Inox Renewables Ltd V Jayesh Electricals Ltd: When The Venue Of Arbitration Is Changed By Parties With Mutual Agreement, The Changed Venue Becomes Their Seat Of Arbitration

DATE OF JUDGMENT:
13th April 2021

JUDGES:
Justice Rohinton Fali Nariman, Justice Hrishikesh Roy

PARTIES:
M/s Inox Renewables Ltd (Petitioner)
Jayesh Electricals Ltd.(Respondent)

SUMMARY

In M/s Inox Renewables Ltd. V. Jayesh Electricals Ltd. the Hon’ble Supreme Court held that at the point when parties change the 'place of arbitration' by shared arrangement, the new place will turn into the 'seat of arbitration'. Accordingly, the Courts at the changed place of intervention will have locale over the arbitral procedures.

AN OVERVIEW

1. Gujarat Fluorochemicals Ltd ["GFL"] and Jayesh Electricals Ltd had an understanding for assembling and supply of power transformers. This arrangement had an intervention statement, which fixed the setting of mediation at Jaipur, Rajasthan and gave courts in Rajasthan elite jurisdiction over questions emerging out of the agreement.
2. Later, GFL offered its whole business to Inox Renewables Ltd. The business move understanding among GFL and Inox likewise had an arbitration condition, which fixed the setting at Vadodara, Gujarat, and gave Courts at Vadodara elite jurisdiction.
3. When disputes emerged among Inox and Jayesh Electricals, the last moved toward the Gujarat High Court under Section 11 of the Arbitration and Conciliation Act, 1996 for the arrangement of a mediator. The High Court named a resigned HC judge as a mediator.
4. Before the authority, both the parties commonly consented to have Ahmedabad as the scene of discretion, in spite of the provision in the arrangement which had fixed Jaipur as the setting. The authority continued with the discretion at Ahmedabad, recording the assent of both the gatherings to hold the procedures there.
5. The mediator passed an award for Jayesh Electricals. This was challenged by Inox before the Commercial Court at Ahmedabad under Section 34 of the Act. The Ahmedabad Court excused the appeal holding that jurisdiction is vested with Vadodara Court according to the business move arrangement.
6. Inox challenged this further before the Gujarat High Court. The High Court avowed the finding of the Ahmedabad Court that it had no jurisdiction to manage the allure. Notwithstanding, the High Court saw that it was the court at Jaipur which had the jurisdiction, rather than Vadodara Court.
7. Inox made a further appeal to the Supreme Court against the decision of High Court.

ISSUES

The court analyzed the issue that – Whether the changed venue of arbitration will have the jurisdiction over the arbitral procedures?

IMPORTANT PROVISIONS

1. Section 11 of the Arbitration and Conciliation Act, 1996: defines the appointment of arbitrators.
2. Section 34 of the Arbitration and Conciliation Act, 1996: states the application for setting aside arbitral award.
3. Section 20(1) of the Arbitration and Conciliation Act, 1996: states that the parties are free to agree on the place of arbitration

ANALYSIS OF THE JUDGEMENT

1. The Court dismissed the contention that a composed arrangement was important to move the scene of the mediation. The Court noticed that the authority had recorded the assent of both the gatherings to change the setting to Ahmedabad, and the equivalent has not been questioned or tested. "the gatherings may commonly show up at a seat of mediation and may change the seat of intervention by shared arrangement which is recorded by the referee in his honor to which no test is made by one or the other part", the Court noticed.
2. Further, referring to BGS SGS Soma, the Court held that the very moment Ahmedabad was picked as the setting, the Courts at Ahmedabad gained restrictive purview as the seat of the arbitration. "This case would show that the moment the seat is picked as Ahmedabad, it is likened to a selective jurisdiction provision, consequently vesting the courts at Ahmedabad with restrictive purview to manage the intervention, "obviously the parties have, by common understanding, gone into a consent to substitute the scene at Jaipur with Ahmedabad as the venue of mediation under Section 20(1) of the Arbitration and Conciliation Act, 1996″.
3. Referring to the point of reference in Indus Mobile Distribution Private Limited versus Datawind Innovations Private Limited, (2017) 7 SCC 678, the Court noticed "the "setting" being moved from Jaipur to Ahmedabad is actually a moving of the venue of intervention regarding Section 20(1), and not concerning Section 20(3) of the Arbitration and Conciliation Act, 1996, as it has been clarified that Jaipur doesn't keep on being the seat of mediation and Ahmedabad is presently the seat assigned by the gatherings, and not a place to hold meetings ".
4. "Once the seat of assertion is supplanted by shared consent to be at Ahmedabad, the Courts at Rajasthan are not, at this point vested with jurisdiction as elite jurisdiction is presently vested in the Courts at Ahmedabad, given the adjustment of the seat of mediation", the Supreme Court concluded.
5. The appeal was permitted holding that Ahmedabad Court had jurisdiction to manage the Section 34 petition.

CONCLUSION

The Supreme Court held that when parties change the 'place of mediation' by common understanding, the new place will turn into the 'seat of the arbitration'. Subsequently, the Courts at the changed place of intervention will have jurisdiction over the arbitral procedures. The bench containing Justices Rohinton Fali Nariman and Hrishikesh Roy gave this critical decision for the situation M/s Inox Renewables Ltd v Jayesh Electricals Ltd. The bench followed the point of reference in BGS SGS Soma JV versus NHPC Ltd, which held that the setting of arbitration will be the juridical place of mediation without opposite expectation of the parties.

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