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Feb 24 – 2026

SUPREME COURT FLAGS CONFUSING ARBITRATION CLAUSES AS “PROFESSIONAL MISCONDUCT”

Himadri Speciality Chemicals Limited vs. Jindal Coke Limited

In a significant oral observation aimed at reforming arbitration practices, the Supreme Court of India strongly criticised law firms for drafting confusing and contradictory arbitration clauses, remarking that such conduct may amount to professional misconduct.

The case arose from a conflict between a jurisdiction clause and an arbitration clause within the same commercial agreement, leading to avoidable litigation before multiple courts.

Background of the Case

The matter was heard by a Bench comprising:

  • Surya Kant (Chief Justice of India)
  • Joymalya Bagchi
  • Vipul Pancholi

The dispute concerned two clauses in the agreement:

  • Clause 14 – Provided that disputes would be referred to arbitration, with the venue of arbitration at New Delhi.
  • Clause 13 – Stated that Indian law would govern the agreement and that courts of Jaipur would have exclusive jurisdiction over matters relating to the agreement.

This apparent inconsistency triggered litigation over which court had jurisdiction to appoint an arbitrator.

Delhi High Court’s Decision

The Delhi High Court relied on established Supreme Court precedents and held that the “venue” clause effectively operated as the seat of arbitration, thereby conferring jurisdiction upon Delhi courts.

Accordingly, it appointed Senior Advocate V. Mohana as the sole arbitrator under the aegis of the Delhi International Arbitration Centre.

This order was challenged before the Supreme Court.

Key Legal Issue

The petitioner argued that divergent views existed across High Courts on whether a jurisdiction clause could act as a “CONTRARY INDICIA” preventing a venue from being treated as the seat of arbitration.

The concern was not merely procedural. Once a place is determined to be the seat, all subsequent proceedings under:

  • Section 34 (setting aside arbitral award)
  • Section 37 (appeals)

of the Arbitration and Conciliation Act, 1996 would lie exclusively before courts of that seat.

Thus, the issue had far-reaching implications beyond appointment of the arbitrator.

Supreme Court’s Strong Observations

Chief Justice Surya Kant expressed serious concern over the drafting practices of law firms:

“Why can’t the terms be simplified to avoid confusion?”

He observed that such clauses are:

  • “Deliberately, mischievously designed”
  • Drafted in a manner that generates avoidable litigation
  • A burden on already overworked courts

The Court went further to state that creating litigation through poor drafting amounts to professional misconduct. The CJI questioned how law firms could fail to understand fundamental distinctions between:

  • Seat of arbitration
  • Venue of arbitration
  • Governing law
  • Jurisdiction clause

He remarked that a simple, clearly worded clause could avoid such disputes altogether:

“One line you can resolve.”

The Bench also warned that it may, in appropriate cases, question which law firm drafted such agreements.

Seat vs. Venue – Why It Matters

This case again highlights a recurring issue in arbitration law:

  • Seat determines the supervisory court and curial law.
  • Venue is merely the physical location where hearings may be conducted.
  • Jurisdiction clauses must align with the designated seat to avoid conflict.

When poorly drafted, such clauses result in:

  • Multiple proceedings in different courts
  • Delay in constitution of arbitral tribunals
  • Increased costs for parties
  • Judicial burden

Justice Joymalya Bagchi noted that while such technicalities may assume significance in international commercial arbitration, domestic arbitration should not be delayed by hyper-technical objections.

Supreme Court’s Final Decision

Despite acknowledging that arguable legal questions were raised, the Supreme Court:

  • Refused to interfere with the Delhi High Court’s order
  • Noted that an arbitrator had already been appointed
  • Observed that parties were willing to proceed before the appointed arbitrator

The plea was accordingly dismissed.

Significance of the Judgment

This case is important for several reasons:

  • Strong Warning to Law Firms:

The Court’s remarks send a clear message: complex drafting that creates artificial disputes will not be tolerated.

  • Push Toward Simplified Arbitration Clauses:

The judiciary is advocating for clarity, precision, and simplicity in arbitration agreements.

  • Reinforcement of Pro-Arbitration Approach:

The Court emphasized expediting arbitration rather than entertaining technical objections.

  • Institutional Accountability:

The Court’s observations hint at possible scrutiny of professional standards in legal drafting.

Practical Takeaways for Drafting Arbitration Clauses

To avoid litigation:

  • Clearly state the seat of arbitration.
  • Avoid ambiguity between venue and seat.
  • Align exclusive jurisdiction clauses with the chosen seat.
  • Avoid unnecessary “luxury clauses.”
  • Keep arbitration clauses concise and unambiguous.

Example of a clear clause:

“The seat and venue of arbitration shall be New Delhi. Courts at New Delhi shall have exclusive jurisdiction over all matters arising out of the arbitration.”

Conclusion

In Himadri Speciality Chemicals Limited v. Jindal Coke Limited, the Supreme Court not only resolved a procedural dispute but also delivered a broader institutional message:

“Arbitration must reduce litigation — not generate it.”

By calling confusing arbitration clauses “professional misconduct,” the Court has signalled a move toward greater accountability in commercial drafting and a stronger commitment to efficient dispute resolution in India.