DAMODARAM SANJIVAYYA NATIONAL LAW

UNIVERSITY
VISAKHAPATNAM, A.P., INDIA

PROJECT TITLE

CASE ANALYSIS OF INDUS MOBILE DISTRIBUTION

PRIVATE VS DATAWIND INNOVATIONS PVT. LTD

SUBJECT

ALTERNATIVE DISPUTE RESOLUTION

NAME OF THE LECTURER

Mr VISHNU KUMAR

ATTILI. LEELA NAGA JANAKI RAJITHA

6TH SEMESTER

2017018
Contents
SYNOPSIS.................................................................................................................................3

CASE ANALYSIS:....................................................................................................................5

CITATION:................................................................................................................................5

INTRODUCTION:....................................................................................................................5

LEGAL PRINCIPLES:..............................................................................................................5

FACTS OF THE CASE:............................................................................................................8

Arguments of the appellant......................................................................................................10

Arguments of the respondent:..................................................................................................10

Issue before the Supreme Court...............................................................................................11

CASES REFERRED................................................................................................................11

Decision of the Supreme Court................................................................................................12

COMMENT:............................................................................................................................14

DOCTRINE OF OUSTER DICUSSED IN JUDGMENT:.....................................................15

CONCLUSION:.......................................................................................................................17

Cases Citing this Case..............................................................................................................17

CASE ANALYSIS OF INDUS MOBILE
DISTRIBUTION PRIVATE VS
DATAWIND INNOVATIONS PVT. LTD
SYNOPSIS

INTRODUCTION:
Today, arbitration is considered to be the most preferred means to resolve commercial dispute
but in many cases it becomes very difficult to decide as where the arbitration will take place.
Although, arbitration clause lacks ambiguity but the concept of seat has produced a lot of
confusion. The concept of seat has been evolved by the courts of England and now embedded
in our jurisprudence. The seat of arbitration determines the law according to which arbitration
proceedings are conducted. The regulation of arbitration proceeding and recognition of the
award is performed by the court within whose jurisdiction the arbitration take place i.e., seat 1.
Thus, it can be safely concluded that seat is very important in arbitration.

In case of domestic arbitration a peculiar question arises that which court will have
jurisdiction, court mentioned as seat of arbitration or court having jurisdiction under sec
16.20 of Civil Procedure Code, 1908.

There have been conflicting judgements of various High Courts and the Supreme Court on
this issue. Most recently, the Supreme Court in Indus Mobile Distribution Private Limited v.
Datawind Innovations Private Limited (“Indus Mobile”) has held that the designation of seat
in the arbitration agreement is akin to an exclusive jurisdiction clause. It means that when the
parties have chosen a particular place as the seat of arbitration, the courts of that place will
have exclusive jurisdiction to regulate the arbitral proceedings. This is irrespective of where
the cause of action arose or where the parties or the subject matter of dispute is located.

OBJECT OF THE STUDY:

1
Enercon v. Enercon, (2014) 5 SCC 1.
The main aim of the study is to case analysis of the case Indus Mobile Distribution Private
Limited v. Datawind Innovations Private Limited. In this project the researcher discussed
about the principle laid down in the case. The doctrines discussed in the case were discussed
in this project. The aftermath created by the case law was discussed and also the progressive
effect created by the judgment in the arbitration field was discussed.

SCOPE OF THE STUDY:

The scope of the study is limited to the case analysis of the case Indus Mobile Distribution
Private Limited v. Datawind Innovations Private Limited. The facts of the case, the position
before the case, the aftermath, reasoning of the judgement were discussed in the project.
HYPOTHESIS:

Whether the case law created a progressive approach in the arbitration in India?

RESEARCH METHODOLOGY:
Research Methodology used was doctrinal methodology. Descriptive and analytical type of
study is done in this project.  Doctrinal Methodology includes doing research from books,
articles, journals, case study, newspapers and also taking the help of web articles. OXFORD
style of citation is used in this project.

REVIEW OF LITERATURE:
The researcher had taken the information from the articles, websites and books which
provided a lot of help for completion of the project. The information in the articles and
websites are cited.
CASE ANALYSIS:

INDUS MOBILE DISTRIBUTION PRIVATE VS DATAWIND INNOVATIONS PVT.

LTD

CITATION:

 (2017) 7 SCC 678

INTRODUCTION:

Today, arbitration is considered to be the most preferred means to resolve commercial dispute
but in many cases it becomes very difficult to decide as where the arbitration will take place.
Although, arbitration clause lacks ambiguity but the concept of seat has produced a lot of
confusion. The concept of seat has been evolved by the courts of England and now embedded
in our jurisprudence. The seat of arbitration determines the law according to which arbitration
proceedings are conducted. The regulation of arbitration proceeding and recognition of the
award is performed by the court within whose jurisdiction the arbitration take place i.e., seat 2.
Thus, it can be safely concluded that seat is very important in arbitration.

In case of domestic arbitration a peculiar question arises that which court will have
jurisdiction, court mentioned as seat of arbitration or court having jurisdiction under sec
16.20 of Civil Procedure Code, 1908.

There have been conflicting judgements of various High Courts and the Supreme Court on
this issue. Most recently, the Supreme Court in Indus Mobile Distribution Private Limited v.
Datawind Innovations Private Limited (“Indus Mobile”) has held that the designation of seat
in the arbitration agreement is akin to an exclusive jurisdiction clause. It means that when the
parties have chosen a particular place as the seat of arbitration, the courts of that place will
have exclusive jurisdiction to regulate the arbitral proceedings. This is irrespective of where
the cause of action arose or where the parties or the subject matter of dispute is located.

LEGAL PRINCIPLES:

CIVIL PROCEDURE CODE, 1908

SEC 2. Definitions. – (1) In this Part, unless the context otherwise requires,
2
Enercon v. Enercon, (2014) 5 SCC 1.
(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.”

SEC 16. Suits to be instituted where subject.matter situate.

Subject to the pecuniary or other limitations prescribed by any law, suits.

(a) For the recovery of immovable property with or without rent or profits,

(b) For the partition of immovable property,

(c) For foreclosure, sale or redemption in the case of a mortgage of or charge upon
immovable property,

(d) For the determination of any other right to or interest in immovable property,

(e) For compensation for wrong to immovable property,

(f) For the recovery of movable property actually under distraint or attachment, shall be
instituted in the Court within the local limits of whose jurisdiction the property is situate:

Provided that a suit to obtain relief respecting, or compensation for wrong to, immovable
property held by or on behalf of the defendant, may where the relief sought can be entirely
obtained through his personal obedience be instituted either in the Court within the local
limits of whose jurisdiction the property is situate, or in the Court within the local limits of
whose jurisdiction the defendant actually and voluntarily resides, or carries on business, or
personally works for gain.

SEC 17. Suits for immovable property situate within jurisdiction of different Courts.

Where a suit is to obtain relief respecting, or compensation for wrong to, immovable property
situate within the jurisdiction of different Court, the suit may be instituted in any Court within
the local limits of whose jurisdiction any portion of the property is situate :

Provided that, in respect of the value of the subject matter of the suit, the entire claim is
cognizable by such Court.

SEC 18. Place of institution of suit where local limits of jurisdiction of Courts are uncertain.
(1) Where it is alleged to be uncertain within the local limits of the jurisdiction of which of
two or more Courts any immovable property is situate, any one of those Courts may, if
satisfied that there is ground for the alleged uncertainty, record a statement to that effect and
thereupon proceed to entertain and dispose of any suit relating to that property, and its decree
in the suit shall have the same effect as if the property were situate within the local limits of
its jurisdiction:

Provided that the suit is one with respect to which the Court is competent as regards the
nature and value of the suit to exercise jurisdiction.

(2) Where a statement has not been recorded under sub.section (1), and objection is taken
before an Appellate or Revisional Court that a decree or order in a suit relating to such
property was made by a Court not having jurisdiction where the property is situate, the
Appellate or Revisional Court shall not allow the objection unless in its opinion there was, at
the time of the institution of the suit, no reasonable ground for uncertainty as to the Court
having jurisdiction with respect thereto and there has been a consequent failure of justice.

SEC 19. Suits for compensation for wrongs to person or movables.

Where a suit is for compensation for wrong done to the person or to movable property, if the
wrong was done within the local limits of the jurisdiction of one Court and the defendant
resides, or carries on business, or personally works for gain, within the local limits of the
jurisdiction of another Court, the suit may be instituted at the option of the plaintiff in either
of the said Courts.

SEC 20. Other suits to be instituted where defendants reside or cause of action arises.

Subject to the limitations aforesaid, every suit shall be instituted in Court within the local
limits of whose jurisdiction.

(a) the defendant, or each of the defendants where there are more than one, at the time of the
commencement of the suit, actually and voluntarily resides, or carries on business, or
personally works for gain; or

(b) any of the defendants, where there are more than one, at the time of the commencement of
the suit actually and voluntarily resides, or carries on business, or personally works for gain,
provided that in such case either the leave of the Court is given, or the defendants who do not
reside, or carry on business, or personally work for gain, as aforesaid, acquiesce in such
institution; or

(c) the cause of action, wholly or in part, arises.

SEC 21Objections to jurisdiction.

(1) No objection as to the place of suing shall be allowed by any appellate or Revisional
Court unless such objection was taken in the Court of first instance at the earliest possible
opportunity and in all cases where issues or settled at or before such settlement, and unless
there has been a consequent failure of justice.

(2) No objection as to the competence of a Court with reference to the pecuniary limits of its
jurisdiction shall be allowed by any Appellate or Revisional Court unless such objection was
taken in the Court of first instance at the earliest possible opportunity, and in all cases where
issues are settled, at or before such settlement, and unless there has been a consequent failure
of justice.

(3) No objection as to the competence of the executing Court with reference to the local
limits of its jurisdiction shall be allowed by any Appellate or Revisional Court unless such
objection was taken in the executing Court at the earliest possible opportunity, and unless
there has been a consequent failure of justice.

DOCTRINE OF OUSTER: it is principle in which when the courts who have jurisdiction are
ousted and the jurisdiction will be given to the court not having jurisdiction because the
parties agreed to try matters in that court.

ARBITRATION AND CONCILIATION ACT, 1996

SEC 9 Interim measures etc. by Court

[1] A party may, before, or during arbitral proceedings or at any time after the making of the
arbitral award but before it is enforced in accordance with section 36, apply to a court-

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes
of arbitral proceedings; or

(ii) for an interim measure or protection in respect of any of the following matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement;
(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-
matter of the dispute in arbitration, or as to which any question may arise therein and
authorising for any of the aforesaid purposes any person to enter upon any land or building in
the possession of any party or authorising any samples to be taken or any observation to be
made, or experiment to be tried, which may be necessary or expedient for the purpose of
obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and
convenient, and the Court shall have the same power for making orders as it has for the
purpose of, and in relation to, any proceedings before it.

[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for
any interim measure of protection under sub-section (1), the arbitral proceedings shall be
commenced within a period of ninety days from the date of such order or within such further
time as the Court may determine.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application
under sub-section (1), unless the Court finds that circumstances exist which may not render
the remedy provided under section 17 efficacious.]

FACTS OF THE CASE:

In this case, Respondent No.1 is engaged in the manufacture, marketing 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.

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.

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.”

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.

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.

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 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.

The Impugned Decision of the Delhi High Court

The Delhi High Court while disposing off the two petitions held that as no part of the cause
of action arose in Mumbai, the Courts of Mumbai would have no jurisdiction over the matter
with only the Courts of Amritsar, Chennai and Delhi having jurisdiction.

Since, the Delhi High Court had been approached first, it would continue to have jurisdiction
in the matter. Further, the Court restrained the Appellant from transferring, alienating or
creating any third party interests in the Appellant’s property in Chennai and also appointed
the sole Arbitrator.

Arguments of the appellant

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.

Arguments of the respondent:

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.

Issue before the Supreme Court

In case no cause of action arises at the place where the seat of arbitration is situated, whether
the Court within whose jurisdiction the seat of arbitration is located would have exclusive
jurisdiction in all proceedings.  

CASES REFERRED

Bharat Aluminium Company Limited and others v Kaiser Aluminium Technical

Service, Incorporate and others 2012 Indlaw SC 297.

 Act has accepted the territoriality principle which has been adopted in the UNCITRAL
Model Law. S. 2(2) of Act makes a declaration that Part I of the Act shall apply to all
arbitrations which take place within India. Part I of the Act would have no application to
International Commercial Arbitration held outside India. (B) Does the missing 'only' indicate
a deviation from art. 1(2) of the Model Law. Held, the omission of the word 'only' in s. 2(2)
of the Act does not detract from the territorial scope of its application as embodied in art. 1(2)
of the Model Law. The article merely states that the Arbitration Law was enacted in a given
state shall apply if the arbitration was in the territory of that State. The absence of the word
'only' which was found in art. 1(2) of the Model Law, from s. 2(2) of the Act does not change
the content/import of s. 2(2) of Act as limiting the application of Part I of the Act to
arbitrations where the place/seat was in India . Therefore, s. 2(2) of Act merely reinforces the
limits of operation of the Act to India. (C) Was s. 2(2) of Act in conflict with ss. 2(4) and 2(5)
of Act? Held, provisions of ss. 2(4) and 2(5) of Act would not be applicable to arbitrations
which were covered by Part II of the Act, i.e. the arbitrations which take place outside India.
Therefore, there was no inconsistency between ss. 2(2), 2(4) and 2(5) of Act. (D) Does s. 2(7)
of Act indicate that Part I of Act applies to arbitrations held outside India. Held, s. 2(7) of Act
was enacted to reinforce the territorial criterion by providing that, when 2 foreigners arbitrate
in India, under a Foreign Arbitration Act, the provisions of Part I of Act will apply. Indian
Courts being the supervisory Courts, will exercise control and regulate the arbitration
proceedings, which will produce a 'domestically rendered international commercial award’. It
would be a 'foreign award' for the purposes of enforcement in a country other than India. S.
2(7) of Act does not alter the proposition that Part I of Act applies only where the 'seat' or
'place' of the arbitration was in India. (E) Does s. 48(1)(e) of Act recognize the jurisdiction of
Indian Courts to annul a foreign award, falling within Part II of Act . Held, the words
'suspended or set aside', in Cl. (e) of s. 48(1) of Act cannot be interpreted to mean that, by
necessary implication, the foreign award sought to be enforced in India can also be
challenged on merits in Indian Courts . The provision merely recognizes that courts of the 2
nations which were competent to annul or suspend an award. It does not ipso facto confer
jurisdiction on such Courts for annulment of an award made outside the country. Such
jurisdiction has to be specifically provided, in the relevant national legislation of the country
in which the Court concerned was located. (F) Was an Inter Parte Suit for Interim Relief
Maintainable. Held, in a foreign seated international commercial arbitration, no application
for interim relief would be maintainable u/s. 9 or any other provision of Act, as applicability
of Part I of the Act was limited to all arbitrations which take place in India. Similarly, no suit
for interim injunction simplicitor would be maintainable in India, on the basis of an
international commercial arbitration with a seat outside India.

Eitzen Bulk A/s and another v Ashapura Minechem Limited and others 2016 Indlaw SC
374.

Held, by cl.28, parties chose to exclude application of Part I to Arbitration proceedings

between them by choosing London as venue for Arbitration and by making English law
applicable to Arbitration. Hence, court in India could not have jurisdiction to entertain
objections u/s. 34 in such a case. Further, mere choosing of the juridical seat of Arbitration
attracts the law applicable to such location and it would not be necessary to specify which
law would apply to Arbitration proceedings, since the law of the particular country would
apply ipso jure. Hence, judgment of HC of Gujarat holding that Ashapura's objections u/s. 34
of the Act are tenable before Court in India is contrary to law and the same are dismissed as
untenable. Further, appeals of Eitzen are allowed and judgment of Bombay HC dt. 3-12-2015
enforcing Foreign Award under Part II of the Act is upheld. Appeals disposed of.

Union of India v Reliance Industries Limited and others 2015 Indlaw SC 878.

Held, provisions of Part I of 1996, Act 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. However, in cases of international commercial arbitrations
held out of India 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 chosen by the
parties would prevail. However, any provision, in Part I, which is contrary to or excluded by
that law or rules will not apply. Thus, Part-I of 1996 Act, 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.
This Court has already determined both that the juridical seat of the arbitration is at London
and that the arbitration agreement is governed by English law. This being the case, it is not
open to the appellant to argue that Part-I of 1996 Act, would be applicable. Therefore, both
on grounds of res judicata as well as the law laid down in the judgment dtd. 28-5-2014, this
application u/s. 14 of 1996, Act deserves to be dismissed. Hence, judgment passed by HC
does not warrant any interference. Petition dismissed.

Harmony Innovation Shipping Limited v Gupta Coal India Limited and another 2015
Indlaw SC 166.

Held, stipulations in arbitration clause shows that if any dispute or difference would arise
under charter, arbitration in London to apply; that arbitrators are to be commercial men who
are members of London Arbitration Association; contract is to be construed and governed by
English Law; and that arbitration should be conducted, if claim is for lesser sum, in
accordance with small claims procedure of London Maritime Arbitration Association. There
is no other provision in agreement that any other law would govern arbitration clause.
Further, there is no other clause anywhere in contract. Further, it is also postulated that if
dispute is for amount less that USD 50000 then, arbitration should be conducted in
accordance with small claims procedure of London Maritime Arbitration Association. SC
held that when aforesaid stipulations are read and appreciated in contextual perspective,
'presumed intention' of parties is clear as crystal that juridical seat of arbitration would be
London. Hence, it would be appropriate to interpret clause that it is proper clause or
substantial clause and not curial or procedural one by which arbitration proceedings are to be
conducted, hence, SC is disposed to think that seat of arbitration will be at London. Hence,
SC held that DB has allowed petition on foundation that case in question would govern field,
hence, court below had no jurisdiction is not correct. SC held that courts in India will not
have jurisdiction as there is implied exclusion. Appeal dismissed.
Reliance Industries Limited and another v Union of India 2014 Indlaw SC 391.

Held, petition filed by respondents’ u/s. 34 of the Act in HC was not maintainable. SC further
over-ruled and set aside the conclusion of HC that, even though the arbitration agreement
would be governed by the laws of England and that juridical seat of arbitration would be in
London, Part I of the Act would still be applicable as the laws governing the substantive
contract were Indian Laws. In the event, a final award was made against respondent, the
enforceability of the same in India, could be resisted on the ground of Public Policy.
Conclusion of HC that in the event, the award was sought to be enforced outside India, it
would leave the Indian party remediless was without any basis as the parties have
consensually provided that the arbitration agreement would be governed by the English law.
Therefore, the remedy against the award would have to be sought in England, where the
juridical seat was located. SC accepted the submission of appellant that since substantive law
governing the contract was Indian Law, even the Courts in England, in case the arbitrability
was challenged, would have to decide the issue by applying Indian Law viz. the principle of
public policy etc. as it prevailed in Indian Law. Impugned judgment of HC was set aside.
Appeal allowed.

Enercon (India) Limited and others v Enercon GMBH and another 2014 Indlaw SC 92.

Held, even though the venue of arbitration proceedings was fixed in London, it could not be
presumed that the parties had intended the seat to be also in London. In an International
Commercial Arbitration, venue could often be different from the seat of arbitration. In such
circumstances, the hearing of the arbitration would be conducted at the venue fixed by the
parties, but that would not bring about a change in the seat of the arbitration. Having held that
the seat of arbitration would be in India, HC committed an error in concluding that the Courts
in England would have concurrent jurisdiction. Holding that the Courts in England and India
would have concurrent jurisdiction, as observed on different occasions by Courts in different
jurisdictions, would lead to unnecessary complications and inconvenience. That, in turn,
would be contrary to underlying principle of the policy of dispute resolution through
arbitration. Whole aim and objective of arbitration was to enable the parties to resolve the
disputes speedily, economically and finally. Once the seat of arbitration was fixed in India, it
would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the
arbitration. Such view of SC found support from the judgment of the Court of Appeal in
England in recognizing the difficulties that the parties would face in case the Courts in India
and England have concurrent jurisdiction. That apart, we have earlier noticed that the main
contract, the IPLA was to be performed in India. Governing law of the contract was the law
of India. Neither party was English. One party was Indian, the other was German.
Enforcement of the award would be in India. Any interim measures which were to be sought
against the assets of appellant No. 1 ought to be in India as the assets are situated in India. SC
had also earlier noticed that respondent No.1 had not only participated in the proceedings in
the Daman courts and the Bombay HC, but also filed independent proceedings under 1956
Act at Madras and Delhi. All these factors would indicate that respondent No.1 did not even
consider the Indian Courts as forum-non-conveniens. SC was of the considered opinion that
the objection raised by appellants to the continuance of the parallel proceedings in England
was not wholly without justification. Only single factor which prompted respondent No.1 to
pursue the action in England was that the venue of the arbitration was fixed in London.
Considerations for designating a convenient venue for arbitration could not be understood as
conferring concurrent jurisdiction on the English Courts over the arbitration proceedings or
disputes in general. SC was inclined to restore the anti-suit injunction granted by the Daman
Trial Court. Findings recorded by appellate court that the parties could proceed to arbitration
were affirmed. Findings recorded by the Trial Court dismissing the application u/s. 45 of
1996 Act was set aside. In other words, application filed by respondents for reference of the
dispute to arbitration u/s. 45 of 1996 Act was correctly allowed by appellate court as well as
by HC. Findings of the HC was affirmed to that extent. All the disputes arising between the
parties in relation to the following agreements were referred to the Tribunal for adjudication.
In the normal circumstances, HC would have directed the parties to approach the two l
arbitrators, to appoint the third arbitrator who should also act as the presiding arbitrator.
However, keeping in view the peculiar facts and circumstances of instant case and the
inordinate delay which was caused due to the extremely convoluted and complicated
proceedings indulged in by the parties, SC deemed it appropriate to take it upon itself to
name the third arbitrator. Thus, Regular Civil Suit, pending before the Court of Civil Judge
and the application u/s. 45 of 1996 Act filed in the Civil Suit and Contempt Petition in
relation to Civil Suit pending before HC at the instance of appellants were stayed. Parties
were at liberty to approach the Court for the appropriate orders, upon the final award being
rendered by Tribunal. It would not preclude the parties from seeking interim measures u/s. 9
of 1996 Act. Appeals partly allowed.

Swastik Gases Private Limited v Indian Oil Corporation Limited 2013 Indlaw SC 414.
B.E. Simoese Von Staraburg Niedenthal and Another v Chhattisgarh Investment
Limited 2015 (12) SCC 225

Decision of the Supreme Court

The Supreme Court, in its judgment (“Judgment”), has dealt with the concept of “seat” of
arbitration in considerable detail and for the purpose, it has referred to its earlier judgments
dealing with the principles of “juridical seat” and “place” of arbitration, notably Bharat
Aluminium Co. v Kaiser Aluminium Technical Services Ltd.3 , (“BALCO”); Enercon (India)
4
Ltd. v Enercon (“Enercon”); Reliance Industries Ltd. v Union of India 5 , (“Reliance 1”);
Union of India v Reliance Industries Limited and Others 6 , (“Reliance 2”); and Eitzen Bulk
A/S v Ashapura Minechem Limited and Another 7 , (“Eitzen”). The Judgment also discussed
the relevant provisions of the Arbitration Act, including Section 206 which, inter alia,
provides autonomy to the parties to an arbitration agreement to agree on the place of
arbitration. The following important principles emerge from the Judgment pursuant to
discussion of the above mentioned judgments and the relevant provisions of the Arbitration
Act: 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. Accordingly, a choice of
seat for the arbitration must be a choice of forum for remedies seeking to attack the award. 8 It
is an internationally accepted principle that arbitrations are anchored to the seat/place/ situs of
arbitration and therefore, the ‘seat’ of arbitration is intended to be its centre of gravity.
However, choosing a ‘seat’ of arbitration 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. 9 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. ‘Juridical seat’ is nothing but the ‘legal place’ of
arbitration. Once the parties have decided a particular place as the juridical seat or legal place
3
(2012) 9 SCC 552
4
(2014) 5 SCC 1
5
(2014) 7 SCC 603
6
(2015) 10 SCC 213
7
(2016) 11 SCC 508
8
Ibid 1
9
Ibid 3
of arbitration (a city in India or a foreign country), then the courts of that place alone would
have jurisdiction over the arbitration. Therefore, in cases where the seat of arbitration is
located outside India, by necessary implication Part I of the Arbitration Act is excluded as the
supervisory jurisdiction of courts over the arbitration goes along with the “seat”. 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. Accordingly,
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 is
concerned, those provisions must be obeyed.

COMMENT:

In arriving at this conclusion, the Court in Indus Mobile relies on para 96 of BALCO v.

Kaiser Aluminium Technical Services Inc. [(2012) 4 SCC 552] (“BALCO”).

In para 96, the Constitution Bench of the Supreme Court interpreting s. 2(1)(e) of then
un.amended Act had held that ‘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”. The Constitution Bench has also explicated that
in s.20(1) and s.20(2) of the Act the term ‘place’ would mean ‘venue’ and in s. 20(3) the
expression ‘place’ would mean ‘seat’.

However, the amendments carried out in 2016, did not carry these amendments in terms of,
either para 96 of BALCO or as per the suggestions of the 246 th Law Commission in regard to
s. 20 of the Act. Both remained unchanged.

s.2(1)(e) of the Act reads –

 “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;”

The language of the section inextricably links the jurisdiction of court in domestic
arbitrations to suits and hence to the Code of Civil Procedure, 1908 (“CPC”). The subject
matter of a suit can be determined only by resorting to the provisions of the CPC, particularly
s. 20 of the CPC, which requires the jurisdiction to be either where the defendant resides or
where a part of cause of action arises.

However, the court in Indus Mobile holds that the provisions of ss. 16 to 21 of the CPC are
not attracted. The Indus Mobile judgement has received criticism on this score and it is
widely opined that the court could not have deviated from the plain language of the statute.
The definition of ‘court’ appears in Part I, which makes it mandatory for all domestic
arbitrations to follow the same principles with regard to jurisdiction as in case of a suit.
Interestingly, the Court in Indus Mobile was aware that the suggestions were not incorporated
by the amendments and observed in this regard, “it was found unnecessary to expressly
incorporate what the Constitution Bench of the Supreme Court has already done by way of
construction of the Act.”

There is also some criticism that reliance on para 96 was incorrect since the observations of
the Constitution Bench were in obiter. And in doing so, the Court incorrectly applied the law
with respect to seat and venue applicable to foreign seated international commercial
arbitration to the domestic arbitrations, without considering that the Act has clearly drawn a
distinction between them. Part I of the Act deals with domestic awards while Part II deals
with foreign awards. It is pertinent, however, to mention that several judgments have relied
on para 96 of BALCO.

DOCTRINE OF OUSTER DICUSSED IN JUDGMENT:

Having said that, it is equally true, that there can be no dispute that the following are the
settled positions of law:
1. At para 96 of BALCO, the Constitution Bench of the Supreme Court, additionally, has
also stated, “… 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”. In view thereof, jurisdiction would therefore lie at Amritsar,
Chennai and New Delhi, but also equally at Mumbai, which is where the seat of arbitration
was designated. So while, the Court in Indus Mobile observes, that 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’, jurisdiction has been conferred on the neutral venue in view of
the decision of BALCO.
2. It is settled law that while it is not permissible for parties to confer jurisdiction where
jurisdiction does not exist, but by the doctrine of ouster, the jurisdiction of courts that
ordinarily have jurisdiction can be ousted, by agreement of parties. Hakam Singh v. Gammon
(India) Ltd. [(1971) 1 SCC 286] was amongst the earliest cases wherein this principle was
enunciated. Parties could by agreement have their disputes tried by only one of the courts that
had jurisdiction. This principle has been followed in many subsequent decisions,
including Swastik Gases Pvt. Ltd. v. Indian Oil Corporation Ltd., [(2013) 9 SCC 32]
(“Swastik Gases”). By sequitur therefore, nothing estopped the parties from opting for
Mumbai as an exclusive jurisdiction, thereby ousting the jurisdiction of Amritsar, Chennai
and New Delhi.3rrr

3. Finally, it is settled law that the construction of an ouster clause does not require the
use of words ‘alone’, ‘only’ and ‘exclusive’ [Swastik Gases].

It is pertinent to mention that Indus Mobile makes a reference to each of these elements,

albeit, does not string it in the manner stated above. The ratio of the judgement, if reviewed
in this context, appears to be the correct exposition of the law.

Perhaps, the Court in Indus Mobile could have avoided observing – –neither would any of the
provisions of Section 16 to 21 of the CPC be attracted’. This observation is contrary to the
ratio of Swastik Gases, where a three.judge bench in the context s.11 of the Act, found s.20 of
the CPC to be ‘relevant’. Mere absence of this observation could harmoniously construe the
gamut of seemingly conflicting legal propositions. As a matter of law, an attempt to
harmoniously construe different legislations must be made in a manner that no provision or
objective of any legislation is rendered otiose (ut res magis valeat quam pereat).
The Indus Mobile judgment is of particular importance to arbitration. To quote a previous
article, “Had the Supreme Court affirmed the Delhi High Court’s decision, it would have put
domestic arbitration in a rather inequitable position. As the law stands today, it is perhaps
possible for two Indian parties to choose a foreign seat where no cause of action has arisen
qua the dispute between the two parties. In such a situation, choosing an Indian state that
didn’t have cause of action would have led to ambiguity on where the supervisory
jurisdiction was vested, as such [the] chosen seat would not have the benefit of exclusivity.
Consequently, Indian parties would be incentivised to choose a foreign seat over a neutral
Indian seat. It would also discourage parties in international commercial arbitration from
choosing India as a preferred seat of arbitration”

Let us not rush to judgment and seek to overturn a progressive judgment that espouses India’s
arbitral dreams. Rather, let’s seek to ensure that the next set of amendments capture the law
as espoused by Indus Mobile. In fact, towards this end, the courts might also consider
recognising the designation of seat, as a part of ‘cause of action’ and put the controversy to
rest once and for all. After all, what constitutes ‘cause of action’ has largely been settled by
judicial precedent.

CONCLUSION:

The Supreme Court in this landmark judgment has provided clarity on jurisdiction of Courts.
The judgments make it clear that when there is an exclusive jurisdiction clause in arbitration
agreement stating that a particular court would have jurisdiction over the dispute arising
under the agreement, it will oust the jurisdiction of other courts, even if cause of action didn’t
arose at that place. Lawmaker should amend and include provision, which is similar to
judgment, otherwise it will continue to create confusion. Also, Parties entering into
agreement should decide the seat of arbitration after due consideration as this case prevents
forum shopping, once the seat is decided.

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