In commercial agreements, arbitration is undeniably a preferred choice for dispute resolution. Consequently, dispute resolution clauses gain significant importance.
One of the critical aspects in any dispute resolution clause providing for arbitration relates to the place of arbitration, which is generally selected having regard to the convenience of the parties. Often the seat for the arbitration proceedings is agreed upon to be at such place which may not have any bearing either with the performance of the agreement or with the parties. Such a place is colloquially termed as the “neutral place of arbitration”. Apart from the dispute resolution mechanism and the place of arbitration, the parties also agree upon the Court which shall have exclusive jurisdiction.
The law regarding jurisdiction of the Court (if not for moveable property) is governed by Section 20 of the Code of Civil Procedure, 1908 (“CPC”). Section 20 of CPC provides that a party may bring a suit with a Court within whose jurisdiction, the defendant resides or personally works for gain or that the cause of action wholly or in part arises.
The Apex Court in the case of Swastik Gases, has clarified the settled law that where more than one Court has jurisdiction, it is open for parties to exclude all other Courts. It is equally well settled that when neither of the conditions encapsulated under Section 20 (Supra) is satisfied, the parties by contract cannot confer jurisdiction upon a Court, which otherwise shall not have jurisdiction.
The issue in the context of jurisdiction may arise when parties have agreed that the seat of the arbitration proceedings shall be at one particular place viz. the neutral place of arbitration, while have conferred exclusive jurisdiction to a Court which is not in accordance to Section 20 of CPC.
A controversy of a similar kind was dealt by the Supreme Court of India recently in the case of Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited & Ors. (Civil Appeal Nos. 5370-5371 of 2017). In the said case, Indus Mobile Distribution Private Limited (“Indus Mobile”) had entered into an agreement dated 25.10.2014 with Datawind Innovations Private Limited (“Datawind”), whereby Datawind was appointed as a Retail Channel Partner. Under the agreement, Datawind was to supply goods to Indus Mobile in Chennai from Amritsar, Punjab through Delhi. The agreement provided, for resolution of disputes through arbitration to be conducted in Mumbai and that the Courts in Mumbai shall have exclusive jurisdiction. Disputes arose under the agreement, consequent to which Datawind preferred petitions before the Delhi High Court under Section 9 of the Arbitration & Conciliation Act, 1996 seeking interim measures and under Section 11 of the Arbitration and Conciliation Act, 1996 seeking appointment of an arbitrator. Contending that the petitions filed are not maintainable, Indus Mobile relied upon the terms of the agreement whereby the parties had agreed that only Courts in Mumbai shall have exclusive jurisdiction, apart from the fact that the seat of arbitration was in Mumbai. On the other hand, before the Delhi High Court it was submitted by Datawind that no cause of action has arisen in Mumbai and as part of cause of action had arisen in Delhi, the petitions filed were maintainable. Holding that part cause of action had arisen in Delhi, the Delhi High Court allowed the petitions filed by Datawind. The High Court further held that since no part of the cause of action arose in Mumbai, the exclusive jurisdiction clause would not apply and the courts in Mumbai would have no jurisdiction. Whilst disposing the petitions filed, the Delhi High Court directed the parties to conduct the arbitration proceedings in Mumbai. The said order of the Delhi High Court was assailed before the Supreme Court of India.
The Apex Court decided the appeal in favour of Indus Mobile and set aside the judgment passed by the Delhi High Court. The Supreme Court of India observed that the judgment passed in BALCO fairly settles the position by holding that the seat or situs of the arbitration proceedings confers supervisory jurisdiction upon the Court within whose jurisdiction the arbitration proceedings are held and therefore petitions under the Arbitration and Conciliation Act, 1996 shall lie before the Court exercising supervisory jurisdiction. Upon referring to the several judicial precedents and the suggested amendments made by the Law Commission pursuant to which the Arbitration and Conciliation Act, 1996 was amended in 2015, the Court in the present case held that “the moment the seat is designated, it is akin to an exclusive jurisdiction clause.”
While the judgment passed by the Apex Court in the case of Indus Mobile may have once again cleared the position regarding the supervisory powers which the Court shall have within whose jurisdiction the arbitration proceedings are held, however, such a precedent is also likely to create more interpretational issues. The judgment does not contemplate the situation when the seat of arbitration may not be neutral, but in accordance to Section 20 CPC and exclusive jurisdiction is conferred to one of the territories which also has jurisdiction as per Section 20 CPC, albeit is different from the seat of arbitration. The question which may then require consideration, thus inviting a round of litigation, is whether ‘exclusive’ jurisdiction ‘acquired’ by a Court owing to the seat of the arbitration, shall override the exclusive jurisdiction agreed to by the parties in an agreement.
Under such circumstances, it therefore seems to be conducive that to avoid multiple litigations, in domestic arbitration, instead of having seat of arbitration separate from the place agreed to have exclusive jurisdiction by agreement, the same place i.e. seat of arbitration and under exclusive jurisdiction clause, should be agreed upon by the parties.
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