Featured image for Supreme Court Judgment dated 04-07-2017 in case of petitioner name Roger Shashoua & Others vs Mukesh Sharma & Others
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Jurisdictional Dispute in Arbitration: Supreme Court Rules on Seat and Venue of Arbitration

The case of Roger Shashoua & Others v. Mukesh Sharma & Others brought a significant legal debate on the jurisdictional authority in arbitration proceedings, particularly in determining the seat of arbitration and its impact on the applicability of Indian courts.

The dispute revolved around whether the Indian courts had jurisdiction to hear objections under Section 34 of the Arbitration and Conciliation Act, 1996, regarding an arbitral award where the arbitration clause specified London as the venue. The appellants contended that the High Court had erred in holding that Indian courts had jurisdiction. They relied on the ruling in Shashoua v. Sharma and subsequent decisions which established that the choice of venue could, in some instances, imply the seat of arbitration.

Background of the Case

The arbitration proceedings were conducted in accordance with the Rules of the International Chamber of Commerce (ICC). The shareholders’ agreement stipulated that “The venue of the arbitration shall be London, United Kingdom.” The agreement was otherwise governed by Indian law.

The dispute arose when the respondent filed a petition under Section 34 of the Arbitration Act before the District Judge, Gautam Budh Nagar, Uttar Pradesh, challenging the arbitral award. The District Judge refused to entertain the petition citing a lack of territorial jurisdiction, leading to an appeal before the High Court of Allahabad, which also dismissed the matter on maintainability grounds. Subsequently, a writ petition was filed before the High Court of Delhi, which took up the matter.

Key Issues Before the Court

  • Whether the phrase “venue of arbitration” is sufficient to determine the seat of arbitration.
  • Whether Indian courts had jurisdiction over the matter despite arbitration being conducted in London.
  • Whether the interpretation in Shashoua v. Sharma and BALCO applies to the present case.

Arguments of the Petitioner

The petitioners, represented by senior counsel Mr. Rakesh Dwivedi, argued:

  • The agreement provided for London as the venue of arbitration, which in international practice, particularly in light of Shashoua v. Sharma, indicated that London was the seat of arbitration.
  • The courts in London had jurisdiction over arbitration-related matters, and Indian courts could not entertain challenges under Part I of the Act.
  • The Delhi High Court erred in concluding that the arbitration clause did not exclude the jurisdiction of Indian courts.

Arguments of the Respondent

The respondent, represented by Mr. Chidambaram, countered:

  • The agreement only mentioned London as the venue but did not expressly confer exclusive jurisdiction on the courts in London.
  • The arbitration clause stipulated that the agreement would be governed by Indian law, thereby allowing Indian courts jurisdiction over disputes.
  • The Constitution Bench decision in BALCO did not unequivocally approve Shashoua v. Sharma.

Supreme Court’s Analysis and Judgment

The Supreme Court, led by Dipak Misra and R. Banumathi, held:

  • The term “venue” in an arbitration clause must be interpreted in conjunction with other factors such as governing law, procedural rules, and intent of the parties.
  • The Shashoua principle was reaffirmed, holding that where an agreement provides for arbitration “in accordance with ICC Rules” and mentions a venue without naming an alternative seat, the venue itself is the seat of arbitration.
  • As London was specified as the venue, and the arbitration was conducted under ICC Rules, it implied that London was also the seat, and thus Indian courts had no jurisdiction.
  • The Delhi High Court’s ruling was set aside, and it was held that Indian courts had no jurisdiction to hear a challenge under Section 34 of the Act.

Conclusion

The Supreme Court’s ruling in this case reinforces the principles of international arbitration, ensuring that the choice of a venue in an arbitration agreement, when read with the applicable procedural rules, may determine the seat of arbitration. This decision aligns with global standards and strengthens India’s position as a jurisdiction that respects party autonomy in arbitration matters.

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