SC: Changed venue becomes ‘seat of arbitration’ when venue is changed by mutual agreement


Aryan Grover

A division bench of the Supreme Court, comprising of Justice Rohinton Fali Nariman and Justice Hrishikesh Roy, have laid out in their ruling in the case M/s Inox Renewables Ltd. v. Jayesh Electricals Ltd. that when the parties change the ‘venue/place of arbitration by mutual agreement, the new venue/place will become the ‘seat of arbitration’.

Consequently, the changed venue/place of arbitration shall have jurisdiction over the arbitration proceedings.

The parties involved in the case had an agreement for manufacture and supply of power transformers. An arbitration clause in the agreement fixed the venue of arbitration as Jaipur, Rajasthan, giving courts in Rajasthan the exclusive jurisdiction over disputes arising as a result of the agreement.

When GFL sold its business in its entirety to Inox Renewables Ltd., the transfer agreement between them fixed the venue of the arbitration clause at Vadodara, giving Gujarat courts exclusive jurisdiction.

When disputes happened to arise between Inox and Jayesh, Jayesh Electricals approached the Gujarat High Court under Section 11 of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator.

The High Court then appointed a retired judge of the High Court to act as the arbitrator.

Inox and Jayesh mutually agreed to fixing Ahmedabad as the venue of arbitration, despite the clause in the agreement which provided for Jaipur as the venue.

When the arbitrator passed a judgement in the favour of Jayesh Electricals, Inox challenged this judgement before a commercial court at Ahmedabad, which dismissed the appeal, stating that exclusive jurisdiction over the case is vested with the Vadodara Court.

Inox then challenged this before the Gujarat High Court, which affirmed the findings of the Ahmedabad Court, that it had no jurisdiction over the appeal.

In its ruling, however, the court observed that the Jaipur court was the one which had jurisdiction, and not the Vadodara court.

In an appeal made to the Supreme Court against the High Court’s decision, the SC held that a written agreement was not necessary to shift the venue of arbitration.

It further observed, “The parties may mutually arrive at a seat of arbitration and may change the seat of arbitration by mutual agreement which is recorded by the arbitrator in his award to which no challenge is made by either part.”

In its concluding remark, the Apex Court held that the Ahmedabad Court had jurisdiction to deal with the petition, stating, “Once the seat of arbitration is replaced by mutual agreement to be at Ahmedabad, the Courts at Rajasthan are no longer vested with jurisdiction as exclusive jurisdiction is now vested in the Courts at Ahmedabad, given the change in the seat of arbitration.”

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