M/s Arif Azim Co. Ltd. v. M/s Micromax Informatics Fze

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of Part I to arbitration seated or held outside India. It appears to us that neither of the provisions relied upon by the learned counsel for the appellants would make any section of Part I applicable to arbitration seated outside India. It will be apposite now to consider each of the aforesaid provisions in turn.

96. [...] We are of the opinion, 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. In our view, 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. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the courts of Delhi being the courts having supervisory jurisdiction over the

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arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the courts would have jurisdiction i.e. the court within whose jurisdiction the subject-matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located.

97. The definition of Section 2(1)(e) includes “subject- matter of the arbitration” to give jurisdiction to the courts where the arbitration takes place, which otherwise would not exist. On the other hand, Section 47 which is in Part II of the Arbitration Act, 1996 dealing with enforcement of certain foreign awards has defined the term “court” as a court having jurisdiction over the subject-matter of the award. This has a clear reference to a court within whose jurisdiction the asset/person is located, against which/ whom the enforcement of the international arbitral award is sought. The provisions contained in Section 2(1)(e) being purely jurisdictional in nature can have no relevance to the question whether Part I applies to arbitrations which take place outside India. xxx Only if the agreement of the parties is construed to provide for the “seat”/“place” of arbitration being in India — would Part I of the Arbitration Act, 1996 be applicable. If the agreement is held to provide for a “seat”/“place” outside India, Part I would be inapplicable to the extent inconsistent with the arbitration law of the seat, even if the agreement purports to provide that the Arbitration Act, 1996 shall govern the arbitration proceedings. xxx

117. It would, therefore, follow that if the arbitration agreement is found or held to provide for a seat/place

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of arbitration outside India, then the provision that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable the Indian courts to exercise supervisory jurisdiction over the arbitration or the award. It would only mean that the parties have contractually imported from the Arbitration Act, 1996, those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English procedural law/curial law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat/place in India.” (Emphasis supplied)

Thus, this Court held that Part I of the Act, 1996 is only applicable to arbitrations that take place in India and as such the decision of this Court in Bhatia International (supra) and Venture Global (supra) are no longer a good law. However, to avoid the chaos that might ensue upon arbitrations agreements and proceedings thereto which are already underway pursuant to the ratio of Bhatia International (supra) and Venture Global (supra), this Court held that the law declared by it will only apply prospectively to all arbitration agreements that have been executed on or after 06.09.2012 i.e., the date of pronouncement. This Court ultimately summed up its findings with the following conclusions reproduced below: - “Conclusion

194. In view of the above discussion, we are of the considered opinion that the Arbitration Act, 1996 has accepted the territoriality principle which has been adopted the Uncitral Model Law. Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all arbitrations which take place within India. We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be subject to the jurisdiction of the Indian

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courts when the same are sought to be enforced in India in accordance with the provisions contained in Part II of the Arbitration Act, 1996. In our opinion, the provisions contained in the Arbitration Act, 1996 make it crystal clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act, 1996.

195. With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International and Venture Global Engg. In our opinion, the provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign-seated international commercial arbitration, no application for interim relief would be maintainable under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all arbitrations which take place in India. Similarly, no suit for interim injunction simpliciter would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.

196. We conclude that Part I of the Arbitration Act, 1996 is applicable only to all the arbitrations which take place within the territory of India.

197. The judgment in Bhatia International was rendered by this Court on 13-3-2002. Since then, the aforesaid judgment has been followed by all the High Courts as well as by this Court on numerous occasions. In fact, the judgment in Venture Global Engg. has been rendered on 10-1-2008 in terms of the ratio of the decision in Bhatia International. Thus, in order to do complete justice, we hereby order, that the law now declared by this Court shall apply prospectively, to all the arbitration agreements executed hereafter.” (Emphasis supplied)

38Copy pinpoint38. This Court in Union of India v. Reliance Industries Ltd. & Ors. reported in (2015) 10 SCC 213 clarified the true import and effect of

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the decision in BALCO (supra). It held that although the doctrine of concurrent jurisdiction had been prospectively overruled in BALCO (supra) yet it would not mean or understood that all arbitration agreements prior to the date of pronouncement of BALCO (supra) will continue to be governed by Bhatia International (supra). It observed that Bhatia International (supra) itself had held that Part I of the Act, 1996 will not apply if it has been excluded expressly or by necessary implication. It said that the position of law that emerges from a conjoint reading of BALCO (supra) and Bhatia International (supra) is that where the court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part I of the Arbitration Act, 1996 would be excluded by necessary implication and the doctrine of concurrent jurisdiction will not apply irrespective of whether the arbitration agreement pre-dates BALCO (supra) or not. The relevant observations read as under: - “13. It can be seen that this Court in Singer case did not give effect to the difference between the substantive law of the contract and the law that governed the arbitration. Therefore, since a construction of Section 9(b) of the Foreign Awards Act led to the aforesaid situation and led to the doctrine of concurrent jurisdiction, the 1996 Act, while enacting Section 9(a) of the repealed Foreign Awards Act, 1961, in Section 51 thereof, was careful enough to omit Section 9(b) of the 1961 Act which, as stated hereinabove, excluded the Foreign Awards Act from applying to any award made on arbitration agreements governed by the law of India.

14. This being the case, the theory of concurrent jurisdiction was expressly given a go-by with the dropping of Section 9(b) of the Foreign Awards Act, while enacting Part II of the Arbitration Act, 1996, which repealed all the three earlier laws and put the law of arbitration into one statute, albeit in four different parts.

15. However, this Court in Bhatia International v. Bulk Trading S.A., resurrected this doctrine of concurrent jurisdiction by holding, in para 32, that even where arbitrations are held outside India, unless the parties agree to exclude the application of Part I of the Arbitration Act, 1996, either

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expressly or by necessary implication, the courts in India will exercise concurrent jurisdiction with the court in the country in which the foreign award was made. Bhatia International was in the context of a Section 9 application made under Part I of the 1996 Act by the respondent in that case for interim orders to safeguard the assets of the Indian company in case a foreign award was to be executed in India against it. The reductio ad absurdum of this doctrine of concurrent jurisdiction came to be felt in a most poignant form in the judgment of Venture Global Engg. v. Satyam Computer Services Ltd., by which this Court held that a foreign award would also be considered as a domestic award and the challenge procedure provided in Section 34 of Part I of the 1996 Act would therefore apply. This led to a situation where the foreign award could be challenged in the country in which it is made; it could also be challenged under Part I of the 1996 Act in India; and could be refused to be recognised and enforced under Section 48 contained in Part II of the 1996 Act.

16. Given this state of the law, a five-Judge Bench of this Court in BALCO v. Kaiser Aluminium Technical Services Inc., overruled both Bhatia International and Venture Global Engg. [...]

17. It will thus be seen that facts like the present case attract the Bhatia International3 principle of concurrent jurisdiction inasmuch as all arbitration agreements entered into before 12-9-2012, that is, the date of pronouncement of BALCO judgment, will be governed by Bhatia International.

18. It is important to note that in para 32 of Bhatia International itself this Court has held that Part I of the Arbitration Act, 1996 will not apply if it has been excluded either expressly or by necessary implication. Several judgments of this Court have held that Part I 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. … xxx

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21. The last paragraph of BALCO judgment has now to be read with two caveats, both emanating from para 32 of Bhatia International itself — that where the Court comes to a determination that the juridical seat is outside India or where law other than Indian law governs the arbitration agreement, Part I of the Arbitration Act, 1996 would be excluded by necessary implication. Therefore, even in the cases governed by the Bhatia principle, it is only those cases in which agreements stipulate that the seat of the arbitration is in India or on whose facts a judgment cannot be reached on the seat of the arbitration as being outside India that would continue to be governed by the Bhatia principle. Also, it is only those agreements which stipulate or can be read to stipulate that the law governing the arbitration agreement is Indian law which would continue to be governed by the Bhatia rule." (Emphasis supplied)

39Copy pinpoint39. Thus, the legal position that emerges from a conspectus of all the decisions referred to above is that Part I of the Act and the provisions thereunder only applies where the arbitration takes place in India i.e., where either (I) the seat of arbitration is in India OR (II) the law governing the arbitration agreement is Indian law. As a natural corollary to the above, the position of law may be summarized as under: - (i) Arbitration agreements executed after 06.09.2012 where the seat of arbitration is outside India, Part I of the Act, 1996 and the provisions thereunder will not be applicable and would fall beyond the jurisdiction of Indian courts by virtue of the decision of this Court in BALCO (supra). (ii) Even those arbitration agreements that have been executed prior to 06.09.2012 and thus, governed by Bhatia International (supra), Part I of the Act, 1996 may not necessarily be applicable, if its application has been excluded by the parties in the arbitration agreement either explicitly by designating the seat of arbitration outside India or implicitly by choosing the law governing the agreement to be any other law other than Indian law, by virtue of Reliance Industries (supra).

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(iii) Thus, irrespective of the date of execution of arbitration agreement, Part I of the Act, 1996 will be applicable only to those arbitration agreements where the seat or place of arbitration is in India OR in the absence of any categorical finding as to the place or seat of arbitration, where such agreement stipulates or can be read to stipulate that the law governing the arbitration agreement would be Indian law.

40Copy pinpoint40. The petitioner contended that since the aforesaid Distributorship Agreement that contains the arbitration agreement was executed on 09.11.2010 i.e., prior to the decision of BALCO (supra), Part I of the Act, 1996 would be applicable. However, as discussed in the foregoing paragraphs, Part I of the Act, 1996 is applicable to arbitration agreements prior to BALCO (supra) if the seat of arbitration is in India or where the arbitration agreement is found to be governed by Indian laws. Thus, now the only question that remains to be answered in the present case is whether the seat of arbitration designated under the aforesaid Distributorship Agreement is in India, if not, whether the arbitration agreement could be said to be governed by the Indian laws?

ii. Criterion or Test for Determination of Seat of Arbitration: Conflict of ‘Venue’ versus ‘Seat’ of Arbitration.

41Copy pinpoint41. Before proceeding further with the analysis, it would be apposite to first understand what is the criterion or test for determining the ‘seat’ or place of arbitration.

a. Closest Connection Test – Place of Arbitration to be ascertained by the Law governing the Arbitration Agreement and not the Place of Arbitration.

42Copy pinpoint42. The “closest connection test” is a legal principle used to determine which law governs an arbitration agreement when the parties have not expressly chosen a governing law or where there is a conflict between the choice of law by the parties. This test seeks to identify the jurisdiction that has the closest relationship with the subject-matter in question or simplicter the dispute between the parties by identifying which system of law has the closest and most real connection with the transaction or dispute between the parties.

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43Copy pinpoint43. The ‘Closest Connection Test’ was first applied by this Court in its decision in NTPC (supra). In the aforesaid case, the main substantive contract therein had been executed in India, the general terms and conditions appended to the main contract stipulated that the said contract shall be construed and governed according to Indian laws. It further stipulated that the courts of Delhi were conferred exclusive jurisdiction in all matters arising under the said contract. It also contained an arbitration clause which inter-alia stipulated that where the dispute concerns a foreign contractor, then it will be resolved through arbitration and that the rules of conciliation and arbitration of the International Chamber of Commerce shall apply to such arbitrations. Pursuant to the above, arbitration was conducted between the parties therein by a tribunal constituted by the International Chamber of Commerce and an interim award was made at London. The appellant therein approached the Delhi High Court for setting aside the said interim award, however the High Court held that the award was not governed by the Act, 1940 and could only be set-aside at London being the designated seat of arbitration. Aggrieved by it, the appellant therein approached this Court by way of an appeal.

44Copy pinpoint44. This Court in NTPC (supra) held that the law governing the contract will be the proper law governing the arbitration agreement and by it the place of arbitration itself. Where the parties have expressly chosen the proper law of the contract, the courts of that system of law will have jurisdiction. Where however, the parties have not expressly chosen the substantive law governing the contract, there the intention has to be discovered by applying the ‘Closest Connection Test’ to determine which place or system of law has its closest and most real connection with the transaction or dispute. It further, cautioned that mere selection of place of arbitration will not be sufficient to draw an inference as to the intention of parties as regards the seat of arbitration, unless there is a significant link with such place. The aforesaid decision may be better understood in three-parts: - (i) First, it observed that the proper law of the arbitration agreement is normally the same as the proper law of the contract or the substantive law governing the contract. Where the proper law of the contract is expressly chosen by the parties then such law must, in the absence of an unmistakable intention to the

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contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract. In other words, if the proper law of the contract is expressly chosen and the arbitration agreement forms part and parcel of such contract, then the substantive law of such contract will govern the arbitration agreement, and by its extension the place of arbitration. The relevant observations read as under: - “24. The validity, effect and interpretation of the arbitration agreement are governed by its proper law. Such law will decide whether the arbitration clause is wide enough to cover the dispute between the parties. Such law will also ordinarily decide whether the arbitration clause binds the parties even when one of them alleges that the contract is void, or voidable or illegal or that such contract has been discharged by breach or frustration. (See Heyman v. Darwins Ltd.) The proper law of arbitration will also decide whether the arbitration clause would equally apply to a different contract between the same parties or between one of those parties and a third party.

25. The parties have the freedom to choose the law governing an international commercial arbitration agreement. They may choose the substantive law governing the arbitration agreement as well as the procedural law governing the conduct of the arbitration. Such choice is exercised either expressly or by implication. Where there is no express choice of the law governing the contract as a whole, or the arbitration agreement in particular, there is, in the absence of any contrary indication, a presumption that the parties have intended that the proper law of the contract as well as the law governing the arbitration agreement are the same as the law of the country in which the arbitration is agreed to be held. On the other hand, where the proper law of the contract is expressly chosen by the parties, as in the present case, such law must, in the absence

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of an unmistakable intention to the contrary, govern the arbitration agreement which, though collateral or ancillary to the main contract, is nevertheless a part of such contract.” (Emphasis supplied)

(ii) Secondly, if there is no express statement about the governing law, then the true intention of parties as to the place or seat of arbitration has to be discovered by applying sound ideas of business, convenience and sense to the language of the contract itself in order to determine the proper law of the contract. This may be done by applying the ‘Closest Connection Test’ whereby the courts impute an intention by applying the objective test to determine what the parties would have as just and reasonable persons intended as regards the applicable law had they applied their minds to the question. For this purpose, the place where the contract was made, the form and object of the contract, the place of performance, the place of residence or business of the parties, reference to the courts having jurisdiction and such other links are to be examined to determine the system of law with which the transaction has its closest and most real connection. The relevant observations read as under: - “13. [...] Where, however, the intention of the parties is not expressly stated and no inference about it can be drawn, their intention as such has no relevance. In that event, the courts endeavour to impute an intention by identifying the legal system with which the transaction has its closest and most real connection. xxx

16. Where the parties have not expressly or impliedly selected the proper law, the courts impute an intention by applying the objective test to determine what the parties would have as just and reasonable persons intended as regards the applicable law had they applied their minds to the question. 7 The Judge has to determine the proper law for the parties in such circumstances by putting himself in the place of a “reasonable man”. He has to determine the

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intention of the parties by asking himself how a just and reasonable person would have regarded the problem” [...]

17. For this purpose the place where the contract was made, the form and object of the contract, the place of performance, the place of residence or business of the parties, reference to the courts having jurisdiction and such other links are examined by the courts to determine the system of law with which the transaction has its closest and most real connection.” (Emphasis supplied)

(iii) Lastly, the choice of place of arbitration or selection of courts of particular country for submission to its jurisdiction, will have little relevance in determining the system of law to govern the arbitration agreement and may not be sufficient to draw an inference as to the intention of parties to regard the chosen place as the proper law of arbitration unless it is supported by the law governing the contract or in its absence if there is a significant link with such place that gives a strong indication that the law governing the arbitration agreement is the law of the place chosen for arbitration. The relevant observations read as under: - “15. In the absence of an express statement about the governing law, the inferred intention of the parties determines that law. The true intention of the parties, in the absence of an express selection, has to be discovered by applying “sound ideas of business, convenience and sense to the language of the contract itself". In such a case, selection of courts of a particular country as having jurisdiction in matters arising under the contract is usually, but not invariably, an indication of the intention of the parties that the system of law followed by those courts is the proper law by which they intend their contract to be governed. However, the mere selection of a particular place for submission to the jurisdiction of the courts or for the conduct of arbitration will not, in

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the absence of any other relevant connecting factor with that place, be sufficient to draw an inference as to the intention of the parties to be governed by the system of law prevalent in that place. This is specially so in the case of arbitration, for the selection of the place of arbitration may have little significance where it is chosen, as is often the case, without regard to any relevant or significant link with the place. This is particularly true when the place of arbitration is not chosen by the parties themselves, but by the arbitrators or by an outside body, and that too for reasons unconnected with the contract. Choice of place for submission to jurisdiction of courts or for arbitration may thus prove to have little relevance for drawing an inference as to the governing law of the contract, unless supported in that respect by the rest of the contract and the surrounding circumstances. Any such clause must necessarily give way to stronger indications in regard to the intention of the parties.” (Emphasis supplied)

45Copy pinpoint45. Accordingly, this Court in NTPC (supra) held that since the proper law governing the contract was expressly stipulated to be the laws in force in India and because the parties had specifically accepted the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract it meant that the law governing the arbitration agreement would be same as the proper law governing the contract which contained the relevant arbitration clause. It further observed that since London had no significant connection with the contract or the parties except being a neutral place that had been chosen only because of the rules of the International Chamber of Commerce, it held that, the stipulation of such rules merely governed the procedure and conduct of the arbitration and could not in any manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts that governed the main contract including the arbitration clause that formed part and parcel of the main contract. The aforesaid relevant observations read as under: -

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“26. [...]Where, however, the parties have, as in the instant case, stipulated that the arbitration between them will be conducted in accordance with the ICC Rules, those rules, being in many respects self-contained or self-regulating and constituting a contractual code of procedure, will govern the conduct of the arbitration, except insofar as they conflict with the mandatory requirements of the proper law of arbitration, or of the procedural law of the seat of arbitration.

27. The proper law of the contract in the present case being expressly stipulated to be the laws in force in India and the exclusive jurisdiction of the courts in Delhi in all matters arising under the contract having been specifically accepted, and the parties not having chosen expressly or by implication a law different from the Indian law in regard to the agreement contained in the arbitration clause, the proper law governing the arbitration agreement is indeed the law in force in India, and the competent courts of this country must necessarily have jurisdiction over all matters concerning arbitration. Neither the rules of procedure for the conduct of arbitration contractually chosen by the parties (the ICC Rules) nor the mandatory requirements of the procedure followed in the courts of the country in which the arbitration is held can in any manner supersede the overriding jurisdiction and control of the Indian law and the Indian courts. xxx

50. The arbitration clause must be considered together with the rest of the contract and the relevant surrounding circumstances. In the present case, as seen above, the choice of the place of arbitration was, as far as the parties are concerned, merely accidental insofar as they had not expressed any intention in regard to it and the choice was made by the ICC Court for reasons totally unconnected with either party to the contract. On the other hand, apart from the expressly stated intention of the parties, the contract itself, including the arbitration agreement contained in

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one of its clauses, is redolent of India and matters Indian. The disputes between the parties under the contract have no connection with anything English, and they have the closest connection with Indian laws, rules and regulations. In the circumstances, the mere fact that the venue chosen by the ICC Court for the conduct of arbitration is London does not support the case of the Singer on the point. Any attempt to exclude the jurisdiction of the competent courts and the laws in force in India is totally inconsistent with the agreement between the parties.

51. In sum, it may be stated that the law expressly chosen by the parties in respect of all matters arising under their contract, which must necessarily include the agreement contained in the arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having been expressly recognised by the parties to the contract in all matters arising under it, and the contract being most intimately associated with India, the proper law of arbitration and the competent courts are both exclusively Indian, while matters of procedure connected with the conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to the extent that such rules are not in conflict with the public policy and the mandatory requirements of the proper law and of the law of the place of arbitration. The Foreign Awards Act, 1961 has no application to the award in question which has been made on an arbitration agreement governed by the law of India. xxx

53. All substantive rights arising under the agreement including that which is contained in the arbitration clause are, in our view, governed by the laws of India. In respect of the actual conduct of arbitration, the procedural law of England may be applicable to the extent that the ICC Rules are insufficient or repugnant to the public policy or other mandatory provisions of the laws in force in England. Nevertheless, the jurisdiction exercisable by the English

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courts and the applicability of the laws of that country in procedural matters must be viewed as concurrent and consistent with the jurisdiction of the competent Indian courts and the operation of Indian laws in all matters concerning arbitration insofar as the main contract as well as that which is contained in the arbitration clause are governed by the laws of India.” (Emphasis supplied)

46Copy pinpoint46. What has been conveyed in so many words by this Court in NTPC (supra) is that the law which governs the contract including the arbitration agreement, the courts of that system of law will have the supervisory jurisdiction over the arbitration. Where however the parties have expressly chosen a place of arbitration or selected a court of particular country for submission to the jurisdiction or selected the law for conduct of arbitration i.e., curial law, such place will only be regarded as venue, unless such factor is supported by relevant connecting factor sufficient to draw an inference as to what the parties would have intended as regards the applicable law. Thus, a mere place chosen by the parties will only be regarded as a venue and will not be construed as seat unless there is a significant link with such place to be ascertained by applying the ‘Closest Connection Test’ to determine which place or system of law has the most real with the transaction or dispute.

47Copy pinpoint47. Similarly, in Enercon (India) Ltd. & Ors. v. Enercon GMBH & Anr. reported in (2014) 5 SCC 1 this Court, held that where the parties have expressly agreed that the law governing the contract, the law governing the arbitration agreement and the law of arbitration / curial law would be Indian laws, then the seat or place of arbitration would be India. It further observed that mere mentioning of London as the place of arbitration will not designate it as the seat of arbitration, in the absence of anything to connect it to the arbitration agreement. This Court applying the closest connection test, held that the place with the closest and most real connection with the arbitration agreement and the law of arbitration was India and not London. The relevant observations read as under: - "98. We find much substance in the submissions of Mr Nariman that there are very strong indicators to suggest

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that the parties always understood that the seat of arbitration would be in India and London would only be the “venue” to hold the proceedings of arbitration. We find force in the submission made by the learned Senior Counsel for the appellants that the facts of the present case would make the ratio of law laid down in Naviera Amazonica Peruana S.A. applicable in the present case. Applying the closest and the intimate connection to arbitration, it would be seen that the parties had agreed that the provisions of the Indian Arbitration Act, 1996 would apply to the arbitration proceedings. By making such a choice, the parties have made the curial law provisions contained in Chapters III, IV, V and VI of the Indian Arbitration Act, 1996 applicable. Even Dr Singhvi had submitted that Chapters III, IV, V and VI would apply if the seat of arbitration is in India. By choosing that Part I of the Indian Arbitration Act, 1996 would apply, the parties have made a choice that the seat of arbitration would be in India. Section 2(2) of the Indian Arbitration Act, 1996 provides that Part I “shall apply where the place of arbitration is in India”. In Balco, it has been categorically held that Part I of the Indian Arbitration Act, 1996, will have no application, if the seat of arbitration is not in India. In the present case, London is mentioned only as a “venue” of arbitration which, in our opinion, in the facts of this case cannot be read as the “seat” of arbitration.

99. We are fortified in taking the aforesaid view since all the three laws applicable in arbitration proceedings are Indian laws. The law governing the contract, the law governing the arbitration agreement and the law of arbitration/curial law are all stated to be Indian. In such circumstances, the observation in Naviera Amazonica Peruana S.A. would become fully applicable. In that case, the Court of Appeal in England considered the agreement which contained a clause providing for the jurisdiction of the courts in Lima, Peru in the event of judicial dispute; and at the same time contained a clause providing that the arbitration would be governed by the English law and the procedural law of arbitration shall be the English

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law. The Court of Appeal summarised the state of the jurisprudence on this topic. [...] xxx

116. The submission made by Dr Singhvi would only be worthy of acceptance on the assumption that London is the seat. That would be to put the cart before the horse. Surely, jurisdiction of the courts cannot be rested upon unsure or insecure foundations. If so, it will flounder with every gust of wind from different directions. Given the connection to India of the entire dispute between the parties, it is difficult to accept that parties have agreed that the seat would be London and that venue is only a misnomer. The parties having chosen the Indian Arbitration Act, 1996 as the law governing the substantive contract, the agreement to arbitrate and the performance of the agreement and the law governing the conduct of the arbitration; it would, therefore, in our opinion, be vexatious and oppressive if Enercon GmbH is permitted to compel EIL to litigate in England. … xxx

123. The cases relied upon by Dr Singhvi relate to the phrase “arbitration in London” or expressions similar thereto. The same cannot be equated with the term “venue of arbitration proceedings shall be in London”. Arbitration in London can be understood to include venue as well as seat; but it would be rather stretching the imagination if “venue of arbitration shall be in London” could be understood as “seat of arbitration shall be London”, in the absence of any other factor connecting the arbitration to London. In spite of Dr Singhvi’s seemingly attractive submission to convince us, we decline to entertain the notion that India would not be the natural forum for all remedies in relation to the disputes, having such a close and intimate connection with India. In contrast, London is described only as a venue which Dr Singhvi says would be the natural forum. xxx

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135. In the present case, even though the venue of arbitration proceedings has been fixed in London, it cannot be presumed that the parties have intended the seat to be also in London. In an international commercial arbitration, venue can often be different from the seat of arbitration. In such circumstances, the hearing of the arbitration will be conducted at the venue fixed by the parties, but this would not bring about a change in the seat of the arbitration. [...]” (Emphasis supplied)

48Copy pinpoint48. What can be discerned from the above decision of this Court in Enercon (supra) is that for determining the seat of arbitration the closest connection test involves identifying the law with which the agreement to arbitrate has its closest and most real connection. Where the parties have expressly or impliedly provided the law governing the substantive contract, the arbitration agreement and the curial law, the law with which the agreement to arbitrate has its closest and most real connection would be the law of the seat of arbitration. Where the question before the courts involves ascertaining whether a particular place is the seat or venue of arbitration, the place with the closest connection with the law governing the arbitration agreement would be the seat of arbitration. Interestingly, although this Court deliberately did not address whether seat is to be determined based on the closest connection with the law governing the arbitration agreement or the curial law since in the facts of the said case both the law governing the contract and the curial law were the same, yet this Court approvingly referred to two other decisions in Roger Shashoua (1) v. Sharma, [2009] EWHC 957 (Comm) and Sulame´rica Cia Nacional de Seguros SA v. Enesa Engelharia SA, (2013) 1 WLR 102 (CA) wherein the seat of arbitration was construed on the basis of the curial law. The relevant observations read as under: - "105. We are also unable to accept the submission made by Dr Singhvi that in this case the venue should be understood as reference to place in the manner it finds mention in Section 20(1), as opposed to the manner it appears in Section 20(3) of the Indian Arbitration Act,

1996. Such a submission cannot be accepted since the

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parties have agreed that curial law would be the Indian Arbitration Act, 1996. xxx

124. In Shashoua, such an expression was understood as seat instead of venue, as the parties had agreed that the ICC Rules would apply to the arbitration proceedings. In Shashoua, the ratio in Naviera and Braes of Doune has been followed. In that case, the Court was concerned with the construction of the shareholders’ agreement between the parties, which provided that “the venue of the arbitration shall be London, United Kingdom”. It provided that the arbitration proceedings should be conducted in English in accordance with the ICC Rules and that the governing law of the shareholders’ agreement itself would be the law of India. The claimants made an application to the High Court in New Delhi seeking interim measures of protection under Section 9 of the Indian Arbitration Act, 1996, prior to the institution of arbitration proceedings. Following the commencement of the arbitration, the defendant and the joint venture company raised a challenge to the jurisdiction of the Arbitral Tribunal, which the panel heard as a preliminary issue. The Tribunal rejected the jurisdictional objection.

xxx

131. Upon consideration of the entire matter, it was observed in Sulamérica that “In these circumstances it is clear to me that the law with which the agreement to arbitrate has its closest and most real connection is the law of the seat of arbitration, namely, the law of England”. It was thereafter concluded by the High Court that the English law is the proper law of the agreement to arbitrate.

xxx

133. We also do not find any merit in the submission of Dr Singhvi that the close and the most intimate

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connection test is wholly irrelevant in this case. It is true that the parties have specified all the three laws. But the Court in these proceedings is required to determine the seat of the arbitration, as the respondents have taken the plea that the term “venue” in the arbitration clause actually makes a reference to the “seat” of the arbitration.”

(Emphasis supplied)

49Copy pinpoint49. Thus, with the decision of Enercon (supra), the stage is now set to examine the decision of Roger Shashoua (1) (supra) to trace the evolution of the Shashoua Principle.

b. The Shashoua Principle – ‘Venue’ to be construed as ‘Seat’

50Copy pinpoint50. In Roger Shashoua (1) a Queen’s Bench Division (Commercial Court) of the England & Wales High Court held that when there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion would be that such venue in-fact is the juridical seat. It observed that often in arbitration agreements it is much more likely that the law of the arbitration agreement will coincide with the curial law, and thus any express stipulation of the curial law would aid in determination of the juridical seat. The relevant observations read as under: - "26. The Shareholders Agreement provided that “the venue of arbitration shall be London, United Kingdom” whilst providing that the arbitration proceedings should be conducted in English in accordance with ICC Rules and that the governing law of the Shareholders Agreement itself would be the laws of India. It is accepted by both parties that the concept of the seat is one which is fundamental to the operation of the Arbitration Act and that the seat can be different from the venue in which arbitration hearings take place. It is certainly not unknown for hearings to take place in an arbitration in more than one jurisdiction for reasons of convenience of

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the parties or witnesses. The claimants submitted that in the ordinary way, however, if the arbitration agreement provided for a venue, that would constitute the seat. If a venue was named but there was to be a different juridical seat, it would be expected that the seat would also be specifically named. Notwithstanding the authorities cited by the defendant, I consider that there is great force in this. The defendant submits however that as “venue” is not synonymous with “seat”, there is no designation of the seat of the arbitration by clause 14.4 and, in the absence of any designation, when regard is had to the parties’ agreement and all the relevant circumstances, the juridical seat must be in India and the curial law must be Indian law.

27. In my judgment, in an arbitration clause which provides for arbitration to be conducted in accordance with the Rules of the ICC in Paris (a supranational body of rules), a provision that the venue of the arbitration shall be London, United Kingdom does amount to the designation of a juridical seat. The parties have not simply provided for the location of hearings to be in London for the sake of convenience and there is indeed no suggestion that London would be convenient in itself, in the light of the governing law of the Shareholders Agreement, the nature and terms of that agreement and the nature of the disputes which were likely to arise and which did in fact arise (although the first claimant is resident in the UK).

28. The defendant relies upon the nature of the Shareholders Agreement, the provision for the proper law of the agreement to be that of India, the application of the ICC Rules and the Interim Measures Application made by the claimants in India as pointing to Indian law as, not only the curial law, but also that of the agreement to arbitrate. Furthermore reliance is placed on clause 14.5 of the Shareholders Agreement which provides that each party is to bear its own costs of the arbitration, which, on its face, is inconsistent with section 60 of the Arbitration Act. It is said that this conflict, when seen objectively, must militate

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against the application of English law to the arbitration and to the seat being London. In my judgment none of these matters will bear the weight which the defendant seeks to put upon them.

29. The defendant contends that the law of the agreement to arbitrate is Indian law, essentially because the proper law of the Shareholders Agreement is Indian law. As appears from the decided authorities however, although there have been dicta to this effect, recent decisions, where the focus has been on the seat of the arbitration and the agreement to arbitrate, establish that it is much more likely that the law of the arbitration agreement will coincide with the curial law. This does not therefore much assist the defendant and the argument that the nature of the Shareholders Agreement points to Indian law as the curial law is in reality no more than an argument that its nature points to Indian law as the substantive law of the Shareholders Agreement, which is in any event expressly provided. [...] xxx

34. “London arbitration” is a well known phenomenon which is often chosen by foreign nationals with a different law, such as the law of New York, governing the substantive rights of the parties. This is because of the legislative framework and supervisory powers of the courts here which many parties are keen to adopt. When therefore there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is, to my mind, that London is the juridical seat and English law the curial law. In my judgment it is clear that either London has been designated by the parties to the arbitration agreement as the seat of the arbitration or, having regard to the parties’ agreement and all the relevant circumstances, it is the

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seat to be determined in accordance with the final fall back provision of section 3 of the Arbitration Act.” (Emphasis supplied)

51Copy pinpoint51. In Roger Shashoua (2) v. Mukesh Sharma reported in (2017) 14 SCC 722 this Court held that the test that was applied in NTPC (supra) was no longer a good law in view of the repeal of Section 9(b) of the Act, 1961. It further, held that the principle enunciated in Roger Shashoua (1) had been expressly approved by the 5-Judge Bench decision of this Court in BALCO (supra). Accordingly, this Court applying the Shashoua Principle held that the mention of London in the arbitration agreement was not merely as a location but as a juridical seat. The relevant observations read as under: - "46. As stated earlier, in Shashoua Cooke, J., in the course of analysis, held that “London arbitration” is a well-known phenomenon which is often chosen by foreign nationals with a different law, such as the law of New York, governing the substantive rights of the parties and it is because of the legislative framework and supervisory powers of the courts here which many parties are keen to adopt. The learned Judge has further held that when there is an express designation of the arbitration venue as London and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is that London is the juridical seat and English law the curial law. xxx

54. We had earlier extracted extensively from the said judgment, as we find, the Court after adverting to various aspects, has categorically held that the High Court had not followed the Shashoua principle. The various decisions referred to in Enercon (India) Ltd., the analysis made and the propositions deduced leads to an indubitable conclusion that

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Shashoua principle has been accepted by Enercon (India) Ltd. It is also to be noted that in Balco, the Constitution Bench has not merely reproduced few paragraphs from Shashoua but has also referred to other decisions on which Shashoua has placed reliance upon. As we notice, there is analysis of earlier judgments, though it does not specifically state that “propositions laid down in Shashoua are accepted”. On a clear reading, the ratio of the decision in Balco, in the ultimate eventuate, reflects that the Shashoua principle has been accepted and the two-Judge Bench in Enercon (India) Ltd., after succinctly analysing it, has stated that the said principles have been accepted by the Constitution Bench. Therefore, we are unable to accept the submission of Mr Chidambaram that the finding recorded in Enercon (India) Ltd. that Shashoua principle has been accepted in Balco should be declared as per incuriam. xxx

60. Tested on the aforesaid principle, we find that the question that arose in Balco and the discussion that has been made by the larger Bench relating to Shashoua and C v. D are squarely in the context of applicability of Part I or Part II of the Act. It will not be erroneous to say that the Constitution Bench has built the propositional pyramid on the basis or foundation of certain judgments and Shashoua and C v. D are two of them. It will be inappropriate to say that in Enercon (India) Ltd. the Court has cryptically observed that observations made in Shashoua have been approvingly quoted by the Court in Balco in para 110. We are inclined to think, as we are obliged to, that the Shashoua principle has been accepted in Balco as well as Enercon (India) Ltd. on proper ratiocination and, therefore, the submission advanced on this score by Mr Chidambaram, learned Senior Counsel for the respondent, is repelled. xxx

72. It is worthy to note that the arbitration agreement is not silent as to what law and procedure is to be followed. On

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the contrary, Clause 14.1. lays down that the arbitration proceedings shall be in accordance with the Rules of Conciliation and Arbitration of ICC. In Enercon (India) Ltd., the two-Judge Bench referring to Shashoua case accepted the view of Cooke, J. that the phrase “venue of arbitration shall be in London, UK” was accompanied by the provision in the arbitration clause or arbitration to be conducted in accordance with the Rules of ICC in Paris. The two-Judge Bench accepted the Rules of ICC, Paris which is supranational body of Rules as has been noted by Cooke, J. and that is how it has accepted that the parties have not simply provided for the location of hearings to be in London. To elaborate, the distinction between the venue and the seat remains. But when a court finds that there is prescription for venue and something else, it has to be adjudged on the facts of each case to determine the juridical seat. As in the instant case, the agreement in question has been interpreted and it has been held that London is not mentioned as the mere location but the courts in London will have the jurisdiction, another interpretative perception as projected by the learned Senior Counsel is unacceptable. xxx

74. It is apposite to note that the said decision has been discussed at length in Union of India v. Reliance Industries Ltd. The Court, in fact, reproduced the arbitration clause in Singer Co. and referred to the analysis made in the judgment and noted that notwithstanding the award, it was a foreign award, since the substantive law of the contract was Indian law and the arbitration law was part of the contract, the arbitration clause would be governed by Indian law and not by the Rules of International Chamber of Commerce. On that basis the Court held in Singer Co. that the mere fact that the venue chosen by the ICC Court or conduct of the arbitration proceeding was London, does not exclude the operation of the Act which dealt with the domestic awards under the 1940 Act. and thereafter opined:

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“13. It can be seen that this Court in Singer case 9 did not give effect to the difference between the substantive law of the contract and the law that governed the arbitration. Therefore, since a construction of Section 9(b) of the Foreign Awards Act led to the aforesaid situation and led to the doctrine of concurrent jurisdiction, the 1996 Act, while enacting Section 9(a) of the repealed Foreign Awards Act, 1961, in Section 51 thereof, was careful enough to omit Section 9(b) of the 1961 Act which, as stated hereinabove, excluded the Foreign Awards Act from applying to any award made on arbitration agreements governed by the law of India.

14. This being the case, the theory of concurrent jurisdiction was expressly given a go-by with the dropping of Section 9(b) of the Foreign Awards Act, while enacting Part II of the Arbitration Act, 1996, which repealed all the three earlier laws and put the law of arbitration into one statute, albeit in four different parts.”

75. We respectfully concur with the said view, for there is no reason to differ. Apart from that, we have already held that the agreement in question having been interpreted in a particular manner by the English courts and the said interpretation having gained acceptation by this Court, the inescapable conclusion is that the courts in India have no jurisdiction.” (Emphasis supplied)

52Copy pinpoint52. This Court in its decision in BGS SGS SOMA JV v. NHPC LTD., reported in (2020) 4 SCC 234 held that wherever in the arbitration agreement there is designation of a place of arbitration as ‘venue’ of the ‘arbitral proceedings’, then such place effectively is the ‘seat’ of arbitration. This is because, the expression ‘arbitral proceedings’ does not refer to individual hearings but rather the whole arbitration

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process including the making of the award. It further held that where the parties have anchored the arbitral proceedings to one fixed location or place, it would indicate that the parties intended such place to be the seat of arbitration. It held that where the place designated as venue in the arbitration agreement is coupled with there being no other significant contrary indicia that such place is merely a venue, then such place would be construed as the ‘seat’ of the arbitral proceedings. This Court also added that the international context where a supranational body of rules is to govern the arbitration in or in the national context the laws of a particular country then this would further be an indicia that the ‘venue’ designated in the arbitration agreement is really the seat of arbitration. The relevant observations read as under: - "82. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” is really the “seat” of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as “tribunals are to meet or have witnesses, experts or the parties” where only hearings are to take place in the “venue”, which may lead to the conclusion, other things being equal, that the venue so stated is not the “seat” of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings “shall be held” at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a “venue” and not the “seat” of the arbitral proceedings, would then conclusively show that such a clause designates a “seat” of the arbitral proceedings. In an international context, if a supranational

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body of rules is to govern the arbitration, this would further be an indicia that “the venue”, so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the “stated venue”, which then becomes the “seat” for the purposes of arbitration.” (Emphasis supplied)

53Copy pinpoint53. Thus, this Court in BGS SGS SOMA (supra) laid down a three- condition test as to when ‘venue’ can be construed as ‘seat’ of arbitration. The conditions that are required to be fulfilled are as under: - i. The arbitration agreement or clause in question should designate or mention only one place; ii. Such place must have anchored the arbitral proceedings i.e., the arbitral proceedings must have been fixed to that place alone without any scope of change; iii. There must be no other significant contrary indicia to show that the place designated is merely the venue and not the seat. Where the aforesaid conditions are fulfilled, then the place that has been designated as ‘venue’ can be construed as the ‘seat’ of arbitration. It is clarified that, while applying the aforesaid test, it must be borne in mind that where a supranational body of rules has been stipulated in an arbitration agreement or clause, such stipulation is not to be regarded as a contrary indicium, such stipulation does not mean that no seat has been designated rather such stipulation is a positive indicia that the place so designated is actually the ‘seat’.

54Copy pinpoint54. The aforesaid test was approvingly applied by this Court in Mankastu Impex Private Ltd. v. Airvisual Ltd. reported in (2020) 5 SCC 399 and it was held that where the reference to a place in the arbitration agreement is not simply as “venue” and rather a reference as place for final resolution by arbitration, such place shall be construed as the seat of arbitration. The relevant observations read as under: - “20. It is well settled that “seat of arbitration” and “venue of arbitration” cannot be used interchangeably. It has

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also been established that mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “seat” of arbitration. The intention of the parties as to the “seat” should be determined from other clauses in the agreement and the conduct of the parties.

21. In the present case, the arbitration agreement entered into between the parties provides Hong Kong as the place of arbitration. The agreement between the parties choosing “Hong Kong” as the place of arbitration by itself will not lead to the conclusion that the parties have chosen Hong Kong as the seat of arbitration. The words, “the place of arbitration” shall be “Hong Kong”, have to be read along with Clause 17.2. Clause 17.2 provides that “… any dispute, controversy, difference arising out of or relating to MoU shall be referred to and finally resolved by arbitration administered in Hong Kong….”. On a plain reading of the arbitration agreement, it is clear that the reference to Hong Kong as “place of arbitration” is not a simple reference as the “venue” for the arbitral proceedings; but a reference to Hong Kong is for final resolution by arbitration administered in Hong Kong. The agreement between the parties that the dispute “shall be referred to and finally resolved by arbitration administered in Hong Kong” clearly suggests that the parties have agreed that the arbitration be seated at Hong Kong and that laws of Hong Kong shall govern the arbitration proceedings as well as have power of judicial review over the arbitration award.

22. As pointed out earlier, Clause 17.2 of MoU stipulates that the dispute arising out of or relating to MoU including the existence, validity, interpretation, breach or termination thereof or any dispute arising out of or relating to it shall be referred to and finally resolved by the arbitration administered in Hong Kong. The words in Clause 17.2 that “arbitration administered in Hong Kong” is an indicia that the seat of arbitration is at Hong Kong. Once the parties have chosen “Hong Kong” as the place of arbitration to be administered in Hong Kong, the laws of Hong Kong

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would govern the arbitration. The Indian courts have no jurisdiction for appointment of the arbitrator.” (Emphasis supplied)

iii. Whether the Seat of Arbitration in the underlying Distributorship Agreement is in India?

55Copy pinpoint55. Now coming to the facts of the present case, Clause 26 of the aforesaid Distributorship Agreement stipulates that the arbitration shall be subject to UAE Arbitration and Conciliation rules. The aforesaid arbitration clause further designates only one place i.e., Dubai, UAE as the venue of arbitration.

56Copy pinpoint56. In view of the law laid down by this Court in BGS SGS SOMA (supra), since only one place has been designated in the arbitration clause, and such place has been categorically fixed inasmuch as there is no scope for the place designated as venue to change in terms of Clause 26, and furthermore, the said clause has explicitly stipulated that the curial law would be the UAE Arbitration and Conciliation rules and there being no other contrary indicia let alone a significant contrary indicia, we are of the considered opinion that the Dubai, UAE has not been designated merely as a venue but rather as the juridical seat of arbitration in terms of clause 26 of the Distributorship Agreement.

57Copy pinpoint57. We are further reinforced in our findings in light of the Shashoua Principle as laid down in Roger Shashoua (1) (supra) wherein it was held that more often than not the law of the arbitration agreement and by it the seat of the arbitration coincides with the curial law. Since the parties herein have expressly chosen the curial law of arbitration to be the UAE Arbitration and Conciliation rules, there is no second opinion that the seat of arbitration in the underlying Distributorship Agreement is Dubai, UAE and not India.

58Copy pinpoint58. It has been contended by the petitioner herein that, no one fixed place or seat of arbitration has been designated under the Distributorship Agreement since Clause 27 of the aforesaid Agreement stipulates that it shall be subject to the non-exclusive jurisdiction of the Dubai Courts. It has been submitted that since the parties had agreed not to confer exclusive jurisdiction to courts in Dubai, neither of the parties to

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the agreement construed the arbitration clause as designating courts in Dubai as the seat of arbitration. It was also contended that the non-exclusive jurisdiction clause had been specifically incorporated to confer jurisdiction on other courts too.

59Copy pinpoint59. In Enercon (supra), this Court held that the ‘seat’ or the situs of arbitration is a crucial location as it determines the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. The relevant observations read as under: - “97. This now clears the decks for the crucial question i.e. is the “seat” of arbitration in London or in India. This is necessarily so as the location of the seat will determine the courts that will have exclusive jurisdiction to oversee the arbitration proceedings. Therefore, understandably, much debate has been generated before us on the question whether the use of the phrase “venue shall be in London” actually refers to designation of the seat of arbitration in London.” (Emphasis supplied)

60Copy pinpoint60. Similarly, in Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd reported in (2017) 7 SCC 678, this Court held that in arbitration law, the moment ‘seat’ is determined, it would be akin to an exclusive jurisdiction clause whereby only the jurisdictional courts of that seat will have the jurisdiction to regulate the arbitral proceedings. It further held that where more than one court has jurisdiction, it is open for the parties to exclude all other courts and choose to submit to the jurisdiction of one court alone. The relevant observations read as under: - “19. A conspectus of all the aforesaid 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

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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 Sections 16 to 21 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.

20. It is well settled that where more than one court has jurisdiction, it is open for the parties to exclude all other courts. …” (Emphasis supplied)

61Copy pinpoint61. In Swastik Gases (P) Ltd. v. Indian Oil Corpn. Ltd., reported in (2013) 9 SCC 32, it was held that in a jurisdictional clause even if words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used it would make no material difference as to the exclusive nature of the jurisdiction conferred by such clause. This Court observed that this is because, the moment a jurisdiction is conferred, the maxim expressio unius est exclusio alterius i.e., expression of one is the exclusion of another comes into play, and it would be as if its an exclusive clause if there is nothing to indicate the contrary. The relevant observations read as under: - “31. In the instant case, the appellant does not dispute that part of cause of action has arisen in Kolkata. What appellant says is that part of cause of action has also arisen in Jaipur and, therefore, the Chief Justice of the Rajasthan High Court or the designate Judge has jurisdiction to consider the application made by the appellant for the appointment of an arbitrator under Section 11. Having regard to Section 11(12)(b) and Section 2(e) of the 1996 Act read with Section 20(c) of the Code, there remains no doubt that the Chief Justice or the designate Judge of the Rajasthan High Court has jurisdiction in the matter.

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The question is, whether parties by virtue of Clause 18 of the agreement have agreed to exclude the jurisdiction of the courts at Jaipur or, in other words, whether in view of Clause 18 of the agreement, the jurisdiction of the Chief Justice of the Rajasthan High Court has been excluded?

32. For answer to the above question, we have to see the effect of the jurisdiction clause in the agreement which provides that the agreement shall be subject to jurisdiction of the courts at Kolkata. It is a fact that whilst providing for jurisdiction clause in the agreement the words like “alone”, “only”, “exclusive” or “exclusive jurisdiction” have not been used but this, in our view, is not decisive and does not make any material difference. The intention of the parties—by having Clause 18 in the agreement—is clear and unambiguous that the courts at Kolkata shall have jurisdiction which means that the courts at Kolkata alone shall have jurisdiction. It is so because for construction of jurisdiction clause, like Clause 18 in the agreement, the maxim expressio unius est exclusio alterius comes into play as there is nothing to indicate to the contrary. This legal maxim means that expression of one is the exclusion of another. By making a provision that the agreement is subject to the jurisdiction of the courts at Kolkata, the parties have impliedly excluded the jurisdiction of other courts. Where the contract specifies the jurisdiction of the courts at a particular place and such courts have jurisdiction to deal with the matter, we think that an inference may be drawn that parties intended to exclude all other courts. A clause like this is not hit by Section 23 of the Contract Act at all. Such clause is neither forbidden by law nor it is against the public policy. It does not offend Section 28 of the Contract Act in any manner. xxx

55. It will be seen from the above decisions that except in A.B.C. Laminart [A.B.C. Laminart (P) Ltd. v. A.P. Agencies (1989) 2 SCC 163] where this Court declined to exclude the jurisdiction of the courts in Salem, in all other similar

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cases an inference was drawn (explicitly or implicitly) that the parties intended the implementation of the exclusion clause as it reads notwithstanding the absence of the words “only”, “alone” or “exclusively” and the like. The reason for this is quite obvious. The parties would not have included the ouster clause in their agreement were it not to carry any meaning at all. The very fact that the ouster clause is included in the agreement between the parties conveys their clear intention to exclude the jurisdiction of courts other than those mentioned in the clause concerned. Conversely, if the parties had intended that all courts where the cause of action or a part thereof had arisen would continue to have jurisdiction over the dispute, the exclusion clause would not have found a place in the agreement between the parties.” (Emphasis supplied)

62Copy pinpoint62. As discussed in the foregoing paragraphs, since the Distributorship Agreement already designates Dubai, UAE as the seat of arbitration, the same would be akin to an exclusive jurisdiction clause with only the courts in Dubai, UAE having the jurisdiction over such arbitration in view of the decision of this Court in Indus Mobile Distribution (supra).

63Copy pinpoint63. Even if it is assumed that the aforesaid clause does not confer jurisdiction exclusively to the courts where the seat of arbitration is situated, still this Court will not have jurisdiction to entertain the present Section 11 petition. This is because, in view of the law laid down in BALCO (supra) and Reliance Industries (supra), Part I of this Act, 1996 will not be applicable where the seat of arbitration is outside India or where the law governing the arbitration agreement is not Indian laws. In the present case as discussed in the foregoing paragraphs, the Distributorship Agreement, more particularly Clauses 26 & 27 respectively makes it abundantly clear that the seat of arbitration is in fact Dubai, UAE, furthermore both the law governing the contract and the curial law are not Indian laws. In such scenario, even if the argument of the petitioner that the non-exclusive jurisdiction clause had been incorporated to confer jurisdiction on other courts too is accepted in toto, even then this Court will not have any jurisdiction

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to exercise its powers under Section 11 of the Act, 1996 as neither the seat is India nor is the arbitration agreement governed by Indian laws. Since Part I of the Act, 1996 is inapplicable, the parties cannot confer any jurisdiction to a court which otherwise has no jurisdiction even if such conferment is permissible as per the Distributorship Agreement.

64Copy pinpoint64. Clause 27 of the aforesaid Distributorship Agreement reads as follows: “This Agreement shall be governed by and construed in accordance with the laws of UAE and shall be subject to the non-exclusive jurisdiction of the Dubai Courts”. The expression “non-exclusive jurisdiction of the Dubai Courts” occurring in the said clause cannot be singled out and construed devoid of its context. The said clause provides the law governing the entire Distributorship Agreement and the stipulation that it shall be subject to the non-exclusive jurisdiction of the Dubai Court only relates to the substantive agreement and not the arbitration agreement contained in the preceding clause. The said clause can at best be construed to stipulate that any substantive part pertaining to such agreement which might not fall within the scope of ‘disputes’ covered under Clause 26 i.e.., those disputes which are not arbitrable between the parties will then in turn be amenable to the jurisdiction of Dubai Courts or any other courts. The said clause in no manner can be construed to mean that there exists no ‘seat’ or ‘situs’ of arbitration and that parties merely because there is no court that has been conferred exclusive jurisdiction in respect of the said agreement. It is the seat of arbitration which determines which court will have exclusive jurisdiction and not vice-versa.

a. Doctrine of Forum non Conveniens

65Copy pinpoint65. The aforesaid may be looked at from one another angle, through the doctrine of forum non conveniens. The term ‘forum non conveniens’ is a latin term which means “an inconvenient forum” and provides that a court which otherwise might have jurisdiction may decline jurisdiction over a case if there is a more appropriate forum available to the parties, and is typically invoked in respect of cross-border subject-matters that are amenable to multiple concurrent jurisdictions. Depending upon the nature of the dispute, the subject-matter involves and the parties thereto, the courts by invoking this doctrine proceed to determine which one of the available forums may be more convenient and fair for entertaining and adjudicating the matter.

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66Copy pinpoint66. In order to apply the doctrine of forum non conveniens an dequate alternative forum must exist where the subject-matter may be espoused. The alternative forum must be capable of providing a fair and adequate remedy for the dispute, however this does not mean that the alternative forum must offer identical remedies, and this doctrine may be applied as long as the other alternative forum offers a reasonably fair process of remedy and is more convenient or appropriate in the opinion of the court invoking the doctrine. Courts in doing so must weigh the relative importance of private and public interest factors. In doing so, they exercise a high level of discretion and often issue rulings that are fact-specific.

67Copy pinpoint67. In Spiliada Maritime Corp v. Cansulex Ltd. reported in [1987] AC 460, the House of Lords while considering a non-exclusive jurisdiction clause laid down the test for applying the doctrine of forum non conveniens to decline jurisdiction on the grounds that another forum is more appropriate. It held that where the court is satisfied that there is some other available forum, having competent jurisdiction, which is more appropriate to decide the dispute the courts can decline its jurisdiction or stay the proceedings before it in favour of a more suitable forum for the interests of all the parties and the ends of justice. The relevant observations read as under: - “The existence of a non-exclusive jurisdiction clause is a factor, but it is not conclusive. It must be weighed alongside other considerations of convenience and connection to determine the appropriate forum. The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, i.e., in which the case may be tried more suitably for the interests of all the parties and the ends of justice. The principle of forum non conveniens allows discretion to stay proceedings in favor of a clearly more appropriate forum unless justice requires the case to proceed in the chosen forum due to special circumstances. If the court concludes at the end of stage one that there is another clearly more appropriate forum, it will ordinarily grant a stay unless the plaintiff can show that there are

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special circumstances by reason of which justice requires that the trial should nevertheless take place in England. While the plaintiff’s choice of forum is significant, it is not decisive; the court must weigh it against factors that might inconvenience the defendant or make the chosen forum less appropriate for the interests of justice. If the defendant shows another available forum is more suitable, then the court should only retain jurisdiction if the plaintiff can show that substantial justice would not be achieved in the alternative forum. In determining whether there is another forum which is more appropriate for the trial of the action, the court will look for the forum with which the action has the most real and substantial connection.” (Emphasis supplied)

68Copy pinpoint68. In Modi Entertainment Network v. W.S.G. Cricket Pte. Ltd. reported in (2003) 4 SCC 341, this Court observed that while construing a non-exclusive jurisdiction clause, where more forums than one are available, the court in exercise of its discretion will examine as to which is the appropriate forum (forum conveniens) having regard to the convenience of the parties. It further observed that Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily should not be entertained as s it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non- exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. It also held that the burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein are oppressive or vexatious would be on the party so contending to aver and prove the same. The relevant observations read as under: - "24. From the above discussion the following principles emerge: (1) In exercising discretion to grant an anti-suit injunction the court must be satisfied of the following aspects:

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(a) the defendant, against whom injunction is sought, is amenable to the personal jurisdiction of the court; (b) if the injunction is declined, the ends of justice will be defeated and injustice will be perpetuated; and (c) the principle of comity — respect for the court in which the commencement or continuance of action/proceeding is sought to be restrained — must be borne in mind. (2) In a case where more forums than one are available, the court in exercise of its discretion to grant anti-suit injunction will examine as to which is the appropriate forum (forum conveniens) having regard to the convenience of the parties and may grant anti-suit injunction in regard to proceedings which are oppressive or vexatious or in a forum non-conveniens. (3) Where jurisdiction of a court is invoked on the basis of jurisdiction clause in a contract, the recitals therein in regard to exclusive or non-exclusive jurisdiction of the court of choice of the parties are not determinative but are relevant factors and when a question arises as to the nature of jurisdiction agreed to between the parties the court has to decide the same on a true interpretation of the contract on the facts and in the circumstances of each case. (4) A court of natural jurisdiction will not normally grant anti-suit injunction against a defendant before it where parties have agreed to submit to the exclusive jurisdiction of a court including a foreign court, a forum of their choice in regard to the commencement or continuance of proceedings in the court of choice, save in an exceptional case for good and sufficient reasons, with a view to prevent injustice in circumstances such as which permit a contracting party to be relieved of the burden of the contract; or since the date of the contract the circumstances or subsequent events have made it impossible for the party seeking injunction to prosecute the case in the court of choice because the essence of the jurisdiction of the court does not exist or because of a vis major or force majeure and the like.

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(5) Where parties have agreed, under a non-exclusive jurisdiction clause, to approach a neutral foreign forum and be governed by the law applicable to it for the resolution of their disputes arising under the contract, ordinarily no anti-suit injunction will be granted in regard to proceedings in such a forum conveniens and favoured forum as it shall be presumed that the parties have thought over their convenience and all other relevant factors before submitting to the non-exclusive jurisdiction of the court of their choice which cannot be treated just as an alternative forum. (6) A party to the contract containing jurisdiction clause cannot normally be prevented from approaching the court of choice of the parties as it would amount to aiding breach of the contract; yet when one of the parties to the jurisdiction clause approaches the court of choice in which exclusive or non-exclusive jurisdiction is created, the proceedings in that court cannot per se be treated as vexatious or oppressive nor can the court be said to be forum non-conveniens. (7) The burden of establishing that the forum of choice is a forum non-conveniens or the proceedings therein are oppressive or vexatious would be on the party so contending to aver and prove the same." (Emphasis supplied)

69Copy pinpoint69. What can be discerned from above is that where more than one forum is available, it is the discretion of the court to entertain the matter by examining as to which is the appropriate forum more suited for the interests of all the parties and the ends of justice. Ordinarily, the burden to prove that the court or forum in seisin of the matter is an inconvenient forum or the proceeding therein are oppressive or vexatious lies on the party contending the same, yet the choice of forum by the other party is not decisive, and that it is for the court to determine whether the proceedings before it might be an inconvenience to the interests of the parties or less appropriate for the subject-matter in question.

70Copy pinpoint70. Thus, even if it is assumed that Clause 27 of the aforesaid Distributorship Agreement conferred concurrent jurisdiction to both the

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courts in UAE and the other courts and thus, the petitioner herein was well-within its right to approach this Court in terms of the non-exclusive jurisdiction clause for the purpose of appointment of arbitrator, this Court can decline to exercise its jurisdiction if there exists a more appropriate forum. As discussed in the foregoing paragraphs, the seat of arbitration in terms of the aforesaid Distributorship Agreement is Dubai, UAE, both the law governing the contract and the curial law are the laws of UAE, the respondent no. 1 herein with whom the petitioner’s credit account lies is also situated in Dubai, even the venue of arbitration is Dubai, thus by all reasons of logic the more appropriate forum suitable for appointment of arbitrator is Dubai, UAE and not the courts of India.

E. CONCLUSION

71Copy pinpoint71. From the above exposition of law, the following position of law emerges: - (i) Part I of the Act, 1996 and the provisions thereunder only applies where the arbitration takes place in India i.e., where either (I) the seat of arbitration is in India OR (II) the law governing the arbitration agreement are the laws of India. (ii) Arbitration agreements executed after 06.09.2012 where the seat of arbitration is outside India, Part I of the Act, 1996 and the provisions thereunder will not be applicable and would fall beyond the jurisdiction of Indian courts. (iii) Even those arbitration agreements that have been executed prior to 06.09.2012 Part I of the Act, 1996 will not be applicable, if its application has been excluded by the parties in the arbitration agreement either explicitly by designating the seat of arbitration outside India or implicitly by choosing the law governing the agreement to be any other law other than Indian law. (iv) The moment ‘seat’ is determined, it would be akin to an exclusive jurisdiction clause whereby only the jurisdictional courts of that seat alone will have the jurisdiction to regulate the arbitral proceedings. The notional doctrine of concurrent jurisdiction has been expressly rejected and overruled by this Court in its subsequent decisions. (v) The ‘Closest Connection Test’ for determining the seat of arbitration by identifying the law with which the agreement

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to arbitrate has its closest and most real connection is no longer a viable criterion for determination of the seat or situs of arbitration in view of the Shashoua Principle. The seat of arbitration cannot be determined by formulaic and unpredictable application of choice of law rules based on abstract connecting factors to the underlying contract. Even if the law governing the contract has been expressly stipulated, it does not mean that the law governing the arbitration agreement and by extension the seat of arbitration will be the same as the lex contractus. (vi) The more appropriate criterion for determining the seat of arbitration in view of the subsequent decisions of this Court is that where in an arbitration agreement there is an express designation of a place of arbitration anchoring the arbitral proceedings to such place, and there being no other significant contrary indicia to show otherwise, such place would be the ‘seat’ of arbitration even if it is designated in the nomenclature of ‘venue’ in the arbitration agreement. (vii) Where the curial law of a particular place or supranational body of rules has been stipulated in an arbitration agreement or clause, such stipulation is a positive indicium that the place so designated is actually the ‘seat’, as more often than not the law governing the arbitration agreement and by extension the seat of the arbitration tends to coincide with the curial law. (viii) Merely because the parties have stipulated a venue without any express choice of a seat, the courts cannot sideline the specific choices made by the parties in the arbitration agreement by imputing these stipulations as inadvertence at the behest of the parties as regards the seat of arbitration. Deference has to be shown to each and every choice and stipulations made by the parties, afterall the courts are only a conduit or means to arbitration, and the sum and substance of the arbitration is derived from the choices of the parties and their intentions contained in the arbitration agreement. It is the duty of the court to give weight and due consideration to each choice made by the parties and to construe the arbitration agreement in a manner that aligns the most with such stipulations and intentions.

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(ix) We do not for a moment say that, the Closest Connection Test has no application whatsoever, where there is no express or implied designation of a place of arbitration in the agreement either in the form of ‘venue’ or ‘curial law’, there the closest connection test may be more suitable for determining the seat of arbitration. (x) Where two or more possible places that have been designated in the arbitration agreement either expressly or impliedly, equally appear to be the seat of arbitration, then in such cases the conflict may be resolved through recourse to the Doctrine of Forum Non Conveniens, and the seat be then determined based on which one of the possible places may be the most appropriate forum keeping in mind the nature of the agreement, the dispute at hand, the parties themselves and their intentions. The place most suited for the interests of all the parties and the ends of justice may be determined as the ‘seat’ of arbitration.

72Copy pinpoint72. Thus, for all the foregoing reasons, we have reached the conclusion that the present petition under Section 11 of the Act, 1996 is not maintainable as neither the seat of arbitration is India nor is the arbitration agreement governed by laws of India.

73Copy pinpoint73. In the result, the present petition filed by the petitioner fails and is hereby dismissed.

74Copy pinpoint74. The parties shall bear their own costs.

75Copy pinpoint75. Pending application(s), if any, also stand disposed of.

Result of the case: Petition dismissed.

† Headnotes prepared by: Ankit Gyan