Supreme Court of India stated that once the arbitrator fixes ‘the seat’ in terms of subsection (2) of Section 20 of the Act, the arbitrator cannot change ‘the seat’ of the arbitration, except when and if the parties mutually agree and state that the ‘seat of arbitration’ should be changed to another location.
Brief Facts:
The appellant and the respondent had entered into a contract. The arbitration clause is silent and does not stipulate the seat or venue of arbitration. The corporate office of the respondent is also located at Panchkula. However, the registered office of the appellant is located in Bengaluru. As disputes arose between the parties, the matter was referred to arbitration, and Mr. Justice (Retd.) N.C. Jain was appointed as the sole arbitrator. In the first sitting held on 5th August 2014, the arbitral tribunal held that the venue of the proceedings would be H.No. 292, Sector-6, Panchkula, Haryana. In the proceedings held on 29th May 2015, Mr. Justice (Retd.) N.C. Jain recused recording that he did not want to continue as the arbitrator for personal reasons. The petition filed by the respondent under Section 9 of the Act before the Additional District Judge, Panchkula, was dismissed vide order dated 14th December 2016, on the ground of lack of territorial jurisdiction, inter alia, recording that the jurisdiction to entertain the application vests solely with the Delhi High Court, where a prior petition under Section 34 had been filed, and was pending. The petition under Section 9, being a subsequent petition, would be barred under Section 42 of the Act. However, this order has been set aside by the High Court of Punjab and Haryana vide order dated 14th October 2019.
HC’s Decision:
HC found that the courts of Delhi do not have the jurisdiction to entertain the objections under Section 34 of the Act. To this effect, the High Court of Punjab and Haryana has recorded that the agreement between the parties was silent as to ‘the seat’ of the arbitration proceedings, and the second arbitrator Mr. Justice (Retd.) T.S. Doabia, vide his first order dated 30th June 2015, had not determined Delhi to be the ‘seat of arbitration’.
SC’s Observations:
The issue before the SC was whether conducting the arbitration proceedings at Delhi, owing to the appointment of a new arbitrator,1 would shift the ‘jurisdictional seat of arbitration’ from Panchkula in Haryana, the place fixed by the first arbitrator for the arbitration proceedings?
SC stated that the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. The ‘seat of arbitration’ need not be the place where any cause of action has arisen, in the sense that the ‘seat of arbitration may be different from the place where obligations are/had to be performed under the contract.
SC stated that there are good reasons why we feel that subsequent hearings or proceedings at a different location other than the place fixed by the arbitrator as the ‘seat of arbitration’ should not be regarded and treated as a change or relocation of jurisdictional ‘seat’. This would, in our opinion, lead to uncertainty and confusion resulting in avoidable esoteric and hermetic litigation as to the jurisdictional ‘seat of arbitration’. ‘The seat’ once fixed by the arbitral tribunal under Section 20(2), should remain static and fixed, whereas the ‘venue’ of arbitration can change and move from ‘the seat’ to a new location. Venue is not constant and stationary and can move and change in terms of sub-section (3) to Section 20 of the Act. Change of venue does not result in change or relocation of the ‘seat of arbitration’.
SC further stated that the seat’ determines the jurisdiction of the courts. There would be situations where the venue of arbitration in terms of sub-section (3) of Section 20 would be different from the place of the jurisdictional ‘seat’, and it is equally possible majority or most of the hearing may have taken place at a venue which is different from the ‘seat of arbitration’.
SC stated that the place or the venue fixed for arbitration proceedings, when sub-section (2) of Section 20 applies, will be the jurisdictional ‘seat’ and the courts having jurisdiction over the jurisdictional ‘seat’ would have exclusive jurisdiction. This principle would have exception that would apply when by mutual consent the parties agree that the jurisdictional ‘seat’ should be changed, and such consent must be express and clearly understood and agreed by the parties.
SC Held:
After evaluating submissions made by both the parties the SC held that “once the jurisdictional
‘seat’ of arbitration is fixed in terms of sub-section (2) of Section 20 of the Act, then, without the express mutual consent of the parties to the arbitration, ‘the seat’ cannot be changed. Therefore, the appointment of a new arbitrator who holds the arbitration proceedings at a different location would not change the jurisdictional ‘seat’ already fixed by the earlier or first arbitrator. The place of arbitration in such an event should be treated as a venue where arbitration proceedings are held.”
Case Title: BBR (India) Private Ltd. v. S.P. Singla Constructions Private Ltd.
Bench: J. Ajay Rastogi and J. Sanjiv Khanna
Citation: CIVIL APPEAL NOS. 4130-4131 OF 2022
Decided on: 18th May, 2022
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