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Disortho S.A.S. v. Meril Life Sciences Pvt. Ltd.

Not available · 2025 INSC 352Decided 18 Mar 2025
Arbitration Petition No. 48 of 2023
Chief Justice · Justice Sanjay Kumar · Justice K.V. Viswanathan

Background

Disortho, a Colombian company, and Meril, a Gujarat-based Indian company, signed a distribution agreement for medical products in Colombia. The contract contained two seemingly conflicting clauses: one said the agreement would be governed by Indian law with courts in Gujarat having jurisdiction, while another provided for conciliation and arbitration in Bogota, Colombia, under Colombian arbitration rules with the award to follow Colombian law. When a dispute arose, Disortho asked the Indian Supreme Court to appoint an arbitrator; Meril argued Indian courts had no power to do so because the arbitration was meant to be seated in Colombia.

Decision Breakdown

Surveying English, Singapore, and its own precedent (including the recent Arif Azim case), the Court applied a three-step test to work out which country's law governed the arbitration agreement itself: express choice, implied choice, and closest connection. Finding no express choice of law for the arbitration agreement specifically, the Court held that the clause naming Indian law and Gujarat's courts as governing the overall contract created a strong implied choice that Indian law also governed the arbitration agreement, and that naming Bogota as the arbitration venue did not override this: a venue is not automatically the same as the "seat" that determines governing law. Since both companies also agreed during the hearing to have the arbitration take place in India with a single arbitrator, the Court appointed a retired Delhi High Court judge as sole arbitrator under Delhi International Arbitration Centre rules.

Lesson Learnt

When a cross-border contract contains apparently conflicting clauses about governing law and arbitration venue, courts try to read them together rather than let one cancel out the other; simply naming a foreign city as the place for arbitration does not, by itself, mean that country's law controls the arbitration agreement if the contract's own governing-law clause points elsewhere.

Official source (sci.gov.in)View Judgment (PDF)

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