The recent decision of the three judge bench in the case of BGS SGS Soma JV v. NHPC Ltd1, has settled the conundrum with regards to place, seat and venue of arbitration. It has put to rest the debate and laid down that the place of arbitration is akin to the seat of arbitration irrespective of the fact that cause of action has arisen at a different place. Moreover, the courts of juridical seat will have exclusive jurisdiction over arbitral proceedings. Additionally, it also ruled on the maintainability of Section 37 application against a transfer order.
In any contract, it is crucial to have a clause which provides for resolution of disputes through arbitration for speedy redressal of claims. The incorporation of an arbitration clause requires careful and conservative drafting, so that no scope of interpretation is left. The clause most importantly, must, provide for a place/seat of arbitration, where the arbitral proceedings would be conducted. Very often, parties to a contract, miss out on incorporating such important information while drafting arbitration clauses which, consequently, lets it open for interpretation. The problem arises when the poorly drafted clauses do not mention the seat of arbitration, which subsequently leads to another problem, i.e. when parties are to the approach the court for settling their grievances with regards to the awards. For instance, if in a contract, the arbitration clause, provides for City A and City B as place of arbitration but does not prescribe which court will have jurisdiction, then, the parties may, on the basis of their convenience, approach the respective courts consequently leading to multiplicity of litigation and delayed redressal of claims.The Hon'ble Supreme Court, in one of its most welcomed decision, has settled this problem while holding that the term place of arbitration can be used interchangeably with seat till the time nothing has been appended to it, to have any contrary effect. The article discusses in brief this position along with other aspects that have been dealt by the Supreme Court in its recent judgment.
The facts in this matter are critical to understand the rationale of the ruling as the Supreme Court did rule on law but had important references to the facts in hand. It is likely to also assist future as well as ongoing arbitration matters in India, since, many a times, arbitration agreements simply provide for place of arbitration and miss out on mentioning seat.
- The arbitration agreement provided for the arbitral proceedings to be conducted either at New Delhi or Faridabad. The clause merely provided for place of arbitration.
- Disputes arose between the parties and the proceedings commenced in New Delhi. The outcome of these proceedings was an award, passed in the favor of the Appellant i.e. BGS SGS Soma JV.
- The Respondent i.e. NHPC challenged this award by way of an application filed under Section 34 of the Act before the Hon'ble District court of Faridabad.
- Bringing into light, the fact, that the aforesaid application was not amenable to the jurisdiction of the Faridabad Court, the Appellant filed an application under Section 151 of Code of Civil Procedure read with Order VII, Rule 10 of CPC and Section 2(1)(e)(i) of the Arbitration Act, seeking the return of the Section 34 application to the courts of New Delhi, to which the jurisdiction accrues. This application was allowed and a transfer order was issued.
- The Respondent went in appeal against this order before the Hon'ble High Court of Punjab and Haryana (hereinafter referred to as the "Hon'ble High Court) under Section 37 of the Act. The Hon'ble High Court allowed the appeal filed by the Respondent and ruled that Section 34 proceedings are amenable to the Courts of Faridabad as that is the place where the cause of action had arisen and New Delhi was just a convenient "venue".
- Aggrieved by the said order, the Appellant moved before the Hon'ble Supreme Court in appeal.
The Hon'ble Supreme Court's ruling is explained under the following heads:
On maintainability of Section 37 Application against the transfer order
The Hon'ble Supreme Court, ruling against the said issue, held that a Section 37 application is not maintainable against a transfer order.
Section 37 prescribes for orders which can be appealed and these are:
- granting or refusing to grant any measure under section 9;
- setting aside or refusing to set aside an arbitral award under section 34;
- refusing reference to arbitration under Section 8.
The Appellant challenged the impugned order which allowed the Section 37 Application filed by the Respondent.
The Hon'ble Supreme Court held that the Hon'ble High Court erred in allowing Section 37 application against the transfer order which was issued to transfer Section 34 proceedings from Hon'ble District Court of Faridabad to the New Delhi one.
It stated that such an order cannot be construed as an order setting aside or refusing to set aside an arbitral award under Section 34 as it merely prescribes for the transfer of proceedings instead of actually deciding the application i.e. grant/refusal to set aside the arbitral award.
Therefore, the Respondent's Appeal was held to be not maintainable as it could not pass the muster provided under Section 37 of the Act, in short, the order against which the Respondent went in appeal, was not appealable and hence the non-maintainability.
On place, venue and seat of arbitration
The Hon'ble Supreme Court ruled against the decision of the Hon'ble High Court in this issue as well and held that New Delhi was the seat of arbitration and not Faridabad. The reasoning behind this decision can be understood under the following heads:
(i) Determination of exclusive jurisdiction of court
The Respondent had relied on Para 96 of Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc2 (hereinafter referred to as "BALCO")and Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd.3 (hereinafter referred to as Antrix), to buttress his argument that the following two courts have concurrent jurisdiction:
- Court where cause of action arose
- Court of the seat of arbitration
The Respondent's contention was that since the contract was signed in Faridabad and notice was issued in Faridabad, the cause of action had arisen in Faridabad and therefore according to the aforesaid judgments, Court of Faridabad will have jurisdiction.
The Hon'ble Supreme Court held that the Respondent incorrectly relied upon the decision in the case of BALCO, as the judgment is to be read holistically. Reliance was placed by the Hon'ble Apex Court on the other observations of the BALCO's decision wherein it had held and agreed with the decision of Roger Shashoua & Ors. v. Mukesh Sharma4 (hereinafter referred to as "Roger") that the court of the seat of the arbitration will have exclusive jurisdiction. Additionally, the BALCO decision acknowledged the fact that the terms; 'place' and 'seat' can be used interchangeably.
Therefore, the Hon'ble Apex Court while ruling that court of seat of arbitration will have exclusive jurisdiction also held that the law enshrined in Antrix with regard to concurrent jurisdiction is incorrect.
(ii) Determination of seat of arbitration
The Hon'ble Supreme Court held that place of arbitration is to be regarded as juridical seat of arbitration in case no other caveat is appended to it, for instance, that it is merely a venue and not the seat. This decision is premised on the rules enunciated in BALCO and Roger.
While dealing with this aspect, the Hon'ble Apex Court overruled the decision of Union of India v. Hardy Exploration and Production (India) Inc.5 (hereinafter referred to as Hardy Exploration) in this respect, stating it to be against BALCO, a bigger strength bench. The rule opined by Hardy Exploration is anti-thetical to that of BALCO, it observed that venue/place of jurisdiction is not seat till the time concomitant factors are appended to it, for instance, venue is to be regarded as seat.
In light of the aforesaid reasoning and after summing up all the judgments, the Hon'ble Supreme Court listed the following two principles:
- Court of Seat of arbitration will have exclusive jurisdiction
- Place of arbitration is to be regarded as seat of arbitration in case no significant indication to the contrary is present.
Applying, these two to the facts of the case, the Hon'ble Supreme Court determined the seat of arbitration. While reading out the language of the arbitral clause in the instant case, which stipulates that the proceedings shall be held in New Delhi/ Faridabad, it stated that since the clause is silent on one particular place being the seat of arbitration, it has to be read by the conduct of the parties. It held that since all the proceedings were conducted in New Delhi and the award was also signed in New Delhi, the parties had impliedly chosen New Delhi as the seat of arbitration and therefore court of seat of arbitration will have exclusive jurisdiction. It also disregarded the contention put forth by the Respondent that Hon'ble District Court of Faridabad will have jurisdiction as partial cause of action had arisen there in as much as the contract was signed there and held that court of seat of arbitration will have exclusive jurisdiction over court of cause of action as has been held in BALCO.
In the opinion of the authors, the decision has settled the grey area with respect to place, seat and venue of arbitration and is a welcome move. In the same light, the authors feel that the decision might not be a good precedent as it has not observed the basic principle and procedure of precedential propriety. There might be a possibility of the decision being challenged in future as the coordinate bench could not have overruled the decision of the equal strength bench in the case of Hardy Exploration, instead, referred it to a larger bench for consideration after giving its reasons of disagreement6.
ABOUT THE AUTHORS: Ambika Pratiyush Swain is a Managing Associate and Siddhi Kochar is a trainee at L&L Partners Law Offices.
 Civil Appeal No. 9307 OF 2019
 (2012) 9 SCC 552
 2018 SCC Online Del 9338
  EWHC 957 (Comm)
 2018 SCC Online SC 1640
 (2005) 2 SCC 673