M/s Arif Azim Co. Ltd. vs M/s Micromax Informatics Fze

Arbitration and Conciliation Act, 1996 – Determination of seat – Closest Connection Test – No longer a viable criterion: Held: The ‘Closest Connection Test’ for determining the seat of arbitration by identifying the law with which the agreement to arbitrate has its closest and most real connection is no longer a viable criterion for determination of the seat or situs of arbitration in view of the Shashoua Principle – The seat of arbitration cannot be determined by formulaic and unpredictable application of choice of law rules based on abstract connecting factors to the underlying contract – Even if the law governing the contract has been expressly stipulated, it does not mean that the law governing the arbitration agreement and by extension the seat of arbitration will be the same as the lex contractus. [Para 71(v)] Arbitration and Conciliation Act, 1996 – Determination of seat of Arbitration – More appropriate criterion:

Held: The more appropriate criterion for determining the seat of arbitration in view of the subsequent decisions of this Court is that where in an arbitration agreement there is an express designation of a place of arbitration anchoring the arbitral proceedings to such place, and there being no other significant contrary indicia to show otherwise, such place would be the ‘seat’ of arbitration even if it is designated in the nomenclature of ‘venue’ in the arbitration agreement – Where the curial law of a particular place or supranational body of rules has been stipulated in an arbitration agreement or clause, such stipulation is a positive indicium that the place so designated is actually the ‘seat’, as more often than not the law governing the arbitration agreement and by extension the seat of the arbitration tends to coincide with the curial law. [Para 71(vi), 71(vii)] Arbitration and Conciliation Act, 1996 – Seat of Arbitration – Choices of parties and their intentions in Arbitration agreement: Held: Merely because the parties have stipulated a venue without any express choice of a seat, the courts cannot sideline the specific choices made by the parties in the arbitration agreement by imputing these stipulations as inadvertence at the behest of the parties as regards the seat of arbitration – Deference has to be shown to each and every choice and stipulations made by the parties, afterall the courts are only a conduit or means to arbitration, and the sum and substance of the arbitration is derived from the choices of the parties and their intentions contained in the arbitration agreement – It is the duty of the court to give weight and due consideration to each choice made by the parties and to construe the arbitration agreement in a manner that aligns the most with such stipulations and intentions. [Para 71(viii)]

Arbitration and Conciliation Act, 1996 – Where there is no express or implied designation of a place of arbitration – Closest Connection Test:

Held: It is not said that the Closest Connection Test has no application whatsoever, where there is no express or implied designation of a place of arbitration in the agreement either in the form of ‘venue’ or ‘curial law’, there the closest connection test may be more suitable for determining the seat of arbitration. [Para 71(ix)] Arbitration and Conciliation Act, 1996 – Doctrine of Forum Non Conveniens – Where two or more possible places that have been designated in the arbitration agreement either expressly or impliedly:

Held: Where two or more possible places that have been designated in the arbitration agreement either expressly or impliedly, equally appear to be the seat of arbitration, then in such cases the conflict may be resolved through recourse to the Doctrine of Forum Non Conveniens, and the seat be then determined based on which one of the possible places may be the most appropriate forum keeping in mind the nature of the agreement, the dispute at hand, the parties themselves and their intentions – The place most suited for the interests of all the parties and the ends of justice may be determined as the ‘seat’ of arbitration. [Para 71(x)] Arbitration and Conciliation Act, 1996 – s.11 – Petitioner herein and respondent no.1 entered into a Consumer Distributorship Agreement inter-alia for distribution of handsets manufactured by respondent no.1 and the same was executed by the parties in Kabul, Afghanistan – Distributorship Agreement also contained Arbitration clause – The said Distributorship Agreement inter-alia stipulates that the said agreement will be governed by the laws of UAE and subject to the non-exclusive jurisdiction of the Dubai Courts – Dispute arose between the parties – Petitioner invoked Arbitration clause – The petitioner sought appointment of an arbitrator u/s. 11(6) of the Act: Held: In the instant case, clause 26 of the aforesaid Distributorship Agreement stipulates that the arbitration shall be subject to UAE Arbitration and Conciliation rules – The aforesaid arbitration clause further designates only one place i.e., Dubai, UAE as the venue of arbitration – Since only one place has been designated in the arbitration clause, and such place has been categorically fixed inasmuch as there is no scope for the place designated as venue to change in terms of Clause 26, and furthermore, the said clause has explicitly stipulated that the curial law would be the UAE Arbitration and Conciliation rules and there being no other contrary indicia let alone a significant contrary indicia, this Court is of the considered opinion that the Dubai, UAE has not been designated merely as a venue but rather as the juridical seat of arbitration in terms of clause 26 of the Distributorship Agreement – And since the Distributorship Agreement already designates Dubai, UAE as the seat of arbitration, the same would be akin to an exclusive jurisdiction clause with only the courts in Dubai, UAE having the jurisdiction over such arbitration – This Court, also will not have jurisdiction to entertain the present Section 11 petition because, Part I of this Act, 1996 will not be applicable where the seat of arbitration is outside India or where the law governing the arbitration agreement is not Indian laws – As the Distributorship Agreement, more particularly Clauses 26 & 27 respectively makes it abundantly clear that the seat of arbitration is in fact Dubai, UAE, furthermore both the law governing the contract and the curial law are not Indian laws – Even if it is assumed that Clause 27 of the aforesaid Distributorship Agreement conferred concurrent jurisdiction to both the courts in UAE and the other courts and thus, the petitioner herein was well-within its right to approach this Court in terms of the non-exclusive jurisdiction clause for the purpose of appointment of arbitrator, this Court can decline to exercise its jurisdiction if there exists a more appropriate forum – The more appropriate forum suitable for appointment of arbitrator is Dubai, UAE and not the courts of India – Thus, the present petition under Section 11 of the Act, 1996 is not maintainable as neither the seat of arbitration is India nor is the arbitration agreement governed by laws of India. [Paras 55, 56, 62, 63, 70, 72]