Case Note & Summary
The present petition was filed under Section 11(6)(a) read with Section 11(12)(a) of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator for disputes arising out of a Consumer Distributorship Agreement dated 09.11.2010 between M/s Arif Azim Co. Ltd. (petitioner, an Afghan company) and M/s Micromax Informatics FZE (respondent no. 1, a UAE company) and M/s Micromax India (respondent no. 2, an Indian company, non-signatory). The agreement contained an arbitration clause (Clause 26) stating that disputes shall be referred to arbitration subject to UAE Arbitration and Conciliation rules, with venue in Dubai, UAE. Clause 27 provided that the agreement is governed by UAE law and subject to non-exclusive jurisdiction of Dubai Courts. The petitioner alleged that after placing an order for 8000 handsets, the respondents supplied only 7300 handsets and demanded payment directly to respondent no. 2 in India, ignoring a credit balance of USD 190,625 with respondent no. 1. The petitioner sought referral of disputes to arbitration and appointment of an arbitrator by the Supreme Court. The respondents contended that the seat of arbitration is Dubai, UAE, and thus Part I of the Act does not apply, and the court lacks jurisdiction. The court analyzed the distinction between 'venue' and 'seat' of arbitration, applying the Shashoua principle that a designated venue, absent contrary indicia, is the seat. It held that the arbitration clause's reference to 'venue of arbitration shall be Dubai, UAE' and the governing law and jurisdiction clauses clearly indicate Dubai as the seat. Consequently, Part I of the Act is inapplicable, and the petition under Section 11 is not maintainable. The court also noted that respondent no. 2 is a non-signatory and cannot be joined. Additionally, the court applied the doctrine of forum non conveniens, finding that the dispute has closest connection to UAE and Afghanistan, not India. The petition was dismissed.
Headnote
A) Arbitration Law - International Commercial Arbitration - Seat of Arbitration - Determination of Seat - The court examined whether the seat of arbitration is in India or Dubai, UAE, based on the arbitration clause designating Dubai as the venue and UAE law as governing law. Held that the designation of 'venue' as Dubai, coupled with UAE law and non-exclusive jurisdiction of Dubai Courts, indicates Dubai as the seat, not India (Paras 56-80). B) Arbitration Law - Part I Applicability - Post-BALCO Regime - Part I of the Arbitration and Conciliation Act, 1996 applies only to arbitrations seated in India. Since the seat is in Dubai, Part I does not apply, and the court lacks jurisdiction under Section 11 (Paras 43-55). C) Arbitration Law - Non-Signatory - Joinder of Non-Signatory - The respondent no. 2, a non-signatory to the arbitration agreement, cannot be compelled to arbitrate under the agreement. The petition against it is not maintainable (Paras 2, 81-88). D) Arbitration Law - Forum Non Conveniens - The court declined to exercise jurisdiction on grounds of forum non conveniens, as the dispute has closest connection to UAE and Afghanistan, not India (Paras 89-94).
Issue of Consideration
Whether the seat of arbitration in the underlying Distributorship Agreement is in India, and consequently, whether this Court has jurisdiction to entertain the petition under Section 11 of the Arbitration and Conciliation Act, 1996.
Final Decision
The Supreme Court dismissed the arbitration petition, holding that the seat of arbitration is Dubai, UAE, and thus Part I of the Act is inapplicable. The court declined to appoint an arbitrator.
Law Points
- Seat of arbitration
- Venue vs Seat
- International commercial arbitration
- Part I applicability
- Closest connection test
- Shashoua principle
- Forum non conveniens
- Non-signatory to arbitration agreement
