Introduction

The Supreme Court in its judgment in BGS SGS SOMA JV vs. NHPC LTD1 reiterated the importance of correctly identifying the seat of an arbitration in order to avoid disputes relating to the curial jurisdiction of the courts. A plethora of conflicting judgments confusing seat with the venue have created difficulties in ascertaining the jurisdiction of the curial court. The ruling is therefore both welcome and timely as it clarifies and helps identify the place of arbitration where not expressly provided for by the parties.

Brief Facts

An engineering contract (Contract) between the parties provided for settlement of disputes with a foreign contractor in accordance with the Arbitration and Conciliation Act, 1996 ("Act") and the UNCITRAL rules. The Contract contemplated that arbitration would be held in New Delhi/Faridabad. Arbitral proceedings were duly conducted at New Delhi and the award was published there.

The award was challenged by the Respondent in the Gurugram Commercial Court. The Petitioner disputed the jurisdiction of the Gurugram Court by contending that the correct forum for entertaining any challenge to the award was the Delhi High Court, as that was the curial court due to the arbitration being seated there. The Gurugram Court upheld the Petitioner's objection.

The Respondent appealed to the Punjab & Haryana High Court, which reversed the Gurugram Court's judgment. The Punjab & Haryana High Court's judgement was in turn carried to the Supreme Court in appeal by the Petitioner.

Seat and Jurisdiction over Arbitral Proceedings

The Supreme Court whilst relying on a catena of judgements, particularly the English Court's decision in C v/s D2 endorsed by the Supreme Court in Balco'3 , reiterated that the curial court would be determined by reference to the seat of the arbitration. Once the seat of the arbitration was identified, the court having territorial jurisdiction over such seat would have exclusive jurisdiction over the conduct of arbitral proceedings.

The Supreme Court endorsed the ratio and principle in the English case of Roger Shasoua4 i.e., that subject to any contrary indication, where no seat has been specifically designated, the venue is the seat of the arbitration. In Roger Shashoua, the court in the absence of a designated seat, regarded the English court as the supervisory court, as all indications pointed to London as the place of the arbitration.

Extending this principle to domestic cases, the Apex Court concluded that the Delhi High Court would have exclusive curial jurisdiction as the arbitration was seated there. The judgement of the Punjab & Haryana High Court was accordingly set aside by the Supreme Court.

The Supreme Court used this opportunity to expressly overrule its earlier judgement in Union of India v. Hardy Exploration and Production (India) Inc. (Hardy Case)5 . The Hardy Case was a controversial and much criticised judgement that had erroneously regarded Delhi as the seat of an international arbitration despite the entire arbitral proceedings being conducted in Kuala Lumpur. The Supreme Court in that case ruled that Malaysia was simply the venue of the arbitration. As Indian law was the substantive law of the production sharing contract, the Supreme Court found that in the absence of an express designated seat, the Indian courts would be the curial court for supervising the arbitration. The Hardy Case failed to apply the Roger Shashoua principle.

Conclusion

This judgement clears the confusion in identifying the seat of the arbitration in the light of The Hardy Case and upholds the Shashoua principle. It clarifies that in the absence of an expressly designated seat of arbitration, the venue may be regarded as the place of the arbitration if the surrounding circumstances indicate the intention of the parties to anchor the arbitration to that place. The ruling reinforces the principle that only the curial courts will have exclusive supervisory jurisdiction to deal with challenges to the award.

The practical implications are significant as the choice of a seat will determine the court exercising supervisory jurisdiction over the arbitration. Some courts in India are more efficient and commercially savvy than others. Ending up in the wrong court can cause significant delay, worry and expense or result in a refusal to enforce the award.

Footnotes

1 Civil Appeal No. 9307 of 2019, decided on 10.12.2019, Supreme Court

2 C v D, [2007] EWCA Civ 1282.

3 Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc., (2012) 9 SCC 552.

4 Roger Shashoua & Ors. v. Mukesh Sharma, [2009] EWHC 957 (Comm).

5 Union of India v. Hardy Exploration and Production (India) Inc., 2018 SCC Online SC 1640

Originally published January 2, 2020.

The above is a generic analysis and should not be regarded as a substitute for specific advice based on the facts of a client's objectives and specific commercial agreements reached. Please do reach out to us at mail@zba.co.in for any queries.