Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited: A Critique
Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited: A Critique. [Shaalini Agrawal] is a third-year student of Gujarat National Law University. The seat of arbitration has various internal and external implications for the arbitral proceedings. One such implication is that the administration and control over the arbitration is done by the courts of the country where the seat is located. Such courts have the power to regulate the conduct of arbitration and hear application challenging the arbitral award.[1] Where the seat of arbitration is designated, expressly or by implication, by the parties as India, the courts in India will have supervisory jurisdiction over the arbitral proceedings and Part 1 of the Arbitration and Conciliation Act, 1996 (“Act”) will apply. In case of domestic arbitration where parties have chosen a neutral city as the seat of arbitration, the question that arises for consideration is which courts in India will have the jurisdiction- courts of seat of arbitration or court which has the subject matter jurisdiction under sections 16-20 of the Civil Procedure Code, 1908 (“Code”). 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[2] (“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. This case comment argues that the judgement in Indus Mobile was erroneous because firstly, it completely ignored the wording of section 2(1)(e) of the Act and secondly, it ignored the judicial precedents of over 70 years that interpreted section 2(1)(e) to confer jurisdiction only on the courts that have territorial jurisdiction over the subject matter of the arbitration according to sections 16-20 of the Code and misplaced reliance on Bharat Aluminium Co v. Kaiser Aluminium Technical Services[3] (“BALCO”). Facts of the Case In this case, Respondent no. 1 was engaged in the manufacture, marketing and distribution of mobile phones and tablets with its registered office at Amritsar. An agreement was entered into between the Appellant and the Respondent no. 1 where the latter would be the former’s retail chain partner. Respondent no. 1 was supplying goods to the Appellant from New Delhi to Chennai. Dispute arose between the two parties. Respondent no. 1 sent a notice to the Appellant stating the default of outstanding dues of Rs.5 crores with interest on the part of the latter and called upon it to pay the outstanding dues within 7 days. Appellant failed to pay and the arbitration clause in the agreement was invoked by the Respondent No. 1. Clause 18 of the agreement provided that the “…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.” Clause 19 of the agreement further provided that “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.” Respondent no. 1 then filed two petitions under sections 9 and 11 of the Arbitration and Conciliation Act, 1996 before the Delhi High Court. The Delhi High Court disposed of both the petitions holding that since no part of the cause of action arose in Mumbai, only the courts of Delhi and Chennai (from and to where goods were supplied), and Amritsar (which is the registered office of the appellant company) could have jurisdiction over the matter. This is so irrespective of the exclusive jurisdiction clause as the courts in Mumbai would have no jurisdiction in the first place. Since the court in Delhi was the first court that was approached, it would have exclusive jurisdiction over the matter. Appellants approached the Supreme Court where they argued that even if no part of the cause of action arose at Mumbai, yet courts in Mumbai would have exclusive jurisdiction over all the proceedings as the seat of the arbitration is at Mumbai. Respondents supported the Delhi High Court judgement by stating that one of the tests prescribed by section 16-20, Civil Procedure Code, 1908, to give a court jurisdiction over the matter must at least be fulfilled and merely the designation of seat as Mumbai would not give exclusive jurisdiction over the proceedings to the Mumbai courts. Decision of the Supreme Court and its Analysis The Supreme Court set aside the order of the Delhi High Court in the following words: “..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.” However, the Supreme Court in the above paragraph upheld two conflicting propositions. Firstly, it held that “On the facts of the