Facts of the case: A purchase order dated 28th January, 2012 was entered into between M/s Gujarat Fluorochemicals Ltd.  and Jayesh Electricals Ltd. for the manufacture and supply of power transformers at wind farms. In the given case an order of purchase was placed at Jaipur, but the venue of arbitration, as per the agreement between the parties, was decided to be Ahmedabad.

The parties went to Gujarat High Court as to what should be the venue for arbitration to be held. The Gujarat High Court decided that the parties should go to the court under whose jurisdiction the transaction has taken place. The matter then went to Supreme Court.

Issue: The issue that arose before the Supreme Court was that whether the Ahmedabad being the venue of the arbitration will also be the seat of the arbitration.

Ratio: In the present case the hon’ble Supreme Court overruled the judgment held in BGS SGS Soma and laid down that the venue of arbitration will also be the seat of the arbitration. In this case there was no written arbitration agreement and thus no written guidelines regarding the shifting of the venue but the parties decided the venue of arbitration with mutual consensus to Ahmedabad. What is clear, therefore, as per this paragraph is that by mutual agreement, parties had specifically shifted the venue/place of arbitration from Jaipur to Ahmedabad. This being so, is it not possible to accede to the argument that this could only have been done by written agreement and that the arbitrator’s finding would really have reference to a convenient venue and not the seat of arbitration.

The apex Court held that since the Ahmedabad was chosen as the venue of the arbitration, then it will only be considered as the seat of the arbitration. Therefore, all the difficulties arising between the parties will be decided by the courts of Ahmedabad and not Jaipur. The court held that as the clause 8.5 of the Purchase Order must be read as a whole, it is not possible to accept that the jurisdiction of Courts in Rajasthan is independent of the venue being at Jaipur. The two clauses must be read together as the Courts in Rajasthan have been vested with jurisdiction only because the seat of arbitration was to be at Jaipur. 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.  

Thus, the decision in order passed by the Gujarat High Court was overruled by the Apex Court. The Apex court laid emphasis on importance of mutual agreement regarding the venue of arbitration between the parties and gave recognition to the same venue to be the seat of the arbitration proceedings.

Written by – Vartika Chahal

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