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2024 Supreme(Online)(SC) 11484
SUPREME COURT OF INDIA
HON'BLE THE CHIEF JUSTICE, HON'BLE MR. JUSTICE J.B. PARDIWALA, HON'BLE MR. JUSTICE MANOJ MISRA
M/S ARIF AZIM CO. LTD. – Appellant
Versus
M/S MICROMAX INFORMATICS FZE – Respondent
ARBIT.PETITON No.-000031 - 2023
The court ruled that the seat of arbitration was designated as Dubai, UAE, making Indian courts lack jurisdiction under the Arbitration and Conciliation Act, 1996.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 11(6)(a) and 11(12)(a) - Distributorship Agreement - Dispute regarding the seat of arbitration - Court found that Dubai, UAE was designated as the seat of arbitration based on the agreement's clauses, and thus Indian courts lacked jurisdiction - The agreement specified UAE laws and arbitration rules, confirming the non-applicability of Indian arbitration laws as the seat was outside India. (Paras 71-73)
(B) Jurisdiction - Non-exclusive jurisdiction clause - The court emphasized that the presence of a non-exclusive jurisdiction clause does not confer jurisdiction to Indian courts when the seat of arbitration is explicitly stated as being outside India. (Paras 60-64)
(C) Forum Non Conveniens - The court held that the doctrine applies, allowing for dismissal of petitions where a more appropriate forum exists, in this case, Dubai, UAE. (Paras 65-70)
Facts of the case:
The petitioner sought appointment of an arbitrator under the Arbitration and Conciliation Act due to a dispute arising from a distributorship agreement with the respondent, asserting that the seat of arbitration was in India despite the agreement stipulating it was in Dubai, UAE. (Paras 1-2)
Findings of Court:
The court concluded that the arbitration agreement clearly designated Dubai as the seat, and thus the jurisdiction of Indian courts was excluded. (Paras 73-74)
Issues: The court addressed whether the petition was maintainable under Indian law given the seat of arbitration was outside India and the governing law was not Indian. (Paras 20-21)
Ratio Decidendi: The court ruled that the explicit designation of Dubai as the seat of arbitration, coupled with the governing law being UAE law, rendered the petition under Section 11 of the Act, 1996 unmaintainable in India. (Paras 71-72)
Result: Petition dismissed.
Digitally signed by SANJAY KUMAR Date: 2024.11.07 Reason:
Signature Not Verified J.B. PARDIWALA, J.: For the convenience of exposition, this judgment is divided into the following parts: -
INDEX A. FACTUAL MATRIX ................................................................................... 3 B. SUBMISSIONS OF THE PARTIES ........................................................ 11 i. Submissions on behalf of the Petitioner. ............................................... 11 ii. Submissions on behalf of the Respondent. ............................................ 18 C. ISSUES FOR DETERMINATION ........................................................... 21 D. ANALYSIS .................................................................................................. 21 i. The Notional Doctrine of Concurrent Jurisdiction and Applicability of Part I of the Arbitration & Conciliation Act, 1996. ............................. 24 a. Pre-BALCO Regime. ................................................................................... 26 b. Post BALCO Regime. ................................................................................. 43 ii. Criterion or Test for Determination of Seat of Arbitration: Conflict of ‘Venue’ versus ‘Seat’ of Arbitration. .................................................... 56 a. Closest Connection Test – Place of Arbitration to be ascertained by the Law governing the Arbitration Agreement and not the Place of Arbitration. ...
56 b. The Shashoua Principle – ‘Venue’ to be construed as ‘Seat’ .................... 71 iii. Whether the Seat of Arbitration in the underlying Distributorship Agreement is in India? ............................................................................ 81 iv. Doctrine of Forum non Conveniens .......................................................
E. CONCLUSION ...........................................................................................
1. The present petition has been filed under Section 11 sub-section (6)(a) read with Section 11 sub-section (12)(a) of the Arbitration and Conciliation Act, 1996 (for short, the “ Act, 1996 ”) seeking a referral of the disputes that have arisen between the parties to arbitration and consequent appointment of an arbitrator by this Court in terms of clauses 26 and 27 of the Consumer Distributorship Agreement respectively dated 09.11.2010 (hereinafter referred to as the “ Agreement ”) entered into between the petitioner and the respondent herein.
2. The petitioner, ‘ M/s Arif Azim Co. Ltd. ’ , is a company based in Afghanistan, having its registered office at 1st Floor, Zarnigar Hotel, Mohammed Jan Khan Watt, Kabul, Afghanistan and is inter-alia engaged in the business of distribution of handsets which are manufactured by the respondent no. 1 in the territory of Kabul, Afghanistan. The respondent no. 1, ‘M/s Micromax Informatics FZE’ is a Free Zone Establishment company incorporated under the laws of United Arab Emirates having its office at 28, Shed No. 18, Technology Park, Free Trade Zone, Ras-Al-Khaimah, UAE. Whereas, the respondent no. 2, ‘M/s Micromax India’ is a public limited company incorporated in India having its registered office at Block A, Plot No. 21/14, Naraina Industrial Area, Phase-II New Delhi. The respondent no. 1 company is a wholly owned subsidiary of the respondent no. 2 company with the same Board Members in both the companies, and together they are engaged in the business of manufacturing, importing and supplying various mobile handsets under its brand name ‘Micromax’ worldwide. We may clarify at the outset, that the respondent no. 2 company herein is a non-signatory to the arbitration agreement in respect of which the present Section 11 petition has been filed.
A. FACTUAL MATRIX 3. The petitioner herein and the respondent no. 1 company entered into a Consumer Distributorship Agreement dated 09.11.2010 (for short, the “ Distributorship Agreement ”) inter-alia for the distribution of handsets which ar
