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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.  5370-5371 OF 2017 (ARISING OUT OF SLP (CIVIL) NOS.27311-27312 OF 2016)

INDUS MOBILE DISTRIBUTION  PRIVATE LIMITED       … APPELLANT

VERSUS

DATAWIND INNOVATIONS  PRIVATE LIMITED & ORS.     … RESPONDENTS

J U D G M E N T

R.F. NARIMAN, J.

1. Leave granted.

2. The  present  appeals  raise  an  interesting  question  as  to

whether,  when  the  seat  of  arbitration  is  Mumbai,  an  exclusive

jurisdiction clause stating that the courts at Mumbai alone would

have  jurisdiction  in  respect  of  disputes  arising  under  the

agreement would oust all other courts including the High Court of

Delhi, whose judgment is appealed against.  

3. The brief facts necessary to appreciate the controversy are

that Respondent No.1 is engaged in the manufacture, marketing

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and distribution of Mobile Phones, Tablets and their accessories.

Respondent  No.1  has  its  registered  office  at  Amritsar,  Punjab.

Respondent No.1 was supplying goods to the appellant at Chennai

from New Delhi.  The appellant approached Respondent No.1 and

expressed an earnest desire to do business with Respondent No.1

as its Retail Chain Partner.  This being the case, an agreement

dated 25.10.2014 was entered into between the parties. Clauses

18  and  19  are  relevant  for  our  purpose,  and  are  set  out

hereinbelow:

“Dispute Resolution Mechanism:

Arbitration:  In  case  of  any  dispute  or  differences arising between parties out of or in relation to the construction, meaning, scope, operation or effect of this Agreement or breach of this Agreement, parties shall make efforts in good faith to amicably resolve such dispute.  

If  such  dispute  or  difference  cannot  be  amicably resolved by the parties (Dispute) within thirty days of its occurrence, or such longer time as mutually agreed,  either  party  may  refer  the  dispute  to  the designated senior officers of the parties.  

If the Dispute cannot be amicably resolved by such officers  within  thirty  (30)  days  from  the  date  of referral,  or  within  such  longer  time  as  mutually agreed,  such  Dispute  shall  be  finally  settled  by arbitration  conducted  under  the  provisions  of  the Arbitration & Conciliation Act 1996 by reference to a sole Arbitrator which shall be mutually agreed by the parties.   Such  arbitration  shall  be  conducted  at Mumbai, in English language.  

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The  arbitration  award  shall  be  final  and  the judgment  thereupon may be entered in  any court having  jurisdiction  over  the  parties  hereto  or application may be made to such court for a judicial acceptance  of  the  award  and  an  order  of enforcement, as the case may be.  The Arbitrator shall have the power to order specific performance of the Agreement.   Each Party shall  bear its own costs of the Arbitration.  

It  is hereby ‘agreed between the Parties that they will continue to perform their respective obligations under  this  Agreement  during the pendency of  the Dispute.  

19. All  disputes  &  differences  of  any  kind whatever  arising out  of  or  in  connection with  this Agreement  shall  be  subject  to  the  exclusive jurisdiction of courts of Mumbai only.”

4. Disputes  arose  between  the  parties  and  a  notice  dated

25.9.2015 was sent by Respondent No.1 to the appellant.   The

notice stated that the appellant had been in default of outstanding

dues of Rs.5 crores with interest thereon and was called upon to

pay  the  outstanding  dues  within  7  days.   Clause  18  of  the

Agreement  was  invoked  by  Respondent  No.1,  and  one  Justice

H.R. Malhotra was appointed as the Sole Arbitrator between the

parties.  By a reply dated 15.10.2015, the appellant objected to the

appointment of Justice Malhotra and asked Respondent No.1 to

withdraw  its  notice.  By  a  further  reply  dated  16.10.2015,  the

averments made in the notice were denied in toto.

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5. Two petitions were then filed by Respondent No.1 – the first

dated  September  2015,  under  Section  9  of  the  Arbitration  and

Conciliation  Act,  1996  asking  for  various  interim  reliefs  in  the

matter.  By an order dated 22.9.2015, the Delhi High Court issued

notice in the interim application and restrained the appellant from

transferring,  alienating  or  creating  any  third  party  interests  in

respect  of  the  property  bearing  No.281,  TK  Road,  Alwarpet,

Chennai-600018 till  the next date of hearing.  By an application

dated 28.10.2015, Respondent No.1 filed a Section 11 petition to

appoint an Arbitrator.  

6. Both  applications  were  disposed  of  by  the  impugned

judgment.   First  and  foremost,  it  was  held  by  the  impugned

judgment that as no part of the cause of action arose in Mumbai,

only  the courts  of  three territories  could have jurisdiction in  the

matter, namely, Delhi and Chennai (from and to where goods were

supplied),  and  Amritsar  (which  is  the  registered  office  of  the

appellant company).  The court therefore held that the exclusive

jurisdiction  clause  would  not  apply  on  facts,  as  the  courts  in

Mumbai would have no jurisdiction at all.  It, therefore, determined

that Delhi being the first Court that was approached would have

jurisdiction in the matter and proceeded to confirm interim order

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dated 22.9.2015 and also proceeded to dispose of the Section 11

petition by appointing Justice S.N. Variava, retired Supreme Court

Judge, as the sole Arbitrator in the proceedings.  The judgment

recorded that the conduct of the arbitration would be in Mumbai.  

7. Learned counsel on behalf of the appellant has assailed the

judgment of the Delhi High Court, stating that even if it were to be

conceded that no part of the cause of action arose at Mumbai, yet

the  seat  of  the  arbitration  being  at  Mumbai,  courts  in  Mumbai

would have exclusive jurisdiction in all proceedings over the same.

According  to  him,  therefore,  the  impugned  judgment  was

erroneous and needs to be set aside.  

8. In  opposition  to  these  arguments,  learned  counsel  for

Respondent No.1 sought to support the judgment by stating that

no part of the cause of action arose in Mumbai.  This being the

case, even if the seat were at Mumbai, it makes no difference as

one of the tests prescribed by the Civil Procedure Code, 1908, to

give a court jurisdiction must at least be fulfilled.  None of these

tests being fulfilled on the facts of the present case, the impugned

judgment is correct and requires no interference.  

9. The  relevant  provisions  of  the  Arbitration  and  Conciliation

Act, 1996 are set out hereinbelow:

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“2. Definitions. - (1) In this Part, unless the context otherwise requires, -

(e) “Court” means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original  civil  jurisdiction, having, jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been  the  subject-matter  of  a  suit,  but  does  not include any civil  court  of  a  grade inferior  to  such principal Civil Court, or any Court of Small Causes;

(2)  This  Part  shall  apply  where  the  place  of arbitration is in India.

20. Place of arbitration. – (1) The parties are free to agree on the place of arbitration.  

(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the  arbitral  tribunal  having  regard  to  the circumstances  of  the  case,  including  the convenience of the parties.

(3)  Notwithstanding sub-section (1)  or  sub-section (2),  the  arbitral  tribunal  may,  unless  otherwise agreed  by  the  parties,  meet  at  any  place  it considers  appropriate  for  consultation  among  its members,  for  hearing  witnesses,  experts  or  the parties,  or  for  inspection  of  documents,  goods  or other property.

31. Form and contents of arbitral award. –

(4) The arbitral  award shall  state its date and the place  of  arbitration  as  determined  in  accordance with section 20 and the award shall be deemed to have been made at that place.”

10. The concept of juridical seat has been evolved by the courts

in  England  and  has  now  been  firmly  embedded  in  our

jurisprudence. Thus, the Constitution Bench in Bharat Aluminium

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Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC

552, has  adverted  to  “seat”  in  some  detail.   Paragraph  96  is

instructive and states as under:-

“Section 2(1)(e) of the Arbitration Act, 1996 reads as under:

“2. Definitions.—(1)  In  this  Part,  unless  the context otherwise requires—

(a)-(d)*** (e)  ‘Court’  means  the  Principal  Civil  Court  of

Original  Jurisdiction in  a district,  and includes the High Court in exercise of its ordinary original civil jurisdiction,  having  jurisdiction  to  decide  the questions  forming  the  subject-matter  of  the arbitration if the same had been the subject-matter of a suit, but does not include any civil  court of a grade inferior to such Principal Civil  Court, or any Court of Small Causes;” We are of the opinion, the term “subject-matter of the  arbitration”  cannot  be  confused  with “subject-matter  of  the  suit”.  The  term “subject-matter”  in  Section  2(1)(e)  is  confined  to Part I.  It  has a reference and connection with the process  of  dispute  resolution.  Its  purpose  is  to identify the courts having supervisory control over the  arbitration  proceedings.  Hence,  it  refers  to  a court which would essentially be a court of the seat of  the  arbitration  process.  In  our  opinion,  the provision  in  Section  2(1)(e)  has  to  be  construed keeping in view the provisions in Section 20 which give recognition to  party  autonomy. Accepting the narrow  construction  as  projected  by  the  learned counsel  for  the  appellants  would,  in  fact,  render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of  action  is  located  and  the  courts  where  the arbitration takes place. This was necessary as on many occasions the agreement may provide for a

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seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory  control  over  the  arbitral  process.  For example,  if  the arbitration is  held  in  Delhi,  where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal  sitting  in  Delhi  passes  an  interim  order under Section 17 of  the Arbitration Act,  1996, the appeal against such an interim order under Section 37 must lie to the courts of Delhi being the courts having supervisory  jurisdiction  over  the arbitration proceedings  and  the  tribunal.  This  would  be irrespective  of  the  fact  that  the  obligations  to  be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is  to  take  place  in  Delhi.  In  such  circumstances, both the courts would have jurisdiction i.e. the court within  whose jurisdiction the subject-matter  of  the suit is situated and the courts within the jurisdiction of  which  the  dispute  resolution  i.e.  arbitration  is located.” [para 96]

11. Paragraphs 98 to 100 have laid down the law as to “seat”

thus:

“We now come to Section 20, which is as under: “20. Place  of  arbitration.—(1)  The  parties  are

free to agree on the place of arbitration. (2)  Failing  any  agreement  referred  to  in

sub-section  (1),  the  place  of  arbitration  shall  be determined by the Arbitral Tribunal having regard to the  circumstances  of  the  case,  including  the convenience of the parties.

(3)  Notwithstanding  sub-section  (1)  or sub-section  (2),  the  Arbitral  Tribunal  may,  unless otherwise agreed by the parties, meet at any place it  considers appropriate for consultation among its

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members,  for  hearing  witnesses,  experts  or  the parties,  or  for  inspection  of  documents,  goods  or other property.” A plain reading of  Section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any “place” or “seat” within India, be it Delhi, Mumbai, etc. In the absence of  the  parties'  agreement  thereto,  Section  20(2) authorises the tribunal to determine the place/seat of  such  arbitration.  Section  20(3)  enables  the tribunal  to  meet  at  any  place  for  conducting hearings at a place of convenience in matters such as  consultations  among  its  members  for  hearing witnesses, experts or the parties. The fixation of the most convenient “venue” is taken care of by Section 20(3). Section 20, has to be read in  the  context  of  Section  2(2),  which  places  a threshold  limitation  on  the  applicability  of  Part  I, where the place of arbitration is in India. Therefore, Section 20 would also not support the submission of the  extra-territorial  applicability  of  Part  I,  as canvassed  by  the  learned  counsel  for  the appellants, so far as purely domestic arbitration is concerned. True, that in an international commercial arbitration, having  a  seat  in  India,  hearings  may  be necessitated outside India. In such circumstances, the hearing of  the arbitration will  be conducted at the venue fixed by the parties, but it would not have the effect of changing the seat of arbitration which would  remain  in  India.  The  legal  position  in  this regard is summed up by Redfern and Hunter, The Law  and  Practice  of  International  Commercial Arbitration (1986) at p. 69 in the following passage under the heading “The Place of Arbitration”:

“The preceding discussion has been on the basis that there is only one ‘place’ of arbitration. This will be the place chosen by or on behalf of the parties; and  it  will  be  designated  in  the  arbitration agreement  or  the  terms  of  the  reference  or  the minutes of proceedings or in some other way as the

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place  or  ‘seat’  of  the  arbitration.  This  does  not mean, however, that the Arbitral Tribunal must hold all  its  meetings  or  hearings  at  the  place  of arbitration. International commercial arbitration often involves people of many different nationalities, from many different countries. In these circumstances, it is by no means unusual for an Arbitral Tribunal to hold meetings—or even hearings—in a place other than the designated place of arbitration, either for its own  convenience  or  for  the  convenience  of  the parties  or  their  witnesses….  It  may  be  more convenient  for  an  Arbitral  Tribunal  sitting  in  one country to conduct a hearing in another country—for instance, for  the purpose of  taking evidence…. In such  circumstances,  each  move  of  the  Arbitral Tribunal  does  not  of  itself  mean  that  the  seat  of arbitration  changes.  The  seat  of  the  arbitration remains the place initially agreed by or on behalf of the parties.” This,  in  our  view,  is  the  correct  depiction  of  the practical considerations and the distinction between “seat”  [Sections  20(1)  and  20(2)]  and  “venue” [Section  20(3)].  We  may  point  out  here  that  the distinction  between  “seat”  and  “venue”  would  be quite crucial in the event, the arbitration agreement designates a foreign country as the “seat”/“place” of the arbitration and also selects the Arbitration Act, 1996 as the curial law/law governing the arbitration proceedings. It would be a matter of construction of the individual agreement to decide whether:

(i) the designated foreign “seat” would be read as in fact only providing for a “venue”/“place” where the hearings would be held, in view of the choice of the Arbitration Act, 1996 as being the curial law, OR

(ii)  the  specific  designation  of  a  foreign  seat, necessarily  carrying  with  it  the  choice  of  that country's  arbitration/curial  law,  would  prevail  over and subsume the conflicting selection choice by the parties of the Arbitration Act, 1996.” [paras 98 – 100]

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12. In  an  instructive  passage,  this  Court  stated  that  an

agreement  as  to  the  seat  of  an  arbitration  is  analogous  to  an

exclusive jurisdiction clause as follows:

“Thus, it  is clear that the regulation of conduct of arbitration and challenge to an award would have to be done by the courts of the country in which the arbitration is being conducted. Such a court is then the  supervisory  court  possessed  of  the  power  to annul the award. This is in keeping with the scheme of the international instruments, such as the Geneva Convention and the New York Convention as well as the UNCITRAL Model Law. It also recognises the territorial  principle  which  gives  effect  to  the sovereign right of a country to regulate, through its national  courts,  an  adjudicatory  duty  being performed  in  its  own  country.  By  way  of  a comparative  example,  we  may  reiterate  the observations made by the Court of Appeal, England in C v. D [2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)] wherein it is observed that:

“It follows from this that a choice of seat for the arbitration must be a choice of forum for remedies seeking to attack the award.”

(emphasis supplied) In  the  aforesaid  case,  the  Court  of  Appeal  had approved the observations made in A v. B [(2007) 1 All  ER (Comm)  591 :  (2007)  1  Lloyd's  Rep 237] wherein it is observed that:

“… an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim  for  a  remedy  …  as  to  the  validity  of  an existing interim or final award is agreed to be made only in the courts  of  the place designated as the seat of arbitration.”               (emphasis supplied) [para 123]

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13. The Constitution Bench’s statement of  the law was further

expanded in  Enercon (India) Ltd. v. Enercon Gmbh, (2014) 5

SCC 1.  After referring to various English authorities in great detail,

this Court held, following the Constitution Bench, as follows:

“It  is  accepted by most  of  the experts  in  the law relating to international arbitration that in almost all the  national  laws,  arbitrations  are  anchored  to the seat/place/situs  of  arbitration. Redfern  and Hunter on International Arbitration (5th Edn., Oxford University  Press,  Oxford/New York  2009),  in  Para 3.54  concludes  that  “the seat of  the  arbitration  is thus  intended  to  be  its  centre  of  gravity”. In BALCO [Bharat  Aluminium  Co. v. Kaiser Aluminium Technical  Services Inc.,  (2012)  9 SCC 552 : (2012) 4 SCC (Civ) 810] , it is further noticed that this does not mean that all proceedings of the arbitration are to be held at the seat of arbitration. The arbitrators are at liberty to hold meetings at a place which is of convenience to all concerned. This may become necessary as arbitrators often come from  different  countries.  Therefore,  it  may  be convenient to hold all  or some of the meetings of the  arbitration  in  a  location  other  than  where the seat of  arbitration  is  located.  In BALCO,  the relevant  passage  from  Redfern  and  Hunter  has been quoted which is as under: (SCC p. 598, para 75)

“75.  … ‘The preceding discussion has been on the basis that there is only one “place” of arbitration. This will be the place chosen by or on behalf of the parties; and it  will  be designated in the arbitration agreement or the terms of reference or the minutes of proceedings or in some other way as the place or “seat”  of  the  arbitration.  This  does  not  mean, however, that the Arbitral Tribunal must hold all  its meetings  or  hearings  at  the  place  of  arbitration. International  commercial  arbitration  often  involves people  of  many  different  nationalities,  from  many

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different countries. In these circumstances, it is by no means unusual for  an Arbitral  Tribunal to hold meetings—or even hearings—in a place other than the designated place of arbitration, either for its own convenience or for the convenience of the parties or their witnesses…. It may be more convenient for an Arbitral Tribunal sitting in one country to conduct a hearing in another country — for instance, for the purpose  of  taking  evidence….  In  such circumstances  each  move  of  the  Arbitral  Tribunal does not of itself mean that the seat of arbitration changes. The seat of arbitration remains the place initially  agreed  by  or  on  behalf  of  the  parties.’ (Naviera  case [Naviera  Amazonica  Peruana S.A. v. Compania  Internacional  De  Seguros  Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] , Lloyd's Rep p. 121)”                                  (emphasis in original) These  observations  have  also  been  noticed in Union  of  India v. McDonnell  Douglas Corpn. [(1993) 2 Lloyd's Rep 48]” [para 134]

14. This Court  reiterated that  once the seat  of  arbitration has

been fixed, it  would be in the nature of an exclusive jurisdiction

clause as to the courts which exercise supervisory powers over the

arbitration. (See: paragraph 138).  

15. In  Reliance  Industries  Ltd.  v.  Union  of  India, (2014)  7

SCC,  603,  this  statement  of  the  law  was  echoed  in  several

paragraphs.  This judgment makes it clear that “juridical seat” is

nothing but the “legal place” of arbitration.  It was held that since

the juridical seat or legal place of arbitration was London, English

courts  alone  would  have  jurisdiction  over  the  arbitration  thus

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excluding Part I of the Indian Act. (See: paragraphs 36, 41, 45 to

60  and  76.1  and  76.2).   This  judgment  was  relied  upon  and

followed  by  Harmony  Innovation  Shipping  Limited  v.  Gupta

Coal  India  Limited  and  Another, (2015)  9  SCC  172  (See:

paragraphs 45 and 48). In Union of India v. Reliance Industries

Limited and Others,  (2015) 10 SCC 213, this Court referred to all

the earlier  judgments and held that  in  cases where the seat  of

arbitration  is  London,  by  necessary  implication  Part  I  of  the

Arbitration  and  Conciliation  Act,  1996  is  excluded  as  the

supervisory jurisdiction of  courts over the arbitration goes along

with “seat”.  

16. In  a  recent  judgment  in  Eitzen  Bulk  A/S  v.  Ashapura

Minechem  Limited  and  Another, (2016)  11 SCC  508,  all  the

aforesaid authorities were referred to and followed.  Paragraph 34

of the said judgment reads as follows:

“As  a  matter  of  fact  the  mere  choosing  of  the juridical  seat  of  arbitration  attracts  the  law applicable to such location. In other words, it would not be necessary to specify which law would apply to the arbitration proceedings, since the law of the particular  country  would  apply  ipso  jure.  The following  passage  from Redfern  and  Hunter  on International  Arbitration contains  the  following explication of the issue:

“It  is  also  sometimes  said  that  parties  have selected  the  procedural  law that  will  govern  their

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arbitration, by providing for arbitration in a particular country.  This  is  too  elliptical  and,  as  an  English court  itself  held more recently  in  Breas of  Doune Wind Farm it does not always hold true. What the parties have done is to choose a place of arbitration in  a  particular  country. That  choice  brings  with  it submission to the laws of that country, including any mandatory  provisions  of  its  law  on  arbitration.  To say  that  the  parties  have  “chosen”  that  particular law to govern the arbitration is rather like saying that an English woman who takes her car to France has “chosen” French traffic law, which will oblige her to drive  on  the  right-hand  side  of  the  road,  to  give priority to vehicles approaching from the right, and generally to obey traffic laws to which she may not be  accustomed.  But  it  would  be  an  odd  use  of language to say this notional motorist had opted for “French traffic law”. What she has done is to choose to go to France. The applicability of French law then follows automatically. It is not a matter of choice.

Parties  may  well  choose  a  particular  place  of arbitration  precisely  because  its  lex  arbitri  is  one which  they  find  attractive.  Nevertheless,  once  a place of arbitration has been chosen, it brings with it its own law. If that law contains provisions that are mandatory  so  far  as  arbitration  are  concerned, those provisions must be obeyed. It is not a matter of choice any more than the notional motorist is free to choose which local traffic laws to obey and which to disregard.” [para 34]

17. It  may  be  mentioned,  in  passing,  that  the  Arbitration  and

Conciliation Act, 1996 has been amended in 2015 pursuant to a

detailed  Law  Commission  Report.   The  Law  Commission

specifically adverted to the difference between “seat” and “venue”

as follows:

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“40. The Supreme Court  in  BALCO decided that Parts I and II  of the Act are mutually exclusive of each other. The intention of Parliament that the Act is  territorial  in  nature  and  sections  9  and  34  will apply only when the seat of arbitration is in India. The seat is the “centre of gravity” of arbitration, and even where  two foreign  parties  arbitrate  in  India, Part I would apply and, by 24 virtue of section 2(7), the  award  would  be  a  “domestic  award”.  The Supreme Court recognized the “seat” of arbitration to  be  the  juridical  seat;  however,  in  line  with international  practice,  it  was  observed  that  the arbitral hearings may take place at a location other than the seat of arbitration. The distinction between “seat”  and  “venue”  was,  therefore,  recognized.  In such a scenario, only if the seat is determined to be India,  Part  I  would be applicable.  If  the seat  was foreign, Part I would be inapplicable. Even if Part I was expressly included “it would only mean that the parties  have  contractually  imported  from  the Arbitration  Act,  1996,  those  provisions  which  are concerned  with  the  internal  conduct  of  their arbitration and which are not inconsistent with the mandatory  provisions  of  the  [foreign]  Procedural Law/Curial  Law.”  The  same  cannot  be  used  to confer jurisdiction on an Indian Court. However, the decision in BALCO was expressly given prospective effect  and  applied  to  arbitration  agreements executed after the date of the judgment.  

41. While the decision in BALCO is a step in the right direction and would drastically reduce judicial intervention in foreign arbitrations, the Commission feels that there are still a few areas that are likely to be problematic.  

(i) Where the assets of a party are located in India, and there is a likelihood that that party will dissipate its assets in the near future, the other party will lack an efficacious remedy if the seat of the arbitration is abroad.  The  latter  party  will  have  two  possible remedies, but neither will  be efficacious. First, the latter  party  can  obtain  an  interim  order  from  a

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foreign Court or the arbitral tribunal itself and file a civil suit to enforce the right created by the interim order. The interim order would not be enforceable directly by filing an execution petition as it would not qualify as a “judgment” or “decree” for the purposes of  sections  13  and  44A  of  the  Code  of  Civil Procedure  (which  provide  a  mechanism  for enforcing foreign judgments). Secondly, in the event that the former party does not adhere to the terms of  the  foreign  Order,  the  latter  party  can  initiate proceedings for contempt in the foreign Court and enforce  the  judgment  of  the  foreign  Court  under sections 13 and 44A of the Code of Civil Procedure. Neither of these remedies is likely to provide a 25 practical remedy to the party seeking to enforce the interim relief obtained by it.  

That being the case, it is a distinct possibility that a foreign party would obtain an arbitral  award in its favour only to realize that the entity against which it has to enforce the award has been stripped of its assets  and  has  been  converted  into  a  shell company.  

(ii)  While  the  decision  in  BALCO  was  made prospective to ensure that hotly negotiated bargains are not overturned overnight, it results in a situation where Courts, despite knowing that the decision in Bhatia is no longer good law, are forced to apply it whenever they are faced with a case arising from an arbitration agreement executed pre-BALCO.  

42.The above issues have been addressed by way of  proposed Amendments  to  sections 2(2),  2(2A), 20, 28 and 31.”

18. In amendments to be made to the Act, the Law Commission

recommended the following:

“  Amendment of Section 20  

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12.In section 20, delete the word “Place” and add the words “Seat and Venue” before the words “of arbitration”.  

(i) In sub-section (1), after the words ”agree on the” delete the word “place”  and add words “seat  and venue”  

(ii) In sub-section (3), after the words “meet at any” delete the word “place” and add word “venue”.  

[NOTE:  The  departure  from  the  existing  phrase “place”  of  arbitration  is  proposed  to  make  the wording of the Act consistent with the international usage of  the concept of  a “seat”  of  arbitration,  to denote  the  legal  home  of  the  arbitration.  The amendment  further  legislatively  distinguishes between the “[legal] seat” from a “[mere] venue” of arbitration.]

Amendment of Section 31  

17.In section 31  

(i) In sub-section (4), after the words “its date and the”  delete  the  word  “place”  and  add  the  word “seat”.”  

19. The amended Act, does not, however, contain the aforesaid

amendments,  presumably  because the  BALCO judgment  in  no

uncertain terms has referred to “place” as “juridical seat” for the

purpose of Section 2(2) of the Act.   It  further made it clear that

Section 20(1) and 20 (2) where the word “place” is used, refers to

“juridical  seat”,  whereas  in  Section  20  (3),  the  word  “place”  is

equivalent  to  “venue”.  This  being  the  settled  law,  it  was  found

unnecessary to expressly incorporate what the Constitution Bench

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of the Supreme Court has already done by way of construction of

the Act.  

20. A conspectus of all the aforesaid provisions shows that the

moment  the  seat  is  designated,  it  is  akin  to  an  exclusive

jurisdiction clause.  On the facts of the present case, it is clear that

the seat of arbitration is Mumbai and Clause 19 further makes it

clear  that  jurisdiction  exclusively  vests  in  the  Mumbai  courts.

Under the Law of Arbitration, unlike the Code of Civil  Procedure

which applies to  suits  filed in  courts,  a  reference to  “seat”  is  a

concept by which a neutral venue can be chosen by the parties to

an arbitration clause.  The neutral venue may not in the classical

sense have jurisdiction – that is, no part of the cause of action may

have arisen at  the neutral  venue and neither  would  any of  the

provisions  of  Section  16  to  21  of  the  CPC  be  attracted.   In

arbitration  law  however,  as  has  been  held  above,  the  moment

“seat” is determined, the fact that the seat is at Mumbai would vest

Mumbai courts with exclusive jurisdiction for purposes of regulating

arbitral  proceedings  arising  out  of  the  agreement  between  the

parties.

21. It  is  well  settled  that  where  more  than  one  court  has

jurisdiction, it is open for parties to exclude all other courts.  For an

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exhaustive analysis of the case law, see Swastik Gases Private

Limited v. Indian Oil  Corporation Limited,  (2013)  9 SCC 32.

This  was  followed  in  a  recent  judgment  in  B.E.  Simoese  Von

Staraburg Niedenthal and Another v. Chhattisgarh Investment

Limited, (2015) 12 SCC 225. Having regard to the above, it  is

clear that Mumbai courts alone have jurisdiction to the exclusion of

all other courts in the country, as the juridical seat of arbitration is

at Mumbai.  This being the case, the impugned judgment is set

aside.   The injunction confirmed by the impugned judgment will

continue  for  a  period  of  four  weeks  from  the  date  of

pronouncement of this judgment, so that the respondents may take

necessary steps under Section 9 in the Mumbai Court.  Appeals

are disposed of accordingly.  

               …………………………………..J.  (PINAKI CHANDRA  GHOSE )

     …….…………………………… J.       (R.F. NARIMAN)

New Delhi; April 19, 2017.

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