M/S. INOX RENEWABLES LTD. versus JAYESH ELECTRICALS LTD. on 13 April 2021

1. Leave granted.

2. The present appeal arises out of the impugned judgment dated9[th] October, 2019 passed by the High Court of Gujarat at Ahmedabad inDwhich Special Civil Application No. 9536 of 2019 filed by the appellant,Inox Renewables Ltd. [“Appellant”] against the order dated 25[th] April,2019 passed by the Commercial Court, Ahmedabad was dismissed,holding that the courts at Jaipur, Rajasthan would be the courts in whichthe Section 34 petition could be filed.

E3. The facts of the case are as follows :

A purchase order dated 28[th] January, 2012 was entered intobetween M/s Gujarat Fluorochemicals Ltd. [“GFL”] and the respondentherein, Jayesh Electricals Ltd. [“Respondent”] for the manufactureand supply of power transformers at wind farms. The arbitration clauseFis contained in clause 8.5 of the purchase order which reads as follows:- “8.5 All the dispute[s] and differences if any shall be settled byarbitration in the manner hereinafter provided.

Arbitration shall be conducted by three arbitrators; one each toGbe nominated by you and the owner and third to be appointed asan umpire by both the [arbitrators] in accordance to the Arbitrationand Conciliation Act, 1996. In case either party fails to appoint anarbitrator within sixty days after receipt of notice from the otherparty invoking the arbitration clause, the arbitrator appointed bythe party invoking the arbitration clause shall become the soleHarbitrator to conduct the arbitration.

The venue of the arbitration shall be Jaipur.

The decisions of the majority of the arbitrators shall be final andbinding on both the parties. The arbitrators may from time to timewith the consent of all the parties: extend the time for making theaward. In the event of any of the arbitrators dying, neglecting,resigning or being unable to act for any reason, it shall be lawfullybinding for the party concerned to nominate another arbitrator inplace to the outgoing arbitrator.

The arbitrator shall have full powers to review and/or revise anydecision, opinion, direction, certification or valuation in accordancewith the agreement and neither party shall be limited in proceedingsbefore such arbitration to the evidence or arguments for thepurpose of obtaining the said decision.

During settlement of disputes and arbitration proceedings, bothparties shall be obliged to carry out their respective obligationsunder the agreement.

In the event of arbitrators’ award being not acceptable to eitherparty, the parties shall be free to seek lawful remedies under thelaw of India and the jurisdiction for the same shall be courts in theState of Rajasthan.”

4. A slump sale of the entire business of GFL took place in favourof the Appellant. This took place by way of a business transfer agreementdated 30[th] March, 2012 executed between the Appellant and GFL towhich the Respondent was not a party. Clause 9.11 and 9.12 of thisbusiness transfer agreement designated Vadodara as the seat of thearbitration between the parties, vesting the courts at Vadodara withexclusive jurisdiction qua disputes arising out of the agreement.

5. On an application being filed by the Respondent on 5[th]September, 2014, under Section 11 of the Arbitration and ConciliationAct, 1996, to appoint an arbitrator under the purchase order, the HighCourt of Gujarat at Ahmedabad passed the following order :- “Learned advocate for the parties jointly submitted that matter bereferred for arbitration of sole arbitrator. I request Shri C.K. Buch(retired Judge of this Court) to act as a sole arbitrator to resolvethe disputes arising between the parties arising out [of a] contractdated 28.01.2012.”

A

B

C

D

E

F

G

H

A6. Pursuant thereto, the learned arbitrator passed an award dated28[th] July, 2018 in which the Respondent was awarded as sum of Rs.38,97,150/- plus Rs. 31,32,650 as interest on the awarded amount from10[th] March, 2017 till the date of the award plus Rs. 2,81,000/- as quantifiedcosts. Future interest was awarded at 15% from the date of award tillthe date of payment. A Section 34 petition was filed by the Appellant inBAhmedabad which was resisted by the Respondent referring to thebusiness transfer agreement and stating that the courts at Vadodaraalone have jurisdiction. The Commercial Court at Ahmedabad videjudgment and order dated 25[th] April, 2019, accepted the case of theRespondent by referring to clauses 9.11 and 9.12 of the business transferCagreement and stated that the courts at Vadodara alone would haveexclusive jurisdiction, the Ahmedabad courts not being vested with suchjurisdiction.

7. The Appellant filed Special Civil Application No. 9536 of 2019against the aforesaid order. The High Court referred to the arbitrationDclause contained in the purchase order as well as what it termed as the“exclusive jurisdiction clause” qua the courts in Rajasthan and then heldthat even assuming that Ahmedabad would have jurisdiction, if one is togo by clause 8.5 of the purchase order, exclusive jurisdiction being vestedin the courts at Rajasthan, the appropriate court would be the court atJaipur. However, despite this finding, it found no error in the AhmedabadECourt’s decision dated 25[th] April, 2019 and dismissed the Special CivilApplication.

8. Shri Sachin Datta, learned Senior Counsel appearing on behalfof the Appellant, drew our attention to the purchase order and arguedthat the business transfer agreement not being between the AppellantFand the Respondent was irrelevant in the present case as was correctlyheld by the impugned judgment. However, the impugned judgment failedto consider that the arbitrator had recorded in the arbitral award that thevenue/place of arbitration was shifted by mutual consent to Ahmedabad,as a result of which, the place of arbitration or seat of arbitration becameGAhmedabad, resulting in courts at Ahmedabad having exclusive jurisdictionand relied heavily upon this Court’s judgment in the case of BSG SGSSOMA JV vs. NHPC Limited, (2020) 4 SCC 234 [“BGS SGS”].

9. Shri Purvish Jitendra Malkan, learned counsel appearing onbehalf of the Respondent, argued in support of the impugned judgment.HHe relied upon the judgment in Videocon Industries Limited vs.

Union of India & Anr., (2011) 6 SCC 161 [“Videocon”] and IndusMobile Distribution Private Limited vs. Datawind InnovationsPrivate Limited, (2017) 7 SCC 678 [“Indus Mobile”] for theproposition that even if the place of arbitration is shifted by mutualagreement, it cannot be so done without a written agreement betweenthe parties. In any event, he argued that the vesting of exclusive jurisdictionwith the courts at Rajasthan, being independent from the arbitration clausestating that the arbitration is to be held at Jaipur, would indicate that thecourts at Rajasthan alone would have exclusive jurisdiction. He alsoargued that the arbitrator’s finding that the venue was shifted by mutualconsent from Jaipur to Ahmedabad has reference only to Section 20(3)of the Arbitration and Conciliation Act, 1996 as Ahmedabad was in realitya convenient place for the arbitration to take place, the seat of thearbitration always remaining at Jaipur.

10. Having heard learned counsel for both parties, it is firstnecessary to set out what the learned arbitrator has held in the awardwith respect to the venue/place of the arbitration. In para 12.3, the learnedarbitrator holds thus :- “12.3 There is no controversy as to the constitution of the Tribunalbetween the parties and the parties have agreed to get their disputeresolved by a sole arbitrator. As per arbitration agreement, thevenue of the arbitration was to be Jaipur. However, the partieshave mutually agreed, irrespective of a specific clause as to the[venue, that the place] of the arbitration would be at Ahmedabadand not at Jaipur. The proceedings, thus, have been conducted atAhmedabad on constitution of the Tribunal by the learned NomineeJudge of the Hon’ble High Court of Gujarat.”

11. What is clear, therefore, as per this paragraph is that by mutualagreement, parties have specifically shifted the venue/place of arbitrationfrom Jaipur to Ahmedabad. This being so, is it not possible to accede tothe argument made by learned counsel for the Respondent that this couldonly have been done by written agreement and that the arbitrator’s findingwould really have reference to a convenient venue and not the seat ofarbitration.

12. In BGS SGS (supra), this Court, after an exhaustive reviewof the entire case law, concluded thus :

A

B

C

D

E

F

G

H

SUPREME COURT REPORTS

“32. It can thus be seen that given the new concept of “juridicalseat” of the arbitral proceedings, and the importance given by theArbitration Act, 1996 to this “seat”, the arbitral award is now notonly to state its date, but also the place of arbitration as determinedin accordance with Section 20. However, the definition of “court”contained in Section 2(1)(c) of the Arbitration Act, 1940, continuedas such in the Arbitration Act, 1996, though narrowed to meanonly principal civil court and the High Court in exercise of theiroriginal ordinary civil jurisdiction. Thus, the concept of juridicalseat of the arbitral proceedings and its relationship to the jurisdictionof courts which are then to look into matters relating to the arbitralproceedings - including challenges to arbitral awards - was unclear,and had to be developed in accordance with international practiceon a case by case basis by this Court.

A

B

C

xxx

xxxxxx

A

B

C

xxx

xxxxxx

48. The aforesaid amendment carried out in the definition ofD“Court” is also a step showing the right direction, namely, that ininternational commercial arbitrations held in India, the High Courtalone is to exercise jurisdiction over such proceedings, even whereno part of the cause of action may have arisen within the jurisdictionof such High Court, such High Court not having ordinary originalEjurisdiction. In such cases, the “place” where the award is deliveredalone is looked at, and the High Court given jurisdiction to supervisethe arbitration proceedings, on the footing of its jurisdiction to hearappeals from decrees of courts subordinate to it, which is only onthe basis of territorial jurisdiction which in turn relates to the “place”where the award is made. In the light of this important change inFthe law, Section 2(1)(e)(i) of the Arbitration Act, 1996 must alsobe construed in the manner indicated by this judgment.

D

E

49. Take the consequence of the opposite conclusion, in the lightof the facts of a given example, as follows. New Delhi isspecifically designated to be the seat of the arbitration in thearbitration clause between the parties. Part of the cause of action,however, arises in several places, including where the contract ispartially to be performed, let us say, in a remote part of Uttarakhand.If concurrent jurisdiction were to be the order of the day, despitethe seat having been located and specifically chosen by the parties,party autonomy would suffer, which BALCO specifically states G

H

cannot be the case. Thus, if an application is made to a DistrictCourt in a remote corner of the Uttarakhand hills, which thenbecomes the court for the purposes of Section 42 of the ArbitrationAct, 1996 where even Section 34 applications have then to bemade, the result would be contrary to the stated intention of theparties - as even though the parties have contemplated that aneutral place be chosen as the seat so that the courts of that placealone would have jurisdiction, yet, any one of five other courts inwhich a part of the cause of action arises, including courts inremote corners of the country, would also be clothed withjurisdiction. This obviously cannot be the case. If, therefore, theconflicting portion of the judgment of BALCO in para 96 is keptaside for a moment, the very fact that parties have chosen a placeto be the seat would necessarily carry with it the decision of bothparties that the courts at the seat would exclusively have jurisdictionover the entire arbitral process.

xxx

xxxxxx

53. In Indus Mobile Distribution (P) Ltd., after clearing the airon the meaning of Section 20 of the Arbitration Act, 1996, theCourt in para 19 (which has already been set out hereinabove)made it clear that the moment a seat is designated by agreementbetween the parties, it is akin to an exclusive jurisdiction clause,which would then vest the courts at the “seat” with exclusivejurisdiction for purposes of regulating arbitral proceedings arisingout of the agreement between the parties.

xxx

xxx

xxx

82. On a conspectus of the aforesaid judgments, it may beconcluded that whenever there is the designation of a place ofarbitration in an arbitration clause as being the “venue” of thearbitration proceedings, the expression “arbitration proceedings”would make it clear that the “venue” is really the “seat” of thearbitral proceedings, as the aforesaid expression does not includejust one or more individual or particular hearing, but the arbitrationproceedings as a whole, including the making of an award at thatplace. 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 AB

C

D

E

F

G

H

AB

C

D

E

F

G

H

Alead to the conclusion, other things being equal, that the venue sostated is not the “seat” of arbitral proceedings, but only a convenientplace of meeting. Further, the fact that the arbitral proceedings“shall be held” at a particular venue would also indicate that theparties intended to anchor arbitral proceedings to a particular place,signifying thereby, that that place is the seat of the arbitralBproceedings. This, coupled with there being no other significantcontrary indicia that the stated venue is merely a “venue” and notthe “seat” of the arbitral proceedings, would then conclusivelyshow that such a clause designates a “seat” of the arbitralproceedings. In an International context, if a supranational bodyCof rules is to govern the arbitration, this would further be an indiciathat “the venue”, so stated, would be the seat of the arbitralproceedings. In a national context, this would be replaced by theArbitration Act, 1996 as applying to the “stated venue”, whichthen becomes the “seat” for the purposes of arbitration.

A

xxxxxxxxx

D

98. However, the fact that in all the three appeals before us theproceedings were finally held at New Delhi, and the awards weresigned in New Delhi, and not at Faridabad, would lead to theconclusion that both parties have chosen New Delhi as the “seat”Eof arbitration under Section 20(1) of the Arbitration Act, 1996.This being the case, both parties have, therefore, chosen that thecourts at New Delhi alone would have exclusive jurisdiction overthe arbitral proceedings. Therefore, the fact that a part of thecause of action may have arisen at Faridabad would not be relevantonce the “seat” has been chosen, which would then amount to anFexclusive jurisdiction clause so far as Courts of the “seat” areconcerned.”

13. This case would show that the moment the seat is chosen asAhmedabad, it is akin to an exclusive jurisdiction clause, thereby vestingthe courts at Ahmedabad with exclusive jurisdiction to deal with theGarbitration. However, learned counsel for the Respondent referred toand relied upon paragraphs 49 and 71 of the aforesaid judgment. Paragraph49 only dealt with the aspect of concurrent jurisdiction as dealt with inBharat Aluminium Co. v. Kaiser Aluminium Technical ServicesInc., (2012) 9 SCC 552 [“BALCO”]which does not arise on the factsHof the present case. Paragraph 71 is equally irrelevant, in that, it is clear that the parties have, by mutual agreement, entered into an agreementto substitute the venue at Jaipur with Ahmedabad as the place/seat ofarbitration under Section 20(1) of the Arbitration and Conciliation Act,1996.

14. Learned counsel for the respondent relied heavily uponVideocon (supra) for the proposition that any change in seat could onlybe by a written agreement signed by the parties. A close look at thejudgment in Videocon (supra) would show that it contained paragraph34.12 which dealt with “venue and law of arbitration agreement” andparagraph 35.2 which dealt with “amendment”, as follows :

“34.12. Venue and Law of Arbitration Agreement. — The venueof sole expert, conciliation or arbitration proceedings pursuant tothis Article, unless the parties otherwise agree, shall be KualaLumpur, Malaysia, and shall be conducted in the English language.Insofar as practicable, the parties shall continue to implement theterms of this contract notwithstanding the initiation of arbitralproceedings and any pending claim or dispute. Notwithstandingthe provisions of Article 33.1, the arbitration agreement containedin 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 inwriting signed by all the parties, which shall state the date uponwhich the amendment or modification shall become effective.”

15. Given the above, this Court concluded :-

“20. We shall first consider the question whether Kuala Lumpurwas the designated seat or juridical seat of arbitration and thesame had been shifted to London. In terms of clause 34.12 of thePSC entered into by 5 parties, the seat of arbitration was KualaLumpur, Malaysia. However, due to outbreak of epidemic SARS,the Arbitral Tribunal decided to hold its sittings first at Amsterdamand then at London and the parties did not object to this. In theproceedings held on 14-10-2003 and 15-10-2003 at London, theArbitral Tribunal recorded the consent of the parties for shiftingthe juridical seat of arbitration to London. Whether this amountedto shifting of the physical or juridical seat of arbitration from KualaLumpur to London? The decision of this would depend on a holisticconsideration of the relevant clauses of the PSC.

A

B

C

D

E

F

G

H

A21. Though, it may appear repetitive, we deem it necessary tomention that as per the terms of agreement, the seat of arbitrationwas Kuala Lumpur. If the parties wanted to amend Article 34.12,they could have done so only by a written instrument which wasrequired to be signed by all of them. Admittedly, neither there wasany agreement between the parties to the PSC to shift the juridicalBseat of arbitration from Kuala Lumpur to London nor was anywritten instrument signed by them for amending Article 34.12.Therefore, the mere fact that the parties to the particular arbitrationhad agreed for shifting of the seat of arbitration to London cannotbe interpreted as anything except physical change of the venue ofCarbitration from Kuala Lumpur to London.”

A

16. The aforesaid judgment would have no application to the factsof the present case as there is nothing akin to clause 35.2, which is theamendment clause which was applied to the facts in Videocon (supra).This being the case, the parties may mutually arrive at a seat of arbitrationDand may change the seat of arbitration by mutual agreement which isrecorded by the arbitrator in his award to which no challenge is made byeither party.

17. The reliance placed by learned counsel for the Respondent onIndus Mobile (supra), and in particular, on paragraphs 18 and 19 thereof,Ewould also support the Appellant’s case, inasmuch as the “venue” beingshifted from Jaipur to Ahmedabad is really a shifting of the venue/placeof arbitration with reference to Section 20(1), and not with reference toSection 20(3) of the Arbitration and Conciliation Act, 1996, as it hasbeen made clear that Jaipur does not continue to be the seat of arbitrationand Ahmedabad is now the seat designated by the parties, and not aFvenue to hold meetings. The learned arbitrator has recorded that bymutual agreement, Jaipur as a “venue” has gone and has been replacedby Ahmedabad. As clause 8.5 of the Purchase Order must be read as awhole, it is not possible to accept the submission of Shri Malkan that thejurisdiction of Courts in Rajasthan is independent of the venue being atGJaipur. The two clauses must be read together as the Courts in Rajasthanhave been vested with jurisdiction only because the seat of arbitrationwas to be at Jaipur. Once the seat of arbitration is replaced by mutualagreement to be at Ahmedabad, the Courts at Rajasthan are no longervested with jurisdiction as exclusive jurisdiction is now vested in theCourts at Ahmedabad, given the change in the seat of arbitration.H

18. For all these reasons, it is clear that the impugned judgmentcannot stand and is set aside. The parties are now referred to the courtsat Ahmedabad for the resolution of the Section 34 petition.

19. Vide order dated 12.12.2019, this Court stayed the executionproceedings in Execution Petition No. 117 of 2019 on the condition thatthe 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 theappropriate forum at Ahmedabad by which the Section 34 petition willbe decided. The execution proceedings shall remain stayed till the disposalof the Section 34 petition unless the appropriate forum at Ahmedabadvaries this interim order.

20. The appeal is disposed of in the aforesaid terms.

21. Pending applications, if any, stand disposed of accordingly.

Nidhi Jain

Appeal disposed of.

A

B

C

D

E

F

G

H