2017 (4) TMI 929 - SC - Indian Laws

Exclusive jurisdiction clause for the courts in arbitration agreement - 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? - Held that - A conspectus of all the 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. Thus 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.

Issues Involved:
1. Jurisdiction of Courts in Arbitration
2. Exclusive Jurisdiction Clause
3. Seat of Arbitration
4. Supervisory Powers of Courts

Detailed Analysis:

1. Jurisdiction of Courts in Arbitration:
The primary issue was whether the 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. The court examined the relevant provisions of the Arbitration and Conciliation Act, 1996, particularly Section 2(1)(e) which defines "Court" and Section 20 which deals with the "Place of arbitration." The judgment clarified that the term "subject-matter of the arbitration" should not be confused with "subject-matter of the suit," emphasizing that it refers to the court having supervisory control over the arbitration proceedings.

2. Exclusive Jurisdiction Clause:
The agreement between the parties included an exclusive jurisdiction clause stating that all disputes arising out of or in connection with the agreement shall be subject to the exclusive jurisdiction of the courts of Mumbai. The judgment highlighted that once the seat of arbitration is designated, it is akin to an exclusive jurisdiction clause. The court relied on precedents such as Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. and Enercon (India) Ltd. v. Enercon Gmbh to establish that the seat of arbitration confers exclusive jurisdiction to the courts of that seat.

3. Seat of Arbitration:
The seat of arbitration was explicitly agreed to be Mumbai. The court discussed the concept of "juridical seat" and its implications, noting that the seat of arbitration is the "centre of gravity" of arbitration. The judgment referenced several cases, including Reliance Industries Ltd. v. Union of India and Harmony Innovation Shipping Limited v. Gupta Coal India Limited, to reinforce that the seat of arbitration determines the supervisory jurisdiction of the courts.

4. Supervisory Powers of Courts:
The court reiterated that the courts of the seat of arbitration have exclusive supervisory powers over the arbitration process. This principle was supported by various judgments, including Union of India v. Reliance Industries Limited and Others, which stated that the supervisory jurisdiction of courts is linked to the seat of arbitration. The judgment also referred to the Law Commission's recommendations and amendments to the Arbitration and Conciliation Act, 1996, which aimed to clarify the distinction between "seat" and "venue."

Conclusion:
The Supreme Court concluded 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. The impugned judgment of the Delhi High Court was set aside. The injunction confirmed by the impugned judgment was to continue for four weeks from the date of pronouncement of this judgment, allowing the respondents to take necessary steps under Section 9 in the Mumbai Court. The appeals were disposed of accordingly.

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