at New Delhi, and the
awards were signed in New Delhi, and not at Faridabad,
would lead to the conclusion that both parties have chosen
New Delhi as the “seat” of arbitration under Section 20(1) of
the Arbitration Act, 1996. This being the case, both parties
have, therefore, chosen that the courts at New Delhi alone
would have exclusive jurisdiction over the arbitral
proceedings. Therefore, the fact that a part of the cause of
action may have arisen at Faridabad would not be relevant
once the “seat” has been chosen, which would then amount to
an exclusive jurisdiction clause so far as Courts of the “seat”
are concerned.”
13. This case would show that the moment the seat is chosen as Ahmedabad, it is
akin to an exclusive jurisdiction clause, thereby vesting the courts at Ahmedabad with
exclusive jurisdiction to deal with the arbitration. However, learned counsel for the
Respondent referred to and relied upon paragraphs 49 and 71 of the aforesaid
judgment. Paragraph 49 only dealt with the aspect of concurrent jurisdiction as dealt
with in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012)
9 SCC 552 [“ BALCO ”] which does not arise on the facts of the present case.
Paragraph 71 is equally irrelevant, in that, it is clear that the parties have, by mutual
agreement, entered into an agreement to substitute the venue at Jaipur with
Ahmedabad as the place/seat of arbitration under Section 20(1) of the Arbitration and
Conciliation Act, 1996.
14. Learned counsel for the respondent relied heavily upon Videocon (supra) for
the proposition that any change in seat could only be by a written agreement signed by
the parties. A close look at the judgment in Videocon (supra) would show that it
contained paragraph 34.12 which dealt with “venue and law of arbitration agreement”
and paragraph 35.2 which dealt with “amendment”, as follows :
“34.12. Venue and Law of Arbitration Agreement . — The
venue of sole expert, conciliation or arbitration proceedings
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pursuant to this Article, unless the parties otherwise agree,
shall be Kuala Lumpur, Malaysia, and shall be conducted in
the English language. Insofar as practicable, the parties shall
continue to implement the terms of this contract
notwithstanding the initiation of arbitral proceedings and any
pending claim or dispute. Notwithstanding the provisions of
Article 33.1, the arbitration agreement contained in this Article
34 shall be governed by the laws of England.
35.2 Amendment . — This contract shall not be amended,
modified, varied or supplemented in any respect except by an
instrument in writing signed by all the parties, which shall state
the date upon which the amendment or modification shall
become effective."
15. Given the above, this Court concluded :-
“20. We shall first consider the question whether Kuala
Lumpur was the designated seat or juridical seat of arbitration
and the same had been shifted to London. In terms of clause
34.12 of the PSC entered into by 5 parties, the seat of
arbitration was Kuala Lumpur, Malaysia. However, due to
outbreak of epidemic SARS, the Arbitral Tribunal decided to
hold its sittings first at Amsterdam and then at London and the
parties did not object to this. In the proceedings held on 14-
10-2003 and 15-10-2003 at London, the Arbitral Tribunal
recorded the consent of the parties for shifting the juridical
seat of arbitration to London. Whether this amounted to
shifting of the physical or juridical seat of arbitration from
Kuala Lumpur to London? The decision of this would depend
on a holistic consideration of the relevant clauses of the PSC.
21. Though, it may appear repetitive, we deem it necessary to
mention that as per the terms of agreement, the seat of
arbitration was Kuala Lumpur. If the parties wanted to amend
Article 34.12, they could have done so only by a written
instrument which was required to be signed by all of them.
Admittedly, neither there was any agreement between the
parties to the PSC to shift the juridical seat of arbitration from
Kuala Lumpur to London nor was any written instrument
signed by them for amending Article 34.12. Therefore, the
mere fact that the parties to the particular arbitration had
agreed for shifting of the seat of arbitration to London cannot
be interpreted as anything except physical change of the
venue of arbitration from Kuala Lumpur to London.”
16. The aforesaid judgment would have no application to the facts of the present
case as there is nothing akin to clause 35.2, which is the amendment clause which was
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applied to the facts in Videocon (supra). This being the case, the parties may mutually
arrive at a seat of arbitration and may change the seat of arbitration by mutual
agreement which is recorded by the arbitrator in his award to which no challenge is
made by either party.
17. The reliance placed by learned counsel for the Respondent on Indus Mobile
(supra), and in particular, on paragraphs 18 and 19 thereof, would also support the
Appellant’s case, inasmuch as the “venue” being shifted from Jaipur to Ahmedabad is
really a shifting of the venue/place of arbitration with reference to Section 20(1), and
not with reference to Section 20(3) of the Arbitration and Conciliation Act, 1996, as it
has been made clear that Jaipur does not continue to be the seat of arbitration and
Ahmedabad is now the seat designated by the parties, and not a venue to hold
meetings. The learned arbitrator has recorded that by mutual agreement, Jaipur as a
“venue” has gone and has been replaced by Ahmedabad. As clause 8.5 of the
Purchase Order must be read as a whole, it is not possible to accept the submission of
Shri Malkan that the jurisdiction of Courts in Rajasthan is independent of the venue
being at Jaipur. The two clauses must be read together as the Courts in Rajasthan
have been vested with jurisdiction only because the seat of arbitration was to be at
Jaipur. Once the seat of arbitration is replaced by mutual agreement to be at
Ahmedabad, the Courts at Rajasthan are no longer vested with jurisdiction as exclusive
jurisdiction is now vested in the Courts at Ahmedabad, given the change in the seat of
arbitration.
18. For all these reasons, it is clear that the impugned judgment cannot stand and is
set aside. The parties are now referred to the courts at Ahmedabad for the resolution of
the Section 34 petition.
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19. Vide order dated 12.12.2019, this Court stayed the execution proceedings in
Execution Petition No. 117 of 2019 on the condition that the Appellant shall deposit an
amount of Rs.40,00,000/- in this Court, which has been so deposited. This deposit will
now be transferred to the appropriate forum at Ahmedabad by which the Section 34
petition will be decided. The execution proceedings shall remain stayed till the disposal
of the Section 34 petition unless the appropriate forum at Ahmedabad varies this
interim order.
20. The appeal is disposed of in the aforesaid terms.
21. Pending applications, if any, stand disposed of accordingly.
…………………………………………,J.
(ROHINTON FALI NARIMAN)
…………………………………………,J.
(HRISHIKESH ROY)
New Delhi;
April 13, 2021.
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ITEM NO.12 Court 3 (Video Conferencing) SECTION III
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition(s) for Special Leave to Appeal (C) No(s). 29161/2019
(Arising out of impugned final judgment and order dated 09-10-2019 in SCA No.
9536/2019 passed by the High Court Of Gujarat At Ahmedabad)
M/S. INOX RENEWABLES LTD. Petitioner(s)
VERSUS
JAYESH ELECTRICALS LTD. Respondent(s)
(FOR ADMISSION and I.R.AMOUNT INVOLVED....)
Date : 13-04-2021 This petition was called on for hearing today.
CORAM : HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN
HON'BLE MR. JUSTICE HRISHIKESH ROY
For Petitioner(s) Mr. Syed Mehdi Imam, AOR
For Respondent(s) Mr. Purvish Jitendra Malkan, AOR
UPON hearing the counsel the Court made the following
O R D E R
(GULSHAN KUMAR ARORA) (R.S. NARAYANAN)
AR-CUM-PS COURT MASTER