Whether the seat of arbitration can be changed by mutual consent of the parties?
Recently an issue arose before the Supreme Court within the case of M/s Inox Renewables Ltd v Jayesh Electricals Ltd, that whether or not the seat may well be modified by a succeeding mutual agreement between the parties, that wasn't in writing.
Brief Facts of the case-
M/s Gujarat Fluorochemicals Ltd. issued a purchase order in favor of M/s Jayesh Electricals for the manufacture and supply of power transformers at wind farms.
As per the clause within the commercial document, just in case of any disputes, the Venue and Seat of the Arbitration was to be at Jaipur within the State of Rajasthan. later on, by a Business Transfer Agreement, the whole business of M/s Gujarat Fluorochemicals Ltd. was transferred to M/s Inox Renewables wherein the exclusive jurisdiction to adjudicate disputes between parties was unconditional with courts at Vadodara within the State of Gujarat.
Soon thenceforth, disputes arose between M/s Inox Renewables and M/s Jayesh Electricals. consistent with an application created by Jayesh Electricals beneath Section eleven of the Arbitration and Conciliation Act, 1996 (hereinafter as "the Act") to the Hon'ble court of Gujarat at Ahmedabad, a Sole intermediary was appointed to adjudicate the disputes between the parties. The Sole intermediary passed an arbitral award in favor of Jayesh Electricals.
Aggrieved by the aforementioned arbitral Award, Inox filed objections to the Award beneath the provisions of Section thirty-four of the Act, before the commercial Court at Ahmedabad with a prayer to line aside from the Arbitral Award. throughout arguments, Jayesh Electricals for the primary time raised an objection that the Courts at Ahmedabad didn't have jurisdiction to entertain the objections because the Courts at Vadodara were unconditional with exclusive jurisdiction. The commercial Court at Ahmedabad, touching on the clauses of the Business Transfer Agreement held that the Courts of Vadodara alone would have exclusive jurisdiction to entertain the petition because the courts at Ahmedabad weren't unconditional with such jurisdiction. Inox appealed against the aforementioned before the Hon'ble court of Gujarat at Ahmedabad that was however laid-off.
Thereafter, Inox approached the Hon'ble Supreme Court of India. The Court held that when the seat of arbitration is replaced by mutual agreement of the parties, the courts at the new seat shall be unconditional with exclusive jurisdiction. Therefore, the present position of law seems to be that if the seat is mentioned within the contract and also the contract encompasses a clause that needs the modification of the contract to be in writing, then any amendment within the contract would be got to be in writing as per the relevant terms of the contract. In such a scenario, the parties would solely be able to change the seat of arbitration by following the procedure arranged down within the contract.
However, if there's no such provision which needs the amendment to the contract, to be in writing, the Judgment of Inox Renewables would apply, and as per the Hon’ble Supreme Court “the parties might reciprocally attain a seat of arbitration and may change the seat of arbitration by mutual agreement that is recorded by the arbitrator in his award to that no challenge is formed by either party.”
Just in case each of the parties wants to vary or alter the Venue and Seat of the Arbitration by conduct or giving implied consent to an equivalent, it's not necessary to modify the subject contract. The parties will reciprocally comply with the amendment or alter the venue of Arbitration and also the mutually agreed place can become the Venue of the Arbitration. However, they need to keep in mind that changing the venue of arbitration for the sake of convenience implies conferring jurisdiction upon the courts of the modified venue.
(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.)