By Rohit Kumar
I. Introduction
Exclusive Jurisdiction Clause in a contract provides a particular court an absolute jurisdiction to decide the dispute arising out from the agreement while ousting all other courts. Exclusive Jurisdiction mainly depends on the choice of “Seat” of arbitration, which simply means the “place” of arbitration proceedings. Section 20 of the Arbitration and Conciliation Act 1996 confers a power to the parties to choose the “Place” for the arbitration. Thus, in a typical arbitration clause the parties to the contract have the “Choice of Law” which gives the rights to the parties to choose, the Governing Law of Arbitration (Lex Loci Arbitri), Substantive Law of Contract and the “Seat” of Arbitration Proceedings (Lex Fori), Qualification of arbitrators, Language of arbitration proceedings, Intended arbitration institution etc..
However, among, all these choices, in the International Commercial Arbitration, the “Seat” of arbitration has a greater significance, as it sometimes decide the curial law means the procedural laws for the arbitration proceedings. However, this choice is also available in the domestic arbitration proceedings as per the provisions of the Arbitration Act 1996. The purpose for choosing the “seat” of arbitration other than the place of business of the parties is to give a neutral atmosphere for the arbitration proceedings and also for the convenience for the arbitral tribunal to conduct the arbitration proceedings efficiently.
II. “Indus Mobile Phones Vs Datawind Pvt Ltd”
The opportunity to revisit the issue of “Exclusive Jurisdiction” clause has been found by the Supreme Court in its recent judgment “Indus Mobile Phones Vs Datawind Pvt Ltd”. In this case the Appellant (Indus) was engaged in the marketing and distribution of the mobile phone and has a principal place of business at Chennai. The Respondent (Datawind) was a mobile phone and tablet manufacturer, having its registered office at Amritsar. The Appellant approached the Respondent to become its retail partner. Consequently, an agreement was instituted between the parties to carrying on their business relationship. This agreement incorporated an arbitral clause as clause 18 and 19 which provides that if a dispute arises the “the arbitration shall be conducted at Mumbai” and only the “Courts of Mumbai shall have exclusive jurisdiction” to decide all kinds of disputes respectively.
Disputes broke out between the parties and the Respondent (Datawind) served a notice the Appellant spelling out the conflict and also invoked the arbitration clause by appointing one Justice H.R Malhotra as a sole arbitrator. Appellant by replying to the Respondent objected the appointment of Justice Malhotra as Sole Arbitrator and also urged the Respondent to withdraw the notice. Denying the averments made by the Appellant, Respondent filed two petitions before the Delhi High Court one the Interim Relief and another for appointment of Arbitrator as per section 9 and 11 of Arbitration and Conciliation Act 1996, respectively. Thereof, the Appellant contended before the Delhi High Court that no cause of action arose out in Delhi, therefore, Delhi High Court has no jurisdiction to entertain the applications of the Respondent and only the court of Chennai (Principal place of Appellant), or Mumbai (Seat of Arbitration) or Amritsar (Place of Respondent) has jurisdiction to entertain any application arises out from the agreement. Both applications were disposed of by the Delhi High Court by an impugned judgment. Wherein, the Delhi High Court by assuming its jurisdiction passed an order dated 3rd Jun 2016 and by completely rejecting the contentions of the Appellant, held that because no cause of action has arisen out in Mumbai, the courts of Mumbai has no jurisdiction to entertain the pleas of the Respondent and because the Delhi High Court was approached first by the party it has jurisdiction in the matter. Thereby rejected the submissions of the Appellant and appointed Justice S N Veraria Retd Supreme Court Judge as a sole arbitrator.
On an appeal filed by Indus (Appellant), the bench of Justice Rohinton Nariman and Justice Pinaki Chandra Ghose set aside the order of the Delhi High Court and held that as per the terms of the of the clause 18 and 19 of the agreement, the courts of Mumbai alone has the exclusive jurisdiction. The court came to its conclusion that once the seat of arbitration is designated it creates an exclusive jurisdiction clause. On the facts of the case, the Court held that the parties had mutually decided the seat of Arbitration as Mumbai, and clause 19 of the agreement made it clear that the Court of Mumbai will have exclusive jurisdiction only. Therefore, Mumbai courts will have absolute jurisdiction over the subject matter of the arbitration. The Hon’ble Bench further makes it clear that the under the laws of Arbitration, unlike Code of Civil Procedure the concept of “seat” of arbitration is has a greater value than the classical concept of “cause of action Hence, in the present case the Supreme Court has reaffirmed the importance of the “Exclusive Jurisdiction Clause”.
The Supreme Court reached to its conclusion by referring BALCO Vs. Kaiser and its subsequent judgments such as Enercon (India) Ltd Vs Enercon (GmBH), Harmony Innovation Shipping Vs Gupta Coal, Union of India Vs Reliance Industries, and Eitzen vs Ashapura Minechem Ltd. Further, the Hon’ble bench also made it clear while relying on Swastik Gases Private Limited Vs Indian Oil Corporation, followed in B.E Simoese Von Staraburg Vs Chattisgarh Investment Limited (also followed in Omaxe Vs PVP Entertainment, Delhi High Court) that where more than one court has a jurisdiction, the parties may select only one court while excluding the others.
III. Implication of the Judgment
The decision by the Supreme Court in the Datawind case (supra), reinstating, that the seat of arbitration shall have exclusive jurisdiction over arbitral proceedings is surely a step in the positive direction. This judgment has aimed at wiping out the confusion over the jurisdiction of multiple courts arising out from a contractual agreement. However, its applicability must be restricted to arbitration proceedings going on in India only in the domestic arbitrations.
However, the ratio of the present judgment shall not be extended to a foreign seated arbitration or even the International Commercial Arbitration going on in India as defined in Section 2(1) (f) of the Act. If this judgment applies in the International Commercial Arbitration cases, it may go contrary to the spirit of the recently amended provisions of the Indian Arbitration Act. Since new amendments recognized the rights of the parties to approach the Indian Courts to grant the interim measures in the arbitration proceedings going on outside India. Further, judgement has strengthened the efforts rendered by the government for making India as a global hub of arbitration and to promote the use of arbitration as efficient way of resolving the commercial disputes over the traditional methods.
Rohit is a Delhi based lawyer, practices before the Supreme Court of India.
Planetary Objectives 