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Role of Mutual Agreements in Shifting of Arbitration Seats.
A pre-requisite for any agreement to invoke arbitrational proceedings is the very inclusion of a clause indicating the same, which very often also mentions what location would be regarded as the seat of arbitration, i.e., where the arbitration proceedings would take place.
The Indian judiciary has opined on the matters regarding a change in the seat of arbitration when it takes place due to an agreement between the parties, which is contrary to the agreed-upon location in their arbitration agreements.
BSG SGS SOMA JV v NHPC Limited (2020)
This dispute resulted in the court iterating the fact that agreement between the parties regarding the selection of a seat as the arbitration procedure would invoke an exclusive jurisdiction clause, which would transfer over the jurisdiction on all courts at that particular seat of arbitration, regarding all matters which are in new nexus with the subject matter of the arbitration.
Following in the footsteps of this judgement, in 2021, the Supreme Court of India opined that a change in the seat of arbitration which is different from the one initially discussed in the arbitration agreement is permitted as long as is there is a mutual agreement between the parties.
M/s Inox Renewables Ltd v Jayesh Electricals Ltd (2021)
This particular case involved transferring business rights from one company to another, whereby the parties to this particular case did not end up amending the original clauses and conditions mentioned in their purchase order agreement. Recourse to an arbitral award was stipulated to be sought before any court in the state of Rajasthan as per the original agreement, holding Jaipur as the venue of arbitration in particular. This agreement was later on changed and amended post the overtaking of business by the petitioners, electing the city of Vadodara as a seat of arbitration, further allowing any redressal/grievances to be conferred to the courts in that particular city.
However, the parties were involved in a dispute in mid-2018, where a request for the appointment of a sole arbitrator was made by both parties before the Gujarat High Court, which is located in the city of Ahmedabad. Following this, the arbitration proceedings recorded the fact that both parties' mutual consent was to shift the proceedings from the city of Vadodara to Ahmedabad. Post further developments in the particular case, the Supreme Court of India was approached regarding a decision passed by the Commercial Court at Ahmedabad and not the Gujarat High Court.
Conclusion
In conclusion, after addressing the other aspects of the case, the Apex Court opined that the arbitration proceedings were enough documentation to prove the fact that the change in the seat of arbitration was permitted by mutual consent or rather mutual acceptance of the shift from Vadodara to Ahmedabad shown by the parties. The law could not object to the same owing to the meeting of minds and the lack of objection by both parties.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre shall not be responsible for any errors caused due to human error or otherwise.
- BSG SGS SOMA JV v NHPC Limited (2020)
- M/s Inox Renewables Ltd v Jayesh Electricals Ltd (2021)
- Conclusion
