The issue about whether an Arbitration proceeding's inimitable jurisdiction
could be enmeshed on the grounds of the Seat of Arbitration, regardless as to
whether any cause of action has surfaced at such and such seat, has indeed been
contemplated for the sometime before various Courts. The Hon'ble Supreme Court
through its recent judgement denounced on April 13, 2021 through Inox
Renewables vs Jayesh Electricals
 had also ultimately landed the assertion
clutching that the Place of Arbitration collectively agreed by the disputants
will indeed vest unique jurisdiction with in Courts of the location of the Bench
regardless as to whether any cause of action must have arisen within said
The Hon'ble Supreme Court however has retained that if the current Seat of
Arbitration is shifted to a different location by mutual agreement of the
parties, its exclusive jurisdiction is also altered and vests in the tribunals
at the new Seat of Arbitration.
Brief Facts of the Case:
M/s Gujarat Fluorochemicals Ltd. approved a purchase requisition for the
manufacture and supply of power transformers for wind turbines to M/s Jayesh
Electricals. In the event of disputes, the Arbitration Clause in the purchase
requisition stated that the venue as well as seat of the arbitration will be in
Jaipur, Rajasthan. Following that, the entire operation of M/s Gujarat
Fluorochemicals Ltd. was redirected to M/s Inox Renewables underneath a Business
Transfer Agreement, with courts in Vadodara, Gujarat, having officially
sanctioned jurisdiction to arbitrate disputes between parties.
Soon after, disagreements originated among M/s Inox Renewables (subsequently
referred to as "Inox") and M/s Jayesh Electricals (subsequently referred to as "Jayesh
Electricals"). As per the form attached by Jayesh Electricals in the Hon'ble
Court of Gujrat in Ahmedabad as per the Arbitration and Conciliation Act, 1996 –
Section 11 ( subsequently referred as the Act ). In order to resolve the
pertained issues, a sole arbitration has been appointed.
Jayesh Electricals was granted an arbitral award by a single arbitrator. Inox,
aggrieved by the said Arbitration, filed an opposition to it in the Commercial
Court of Ahmedabad under Section 34 of the Act, requesting that the Arbitral
Award be earmarked. As during assertions, Jayesh Electricals reared the very
first version, claiming that perhaps the Courts in Ahmedabad lacked jurisdiction
to hear the opposition because the Courts in Vadodara had exclusive
Making reference to the provisions of the Business Transfer Agreement, the
Commercial Court in Ahmedabad retained that the Courts of Vadodara would have
only exclusive jurisdiction to hear the petition because the courts in Ahmedabad
weren't really entrenched with the same kind of jurisdiction. Inox filed an
appeal with the Hon'ble High Court of Gujarat in Ahmedabad, but the charges were
dismissed. The Hon'ble Supreme Court of India was then propositioned by Inox.
Whether the exclusive authority of tribunals at the seat of arbitration titled
in the arbitration clause will change the dynamics of the parties' consensual
understanding to alter the place of arbitration's bench?
In a series of decisions over the years, the Supreme Court has considered the
question of the seat as well as the venue of arbitration proceedings. In Bharat
Aluminium Company vs Kaiser Aluminium Technical Services and Indus Mobile
Distribution Pvt Ltd vs Datawind Innovations Pvt Ltd and Ors, the concern of
seat as well as the venue was brought up. The Hon'ble Supreme Court observed
once the seat of arbitration is ascertained, it acts as the exclusive
jurisdiction clause, allowing just the Courts where the bench is positioned to
listen to the arbitration, excluding all other Courts, along with Courts at
which part of the cause of action may well have emerged.
While transcribing the facts in Inox Renewables vs Jayesh Electricals
the Hon'ble Supreme Court acknowledged that perhaps the Sole Arbitrator in Para
12.3 retained that there really is no debate between the parties who have
consented to arbitration as just a dispute resolution system concerning the
establishment clause of the Arbitral Tribunal. The Arbitration was to take place
in Jaipur, as stipulated in the Arbitration Agreement. Regardless of a specific
clause, the parties have agreed that the arbitration would be held in Ahmedabad
rather than Jaipur. As a result, the hearings were held in Ahmedabad.
As a result of the Hon'ble High Court of Gujarat appointing a sole arbitrator.
It was therefore evident, that just by consensual understanding, the parties
have explicitly changed the venue or location of arbitration from Jaipur to
Ahmedabad. This becoming so, the Hon'ble Supreme Court rejected the argument
produced by Jayesh Electricals that every transition could have only been done
by either a signed agreement or also that the Arbitrator's finding really would
have an allusion to a suitable venue but not the seat of arbitration.
Although part of the cause of action emerges across several locations, such as
where the contract is moderate to be executed, the Hon'ble Supreme Court
reaffirmed the ratio of its decision in BSG SGS SOMA JV vs NHPC Limited,
putting that the courts at the Seat of Arbitration explicitly identified in the
Arbitration Clause between both the parties would've had exclusive jurisdiction.
It was held that even if concurrent jurisdiction does become the rule, despite
the parties' explicit choice of the seat, party independence would be
jeopardized, which could not be permitted. As a result, the mere fact that
parties have preselected a particular location as the seat implies that both
parties have agreed that the courts at the seat will still have exclusive
jurisdiction well over the entire arbitration award.
Furthermore, in Videocon Industries Ltd vs Union of India and Anr
Hon'ble Supreme Court held that throughout the apparent lack of any clause in
the contract between both the parties constraining any addendum or alteration of
a contract to be accomplished only by an apparatus in writing, the parties may
collectively decide on a seat of arbitration and perhaps even alter the seat of
arbitration by consensual understanding.
In Inox Renewables, the Primary Arbitrator noted in the Arbitration Agreement
that neither party had objected to the modification of the seat. By consensual
understanding, the Sole Arbitrator has also noted that Jaipur has been
supplanted as a "venue
" by Ahmedabad. In the illumination of this, the
Hon'ble Supreme Court concluded that it was impossible to consider that the
jurisdiction of Rajasthan's courts was autonomous of the venue's location in
Jaipur. Just because the place of arbitration was to be in Jaipur, the Rajasthan
courts were given jurisdiction.
The Courts of Rajasthan will be no longer bestowed with authority as once seat
of adjudication is supplanted by consensual understanding to be in Ahmedabad, as
exclusive jurisdiction has become enmeshed in the Courts of Ahmedabad, due to
the change in the seat of arbitration.
Thus, in Inox Renewables, the Hon'ble Supreme Court established that when a
collectively satisfactory Seat of Arbitration is shifted to another location,
the exclusive jurisdiction of the Courts changes as well, and jurisdiction vests
with the Courts at the substituted Seat of Arbitration agreed upon by the
In particular circumstances both of the parties seek to change or modify the
Place and Seat of the Arbitration by comportment or having to give affirmative
consent to about the same, it is just not necessary to define the subject
agreement. The parties could even collectively decide to change or modify the
venue of Arbitral proceedings and the collectively satisfactory place would
become the Place of the Arbitral proceedings. They should therefore bear in
mind, even so, that altering the arbitration location for the sake of comfort
entails granting jurisdiction to the courts of the new venue.
The preceding decisions help to understand that when the parties to a dispute
agree to alter the site of the arbitration, the seat will be changed as well,
unless the parties say otherwise. When choosing on the place and seat of the
arbitration, the parties should exercise caution.
When a place of arbitration is designated as the venue of arbitration
proceedings in an arbitration clause, the language utilized must be such that
tribunals are to meet witnesses, experts, or the parties where only hearings are
to take place in the venue; otherwise, this may lead us to the conclusion that
the venue so designated is not the seat of arbitration tribunal but only a
convenient location of choice.
The court has declared unequivocally that the arbitration's seat is linked to an
exclusive jurisdiction clause. In the absence of any contrary indication in the
arbitration agreement, where parties designate words like a venue or place
instead of the word "seat," such venue will be regarded the seat. Users of
arbitration continue to be perplexed by the relationship between the seat,
place, or venue of the arbitration and the jurisdiction of the courts.
Parties should construct their arbitration clauses in their agreements with more
clarity, explicitly defining the seat or place of arbitration, to avoid delays
and discussions before and after the arbitration proceedings.