BBR (INDIA) PRIVATE LIMITED versus S.P. SINGLA CONSTRUCTIONS PRIVATE LIMITED on 18 May 2022

[2022] 19 S.C.R. 977

BBR (INDIA) PRIVATE LIMITED

v.

S.P. SINGLA CONSTRUCTIONS PRIVATE LIMITED

(Civil Appeal Nos. 4130-4131 of 2022)

MAY 18, 2022

[AJAY RASTOGI AND SANJIV KHANNA, JJ.]

Arbitration and Conciliation Act, 1996: s.20 – Place ofArbitration – Whether conducting the arbitration proceedings at anew place, owing to the appointment of a new arbitrator, wouldshift the jurisdictional seat of arbitration – The place of conductingthe arbitration proceedings were shifted from Panchkula to Delhidue to the change of arbitrator – Appellant argued that thesubstantive proceedings were held in Delhi because of which it wouldbe the ‘seat of arbitration’ – Held: Sub-section (1) to s.20 givesprimacy to the agreement of the parties by which they are entitled tofix and specify ‘the seat of arbitration’, which then, by operationof law, determines the jurisdictional court that will, in the said case,exercise territorial jurisdiction – Sub-section (2) comes into thepicture only when the parties have not agreed on the place ofarbitration as ‘the seat’ – In terms of sub-section (2) of s.20 thearbitral tribunal determines the place of arbitration – The arbitraltribunal, while doing so, can take into regard the circumstances ofthe case, including the convenience of the parties – Sub-section (3)of s.20 of the Act enables the arbitral tribunal, unless the partieshave agreed to the contrary, to meet at any place to conduct hearingat a place of convenience in matters, such as consultation amongits members, for the recording of witnesses, experts or hearingparties, inspection of documents, goods, or property – ‘The seat’once fixed by the arbitral tribunal under s.20(2), should remainstatic and fixed – Venue is not constant and stationary and canmove and change in terms of sub-section (3) to s.20 of the Act –Change of venue does not result in change or relocation of the‘seat of arbitration’.

Arbitration and Conciliation Act, 1996: s.42 – Jurisdiction –Appellant relied on s.42 to contend that the seat of arbitration is inDelhi – Held: s.42 is of no avail as it does not help the case

977

A

B

C

D

E

F

G

H

Apropounded by the appellant, as in the present case the arbitratorhad fixed the jurisdictional ‘seat’ under s.20(2) of the Act beforeany party had moved the court under the Act, being a court wherea part or whole of the cause of action had arisen.

Dismissing the appeals, the CourtB

HELD: 1.1 ‘The seat’ once fixed by the arbitral tribunalunder Section 20(2), should remain static and fixed, whereas the‘venue’ of arbitration can change and move from ‘the seat’ to anew location. [Para 25][993-B-C]

1.2 Sub-section (3) of Section 20 specifically states and drawsCa distinction between the venue of arbitration and the ‘seat ofarbitration’ by stating that for convenience and other reasons,the arbitration proceedings may be held at a place different thanthe ‘seat of arbitration’, which location is referred to the venueof arbitration. [Para 26][993-D-E]

D

1.3 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 wouldhave exception that would apply when by mutual consent theEparties agree that the jurisdictional ‘seat’ should be changed,and such consent must be express and clearly understood andagreed by the parties. [Para 28][994-F-G]

1.4 Before the application under Section 34 was filed bythe Appellants, the jurisdictional ‘seat’ of arbitration had beendetermined and fixed Under Sub-section (2) to Section 20 andFthereby, the courts having jurisdiction over Panchkula in Haryana,have exclusive jurisdiction. The courts in Delhi would not getjurisdiction as the jurisdictional ‘seat of arbitration is Panchkulaand not Delhi. [Para 32][997-C]

State of West Bengal v. Associated Contractors (2015)G1 SCC 32 : [2014] 10 SCR 426; Bhartiya AluminiumCompany v. Kaiser Aluminium Technical Services Inc.(2012) 9 SCC 552 BGS SGS Soma JV v. NHPC Limited(2020) 4 SCC 224 : [2019] 17 SCR 742 - relied on.

H

BBR (INDIA) PRIVATE LIMITED v. S.P. SINGLACONSTRUCTIONS PRIVATE LIMITED

Indus Mobile Distribution Private Limited v. DatawindInnovations Private Limited and Ors. (2017) 7 SCC 678: [2017] 4 SCR 744; Brahmani River Pellets Limited v.Kamachi Industries Limited (2020) 5 SCC 462 : [2019]9 SCR 1140; Union of India v. Hardy Exploration andProduction (India) Inc. (2019) 13 SCC 472 : [2018] 13SCR 379; Shashoua v. Sharma (2009) EWHC 957(Comm.) : [2017] 7 SCR 442; Inox Renewables Ltd. v.Jayesh Electricals Ltd. (2019) SCC OnLine SC 2036 :[2021] 7 SCALE 736 and Antrix Corpn. Ltd. v. DevasMultimedia (P) Ltd. 2007 EWCA Civ 1282 (CA) –referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 4130-4131 of 2022.

From the Judgment and Order dated 14.10.2019 of the High Courtof Punjab and Haryana at Chandigarh in F.A.O. No.317 of 2017 andOrder dated 08.11.2019 in R.A. – C.R. No. 173 of 2019.

Jayant Bhushan, Sr. Adv., Tushar Bhushan, Amartya Bhushan,Ketan Paul, Ashwin Kumar Nair, Yugandhara Pawar Jha, Kunal Verma,Advs. for the Appellant.

Ritin Rai, Sr. Adv., Anirudh Wadhwa, Shivam Singh, Ms. RitikaSinha, Ms. Tahira Kathpalia, Bharghav Thali, Ms. Anushka Pandey,Jaideep Khanna, Hamza Tariq, Gopal Singh, Advs. for theRespondent.

A

B

C

D

E

F

G

H

980SUPREME COURT REPORTS

AThe Judgment of the Court was delivered bySANJIV KHANNA, J.

Leave granted.

2. The short and interesting issue which arises in the presentBappeals is – 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 placefixed by the first arbitrator[2] for the arbitration proceedings?

3. Before we refer to the statutory provisions and the case lawprecedents, facts in brief, relevant to decide the aforesaid question, areCrequired to be stated. The appellant – BBR (India) Private Limited, andthe respondent – S.P. Singla Constructions Private Limited, had enteredinto a contract dated 30[th] June 2011, under which the appellant wasrequired to supply, install and undertake stressing of cable strays for the592 metre long cable stay bridge being constructed by the respondentDover the river Ravi at Basouli, Jammu and Kashmir. Letter of intentdated 30[th] June 2011 issued under the contract had an arbitration clausefor resolution of disputes by a sole arbitrator, which reads thus:

“Dispute Resolution and Arbitration

Save where the decision of the contractor is final and binding onEthe subcontract any dispute difference arising between thecontractor and sub-contractor relating to any matter. In firstinstance shall be attempted to be resolved by the arbitration of thesole arbitrator to be appointed by the managing director of S.P.Singla Constructions Pvt. Ltd.FThis letter of intent is being issued to you in two original you arerequested return one original duty signed in token of youracceptance, which shall constitute a valid agreement for the worktill such time a formal agreement is signed between you and us.”

4. The arbitration clause is silent and does not stipulate the seat orGvenue of arbitration. The contract and letter of intent were executed atPanchkula in Haryana. The corporate office of the respondent is alsolocated at Panchkula. However, the registered office of the appellant islocated in Bengaluru, Karnataka.

1 Mr. Justice (Retd) T.S. DoabiaH2 Mr. Justice (Retd.) N.C. Jain

5. As disputes arose between the parties, the matter was referredto arbitration, and Mr. Justice (Retd.) N.C. Jain was appointed as thesole arbitrator. In the first sitting held on 5[th] August 2014, the arbitraltribunal held that the venue of the proceedings would be H.No. 292,Sector-6, Panchkula, Haryana. The respondent was not present at theproceedings and had submitted a written request for an adjournment,which request was accepted. Neither party had objected to the place ofarbitration proceedings as fixed by the arbitral tribunal. Arbitrationproceedings were thereafter held at H.No. 52, Sector-8A, Chandigarh,on 16[th] December 2014, where the parties were directed to completethe pleadings, and the matter was adjourned for the framing of issues on22[nd] February 2015. In the proceedings held on 29[th] May 2015, Mr.Justice (Retd.) N.C. Jain recused recording that he did not want tocontinue as the arbitrator for personal reasons. The records receivedthus far would be handed over to the new arbitrator. Pleadings werecompleted by then.

6. Thereupon, Mr. Justice (Retd.) T.S. Doabia took over as thesole arbitrator and recorded his consent in this regard in the first proceduralorder dated 30[th] June 2015. The order stated that the venue of theproceedings would be Delhi. Apparently, the appellant was not presentand accordingly, the respondent was directed by the arbitral tribunal totake steps to intimate the appellant.

7. The next order dated 18[th] July 2015 mentions that the partieshad filed the claim petition and the statement of defence along with thecounterclaim before Mr. Justice (Retd.) N.C. Jain. Rejoinder had alsobeen filed before the previous arbitrator. The parties were directed tofile their evidence by way of affidavits for which timelines were fixed.The records from the previous arbitrator were required to be collectedby the respondent and placed before the new arbitrator.

8. Thereafter, hearings were held, witnesses were cross-examined,and the arguments were addressed by the parties at Delhi. The orderdated 22[nd] January 2016, states that the award would be pronounced on29[th] January 2016 at the address at New Delhi and that the partiesshould send their representatives, failing which, the award would besent by email followed by a signed copy through post.

9. The award was signed and pronounced at Delhi on 29[th] January2016, whereunder the respondent was awarded a sum of Rs.3,35,86,577/- with interest at the rate of 15% per annum.

AB

C

D

E

F

G

H

A10. Thereafter, two proceedings were initiated. The respondentfiled an application for interim orders under Section 9[3] of the Arbitrationand Conciliation Act, 1996[4] before the Additional District Judge,Panchkula, on 7[th] May 2016. The appellant filed a petition under Section34[5] of the Act before the Delhi High Court on 28[th] April 2016. Thus, the B3 9. Interim measures, etc., by Court.—

(1) A party may, before or during arbitral proceedings or at any time after themaking of the arbitral award but before it is enforced in accordance with section 36,apply to a court—

(i) for the appointment of a guardian for a minor or person of unsound mind for thepurposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters,Cnamely:—

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement; (b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is thesubject-matter of the dispute in arbitration, or as to which any question may arisetherein and authorising for any of the aforesaid purposes any person to enter upon anyDland or building in the possession of any party, or authorising any samples to be takenor any observation to be made, or experiment to be tried, which may be necessary orexpedient for the purpose of obtaining full information or evidence; (d) interim injunction or the appointment of a receiver; (e) such other interim measure of protection as may appear to the Court to be justand convenient, and the Court shall have the same power for making orders as it has forthe purpose of, and in relation to, any proceedings before it.E

(2) Where, before the commencement of the arbitral proceedings, a Court passes anorder for any interim measure of protection under sub-section (1), the arbitralproceedings shall be commenced within a period of ninety days from the date of suchorder or within such further time as the Court may determine.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain anapplication under sub-section (1), unless the Court finds that circumstances existFwhich may not render the remedy provided under section 17 efficacious.

4 For short, “the Act”.

5 34. Application for setting aside arbitral award.—

(1) Recourse to a Court against an arbitral award may be made only by an applicationfor setting aside such award in accordance with sub-section (2) and sub-section (3).

(2) An arbitral award may be set aside by the Court only if—

(a) the party making the application furnishes proof that—

G(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties havesubjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointmentof an arbitrator or of the arbitral proceedings or was otherwise unable to present hiscase; or

(iv) the arbitral award deals with a dispute not contemplated by or not fallingHwithin the terms of the submission to arbitration, or it contains decisions on matters appellant and respondent invoked the jurisdiction of two different courts.Resultantly, the question of the ‘jurisdictional seat of arbitration’ assumesimportance, which must be appropriately answered.

beyond the scope of the submission to arbitration: Provided that, if the decisions onmatters submitted to arbitration can be separated from those not so submitted, onlythat part of the arbitral award which contains decisions on matters not submitted toarbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not inaccordance with the agreement of the parties, unless such agreement was in conflictwith a provision of this Part from which the parties cannot derogate, or, failing suchagreement, was not in accordance with this Part; or (b) the Court finds that—

(i) the subject-matter of the dispute is not capable of settlement by arbitrationunder the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation 1.—For the avoidance of any doubt, it is clarified that an award is inconflict with the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption or wasin violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental policy of Indian law; or

(iii) it is in conflict with the most basic notions of morality or justice.

Explanation 2.—For the avoidance of doubt, the test as to whether there is acontravention with the fundamental policy of Indian law shall not entail a review on themerits of the dispute.

(2A) An arbitral award arising out of arbitrations other than international commercialarbitrations, may also be set aside by the Court, if the Court finds that the award isvitiated by patent illegality appearing on the face of the award: Provided that an awardshall not be set aside merely on the ground of an erroneous application of the law or byreappreciation of evidence.

(3) An application for setting aside may not be made after three months haveelapsed from the date on which the party making that application had received thearbitral award or, if a request had been made under section 33, from the date on whichthat request had been disposed of by the arbitral tribunal: Provided that if the Court issatisfied that the applicant was prevented by sufficient cause from making theapplication within the said period of three months it may entertain the applicationwithin a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it isappropriate and it is so requested by a party, adjourn the proceedings for a period oftime determined by it in order to give the arbitral tribunal an opportunity to resume thearbitral proceedings or to take such other action as in the opinion of arbitral tribunalwill eliminate the grounds for setting aside the arbitral award

(5) An application under this section shall be filed by a party only after issuing aprior notice to the other party and such application shall be accompanied by an affidavitby the applicant endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in anyevent, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.

A

B

C

D

E

F

G

H

A

A11. The petition filed by the respondent under Section 9 of theAct before the Additional District Judge, Panchkula, was dismissedvide order dated 14[th] December 2016, on the ground of lack ofterritorial jurisdiction, inter alia, recording that the jurisdiction toentertain the application vests solely with the Delhi High Court, wherea prior petition under Section 34 had been filed, and was pending. TheBpetition under Section 9, being a subsequent petition, would be barredunder Section 42 of the Act.

12. However, this order has been set aside by the High Court ofPunjab and Haryana vide order dated 14[th] October 2019, with the findingthat the courts of Delhi do not have the jurisdiction to entertain theCobjections under Section 34 of the Act. To this effect, the High Court ofPunjab and Haryana has recorded that the agreement between the partieswas silent as to ‘the seat’ of the arbitration proceedings, and the secondarbitrator Mr. Justice (Retd.) T.S. Doabia, vide his first order dated 30[th]June 2015, had not determined Delhi to be the ‘seat of arbitration’. Relyingon the decision of this Court in State of West Bengal and Others v.DAssociated Contractors,[6] the High Court held that the courts at Panchkulahad jurisdiction to deal with the case. The review application filed by theappellant was dismissed vide order dated 8[th] November 2019.

13. These orders, passed by the High Court of Punjab andHaryana, have been assailed before us by the appellant in these appeals.EBy order dated 9[th] January 2020, notice was issued in the present appeals.

14. Section 2 (1) (e) of the Act, which defines the term ‘court’;Section 20 on the ‘place of arbitration’; as well as Section 42 read thus:

“2. Definitions.—(1) In this Part, unless the context otherwiserequires,—F

xx xxxx

(e) “Court” means— (i) in the case of an arbitration other thaninternational commercial arbitration, the principal Civil Court oforiginal jurisdiction in a district, and includes the High Court inexercise of its ordinary original civil jurisdiction, having jurisdictionGto decide the questions forming the subject-matter of the arbitrationif the same had been the subject-matter of a suit, but does notinclude any Civil Court of a grade inferior to such principal CivilCourt, or any Court of Small Causes;”

xx

xx

xx

“20. (1) The parties are free to agree on the place of arbitration.

(2) Failing any agreement referred to in sub-section (1), the placeof arbitration shall be determined by the arbitral tribunal havingregard to the circumstances of the case, including the convenienceof the parties.

(3) Notwithstanding sub-section (1) or sub-section (2), the arbitraltribunal may, unless otherwise agreed by the parties, meet at anyplace it considers appropriate for consultation among its members,for hearing witnesses, experts or the parties, or for inspection ofdocuments, goods or other property.

xx

xx

xx

42. Jurisdiction.— Notwithstanding anything contained elsewherein this Part or in any other law for the time being in force, wherewith respect to an arbitration agreement any application underthis Part has been made in a Court, that Court alone shall havejurisdiction over the arbitral proceedings and all subsequentapplications arising out of that agreement and the arbitralproceedings shall be made in that Court and in no other Court.”

15. Interpretation of the term ‘court’, as defined in sub-clause (e)to sub-section (1) of Section 2 of the Act, had come up for considerationbefore a Constitutional Bench of five Judges in the case of BhartiyaAluminium Company v. Kaiser Aluminium Technical Services Inc,[7]which decision had examined the distinction between ‘jurisdictional seat’and ‘venue’ in the context of international arbitration, to hold that theexpression ‘seat of arbitration’ is the centre of gravity in arbitration.However, this does not mean that all arbitration proceedings must takeplace at ‘the seat’. The arbitrators at times hold meetings at moreconvenient locations. Regarding the expression ‘court’, it was observedthat Section 2(2) of the Act does not make Part-I applicable to arbitrationsseated outside India. The expressions used in Section 2(2)[8] of the Act 7 (2012) 9 SCC 552; BALCO case, for short.8 See paragraph 20 below. By Act 3 of 2016 proviso to Section 2(2) of the Act has beeninserted with retrospective effect from 23[rd] October 2015, and the provision assubstituted/ameded by Act 33 of 2019 for clause(a), now reads- “(2) This Part shall apply where the place of arbitration is in India:

Provided that subject to an agreement to the contrary, the provisions of sections 9,27 and clause (b) of sub-section (1) and sub-section (3) of section 37 shall also applyto international commercial arbitration, even if the place of arbitration is outside India,and an arbitral award made or to be made in such place is enforceable and recognisedunder the provisions of Part II of this Act.”

A

B

C

D

E

F

G

H

Ado not permit an interpretation to hold that Part-I would also apply toarbitrations held outside the territory of India. Noticing the aboveinterpretation, a three Judges Bench of this Court in BGS SGS SomaJV v. NHPC Limited[9 ]has observed that the expression ‘subject toarbitration’ used in clause (e) to sub-section (1) of Section 2 of the Actcannot be confused with the ‘subject matter of the suit’. The term ‘subjectBmatter of the suit’ in the said provision is confined to Part-I. The purposeof the clause is to identify the courts having supervisory control over thejudicial proceedings. Hence, the clause refers to a court which would beessentially a court of ‘the seat’ of the arbitration process. Accordingly,clause (e) to sub-section (1) of Section 2 has to be construed keeping inCview the provisions of Section 20 of the Act, which are, in fact,determinative and relevant when we decide the question of ‘the seat ofan arbitration’. This interpretation recognises the principle of ‘partyautonomy’, which is the edifice of arbitration. In other words, the term‘court’ as defined in clause (e) to sub-section (1) of Section 2, whichrefers to the ‘subject matter of arbitration’, is not necessarily used asDfinally determinative of the court’s territorial jurisdiction to entertainproceedings under the Act. In BGS SGS Soma (supra), this Courtobserved that any other construction of the provisions would renderSection 20 of the Act nugatory. In view of the Court, the legislature hadgiven jurisdiction to two courts: the court which should have jurisdictionEwhere the cause of action is located; and the court where the arbitrationtakes place. This is necessary as, on some occasions, the agreementmay provide the ‘seat of arbitration’ that would be neutral to both theparties. The courts where the arbitration takes place would be requiredto exercise supervisory control over the arbitral process. The ‘seat ofarbitration’ need not be the place where any cause of action has arisen,Fin the sense that the ‘seat of arbitration may be different from the placewhere obligations are/had to be performed under the contract. In suchcircumstances, both the courts should have jurisdiction, viz., the courtswithin whose jurisdiction ‘the subject matter of the suit’ is situated andthe courts within whose jurisdiction the dispute resolution forum, that is,Gwhere the arbitral tribunal is located.

16. Turning to Section 20 of the Act, sub-section (1) in clear termsstates that the parties can agree on the place of arbitration. The word‘free’ has been used to emphasise the autonomy and flexibility that the H9 (2020) 4 SCC 224

parties enjoy to agree on a place of arbitration which is unrestricted andneed not be confined to the place where the ‘subject matter of the suit’is situated. Sub-section (1) to Section 20 gives primacy to the agreementof the parties by which they are entitled to fix and specify ‘the seat ofarbitration’, which then, by operation of law, determines the jurisdictionalcourt that will, in the said case, exercise territorial jurisdiction. Sub-section(2) comes into the picture only when the parties have not agreed on theplace of arbitration as ‘the seat’.[10] In terms of sub-section (2) of Section20 the arbitral tribunal determines the place of arbitration. The arbitraltribunal, while doing so, can take into regard the circumstances of thecase, including the convenience of the parties. Sub-section (3) of Section20 of the Act enables the arbitral tribunal, unless the parties have agreedto the contrary, to meet at any place to conduct hearing at a place ofconvenience in matters, such as consultation among its members, forthe recording of witnesses, experts or hearing parties, inspection ofdocuments, goods, or property.

17. Relying upon the Constitutional Bench decision in BALCO(supra), in BGS SGS Soma (supra), it has been held that sub-section (3)of Section 20 refers to ‘venue’ whereas the ‘place’ mentioned in sub-section (1) and sub-section (2) refers to the ‘jurisdictional seat’. To explainthe difference, in BALCO (supra), a case relating to internationalarbitration, reference was made to several judgments, albeit the judgmentin Shashoua v. Sharma[11] was extensively quoted to observe that anagreement as to the ‘seat of arbitration’ draws in the law of that countryas the curial law and is analogous to an exclusive jurisdiction clause.[12]The parties that have agreed to ‘the seat’ must challenge an interim orfinal award only in the courts of the place designated as the ‘seat ofarbitration’. In other words, the choice of the ‘seat of arbitration’ mustbe the choice of a forum/court for remedies seeking to attack the award.

18. The aforesaid principles relating to international arbitrationhave been applied to domestic arbitrations. In this regard, we may referto paragraph 38 of BGS SGS Soma (supra), which reads as under:

“38. A reading of paras 75, 76, 96, 110, 116, 123 and 194of BALCO would show that where parties have selected the seat 10 Section 20(2) also applies when ‘the seat’ as mentioned in the agreement is only aconvenient venue.

11 (2009) EWHC 957 (Comm.)

12 Court of appeal decision in C v. D, 2007 EWCA Civ 1282 (CA).

ABC

D

E

F

G

H

A

Aof arbitration in their agreement, such selection would then amountto an exclusive jurisdiction clause, as the parties have now indicatedthat the courts at the “seat” would alone have jurisdiction toentertain challenges against the arbitral award which have beenmade at the seat. The example given in para 96 buttresses thisproposition, and is supported by the previous and subsequentBparagraphs pointed out hereinabove. The BALCO judgment, whenread as a whole, applies the concept of “seat” as laid down by theEnglish judgments (and which is in Section 20 of the ArbitrationAct, 1996), by harmoniously construing Section 20 with Section2(1)(e), so as to broaden the definition of “court”, and bring withinCits ken courts of the “seat” of the arbitration.”

19. The Court in BGS SGS Soma (supra), then proceeded toexamine the contention whether paragraph 96 of BALCO (supra), whichspeaks of concurrent jurisdiction of the courts, that is, the jurisdiction ofcourts where the cause of action has arisen wholly or partly, and theDcourts within the jurisdiction in which the dispute resolution forum –arbitration is located, to observe and elucidate the legal position:

“40. Para 96 of BALCO case is in several parts. First and foremost,Section 2(1)(e), which is the definition of “court” under theArbitration Act, 1996 was referred to, and was construed keepingin view the provisions in Section 20 of the Arbitration Act, 1996,which give recognition to party autonomy in choosing the seat ofthe arbitration proceedings. Secondly, the Court went on to statein two places in the said paragraph that jurisdiction is given to twosets of courts, namely, those courts which would have jurisdictionwhere the cause of action is located; and those courts where thearbitration takes place. However, when it came to providing aneutral place as the “seat” of arbitration proceedings, the examplegiven by the five-Judge Bench made it clear that appeals underSection 37 of the Arbitration Act, 1996 against interim orderspassed under Section 17 of the Arbitration Act, 1996 would lieonly to the courts of the seat — which is Delhi in that example —which are the courts having supervisory control, or jurisdiction,over the arbitration proceedings. The example then goes on tostate that this would be irrespective of the fact that the obligationsto be performed under the contract, that is the cause of action,may arise in part either at Mumbai or Kolkata. The fact that the E

F

G

H

arbitration is to take place in Delhi is of importance. However, thenext sentence in the said paragraph reiterates the concurrentjurisdiction of both courts”.

20. BGS SGS Soma (supra) extensively refers to the judgmentof this Court in Indus Mobile Distribution Private Limited v. DatawindInnovations Private Limited and Others,[13 ]which decision refers tothe legislative history of Section 2(1)(e) and Section 20 of the Act andthe recommendations of the 246[th] Law Commission Report, 2014. Theserecommendations, it is observed, were not implemented in consonancewith the decision in BALCO (supra), which, in no uncertain terms, refersto the ‘place’ as the ‘jurisdictional seat’ for the purpose of clause (e) tosub-section (2) of Section 2 of the Act. This judgment was subsequentlyfollowed in Brahmani River Pellets Limited v. Kamachi IndustriesLimited.[14] It may, however, be noted that clause (e) to sub-section (1)of Section 2 was amended by inserting sub-clause (ii)[15] with the specificobjective to solve the problem of conflict of jurisdiction that would arisein cases where interim measures are sought in India in cases of arbitrationseated outside India. In the context of domestic arbitrations it must beheld that once the ‘seat of arbitration’ has been fixed, then the courts atthe said location alone will have exclusive jurisdiction to exercise thesupervisory powers over the arbitration. The courts at other locationswould not have jurisdiction, including the courts where cause of actionhas arisen. As observed above and held in BGS SGS Soma (supra), andIndus Mobile (supra),[16] the moment the parties by agreement designate‘the seat’, it becomes akin to an exclusive jurisdiction clause. It wouldthen vest the courts at ‘the seat’ with exclusive jurisdiction to regulatearbitration proceedings arising out of the agreement between the parties.

13 (2017) 7 SCC 678

14 (2020) 5 SCC 462

15 (ii) in the case of international commercial arbitration, the High Court in exercise of itsordinary original civil jurisdiction, having jurisdiction to decide the questions formingthe subject-matter of the arbitration if the same had been the subject-matter of a suit,and in other cases, a High Court having jurisdiction to hear appeals from decrees ofcourts subordinate to that High Court;

16 In Indus Mobile Distribution (P) Ltd., the Court after clearing the air on the meaningof Section 20 of the Arbitration Act, 1996 made it clear that the moment a seat isdesignated by agreement between the parties, it is akin to an exclusive jurisdictionclause, which would then vest the courts at the “seat” with exclusive jurisdiction forpurposes of regulating arbitral proceedings arising out of the agreement between theparties.

A

B

C

D

E

F

G

H

A

A21. The Court in BGS SGS Soma (supra) has also dealt with thesituation where the parties have not agreed on or have not fixed thejurisdictional ‘seat of arbitration’, and has laid down the following test todetermine the ‘seat of arbitration’ which would determine the locationof the court that would exercise supervisory jurisdiction. The test is simpleand reads:B

“61. It will thus be seen that wherever there is an expressdesignation of a “venue”, and no designation of any alternativeplace as the “seat”, combined with a supranational body of rulesgoverning the arbitration, and no other significant contrary indicia,the inexorable conclusion is that the stated venue is actually theCjuridical seat of the arbitral proceeding.”

For formulating the test reference was made to several Indianand foreign judgments to emphasise that where the parties had failed tochoose the ‘jurisdictional seat’[17] which would be governing the arbitralproceedings, the proceedings must be considered at any rate prima facieDas being governed and subject to jurisdiction of the court where thearbitration is being held, on the ground that the said court is most likely tobe connected with the proceedings.[18] Accordingly, in BGS SGS Soma(supra), the law as applicable, where the parties by agreement have notfixed the jurisdictional ‘seat’, is crystallised as under:

E

“82. On a conspectus of the aforesaid judgments, it may beconcluded that whenever there is the designation of a place ofarbitration in an arbitration clause as being the “venue” of thearbitration proceedings, the expression “arbitration proceedings”would make it clear that the “venue” is really the “seat” of theFarbitral proceedings, as the aforesaid expression does not includejust one or more individual or particular hearing, but the arbitrationproceedings as a whole, including the making of an award at thatplace. This language has to be contrasted with language such as“tribunals are to meet or have witnesses, experts or the parties”where only hearings are to take place in the “venue”, which mayGlead to the conclusion, other things being equal, that the venue so 17 BGS SGS Soma (supra) case also examines and explains case law where the courtshave held that so called ‘seat’ mentioned in the agreement is convenient ‘venue’ anaspect with which we are not concerned in the present case.

18 See the principle culled out by Dicey and Morris on the Conflict of Laws, 11thHEdition.

stated is not the “seat” of arbitral proceedings, but only a convenientplace of meeting. Further, the fact that the arbitral proceedings“shall be held” at a particular venue would also indicate that theparties intended to anchor arbitral proceedings to a particular place,signifying thereby, that that place is the seat of the arbitralproceedings. This, coupled with there being no other significantcontrary indicia that the stated venue is merely a “venue” and notthe “seat” of the arbitral proceedings, would then conclusivelyshow that such a clause designates a “seat” of the arbitralproceedings. In an international context, if a supranational bodyof rules is to govern the arbitration, this would further be an indiciathat “the venue”, so stated, would be the seat of the arbitralproceedings. In a national context, this would be replaced by theArbitration Act, 1996 as applying to the “stated venue”, whichthen becomes the “seat” for the purposes of arbitration.”

22. BGS SGS Soma (supra) also refers to decision of this Courtin Union of India v. Hardy Exploration and Production (India) Inc.,[19]which had held that the choice of the venue of arbitration did not implythat it had become the ‘seat of arbitration’ and that the venue could notby itself assume the status of ‘the seat’; instead a venue could become‘the seat’ only if “something else is added to it as a concomitant”.According to BGS SGS Soma (supra), the reasoning given in HardyExploration (supra) is per incuriam as it contradicts the ratio and lawlaid down in BALCO (supra). Hence, BGS SGS Soma (supra) holdsthat it would be correct to hold that while exercising jurisdiction undersub-section (2) of Section 20 of the Act, an arbitrator is not to pass adetailed or a considered decision. The place where the arbitral tribunalholds the arbitration proceedings would, by default, be the venue ofarbitration and consequently the ‘seat of arbitration’.

23. When we turn to the facts of the present case, if the arbitrationproceedings were held throughout in Panchkula, there would have beenno difficulty in holding that Delhi is not the jurisdictional ‘seat’. But thatwas not to be, as on recusal of Mr. Justice (Retd.) N.C. Jain and postthe appointment of Mr. Justice (Retd.) T.S.Doabia arbitration proceedings 19 (2019) 13 SCC 472 – In this case the parties had not chosen the seat of arbitrationandthe arbitral tribunal had also not determined the seat of arbitration. Therefore it washeld that the choice of Kuala Lumpur as the venue of arbitration did not imply thatKuala Lumpur had become the seat of arbitration.

A

BC

D

E

F

G

H

Awere held at Delhi. In the context of the present case and noticing thefirst order passed by the arbitral tribunal on 5[th] August 2014 stipulatingthat the place of the proceedings would be Panchkula in Haryana and inthe absence of other significant indica on application of Section 20(2) ofthe Act, the city of Panchkula in Haryana would be the jurisdictional‘seat’ of arbitration. As ‘the seat’ was fixed vide the order dated 5[th]BAugust, 2014, the courts in Delhi would not have jurisdiction.

24. The appellant, however, contends that on the appointment ofthe new arbitrator, namely, Mr. Justice (Retd.) T.S. Doabia, and thereuponthe venue being fixed at Delhi, the jurisdictional ‘seat of arbitration’ hadchanged from Panchkula in Haryana to Delhi. Reliance in this regard isCplaced upon the decision of this Court in Inox Renewables Ltd v. JayeshElectricals Ltd.,[20] in which the ‘seat of arbitration’ fixed by the partieswas Jaipur, but the courts at Ahmedabad had entertained the challengeto the award. The appellant submits that the courts at Ahmedabad hadexercised jurisdiction, which was upheld on the ground that the arbitrationDproceedings were conducted in Ahmedabad. Thus the ‘seat of arbitration’changed and had got relocated from Jaipur to Ahmedabad. This, in thecontext of the decision in Inox Renewables Ltd (supra), is undoubtedlycorrect, but the aforesaid decision cannot be read as a precept in casesgoverned by sub-section (2) of Section 20 of the Act. Inox Renewables(supra) was a case governed under sub-section (1) of Section 20 of theEAct, that is, where parties by the agreement had fixed the jurisdictional‘seat’ at Jaipur, Rajasthan, but thereafter, by mutual consent, had decidedto change the venue of proceedings to Ahmedabad prior to thecommencement of the arbitration. This evidently resulted in the decisionof this Court accepting that the jurisdictional ‘seat of arbitration’ wasAhmedabad. This decision would apply in case the parties, by consent,Fagree mutually that the ‘seat of arbitration’ would be located at a particularplace. The said exercise would be in terms of sub-section (1) of Section20 of the Act, which endorses and emphasises on party autonomy andchoice that determines the ‘seat of arbitration’. It would not apply whenthe arbitrator fixes ‘the seat’ in terms of sub-section (2) of Section 20 ofGthe Act. Once the arbitrator fixes ‘the seat’ in terms of sub-section (2)of Section 20 of the Act, the arbitrator cannot change ‘the seat’ of thearbitration, except when and if the parties mutually agree and state thatthe ‘seat of arbitration’ should be changed to another location, which isnot so in the present case.

25. There are good reasons why we feel that subsequent hearingsor proceedings at a different location other than the place fixed by thearbitrator as the ‘seat of arbitration’ should not be regarded and treatedas a change or relocation of jurisdictional ‘seat’. This would, in our opinion,lead to uncertainty and confusion resulting in avoidable esoteric andhermetic litigation as to the jurisdictional ‘seat of arbitration’. ‘The seat’once fixed by the arbitral tribunal under Section 20(2), should remainstatic and fixed, whereas the ‘venue’ of arbitration can change and movefrom ‘the seat’ to a new location. Venue is not constant and stationaryand can move and change in terms of sub-section (3) to Section 20 ofthe Act. Change of venue does not result in change or relocation of the‘seat of arbitration’.

26. It is highly desirable in commercial matters, in fact in all cases,that there should be certainty as to the court that should exercisejurisdiction. We do not think the law of arbitration visualises repeated orconstant shifting of the ‘seat of arbitration’. In fact, sub-section (3) ofSection 20 specifically states and draws a distinction between the venueof arbitration and the ‘seat of arbitration’ by stating that for convenienceand other reasons, the arbitration proceedings may be held at a placedifferent than the ‘seat of arbitration’, which location is referred to thevenue of arbitration. If we accept this contention of the appellant, wewould, as observed in the case of C v. D (supra), create a recipe forlitigation and (what is worse) confusion which was not intended by theAct. The place of jurisdiction or ‘the seat’ must be certain and static andnot vague or changeable, as the parties should not be in doubt as to thejurisdiction of the courts for availing of judicial remedies. Further, therewould be a risk of parties rushing to the courts to get first hearing orconflicting decisions that the law does not contemplate and is to beavoided.

27. A secondary contention to support the said plea on the groundthat the courts where arbitration proceedings are being conducted shouldbe given supervisory powers, on in-depth consideration, must be rejectedas feeble when we juxtapose the unacceptable practicable consequencesthat emerge. Exercise of supervisory jurisdiction by the courts wherethe arbitration proceedings are being conducted is a relevantconsideration, but not a conclusive and determinative factor when thevenue is not ‘the seat’. ‘The seat’ determines the jurisdiction of thecourts. There would be situations where the venue of arbitration in terms A

B

C

D

EF

G

H

Aof sub-section (3) of Section 20 would be different from the place of thejurisdictional ‘seat’, and it is equally possible majority or most of thehearing may have taken place at a venue which is different from the‘seat of arbitration’. Further, on balance, we find that the aspect ofcertainty as to the court’s jurisdiction must be given and accorded priorityover the contention that the supervisory courts located at the place akinBto the venue where the arbitration proceedings were conducted orsubstantially conducted should be preferred.

28. At this stage, we must also deal with the appellant’s argumentthat substantive proceedings were held in Delhi and, therefore, it wouldbe the ‘seat of arbitration’. The proceedings before the first arbitrationCat Panchkula, Haryana, were restricted to filing of pleadings anddocuments. On deeper consideration, this argument should be rejectedfor the reasons recorded above, as it will lead to confusion anduncertainty. The legal question raised in the present case must beanswered objectively and not subjectively with reference to the facts ofDa particular case. Otherwise, there would be a lack of clarity andconsequent mix-up about the courts that would exercise jurisdiction. Therecould be cases where the arbitration proceedings are held at differentlocations, but the ‘seat of arbitration’, as agreed by the parties or asdetermined by the arbitrator, may be different, and at that place – ‘theseat’, only a few hearings or initial proceedings may have been held.EThis would not matter and would not result in shifting of the jurisdictional‘seat’. Arbitrators can fix the place of residence, place of work, or incase of recusal, arbitration proceedings may be held at two differentplaces, as in the present case. For clarity and certainty, which is requiredwhen the question of territorial jurisdiction arises, we would hold that theplace or the venue fixed for arbitration proceedings, when sub-sectionF(2) of Section 20 applies, will be the jurisdictional ‘seat’ and the courtshaving jurisdiction over the jurisdictional ‘seat’ would have exclusivejurisdiction. This principle would have exception that would apply whenby mutual consent the parties agree that the jurisdictional ‘seat’ shouldbe changed, and such consent must be express and clearly understoodGand agreed by the parties.29. We have quoted Section 42 of the Act. Section 42 was alsoexamined in BGS SGS Soma (supra) and the view expressed by theDelhi High Court in Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd.[21]

was overruled observing that the Section 42 is meant to avoid conflictsof jurisdiction of courts by placing the supervisory jurisdiction over allarbitration proceedings in connection with the arbitration proceedingswith one court exclusively. The aforesaid observation supports ourreasoning that once the jurisdictional ‘seat’ of arbitration is fixed in termsof sub-section (2) of Section 20 of the Act, then, without the expressmutual consent of the parties to the arbitration, ‘the seat’ cannot bechanged. Therefore, the appointment of a new arbitrator who holds thearbitration proceedings at a different location would not change thejurisdictional ‘seat’ already fixed by the earlier or first arbitrator. Theplace of arbitration in such an event should be treated as a venue wherearbitration proceedings are held.

30. We would now reproduce paragraph 59 of the judgment inBGS SGS Soma (supra), which examines Section 42 of the Act andreads as under:

“59. Equally incorrect is the finding in Antrix Corpn. Ltd. thatSection 42 of the Arbitration Act, 1996 would be renderedineffective and useless. Section 42 is meant to avoid conflicts injurisdiction of courts by placing the supervisory jurisdiction overall arbitral proceedings in connection with the arbitration in onecourt exclusively. This is why the section begins with a nonobstante clause, and then goes on to state “…where with respectto an arbitration agreement any application under this parthas been made in a court…” It is obvious that the applicationmade under this part to a court must be a court which hasjurisdiction to decide such application. The subsequent holdingsof this court, that where a seat is designated in an agreement, thecourts of the seat alone have jurisdiction, would require that allapplications under Part I be made only in the court where the seatis located, and that court alone then has jurisdiction over the arbitralproceedings and all subsequent applications arising out of thearbitral agreement. So read, Section 42 is not rendered ineffectiveor useless. Also, where it is found on the facts of a particular casethat either no “seat” is designated by agreement, or the so-called“seat” is only a convenient “venue”, then there may be severalcourts where a part of the cause of action arises that may havejurisdiction. Again, an application under Section 9 of the ArbitrationAct, 1996 may be preferred before a court in which part of the A

B

C

D

E

F

G

H

A

Acause of action arises in a case where parties have not agreed onthe “seat” of arbitration, and before such “seat” may have beendetermined, on the facts of a particular case, by the ArbitralTribunal under Section 20(2) of the Arbitration Act, 1996. In boththese situations, the earliest application having been made to aBcourt in which a part of the cause of action arises would then bethe exclusive court under Section 42, which would have controlover the arbitral proceedings. For all these reasons, the law statedby the Bombay and Delhi High Courts in this regard is incorrectand is overruled.”

C31. We have already referred to the first few sentences of theaforementioned paragraph and explained the reasoning in the context ofthe present case. The paragraph BGS SGS Soma (supra) also explainsthe non-obstante effect as incorporated in Section 42 to hold that it isevident that the application made under Part-I must be to a court whichhas a jurisdiction to decide such application. Where ‘the seat’ is designatedDin the agreement, the courts of ‘the seat’ alone will have the jurisdiction.Thus, all applications under Part-I will be made in the court where ‘theseat’ is located as that court would alone have jurisdiction over thearbitration proceedings and all subsequent proceedings arising out of thearbitration proceedings. The quotation also clarifies that when either noE‘seat’ is designated by an agreement, or the so-called ‘seat’ is only aconvenient venue, then there may be several courts where a part of thecause of action arises that may have jurisdiction. An application underSection 9 of the Act may be preferred before the court in which a partof cause of action arises in the case where parties had not agreed on the‘seat of arbitration’. This is possible in the absence of an agreementFfixing ‘the seat’, as an application under Section 9 may be filed before‘the seat’ is determined by the arbitral tribunal under Section 20(2) ofthe Act. Consequently, in such situations, the court where the earliestapplication has been made, being the court in which a part or entire ofthe cause of action arises, would then be the exclusive court under SectionG42 of the Act. Accordingly, such a court would have control over thearbitration proceedings.[22]

22 We are not examining and are not required to decide the question- whether there is adifference between the expression ‘court’ and the ‘Chief Justice or his nominee’ in theHpresent case.

32. Section 42 is to no avail as it does not help the case propoundedby the appellant, as in the present case the arbitrator had fixed thejurisdictional ‘seat’ under Section 20(2) of the Act before any party hadmoved the court under the Act, being a court where a part or whole ofthe cause of action had arisen. The appellant had moved the Delhi HighCourt under Section 34 of the Act after the arbitral tribunal vide theorder dated 5[th] August 2014 had fixed the jurisdictional ‘seat’ atPanchkula in Haryana. Consequently, the appellant cannot, based onfastest finger first principle, claim that the courts in Delhi get exclusivejurisdiction in view of Section 42 of the Act. The reason is simple thatbefore the application under Section 34 was filed, the jurisdictional ‘seat’of arbitration had been determined and fixed under sub-section (2) toSection 20 and thereby, the courts having jurisdiction over Panchkula inHaryana, have exclusive jurisdiction. The courts in Delhi would not getjurisdiction as the jurisdictional ‘seat of arbitration’ is Panchkula and notDelhi.

33. In view of the aforesaid discussion and reasons, we do notfind any merit in the present appeals, and the same are dismissed withoutany order as to costs.

Bibhuti Bhushan Bose and Amarendra Kumar(Assisted by : Ajay, LCRA)

Apppeals dismissed.

A

B

C

D

E

F

G

H