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Decision to change the seat of arbitration with reference to Inox Renewables Ltd. v. Jayesh Electricals Ltd.
The decision to change the seat of arbitration concerning Inox Renewables Ltd. v. Jayesh Electricals Ltd.
Introduction
On April 13, 2021, the Supreme Court decided in M/S. Inox Renewables Ltd. v. Jayesh Electricals Ltd. (‘Inox Renewables')[1] that, under the current circumstances, a change in the “venue” of arbitration by mutual consent amounted to a change in the legal seat of arbitration. Therefore, the never-ending tale of the seat-venue issue has taken an unforeseen turn, further blurring the distinction between the two.
Facts
M/s Gujrat Fluorochemicals Ltd. (Petitioners) and Jayesh Electricals Ltd. (Respondent) entered into a purchase order on January 28, 2012, for the manufacture and supply of power transformers at wind farms (Agreement). The arbitration began with a purchase order that designated Jaipur as the venue, but the parties decided to hold the proceedings in Ahmedabad. The award was made in favour of the Respondent and was afterwards challenged in Ahmedabad. The Petitioner claimed that because the arbitration was held in Ahmedabad, the Ahmedabad courts had exclusive jurisdiction to hear the issue. The Ahmedabad Court and, later, the High Court differed. Therefore the Petitioner appealed to The Supreme Court with a Special Leave Petition.
Judgment
At the onset, the Supreme Court took note of the arbitrator's judgment that the parties had agreed to change the location of the arbitration from Jaipur to Ahmedabad. Because the BTA was not signed between the Appellant and the Respondent, it is immaterial in this matter. Based on the decision in the BGS SGS SOMA JV6[2] case, it was determined that the selection of Ahmedabad as the seat was analogous to an exclusive jurisdiction provision, providing the courts in Ahmedabad with exclusive jurisdiction to deal with problems about the arbitration.
Conclusion
As an outcome of the precedent created by this decision, it is feared that, in the future, a change of venue by the parties for convenience or otherwise would be regarded as an underlying understanding for a shift in the seat of arbitration. For parties that want to change the venue and not the seat, it is now necessary to carefully construct the written agreement and clearly states that the agreement is only for the venue change and that the seat will stay the same. The initial decision also supported the essential basis of arbitration, namely party autonomy, which is likewise contained in the UNCITRAL model legislation. The preceding decision established the door for the parties to jointly determine or alter the seat of arbitration even after the arbitration proceedings had initiated.
[1] MANU/SC/0285/2021; Civil Appeal No. 1556/2021 decided on 13.04.2021
[2] (2020) 4 SCC 234
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 Foundation shall not be responsible for any errors caused due to human error or otherwise.
- A change in the “venue” of arbitration by mutual consent amounted to a change in the legal seat of arbitration
- Petitioner appealed to The Supreme Court with a Special leave Petition.
- The preceding decision established the door for the parties to jointly determine or alter the seat of arbitration even after the arbitration proceedings had initiated.
