Supreme Court Holds “Indian Law Shall Govern the Agreement and the Related Disputes”, Directs Arbitration to Proceed Under DIAC Rules Despite Foreign Venue
Sanchayita Lahkar
The Supreme Court has allowed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, and appointed a sole arbitrator in a transnational commercial dispute between Disortho S.A.S., a Colombian company, and Meril Life Sciences Private Limited, an Indian entity. The Bench comprising Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, and Justice K.V. Viswanathan held that, despite the arbitration venue being Bogota, Colombia, Indian courts retained jurisdiction for the appointment of the arbitrator based on the governing law stipulated in the parties’ agreement. The Bench recorded, “Indian law shall govern the agreement and the related disputes,” and added that the supervisory powers of Indian courts under Section 11(6) of the Arbitration and Conciliation Act were applicable.
The court observed that Clause 16.5 of the Distributor Agreement between the parties conferred exclusive jurisdiction on courts in Gujarat, India. At the same time, Clause 18 provided for conciliation and arbitration under the Arbitration and Conciliation Centre of the Chamber of Commerce in Bogota, Colombia. The Bench reconciled the apparent conflict between these clauses by holding that Indian law governs the arbitration agreement, even though the procedural rules for arbitration were to follow the Colombian institution’s framework.
The petitioner, Disortho S.A.S., incorporated in Bogota, Colombia, and the respondent, Meril Life Sciences Private Limited, incorporated in Gujarat, India, entered into an International Exclusive Distributor Agreement on 16 May 2016 for the distribution of medical products in Colombia. Disputes later arose, and Disortho invoked arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996 (A&C Act), seeking the appointment of an arbitrator.
Disortho relied on Clauses 16.5 and 18 of the Distributor Agreement, which provided that the agreement would be governed by Indian law and disputes subject to the jurisdiction of courts in Gujarat, India, while arbitration was to be conducted under the auspices of the Chamber of Commerce of Bogota. Meril, in opposition, contended that the arbitration was seated in Colombia, and Indian courts lacked jurisdiction to make appointments under the A&C Act.
Clause 16.5 of the Distributor Agreement stipulated that “This Agreement shall be governed by and construed in accordance with the laws of India and all matters pertaining to this agreement or the matters arising as a consequence of this agreement will be subject to the jurisdiction of courts in Gujarat, India.” Clause 18 provided that unresolved disputes could be submitted to conciliation and arbitration at the Chamber of Commerce of Bogota, with Colombian law applicable to the award.
The key legal question that arose for consideration was whether Indian courts had jurisdiction to appoint the arbitral panel, despite the arbitration being seated in Bogota and administered under Colombian institutional rules.
The Supreme Court identified that the case involved the interplay between three legal systems—lex contractus (law governing the contract), lex arbitri (law governing the arbitration agreement), and lex fori (law of the forum court). The court referred to Redfern and Hunter’s Commentary on International Arbitration, which describes how the law governing the arbitration agreement determines the tribunal’s jurisdiction, the validity of the arbitration agreement, and its scope.
The Bench noted that under international jurisprudence, particularly the English decision in Paul Smith Ltd. v. H&S International Holdings Inc., and Melford Capital Partners v. Wingfield Digby, courts have distinguished between (i) the law governing the arbitration itself, (ii) the law governing the arbitration agreement, (iii) the law governing the contract, and (iv) the procedural rules of arbitration.
Referring to the Sulamérica Cia test, the court explained the three-step approach to determining the law governing the arbitration agreement: (i) express choice, (ii) implied choice, and (iii) closest and most real connection. The court stated, “There is a strong presumption that the lex contractus, i.e., Indian law, governs the arbitration agreement.”
The Bench also discussed judgments from the Singapore and UK courts, including Enka Insaat v. Chubb and BCY v. BCZ, which examined whether the seat of arbitration necessarily governs the arbitration agreement. The Supreme Court noted, “While parties may distinguish between the lex arbitri and lex fori, absent a clear intent to do so, these concepts are often intertwined.”
The court held that Clause 16.5’s conferral of exclusive jurisdiction on courts in Gujarat and the express choice of Indian law as the governing law were sufficient to infer that Indian law governed the arbitration agreement. The court recorded, “The law governing the arbitration agreement, being Indian law, means that its validity, scope, and interpretation will be determined in accordance with Indian law.”
While Clause 18 directed that the arbitration shall be administered by the Chamber of Commerce of Bogota and governed by Colombian procedural rules, the court found no evidence that Colombian law was chosen to govern the arbitration agreement itself. The Bench stated, “The mere choice of venue is not sufficient, in the absence of other relevant factors, to override the presumption in favour of the lex contractus.”
The court further noted that procedural rules of the arbitration and the seat of arbitration are separate from the supervisory jurisdiction of courts, which remains with Gujarat courts under Clause 16.5. Referring to Enka Insaat and Melford Capital, the court stated that “the law governing the arbitration agreement is distinct from the procedural rules of arbitration.”
The Bench rejected Meril’s argument that courts in Colombia should exercise supervisory jurisdiction, recording that “although Clause 18 specifies that the award shall conform to Colombian law, this provision pertains solely to the arbitration proceedings or the award matters.”
The court recorded that both parties, during the hearing, agreed to conduct the arbitration in India and to the appointment of a sole arbitrator. Accordingly, the Bench stated, “we appoint Mr. Justice S.P. Garg, retired judge of the High Court of Delhi, as the sole arbitrator.” The venue of arbitration will be decided by the parties and the arbitrator, and the proceedings will follow the Delhi International Arbitration Centre Rules applicable to international arbitrations.
The court concluded, “The arbitration petition is allowed in the above terms and disposed of accordingly.”
Case Title: Disortho S.A.S. v. Meril Life Sciences Private Limited
Neutral Citation: 2025 INSC 352
Case Number: Arbitration Petition No.48 of 2023
Bench: Chief Justice Sanjiv Khanna, Justice Sanjay Kumar, Justice K.V. Viswanathan
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