ONCE THE VENUE/PLACE OF ARBITRATION IS SHIFTED BY MUTUAL CONSENT, THE NEW PLACE BECOMES THE SEAT OF ARBITRATION - SC

19th April 2021

Background

A purchase order took place between Gujarat Fluorochemicals Ltd (GFL) and Jayesh Electricals Ltd (JEL) to manufacture and supply power transformers at wind farms. As per the agreement, the parties fixed a venue for arbitration at Jaipur, Rajasthan, which gave Rajasthan courts exclusive jurisdiction over the dispute. Thereafter, GFL sold its business to Inox Renewables Ltd. GFL, and Inox had an agreement with an arbitration clause fixing Vadodara, Gujarat.

A dispute arose between Inox and JEL; they approached the Gujarat HC u/s 11 to appoint an arbitrator. The HC appointed a retired judge as an arbitrator. The arbitration proceeding took place at Ahmedabad, with the consent of both parties. The award was passed in favour of Jayesh electricals.

Inox challenged the award before a commercial court in Ahmedabad; the court dismissed the appeal stating that jurisdiction is vested with Vadodara Court. INOX challenged this further in Gujarat HC; HC observed that Jaipur had jurisdiction instead of Vadodara Court.

Hence, this appeal against the decision of the HC.

DECISION

The “venue” being shifted from Jaipur to Ahmedabad is a shifting of the venue/place of arbitration regarding Section 20(1), and not Section 20(3) of the Act, as it has been made clear that Jaipur does not continue to be the seat of arbitration and Ahmedabad is now the seat designated by the parties, and not a venue to hold meetings.

Once the seat of arbitration is replaced by mutual agreement to be at Ahmedabad, the Courts at Rajasthan are no longer vested with jurisdiction. The parties are now referred to the courts at Ahmedabad for the resolution.

Author: Papiha Ghoshal

Pc - HR daily advisor