No uncertainty in multiple seat arbitration provision

The concept of the seat in arbitration proceedings has been the subject of significant analysis and discussion in Indian arbitration jurisprudence. While courts have considered the question of exclusive jurisdiction and the distinction between seats and venues on a number of occasions, the case of Vedanta Limited v Shreeji Shipping marks the first time the courts have considered the validity of an arbitration agreement in which a number of named local jurisdictions were designated as possible seats of arbitration.

Disputes arose in connection with a transportation agreement between Vedanta and Shreeji Shipping. The contractual arrangements between the parties consisted of a letter of intent followed by a detailed purchase order, which contained an arbitration clause. That clause gave the parties the option of choosing one of the local jurisdictions in Goa, Karnataka and Delhi as the seat of the arbitration. In the notice invoking arbitration, Vedanta suggested that Delhi, as a neutral venue, be designated the seat of arbitration. However, Shreeji Shipping denied the existence of a binding arbitration agreement. They contended that they had never accepted the arbitration clause as they had not signed the purchase order, which contained this clause. They therefore refused to participate in any arbitration proceedings. As a consequence, Vedanta applied to Delhi High Court for the appointment of an arbitrator in accordance with section 11 of the Arbitration and Conciliation Act, 1996.

The act was founded on the basic principle of party autonomy. Accordingly, section 20(1) of the act provides that parties are free to agree on the place of arbitration, that is the seat, without placing any geographical restrictions on the choice of seat. In fact, in PASL Wind Solutions (P) Limited v GE Power Conversion (India) (P) Limited, the Supreme Court held that party autonomy concerning the seat of arbitration is unfettered, and Indian parties may even choose a foreign jurisdiction to be the seat of their arbitration. Section 20(2) of the act further provides that in the case of the parties failing to agree the place of arbitration, the seat will be determined by the arbitral tribunal having regard to the circumstances of the case. The present case was unique as no tribunal had yet been constituted and there was no conclusive agreement as to the seat given that the parties had the option to choose one of three jurisdictions.

Given the particular circumstances of the case, Shreeji Shipping contended that the arbitration clause providing for multiple seats was uncertain and was not capable of being made certain. It was therefore void under section 29 of the Indian Contract Act, 1872. The court rejected this argument and held that the arbitration clause merely gave the parties a choice to invoke arbitration in any of the three jurisdictions mentioned in it, namely Goa, Karnataka or Delhi. The arbitration clause could not be considered ambiguous given that the parties could make it certain simply by choosing one of the three jurisdictions as the seat.

Shreeji Shipping also contended that the seat should be designated following the provisions of sections 16 to 20 of the Code of Civil Procedure, 1908. The location of the seat should be determined by the location of the cause of action. This argument was manifestly contrary to the principle of party autonomy. It would force parties to select a seat on the basis of the facts of the dispute and take away their right to choose the seat for commercial reasons. These would include convenience, costs and accessibility.

Relying on the Supreme Court decision of Indus Mobile Distribution (P) Limited v Datawind Innovations (P) Limited, Delhi High Court held that the reference to a seat is the method by which the parties to an arbitration agreement can choose a neutral venue. The court decided that where an arbitration clause prescribes a number of places, in this case three, as possible seats of arbitration, the parties are at liberty to treat any of them as the seat. This judgment is clear authority that an arbitration clause can include multiple seats and that the clause will not be held void for uncertainty.

Sneha Jaisingh is a partner and Vaishnavi Rao is a managing associate at Bharucha & Partners.