To the Editor,
The post, no doubt, summarises various Indian court judgments relating to seat centricity principle and Section 42 of 1996 Act in a remarkable and succinct fashion. However, I do not agree with its conclusion wherein it has concurred with the opinion expressed by Justice RF Nariman in the Indus Mobile case and has criticised the Antrix judgment. I will prefer putting my concerns in the following manner:
1) It is an accepted fact amongst the arbitration fraternity that there were a lot of loopholes in the 2012 BALCO judgment (hereinafter ‘BALCO’) albeit it brought about a paradigm shift in the arbitration jurisprudence of the country. Primarily, the pronouncement of the Court in Para 96 of the judgment is most controversial. Our 1996 Act has adopted the UNCITRAL Model Law in a major way despite knowing the fact that it was purely intended to be used for International Commercial Arbitrations (as the heading of Model Law itself suggests) and not for purely domestic arbitrations between domestic parties {this is the major problem with our 1996 Act- refer Singaporean or Australian Arbitration Acts which uses two different legislation for two different arbitrations-domestic and international}. While I understand that this was predominantly the fault of the legislators who drafted the Act in 1996 (they cannot be presumed to have been aware of the juridical seat principle), our Supreme Court in BALCO has contributed to this negligence by deliberately locating the importance of seat and the supervisory jurisdiction of seat courts in Section 2(1)(e) of the Act by reading “subject matter of arbitration” used in the section out of reference just to bring the principle of the juridical seat in our domestic Act (The correct interpretation of the section can be found in GE Countrywide case). This deliberate reading of legislation becomes apparent in the conflicting observations and illustrations used in Para 96 by the Court in BALCO, something which the author of the captioned blog post also agrees with. So I believe, we both are in agreement on the point that BALCO was definitely not a good law when it comes to the jurisdiction of seat courts and courts where the cause of action arises.
2) The judgment in Indus Mobile, in its attempt to justify the erroneous position of BALCO’s para 96 observation as explained above, also falls prey to diabolical judgment. It has in effect extended the applicability of seat centricity principle to arbitrations which are predominantly seated in India between purely domestic parties. This has far-reaching implications. This is so because the principle has always been used in the context of international arbitrations – it is used by international parties to find a neutral seat- a seat which will determine the law applicable to the arbitration procedure and not used for giving jurisdiction to courts of a particular city. Therefore, the extension of the principle only to grant jurisdiction to a particular court seems absurd when seen from the perspective of international best practices and this also disturbs the whole mechanism of finding the jurisdictions of competent court as per Section 16 to 21 of CPC (same being incorporated in Section 2(1)(e) itself). In conclusion, I deviate from the opinion of the author here that Indus clarifies the confusion of BALCO, it rather makes it even worse.
3) Now knowing that both the case laws were only an attempt by the SC to incorporate seat principle in our Act (to an extent which the principle itself does not reflect), it will be a parochial approach (the one adopted by the author while criticising Antrix) to just follow the precedent without knowing its defects.
4) While the author rightly points out that Antrix incorrectly interpreted Indus, we both are in dissidence on the point that Section 42 and Indus Mobile can be interpreted harmoniously. This is essentially so because Indus Mobile advocates for the exclusive jurisdiction of courts of seat and Section 42 embraces the jurisdiction of first ‘competent court’ which is approached in connection with the arbitration agreement. The suggestion of the author that “Section 42 shall be used only in cases which do not provide for a seat and the jurisdiction of a court is to be decided by CPC” seems erroneous to me because of two reasons: a) it is a mandatory obligation on the arbitral tribunal to specify a seat in terms of Section 20 of the Act- so there can be no case of an arbitration without a seat; b) the moment a court will be approached for the first time in relation to an arbitration agreement, it will lead to determination of the seat, if not specified by the tribunal in step (a)- seat is an essential criterion to determine the laws of the arbitration. Thereafter, the application is bound to be transferred to the courts of the seat of arbitration as observed by Indus in which case, there is no question of applicability of Section 42 altogether. Hence, application of Indus Mobile rules out the applicability of Section 42- and therefore, the conflict highlighted by the Antrix judgment was indeed a correct one which has no answer because of the faulty legislation in place.
Kishan Gupta,
Dr. RML National Law University, Lucknow.
The RMLNLU Law Review Blog 