Venue of Arbitration shall be the juridical seat of arbitration where contrary intention between the parties is absent

Harshit Sharma | Amity Law School, Madhya Pradesh | 6th January 2020

BGS SGS SOMA JV V/s. NHPC Ltd. CIVIL APPEAL NO. 9307 OF 2019

FACTS OF THE CASE

1. The Petitioner was awarded a contract for construction of Diversion Tunnels, Coffer Dams, Concrete Gravity Dams, Plunge Pools and Cutoff Walls of Subansri Lower Hydroelectric Project on river Subansri, with an installed capacity of 2000 MW, stated to be the largest Hydropower project yet in India.
2. On 16.05.2011, a Notice of Arbitration was issued by the Petitioner to the Respondent, in regard to payment of compensation for losses suffered due to abnormal delays and additional costs as a result of hindrances caused by the Respondent.
3. A 3-membered arbitral tribunal was constituted, which delivered its unanimous award at New Delhi on 26.08.2016, by which the claims of the Petitioner aggregating to ₹424,81,54,096.29 were allowed, together with simple interest at 14% per annum till the date of actual payment.
4. Challenging this, NHPC made an application u/s. 34 of the Arbitration Act before the Faridabad District Court. Pointing out that Faridabad was not the appropriate jurisdiction, JV led an application under Section 151 read with Order VII, Rule 10 CPC and Section 2(1)(e)(i) of the Arbitration Act, seeking the return of the Section 34 application to the appropriate court in New Delhi. This application was allowed ordering return of the same from Faridabad to the appropriate court in New Delhi. 
5. Aggrieved by this transfer order, NHPC led an appeal under Section 37 of the Arbitration Act before the Punjab and Haryana High Court. The HC held that appeal against the transfer order was maintainable under Section 37. It was further held that New Delhi had no exclusive jurisdiction as it was not the “seat of the arbitration” and was a mere “venue of convenience”. 
6. Since a part of cause of action had arisen at Faridabad, the HC held that Section 34 proceedings can be maintained there, ruled the HC.
7. Thus, aggrieved by the same, JV preferred an appeal before the Hon’ble Supreme Court of India. 

ISSUES RAISED

1. Whether the “seat” of the arbitration proceedings is New Delhi or Faridabad, consequent upon which a petition under Section 34 of the Arbitration Act, 1996 may be filed dependent on where the seat of arbitration is located? 

RULING OF THE COURT/ THE COURT HELD THAT

The Hon’ble Supreme Court allowed the appeal and observed/opined the following in this respect: 

1. “The fact that in all the three appeals before us the proceedings were finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the “seat” of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the Courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings. Therefore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the “seat” has been chosen, which would then amount to an exclusive jurisdiction clause so far as Courts of the “seat” are concerned.”
2. “On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” is really the “seat” of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place.”
3. “Further, the fact that the arbitral proceedings “shall be held” at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a “venue” and not the “seat” of the arbitral proceedings, would then conclusively show that such a clause designates a “seat” of the arbitral proceedings.”
4. Consequently, the impugned judgment is set aside, and the Section 34 petition is ordered to be presented in the Courts in New Delhi, as was held by the learned Single Judge of the Special Commercial Court at Gurugram.