103 NUALS LAW JOURNAL VOL.

13

THE RATIO WHICH WAS

HIDDEN IN PLAIN SIGHT:
DETERMINING INDUS
MOBILE’S TRUE IMPORT

Utkarsh Srivastava

In the post-BALCO era, numerous judgments dealing with

domestic arbitrations have been rendered by the various High
Courts and the Supreme Court in India, but none of them has
had the kind of far-reaching effects as the judgment in Indus
Mobile has. On the first view, Indus Mobile appears to fall foul
of the much-debated Paragraph 96 of BALCO, which grants
supervisory jurisdiction over the arbitral proceedings to the
court at the designated ‘seat’, but the position of law is not that
straightforward. The present note looks at how the High
Courts of various states across India have misunderstood
Indus Mobile and finally attempts to arrive at the correct
understanding of the judgment, by referring to the recent but
rare High Court decisions which buck the trend and present a
more acceptable understanding of Indus Mobile. The focus
would also be on highlighting the reasons for the confusion
which has arisen out of the Indus Mobile judgment, and the
role of the Supreme Court in bringing about much-needed
clarity on the subject.


The author is a practicing advocate before the courts in Uttar Pradesh and Delhi, and
an alumnus of National Law University Delhi. The author may be contacted
at [email protected]. I would like to extend my gratitude to Mr. Divyam Krishna,
Advocate for his invaluable comments on the first draft of this note.
104 NUALS LAW JOURNAL VOL. 13

INTRODUCTION

The Bharat Aluminium Co. v. Kaiser Aluminium Technical Services

[“BALCO”]1 judgment, delivered by a Constitution Bench of the Indian Supreme
Court, was undoubtedly a watershed moment in the country's developing arbitral
jurisprudence. The judgment performed the monumental job of clarifying the law
relating to the concept of ‘seat’ in foreign seated arbitrations. Notably, in
Paragraph 96 of BALCO, the Supreme Court also made certain controversial
observations in relation to domestic arbitrations. The relevant part of the said
paragraph is reproduced below:

96. [I]n our view, the legislature has intentionally given jurisdiction to
two courts i.e. the court which would have jurisdiction where the cause of
action is located and the courts where the arbitration takes place. This was
necessary as on many occasions the agreement may provide for a seat of
arbitration at a place which would be neutral to both the parties. Therefore,
the courts where the arbitration takes place would be required to exercise
supervisory control over the arbitral process. For example, if the arbitration
is held in Delhi, where neither of the parties are from Delhi, (Delhi having
been chosen as a neutral place as between a party from Mumbai and the
other from Kolkata) and the tribunal sitting in Delhi passes an interim order
Under Section 17 of the Arbitration Act, 1996, the appeal against such an
interim order Under Section 37 must lie to the courts of Delhi being the
courts having supervisory jurisdiction over the arbitration proceedings and
the tribunal. This would be irrespective of the fact that the obligations to be
performed under the contract were to be performed either at Mumbai or at
Kolkata, and only arbitration is to take place in Delhi. In such
circumstances, both the courts would have jurisdiction i.e. the court within
whose jurisdiction the subject matter of the suit is situated and the courts
within the jurisdiction of which the dispute resolution i.e. arbitration is
located. (Emphasis supplied)

To put it simply, in the said paragraph, the Supreme Court opined that 'court', as
defined under Section 2(1)(e) of the Arbitration and Conciliation Act 1996, was
wide enough to cover not only the courts of the place where the ‘subject-matter of
the suit’/ ‘cause of action’ lies, but also the courts of the ‘seat’. Consequently, courts
at both these places were held to have concurrent supervisory jurisdiction over the
arbitral proceedings.

1 Bharat Aluminium Co. v. Kaiser Aluminium Technical Services, (2012) 9 SCC 552.
105 NUALS LAW JOURNAL VOL. 13

The correctness or otherwise of these observations has been the subject-matter of

numerous debates in the academic circles,2 but those debates are not at the core
of the discussion here. The discussion will focus upon a Division Bench judgment
of the Supreme Court of India in Indus Mobile v. Datawind Innovations [“Indus
Mobile”],3 which has been the source of immense confusion in the country’s
arbitral jurisprudence as a result of its ambiguous ratio decidendi. The attempt
would be to understand what the Indus Mobile judgment really says and the
manner in which that pans out in the shadow of the law as laid down in the
abovementioned Paragraph 96 of BALCO.

V. INDUS MOBILE: CONTRADICTS BALCO OR SIMPLY A CASE OF

MISUNDERSTOOD RATIO?

In Indus Mobile, the Supreme Court, speaking through Justice Nariman, came up
with a finding which seemingly contradicts Paragraph 96 of BALCO. The following
extracts from Paragraph 20 and 21 of Indus Mobile are of relevance for the present
discussion:

20. A conspectus of all the aforesaid provisions shows that the moment
the seat is designated, it is akin to an exclusive jurisdiction clause. On the
facts of the present case, it is clear that the seat of arbitration is Mumbai and
Clause 19 further makes it clear that jurisdiction exclusively vests in the
Mumbai courts.

[I]n arbitration law however, as has been held above, the moment "seat" is
determined, the fact that the seat is at Mumbai would vest Mumbai courts
with exclusive jurisdiction for purposes of regulating arbitral proceedings
arising out of the agreement between the parties.

21. [H]aving regard to the above, it is clear that Mumbai courts alone
have jurisdiction to the exclusion of all other courts in the country, as the
juridical seat of arbitration is at Mumbai.
(Emphasis supplied)

A plain reading of these two paragraphs, at first blush, suggests that Indus Mobile
has laid down the law that the court at the 'seat' has exclusive supervisory
jurisdiction over the domestic arbitral proceedings. Multiple High Courts across

2 SK Dholakia and Aarthi Rajan, Not Three but Half an Error in BALCO: Bhatia International
Rightly Overruled, 1 SCC (Jour.) J-81, (2013); INDU MALHOTRA, O.P. MALHOTRA ON THE LAW &
PRACTICE OF ARBITRATION AND CONCILIATION 158 (3rd ed., 2014); V. Niranjan and Shantanu
Naravane, Bhatia International Rightly Overruled: The Consequences of Three Errors in BALCO,
9 SCC (Jour.) J-26, (2012).
3 Indus Mobile v. Datawind Innovations, (2017) 7 SCC 678.
106 NUALS LAW JOURNAL VOL. 13

the country, including Allahabad,4 Bombay,5 Delhi,6 Kerala (Division Bench),7

Madras (Division Bench),8 Punjab & Haryana,9 Rajasthan,10 Uttarakhand11 have
in fact arrived at such a conclusion. Considering themselves to be bound by the
observations in Indus Mobile, these High Courts concluded that as soon as the
'seat' is determined, the jurisdiction of all other courts of proper/ competent/
natural jurisdiction stands ousted.

With due respect, the High Courts have erred in arriving at such a conclusion for
the following reasons.

Firstly, the concerned High Courts have overlooked the fact that Paragraph 96 of
BALCO grants concurrent supervisory jurisdiction to two courts – courts at the
'seat' as well as the courts where the ‘subject-matter of the suit’/ ‘cause of action’
lies. It is evident that BALCO does not treat the 'seat' as having exclusive
jurisdiction as the judgment itself discusses the concurrent jurisdiction of two
courts at two places.

Since BALCO is a decision of a five-Judge Bench, the Indus Mobile decision cannot
dilute the precedential value of the larger Bench decision of the Supreme Court in
BALCO. Even assuming that the concerned High Courts were right in their
reading of the judgment in Indus Mobile, and correctly understood it to have laid
down that the ‘seat’ has exclusive supervisory jurisdiction, the High Courts should
not have lost sight of the BALCO judgment. The observation in Paragraph 96 of
BALCO continues to be the effective law of the land, and the reliance on Indus
Mobile, to the effect of ousting the jurisdiction of all courts apart from the court at
the ‘seat’, is misplaced. The ratio of Indus Mobile is required to be read in light of
the BALCO judgment, and therefore, any inconsistencies with BALCO are liable
to be ignored.

Secondly, the abovementioned High Courts have failed to get the gist of Indus
Mobile through a more careful reading. The same has been done by a Division
Bench of the Delhi High Court through a well-reasoned judgment in Antrix

4 Suristh Tiwary v. Purushottam Kumar Chaubey, (2017) 125 ALR 582.

5 General Instruments Consortium v. Lanco Infratect Limited, Arbitration Application No. 287 of
2018 (Judgment dated 31 July 2017) (Bom. HC).
6 RITES Ltd. v. Government of NCT of Delhi, 2018 SCC OnLine Del 8227.
7 K. Sasidharan v. Sundaram Finance, (2018) SCC OnLine Ker 2538.
8 Karaikal Port v. Marg Limited, 2018 SCC OnLine Mad 2362.
9 M/s Green Builders v. Ramesh, Arbitration Case No. 33 of 2017 (Judgment dated 7 October 2017)
(P&H HC).
10 Union of India v. SSV Constructions, SB Civil Miscellaneous Appeal No. 806 of 2018 (Judgment
dated 13 November 2018) (Raj. HC).
11 Nagar Palika Parishad v. Ramesth Construction Pvt. Ltd., 2017 (3) UC 2214, Civil Revision No.
35/2017 (Judgment dated 31 May 2017) (Utt. HC).
107 NUALS LAW JOURNAL VOL. 13

Corporation Ltd. v. Devas Multimedia [“Antrix”].12 Antrix attempted to reconcile

BALCO and Indus Mobile and concluded that the latter does not fall foul of
Paragraph 96 of BALCO, as it was dealing with a very specific issue (expressly
framed in Paragraph 2 of the Indus Mobile judgment) - whether an exclusive
jurisdiction clause in favour of a pre-determined 'seat' would oust the jurisdiction
of all other courts - and therefore, its ratio has to be understood in light of the
specific facts and circumstances of the matter.13 The Division Bench placed
reliance on the Calcutta High Court's Hinduja Leyland v. Debdas Routh [“Hinduja
Leyland”]14 judgment wherein a similar conclusion had been arrived at.

Let us envisage five possible situations which may arise in arbitration-related

proceedings:

Situation A Situation B Situation C Situation D Situation E

Seat = City X Seat = City X Seat = City X Seat = City X No Seat

designated
Exclusive Exclusive Exclusive No exclusive
jurisdiction jurisdiction jurisdiction jurisdiction Exclusive
clause is also clause is in clause in clause. jurisdiction
in favour of favour of City favour of City clause is in
City X. Y (Y has Y (Y does not favour of City
proper have proper Y (Y has
jurisdiction). jurisdiction). proper
jurisdiction).

As per Antrix, the process of 'seat' selection merely confers proper jurisdiction on
the courts at the 'seat', which remains concurrent to the courts of the 'subject-
matter of the suit'/ 'cause of action', and Indus Mobile simply lays down that an
exclusive jurisdiction clause in favour of the pre-determined 'seat' (already having
proper jurisdiction as per Paragraph 96 of BALCO) has the effect of ousting the
jurisdiction of the other courts having concurrent jurisdiction. Thus, Indus Mobile
should be regarded as an authority for treating the courts at City X as the courts
with exclusive supervisory jurisdiction only in Situation A, as illustrated above.
In Situation B, in spite of City X being the designated ‘seat’, City Y will have the
exclusive jurisdiction by virtue of having the exclusive jurisdiction clause in its

12 Antrix Corporation Ltd. v. Devas Multimedia, 2018 SCC OnLine Del 9338.
13 Id., at ¶ 56.
14 Hinduja Leyland v. Debdas Routh, 2017 SCC OnLine Cal 16379.
108 NUALS LAW JOURNAL VOL. 13

favour. Similarly, in Situation C and D, City X will merely be a court of proper

jurisdiction as the 'seat' does not get exclusive jurisdiction on a stand-alone basis.

In Emkay Global Financial Services Ltd. v. Girdhar Sondhi,15 Justice Nariman

had the opportunity of considering his own judgment in Indus Mobile. The
extracts from the relevant paragraphs of the Emkay judgment are as follows:

8. The effect of an exclusive jurisdiction clause was dealt with by this

Court in several judgments, the most recent of which is the judgment
contained in Indus Mobile Distribution (P) Ltd. In this case, the arbitration
was to be conducted at Mumbai and was subject to the exclusive jurisdiction
of courts of Mumbai only. After referring to the definition of “Court”
contained in Section 2(1)(e) of the Act, and Sections 20 and 31(4) of the Act,
this Court referred to the judgment of five learned Judges in Balco v. Kaiser
Aluminium Technical Services Inc., in which, the concept of juridical seat
which has been evolved by the courts in England, has now taken root in our
jurisdiction.

9. Following this judgment, it is clear that once courts in Mumbai have

exclusive jurisdiction thanks to the agreement dated 3-7-2008, read with the
National Stock Exchange Bye-laws, it is clear that it is the Mumbai courts
and the Mumbai courts alone, before which a Section 34 application can be
filed. The arbitration that was conducted at Delhi was only at a convenient
venue earmarked by the National Stock Exchange, which is evident on a
reading of Bye-law 4(a)(iv) read with sub-clause (xiv) contained in Chapter
XI.
(Emphasis supplied)

In Emkay, the factual situation was identical to Situation E, as illustrated above.

No city had been expressly designated as the ‘seat’ and the exclusive jurisdiction
clause was in favour of Mumbai (City Y from Situation E), which had proper
jurisdiction by virtue of being the place where the ‘cause of action’ had arisen. In
this light, the exclusive jurisdiction clause in favour of Mumbai was held to be the
decisive factor.

The underlined portions in the above extract, from the Justice Nariman authored
Emkay judgment, may be considered to indicate that the final decision in Indus
Mobile hinged on the exclusive jurisdiction clause and its effect on a court having
proper jurisdiction, and not on the designation of Mumbai as the ‘seat’ on a stand-
alone basis. The exclusive jurisdiction clause in favour of Mumbai, in the factual
scenario of Indus Mobile, would have been inconsequential if ‘seat’ designation
was itself enough to grant exclusive jurisdiction to the courts at the ‘seat’. Thus,

15 Emkay Global Financial Services Ltd. v. Girdhar Sondhi, (2018) 9 SCC 49.
109 NUALS LAW JOURNAL VOL. 13

the Supreme Court, and Justice Nariman himself, highlighting the importance of
the exclusive jurisdiction clause in Indus Mobile might give the supporters of the
Antrix reasoning something to cheer about.

In September 2018, two separate Division Bench judgments of the Calcutta High
Court - Hirok Chowdhury v. Khagendra Dass16 and Debdas Routh v. Hinduja
Leyland17 (arising out of an appeal against the Hinduja Leyland decision relied
upon in Antrix) [“Debdas Routh”] also recognized that the ratio of Indus Mobile is
being misunderstood.

Debdas Routh went to the extent of saying that, when dealing with domestic
arbitrations, Paragraph 96 of BALCO is merely obiter dictum. Therefore, the said
paragraph does not qualify as a binding legal precedent of the Supreme Court
under Article 141 of the Constitution of India.18 If this were to be true, the courts
at the 'seat' cannot qualify as 'court' under Section 2(1)(e) of the Arbitration Act at
all, and can never have supervisory jurisdiction over the arbitral proceedings. The
selection of the ‘seat’ would not even confer the courts at that place with proper
jurisdiction, as was clarified and concluded in Antrix. Resultantly, even a forum
selection clause in favour of the courts at the ‘seat’ would not empower them to
exercise exclusive supervisory jurisdiction over the arbitration, as such a clause
can only be effective when made in favour of a court having proper/ natural
jurisdiction in the first place (See Hakam Singh v. M/s Gammon19 and ABC
Laminart v. AP Agencies20). Thus, in the scenarios discussed above, City X would
not have exclusive supervisory jurisdiction even in Situation A. The very
foundation of the Indus Mobile judgment would be left on shaky ground.

However, it is argued that Debdas Routh goes too far. Without entering the debate
regarding the correctness of BALCO's Paragraph 96, it would be safe to say that,
as of today, it cannot be treated as mere obiter as it has received widespread
acceptance from not only the High Courts across the country but also by the
Supreme Court in Indus Mobile itself. Notwithstanding the argument that Indus
Mobile appears to contradict Paragraph 96 of BALCO on a plain reading, it is clear
that Indus Mobile treated the same paragraph to be instructive and binding in
nature on the law relating to ‘seat’ in domestic arbitrations. The concept of
‘juridical seat’ as explained in BALCO has also been affirmed in the recent Emkay
decision of the Supreme Court, wherein the Supreme Court was again dealing
with a domestic arbitration.

16 Hirok Chowdhary v. Khagendra Dass, AIR 2018 Cal 272.

17 Debdas Routh v. Hinduja Leyland, AIR 2018 Cal 322.
18 Id. at ¶ 68.
19 Hakam Singh v. M/s Gammon, (1971) 1 SCC 286.
20 ABC Laminart v. AP Agencies, (1989) 2 SCC 163.
110 NUALS LAW JOURNAL VOL. 13

In any case, Paragraph 96 being a legal observation of a Constitution Bench of the

Supreme Court would carry considerable weight.21 In the absence of a contrary
Supreme Court pronouncement on the issue, the same can also be argued to be
binding on the country's High Courts.22 Once the attacks on the precedential value
of BALCO’s Paragraph 96 stand repelled, the discussion in Part II [A] above
squarely applies, and the High Courts cannot simply overlook the observations
made in Paragraph 96 of BALCO as obiter dicta with no binding force.

VI. BUT THE TREND CONTINUES

Unfortunately, the issue is far from settled. While the Delhi High Court and, to
some extent, the Calcutta High Court might have recognized that the ratio of the
Indus Mobile judgment is not what it appears to be, this cannot, by itself, clear the
mess of erroneous decisions by the other High Courts across the country. The
binding precedential value of the Antrix judgment is restricted to the courts falling
within the territorial jurisdiction of the Delhi High Court. Similarly, the Hirok
Chowdhury and Debdas Routh judgments also have restricted territorial influence
over the courts in the state of West Bengal. The possibility of more judgments
which derive erroneous conclusions from Indus Mobile being rendered by the
courts across the country, including the High Courts, continues to be ripe. This is
abundantly clear from the fact that the fallacious reliance on Indus Mobile is not
restricted to the courts in the states other than Delhi and West Bengal. Multiple
Single Judge decisions of the Delhi High Court23 itself continue to erroneously rely
upon Indus Mobile, even in the post-Antrix period. These decisions, without so
much as a reference to, and in clear ignorance of the Division Bench judgment of
their own High Court in Antrix, have arrived at the conclusion that where the
‘seat’ of arbitration has been prescribed in the agreement, it attracts exclusive
supervisory jurisdiction in domestic arbitrations.

It is unlikely that the various High Courts would be able to arrive at one uniform
understanding of Indus Mobile read with BALCO. The decision in the Emkay
matter would also not suffice to bring about uniformity as it does not directly deal
with the issue of Indus Mobile’s ratio and its conceivable conflict with BALCO. It
is definitely not enough to settle the debate and to be conclusive on the issue. In
this light, the Supreme Court has a big role to play. The law of arbitration in India

21 Director of Settlements, AP & Ors. v. MR Apparao, (2002) 4 SCC 638 : AIR 2002 SC 1598.
22 Municipal Committee, Amrtisar v. Hazara Singh, (1975) 1 SCC 794 : AIR 1975 SC 1087; Sarwan
Singh Lamba v. Union of India, (1995) 4 SCC 546; Oriental Insurance Co. Ltd. v. Meena Variyal,
(2007) 5 SCC 428 : AIR 2007 SC 1609.
23 Cable Corporation of India Limited v. Jay Pee Sports International Ltd. and Ors., Arbitration
Petition No. 789 of 2016 (Judgment dated 31 July 2018) (Del. HC); OSA Vendita v. Bausch & Lomb
India, Arbitration Petition No. 485 of 2018 (Judgment dated 29 November 2018) (Del. HC); Virgo
Softech v. National Institute of Electronics and Information Technology, Arbitration Petition Nos.
754 of 2018 and 755 of 2018 (Judgment dated 30 November 2018) (Del. HC).
111 NUALS LAW JOURNAL VOL. 13

is in desperate need of a judgment from its Apex Court which tackles the issue
head-on and brings about clarity regarding the true import of the Indus Mobile
judgment and the understanding of Paragraph 96 of BALCO.

VII. SUPREME COURT: THE SOURCE OF THE MESS AS WELL AS

ITS POTENTIAL CLEANER

If one were to point out the most prominent reason for the confusion regarding the
ratio of Indus Mobile, it would be the language and structure of the judgment.
Indus Mobile extensively quotes Paragraph 96 of BALCO, treats it as instructive
on the concept of 'seat' and then takes a stance which, on a plain reading, appears
to be in the teeth of the very same paragraph. The judgment gives the impression
of being internally inconsistent. Only if one were to carry out an Antrix type of
scrutiny of the judgment, can one resolve the potential conflict between BALCO
and Indus Mobile and conclude that Indus Mobile did not intend to lay down the
law for which it is being used as a precedent throughout the country.

Indus Mobile, in Paragraphs 12-15, extensively quotes extracts from Enercon

(India) Ltd. v. Enercon GmbH24 and various other Supreme Court judgments
saying that the 'seat' has exclusive supervisory jurisdiction. It overlooks the fact
that those judgments were delivered in the context of foreign seated arbitrations,
and were therefore inapplicable to the domestic arbitration under consideration
in Indus Mobile. The reference to Enercon seems to be unnecessary and it only
adds to the confusion regarding the judgment. Paragraphs 12-15 are worded in a
manner which gives the impression that the Apex Court treats the designation of
the 'seat' as analogous to an exclusive jurisdiction clause, with further affirmation
coming from the wording of Paragraphs 20 and 21 (most relevant extracts quoted
above). It is arguable that it is actually unclear if the Supreme Court was even
attempting to answer the question that was framed in Paragraph 2 of the
judgment or did it actually intend to lay down the law that 'seat' is akin to an
exclusive jurisdiction clause.

Overall, the manner in which Antrix interprets the judgment is the right way
forward, but the Indus Mobile judgment does leave enough scope for the courts
across the country to be misguided on to a totally different track. The judgment
leaves much to be desired as the ratio is vulnerable to misinterpretation. High
Court judgments like Antrix cannot bring about the required change across the
country due to their territorial limitations. Instead, the burden is upon the
Supreme Court to step up and to decode the Indus Mobile judgment at the first
available opportunity, and to thereby clear up the mess of its own making.

24 Enercon (India) Ltd. v. Enercon GmbH (2014) 5 SCC 1.