Gujarat High Court
Union Of India Repr By Chief Engineer … vs M/S Pushkarraj Construction P Ltd on 6 May, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/SCA/5057/2024 CAV JUDGMENT DATED: 06/05/2025
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Reserved On : 30/01/2025
Pronounced On : 06/05/2025
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 5057 of 2024
With
R/SPECIAL CIVIL APPLICATION NO. 15264 of 2024
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✔
=============================================
UNION OF INDIA REPR BY CHIEF ENGINEER NAVY MUMBAI
Versus
M/S PUSHKARRAJ CONSTRUCTION P LTD.
=============================================
Appearance:
SCA No. 5057 of 2024:
MRS KRISHNA G RAWAL for the Petitioner(s) No. 1
MR ANSIN DESAI, SR ADVOCATE with MR DIGANT B KAKKAD for
the Respondent(s) No. 1
SCA No. 15264 of 2024:
MR ANSIN DESAI, SR ADVOCATE with MR DIGANT B KAKKAD for
the Petitioner
MR HARSHEEL D. SHUKLA for the Respondent(s) No. 1
=============================================
CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
CAV JUDGMENT
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(PER : HONOURABLE THE CHIEF JUSTICE
MRS. JUSTICE SUNITA AGARWAL)
1. The present petition invoking the extraordinary
jurisdiction of this Court under Article 227 of the
Constitution of India has been filed challenging the
order dated 18.07.2022 passed by the Additional District
Judge, Porbandar in rejecting the application under
Section 34 of the Arbitration and Conciliation Act, 1996
read with Order XLI of the Code of Civil Procedure
seeking to challenge the arbitral award dated
24.10.2018 for want of jurisdiction. It is opined by the
concerned Court that there was no reference by the
Court at Porbandar in any judicial proceedings
relegating the parties to the arbitral proceedings, rather
the parties themselves went in for arbitration.
2. Further, Section 10(3) of the Commercial Courts,
Commercial Division and Commercial Appellate Division
of High Courts Act, 2015 has been referred by the
Commercial Court to note that the Commercial Court
exercising territorial jurisdiction over such arbitration
where such commercial court has been constituted, shall
have jurisdiction to hear and dispose of all applications
or appeals arising out of such arbitration. It was opined
that since the arbitration proceedings were not held at
Porbandar, Gujarat and the dispute has not been
referred by any judicial authority of Porbandar, Gujarat,
the Courts at Porbandar would not have the jurisdiction
to examine the validity of the impugned award.
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3. As regards the plea of the petitioner herein relying upon
clause 72 of the contract about the jurisdiction of the
civil court to decide any dispute arising out of or in
respect of the contract, it was opined that the
place/venue of the arbitration proceeding was
Chandigarh and hence, the Court at Porbandar would
have no jurisdiction to set aside the impugned award.
The application under Section 34, as noted hereinabove,
has, thus, been dismissed on the ground of lack of
jurisdiction.
4. Ms. Krishna G. Raval, learned advocate appearing for
the petitioner places two clauses of the contract, namely
General Conditions of the Contracts (GCC) entered into
between the parties. There is no dispute with regard to
the applicability of the GCC worked out for Military
Engineer Services. Clause 70 and clause 72 of the GCC
are relevant to be extracted hereinunder :-
“70. Arbitration – All disputes, between the
parties to the Contract (other than those for which
the decision of the C.W.E. or any other person is by
the Contract expressed to be final and binding)
shall, after written notice by either party to the
Contract to the other of them, be referred to the
sole arbitration of a [Serving Officer having degree
in Engineering or equivalent or having passed final/
direct final Examination of sub-Division II of
Institution of Surveyor (India) recognised by the
Govt. of India] to be appointed by the authority
mentioned in the tender documents.
Unless both parties agree in writing such reference
shall not take place until after the completion orPage 3 of 76
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alleged completion of the Works or termination or
determination of the Contract under Condition Nos.
55, 56 and 57 hereof.
Provided always that commencement or
continuance of any arbitration proceeding
hereunder or otherwise shall not in any manner
militate against the Government’s right of recovery
from the Contractor as provided in Condition 67
hereof.
If the Arbitrator so appointed resigns his
appointment or vacates his office or is unable or
unwilling to act due to any reason whatsoever, the
authority appointing him may appoint a new
Arbitrator to act in his place.
The Arbitrator shall be deemed to have entered on
the reference on the date he issues notice to both
the parties, asking them to submit to him their
statement of the case and pleadings in defence.
The Arbitrator may proceed with the arbitration, ex
parte, if either party, inspite of a notice from the
Arbitrator fails to take part in the proceedings.
The Arbitrator may, from time to time with the
consent of the parties, enlarge, the time for making
and publishing the award.
The Arbitrator shall give his award within a period
of six months from the date of his entering on the
reference or within the extended time as the case
may be on all matters referred to him and shall
indicate his findings, along with sums awarded,
separately on each individual, item of dispute. The
arbitrator shall give reason for the award in each
and every case irrespective of the value of claims or
counter claims.
The venue of Arbitration shall be such place or
places as may by fixed by the Arbitrator in his sole
discretion. The Award of the Arbitrator shall bePage 4 of 76
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final and binding on both parties to the Contract.”
“72. Jurisdiction of Courts – Irrespective of the
place of issue of tenders, the place of acceptance of
tenders, the place of execution of contract or the
place of payment under the contract, the contract
shall be deemed to have been made at the place
from where the acceptance of tenders has been
issued and the work is executed/executable. The
Courts of the place from where the acceptance of
the tender has been issued or the place where the
work is executed/ under execution shall alone have
jurisdiction to decide any dispute arising out of or
in respect of the contract.”
5. Placing clause 70, it was argued by the learned advocate
for the petitioner that the seat of the arbitration had not
been delineated in the contract, rather the agreement
only talks of the venue of arbitration being place or
places (one or more, as may be fixed by the arbitrator in
his sole discretion). The venue as stated in clause 70,
fixed by the arbitrator would not be the seat of
arbitration under Sections (1) and (2) of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as the
“Arbitration Act‘ 1996″), rather it would be a place of
convenience for conducting the arbitration proceeding
as per sub-section (3) of Section 20. The arbitral
proceedings having been conducted at Chandigarh
would not determine the seat of arbitration. Moreover,
reference to sub-section (3) of Section 10 of the
Commercial Courts Act, 2015 in the order impugned is
wholly misplaced, inasmuch as, it talks of the jurisdiction
of the Commercial Court without any reference to the
seat or venue of the arbitration.
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6. The contention is that in the instant case, the subject
contract to erect building for residential purpose for the
personnel serving at Naval Base Porbandar had been
agreed and signed by the parties at Porbandar. The
place of execution of the work being Porbandar, the
dispute with respect to the bills raised by the contractor
after completion of the work and payments made by the
petitioner on deduction for the sub-standard work is a
dispute arising out of or in respect of the contract. In
view of clause 70 of GCC, the disputes between the
parties were referred to the sole arbitrator by the
competent authority. The contention is that the sole
arbitrator conducted hearings both at Mumbai, the
headquarter of the petitioner and then at Chandigarh,
and both the places can only be considered as venue of
arbitration, though may be agreed by both the parties.
7. On the rival claims put forth by the parties, the
arbitrator rejected the claims of the petitioner and
allowed the contractor’s claim vide award dated
24.12.2018, which has led to the filing of the application
under Section 34 of the Arbitration Act’ 1996. As the
application has been rejected on the ground of lack of
territorial jurisdiction, there was no option but to file
this petition invoking extraordinary supervisory
jurisdiction under Article 227 of the Constitution of the
High Court to set the things right, to undo the wrong
committed by the District Court at Porbandar. It is the
case of the petitioner that for the fact that the arbitrator
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had chosen the venue to conduct the arbitration
proceedings at Chandigarh, the same would not become
the seat of arbitration so as to confer jurisdiction to the
courts at Chandigarh.
8. Reliance is placed on the decision of the Apex Court in
BBR (India) Private Ltd. v. S.P. Singla
Constructions (P) Ltd. [(2023) 1 SCC 693] to argue
that there is a distinction between juridical seat and the
venue in the context of the arbitration proceedings.
Even where the seat of the arbitration is fixed by the
parties, it does not mean that all arbitration proceedings
must take place at the seat. The arbitrators at times
hold meetings at more convenient locations. The
expression “subject matter of arbitration” occurring in
clause (e) of sub-section (1) of Section 2 of the
Arbitration Act’ 1996 though cannot be confused with
the subject matter of the suit, but the said clause (e) of
sub-section (1) of Section 2 has to be construed keeping
in view the provisions of Section 20 of the Arbitration
Act’ 1996, which is relevant to decide the question of the
seat of arbitration. Section 20 recognises the principle
of party autonomy, which is the edifice of arbitration. It
was argued that the Apex Court in BGS SGS SOMA JV
v. NHPC [(2020) 4 SCC 234] recognises that the
legislature has given jurisdiction to two courts; the court
which would have jurisdiction where the cause of action
is located; and the courts where the arbitration takes
place.
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9. The observations made in BGS SGS SOMA JV (supra)
is that it may be, on some occasions, the agreement may
provide for a seat of arbitration that would be neutral to
both the parties. The observation in BGS SGS SOMA
JV (supra) that where both the courts have jurisdiction,
i.e. the Courts within whose jurisdiction the arbitral
tribunal is located, is applicable in a case of
international commercial arbitration. The said
observation cannot be applied in this case to confer
exclusive jurisdiction to the courts at Chandigarh of
having jurisdiction to examine the validity of the arbitral
award. In any case, the seat of arbitration cannot be
said to have been fixed by the fact that the arbitrator
had conducted the hearings at Chandigarh and the
award was declared thereafter.
10. It was argued that after the sole arbitrator was
appointed on 22.09.2017 by the Engineer-in-Chief’s
Branch, Integrated Headquarter of Military of Defence
(Army), Kashmir House, New Delhi, the first hearing of
the matter was fixed on 12/13.02.2018 in the office of
the Chief Engineer (Navy), Mumbai. This fact is
reflected from the reading of the award itself, which is at
page ‘253’ of the paper book. The hearing was fixed on
12.01.2018, however, was postponed based on the
request made by the Union of India vide letter dated
20.01.2018 and was further fixed on 22.01.2018.
Thereafter, on the two dates fixed for hearing, i.e. 27th
and 28th April, 2018, the hearing was conducted in the
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office of the panel of arbitrators at Chandigarh. The
award was published on 24.10.2018 after the said
hearing was concluded. The submission, thus, is that
the present is not a case where arbitral proceedings
were conducted solely and wholly at Chandigarh or
where the parties had agreed to fix the seat of
arbitration at Chandigarh, but understanding its impact.
11. It was argued that it is well settled that where more than
one court has jurisdiction, it is open for the parties to
choose one and exclude all other courts. Clause 72 of
the GCC, as agreed by the parties, contains exclusion
clause to the effect that the courts of the place from
where the acceptance of the tender has been issued or
the place where the work is executed/under execution,
shall alone have jurisdiction to decide any dispute
arising out of or in respect of the contract. The
exclusive jurisdiction clause contained in the contract
specifies the jurisdiction of the Court at a particular
place and as such, only such court will have the
jurisdiction to deal with the matter as it signifies the
intention of the parties to exclude all other courts.
12. Moreover, in the present case, the parties did not agree
at a specific place of arbitration, rather, it was left to
the discretion of the arbitrator to decide the venue of
arbitration, which was also kept flexible as it may be at
one or more places. The statement in clause 70 GCC,
thus, signifies the intention of the parties to leave the
choice of place to the discretion of the arbitrator to
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conduct the proceedings at one or more than one. No
seat/venue, as such, has been fixed under the agreement
and the place where the arbitral proceedings were
conducted before the award was declared, cannot be
referred as the juridical seat for the purpose of
conferring exclusive jurisdiction to the Chandigarh
Courts.
13. It was argued that where the agreement between the
parties restricted jurisdiction to adjudicate the dispute
arising out of or in respect to the contract, that Court
alone would have jurisdiction and no other. In the
instant case, the contract having been entered into at
Porbandar with the acceptance of the tender and the
place of work being at Porbandar, the Civil Court at
Porbandar shall have exclusive jurisdiction to decide the
dispute pertaining to the award passed by the arbitrator
as it would be a dispute arising out of or in respect of the
contract.
14. For the mere fact that two hearings of the arbitration
proceedings were conducted at Chandigarh, i.e. the
place where the panel of arbitrator is located, would not
fix the seat of arbitration being at Chandigarh so as to
exclude the jurisdiction of the Court at Porbandar, which
is otherwise having jurisdiction over the subject matter
of the suit and to decide the questions forming the
subject matter of the arbitration, as they are the same as
had been the subject matter of the suit.
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15. Reference has been made to the decisions of the Apex
Court in Swastik Gases (P) Ltd. v. Indian Oil Corpn.
Ltd. [(2013) 9 SCC 32], State of W.B. v. Associated
Contractors [(2015) 1 SCC 32], Brahmani River
Pellets Ltd. v. Kamachi Industries Ltd.[(2020) 5
SCC 462] and Inox Renewables Ltd. v. Jayesh
Electricals Ltd. [2021 SCC Online SC 448] to
substantiate the above submissions.
16. Further reference has been made to the decision of this
Court in Instakart Services Private Ltd. vs.
Megastone Logiparks Pvt. Ltd. [2024 (1) GLH 180],
to argue that it is held by this Court that mere
designation of a place of arbitration in the arbitration
clause as being venue of arbitration proceedings would
not be determinative factor to decide seat of arbitral
proceedings.
17. It was argued that the question of exclusion of the
jurisdiction of the Court at Porbandar would arise only in
case where seat of arbitration was designated, so as to
operate as an exclusive jurisdiction clause to exclude the
jurisdiction of all other courts including the Court (as
where cause of action or a part of cause of action may
have arisen). The said principle laid down in BGS SGS
SOMA JV (supra) as applied by the Apex Court in the
subsequent decisions would not be attracted in the facts
and circumstances of the present case as the parties
have not fixed the seat of arbitration being at
Chandigarh, conferring exclusive jurisdiction to the
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Chandigarh Courts.
18. Mr. Anshin Desai, learned senior advocate assisted by
Mr. Digant B. Kakkad, learned advocate appearing for
the respondent, referring to Section 20(2) of the
Arbitration and Conciliation Act, 1996 would submit that
the seat of arbitration, in the instant case, was fixed by
the arbitrator with the consent of the parties and the
entire arbitration proceedings were held in the office of
the panel of arbitrators at Chandigarh. Reference was
made to the communications sent by the arbitrator fixing
the place of arbitration at Chandigarh to submit that on
a significant consent of the petitioner, the entire
arbitration proceedings held at Chandigarh must be
treated to be the seat of arbitration fixed by the
arbitrator with the consent of the parties and cannot be
said to be the venue and hence, the Civil Court at
Porbandar has rightly rejected the application under
Section 34 holding that the jurisdiction in respect of
arbitration matters would be with the Civil Court of
original jurisdiction exercising territorial jurisdiction
over such arbitration where the commercial court has
been constituted shall have exclusive jurisdiction to hear
and dispose of applications or appeals arising out of such
arbitration. As the arbitration proceedings were not
held at Porbandar, Gujarat nor the dispute has been
referred by any judicial authority within the State of
Gujarat, the Court at Porbandar cannot be said to have
the jurisdiction to examine the validity of the award.
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19. It was vehemently argued that clause 72 of the
contract which talks about the jurisdiction of the Court
to decide any dispute arising out of or in respect of the
contract cannot be treated as contra indicia and will
have no bearing insofar as the exercise of supervisory
jurisdiction over the arbitral proceedings is concerned.
The place/venue of the arbitration fixed by the arbitrator
under Section 20(2) of the Arbitration and Conciliation
Act, 1996 shall be the seat of arbitration decided with
the consent of the parties and once the parties have
agreed to a place of arbitration where all arbitration
hearings were held, no court other than the court having
supervisory jurisdiction and control over the arbitration
proceedings will be competent court having jurisdiction
to examine the validity of the award. Heavy reliance
has been placed on the decisions of the Apex Court in
BGS SGS SOMA JV (supra) and Inox Renewables
Ltd. (supra) to support the above submissions and to
argue that the courts at venue/seat of arbitration have
exclusive jurisdiction notwithstanding general
jurisdiction clause. It was further argued that a separate
jurisdiction clause in the contract has nothing to do with
arbitration clause as they are independent to each other.
20. Reliance is further placed on the decision of the
Apex Court in BBR (India) (P) Ltd. (supra) to
vehemently argue that juridical seat of arbitration once
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fixed under Section 20(2) by the arbitrator shall be the
seat of arbitration and thereby the Court having
jurisdiction over the place where the arbitration
proceedings were held would have exclusive jurisdiction
over the arbitral proceedings and all subsequent
proceedings arising out of the arbitral proceedings.
21. Referring to the decision of the Apex Court in
Hindustan Construction Company Ltd. vs. NHPC
Limited and Anr. [(2020) 4 SCC 310) and Mankastu
Impex Private Ltd. vs. Airvisual Ltd. [(2020) 5 SCC
399], it was urged by the learned counsel for the
respondent that the seat of arbitration is a vital aspect of
any arbitration proceedings. Significance of the seat of
arbitration is that it determines the applicable law when
deciding the arbitration proceedings and arbitration
procedure as well as judicial review over the arbitration
award. The situs is not just about where an institution is
based or where the hearings will be held. But it is all
about which court would have the supervisory power
over the arbitration proceedings. The location of the
seat will determine the courts that will have the
exclusive jurisdiction to oversee the arbitration
proceedings. Once the seat of arbitration is designated,
opposed to on the basis of cause of action, the same
operates as an exclusive jurisdiction clause as a result of
which only the courts where the seat is located would
have the jurisdiction to the exclusion of all other courts,
even court(s) where part of the cause of action may have
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arisen.
22. Heard learned counsels for the parties and perused the
record.
23. Having gone through the decision of the Apex Court in
BGS SGS SOMA JV (supra), we may record that while
dealing with the question as to the maintainability of the
appeals under Section 37 of the Arbitration and
Conciliation Act, 1996, the Apex Court therein was
dealing with a case of international commercial
arbitration where the dispute was between NHPC Ltd.
and a foreign contractor. Clause 67.3 of the agreement
between the parties therein provided for dispute
resolution through arbitration and has categorically
stated that “Arbitration Proceedings shall be held at
New Delhi/Faridabad, India and the language of the
arbitration proceedings and that of all documents and
communications between the parties shall be English”.
In this context the observations in paragraph ’97’ of the
Apex Court in BGS SGS SOMA JV (supra) are relevant
to be taken note of :-
“97. Given the fact that if there were a dispute
between NHPC Ltd. and a foreign contractor,
Clause 67.3 (vi) would have to be read as a clause
designating the “seat” of arbitration, the same must
follow even when sub-clause (vi) is to be read with
sub-clause (i) of Clause 67.3, where the dispute
between NHPC Ltd. would be with an Indian
contractor. The arbitration clause in the present
case states that “Arbitration proceedings shall be
held at New Delhi/Faridabad, India…”, therebyPage 15 of 76
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signifying that all the hearings, including the
making of the award, are to take place at one of the
stated places. Negatively speaking, the clause does
not state that the venue is so that some, or all, of
the hearings take place at the venue; neither does
it use language such as “the Tribunal may meet”, or
“may hear witnesses, experts or parties”. The
expression “shall be held” also indicates that the
so-called “venue” is really the “seat” of the arbitral
proceedings. The dispute is to be settled in
accordance with the Arbitration Act, 1996 which,
therefore, applies a national body of rules to the
arbitration that is to be held either at New Delhi or
Faridabad, given the fact that the present
arbitration would be Indian and not international. It
is clear, therefore, that even in such a scenario,
New Delhi/Faridabad, India has been designated as
the “seat” of the arbitration proceedings.”
24. A careful reading of the paragraph indicates that
the Apex Court by reading the arbitration clause in the
said case has stated that the statement of the clause
signify that all the hearings including making of the
award were to be taken at one of the stated places, i.e.
New Delhi or Faridabad. The expression “shall be held”
also indicated that the place of arbitration chosen by the
parties was really the seat of arbitral proceedings. India
has been designated as the “seat” of arbitration
proceedings by both the parties and, thus, New Delhi
chosen by the parties alone would have exclusive
jurisdiction over the arbitral proceedings. Therefore,
the fact that part of cause of action may have arisen at
Faridabad would not be relevant as once the “seat” has
been chosen, which would then amount to an exclusive
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concerned.
25. In this context, the observations in paragraph ’33’
of BGS SGS SOMA JV (supra) are also relevant to be
noted herein wherein the Apex Court has noted the
observations in paragraph ’96’, ’98’ and ’99’ of the larger
Bench decision in Balco vs. Kaiser Aluminium
Technical Services Inc. [(2012) 9 SCC 552] :-
“33. …………..
The five-Judge Bench in Balco [Balco v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC
552 : (2012) 4 SCC (Civ) 810] dealt with this
problem as follows : (SCC pp. 597-99, 605-607,
paras 75-76, 95-96, 98-99)”
“96. Section 2(1)(e) of the Arbitration Act, 1996
reads as under:
‘2. Definitions.–(1) In this Part, unless the
context otherwise requires.–
(e) “Court” means the Principal civil court of
Original Jurisdiction in a district, and includes
the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction
to decide the questions forming the subject-
matter of the arbitration if the same had been
the subject-matter of a suit, but does not
include any civil court of a grade inferior to
such Principal civil court, or any Court of
Small Causes.’
We are of the opinion, the term “subject-
matter of the arbitration” cannot be confused
with “subject-matter of the suit”. The term
“subject-matter” in Section 2(1)(e) is confined
to Part I. It has a reference and connection
with the process of dispute resolution. Its
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purpose is to identify the courts having
supervisory control over the arbitration
proceedings. Hence, it refers to a court which
would essentially be a court of the seat of the
arbitration process. In our opinion, the
provision in Section 2(1)(e) has to be
construed keeping in view the provisions in
Section 20 which give recognition to party
autonomy. Accepting the narrow construction
as projected by the learned counsel for the
appellants would, in fact, render Section 20
nugatory. In our view, the legislature has
intentionally given jurisdiction to two courts
i.e. the court which would have jurisdiction
where the cause of action is located and the
courts where the arbitration takes place. This
was necessary as on many occasions the
agreement may provide for a seat of
arbitration at a place which would be neutral
to both the parties. Therefore, the courts
where the arbitration takes place would be
required to exercise supervisory control over
the arbitral process. For example, if the
arbitration is held in Delhi, where neither of
the parties are from Delhi, (Delhi having been
chosen as a neutral place as between a party
from Mumbai and the other from Kolkata) and
the tribunal sitting in Delhi passes an interim
order Under Section 17 of the Arbitration Act,
1996, the appeal against such an interim
order under Section 37 must lie to the courts
of Delhi being the courts having supervisory
jurisdiction over the arbitration proceedings
and the tribunal. This would be irrespective of
the fact that the obligations to be performed
under the contract were to be performed
either at Mumbai or at Kolkata, and only
arbitration is to take place in Delhi. In such
circumstances, both the courts would have
jurisdiction i.e. the court within whose
jurisdiction the subject-matter of the suit is
situated and the courts within the jurisdiction
of which the dispute resolution i.e. arbitration
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is located.
98. We now come to Section 20, which is as
under: ’20. Place of arbitration.–(1) The
parties are free to agree on the place of
arbitration. (2) Failing any agreement
referred to in sub-section (1), the place of
arbitration shall be determined by the Arbitral
Tribunal having regard to the circumstances
of the case, including the convenience of the
parties. (3) Notwithstanding sub-section (1) or
sub-section (2), the Arbitral Tribunal may,
unless otherwise agreed by the parties, meet
at any place it considers appropriate for
consultation among its members, for hearing
witnesses, experts or the parties, or for
inspection of documents, good or other
property.’ A plain reading of Section 20 leaves
no room for doubt that where the place of
arbitration is in India, the parties are free to
agree to any “place” or “seat” within India, be
it Delhi, Mumbai, etc. In the absence of the
parties’ agreement thereto, Section 20(2)
authorises the tribunal to determine the place/
seat of such arbitration. Section 20(3) enables
the tribunal to meet at any place for
conducting hearings at a place of convenience
in matters such as consultations among its
members for hearing witnesses, experts or the
parties.
“99. The fixation of the most convenient
“venue” is taken care of by Section 20(3).
Section 20, has to be read in the context of
Section 2(2), which places a threshold
limitation on the applicability of Part I, where
the place of arbitration is in India. Therefore,
Section 20 would also not support the
submission of the extra-territorial applicability
of Part I, as canvassed by the learned counsel
for the appellants, so far as purely domestic
arbitration is concerned.”
(emphasis in original and supplied)
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26. On a reading of paragraph ’96’ of Balco (supra),
noted hereinabove, along with other paragraphs, it was
noted by the Apex Court in paragraphs ’44’ and ’45’ as
under :-
“44. If paras 75, 76, 96, 110, 116, 123 and 194 of
Balco [Balco v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC
(Civ) 810] are to be read together, what becomes
clear is that Section 2(1)(e) has to be construed
keeping in view Section 20 of the Arbitration Act,
1996, which gives recognition to party autonomy —
the Arbitration Act, 1996 having accepted the
territoriality principle in Section 2(2), following the
Uncitral Model Law. The narrow construction of
Section 2(1)(e) was expressly rejected by the five-
Judge Bench in Balco [Balco v. Kaiser Aluminium
Technical Services Inc., (2012) 9 SCC 552 : (2012)
4 SCC (Civ) 810] . This being so, what has then to
be seen is what is the effect Section 20 would have
on Section 2(1)(e) of the Arbitration Act, 1996.
45. It was not until this Court’s judgment in Indus
Mobile Distribution (P) Ltd. [Indus Mobile
Distribution (P) Ltd. v. Datawind Innovations (P)
Ltd., (2017) 7 SCC 678 : (2017) 3 SCC (Civ) 760]
that the provisions of Section 20 were properly
analysed in the light of the 246th Report of the Law
Commission of India titled, “Amendments to the
Arbitration and Conciliation Act, 1996” (August,
2014) (hereinafter referred to as “the Law
Commission Report, 2014”), under which Sections
20(1) and (2) would refer to the “seat” of the
arbitration, and Section 20(3) would refer only to
the “venue” of the arbitration. Given the fact that
when parties, either by agreement or, in default of
there being an agreement, where the Arbitral
Tribunal determines a particular place as the seat
of the arbitration under Section 31(4) of the
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Arbitration Act, 1996, it becomes clear that the
parties having chosen the seat, or the Arbitral
Tribunal having determined the seat, have also
chosen the courts at the seat for the purpose of
interim orders and challenges to the award.”
27. The distinction laid down between the “seat” and
“venue” of arbitration proceeding, as discussed in Indus
Mobile Distribution (P) Ltd. vs. Datawind
Innovations (P) Ltd. [(2017) 7 SCC 678] after
referring to Section 2(1)(e) and 20 of the Arbitration and
Conciliation Act, 1996, it has noted the observations in
paragraphs ’18’ ’19’ and ’20’ of Indus Mobile
Distribution (P) Ltd. in paragraph ’46’ as under :-
“46. This Court in Indus Mobile Distribution (P) Ltd.
[Indus Mobile Distribution (P) Ltd. v. Datawind
Innovations (P) Ltd., (2017) 7 SCC 678 : (2017) 3
SCC (Civ) 760] , after referring to Sections 2(1)(e)
and 20 of the Arbitration Act, 1996, and various
judgments distinguishing between the “seat” of an
arbitral proceeding and “venue” of such
proceeding, referred to the Law Commission
Report, 2014 and the recommendations made
therein as follows : (SCC pp. 692-93, paras 17-20) :
“18. The amended Act, does not, however,
contain the aforesaid amendments,
presumably because the Balco [Balco v. Kaiser
Aluminium Technical Services Inc., (2012) 9
SCC 552 : (2012) 4 SCC (Civ) 810] judgment
in no uncertain terms has referred to “place”
as “juridical seat” for the purpose of Section
2(2) of the Act. It further made it clear that
Sections 20(1) and 20(2) where the word
“place” is used, refers to “juridical seat”,
whereas in Section 20(3), the word “place” is
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equivalent to “venue”. This being the settled
law, it was found unnecessary to expressly
incorporate what the Constitution Bench of
the Supreme Court has already done by way
of construction of the Act.
19. A conspectus of all the aforesaid
provisions shows that the moment the seat is
designated, it is akin to an exclusive
jurisdiction clause. On the facts of the present
case, it is clear that the seat of arbitration is
Mumbai and Clause 19 further makes it clear
that jurisdiction exclusively vests in the
Mumbai courts. Under the law of arbitration,
unlike the Code of Civil Procedure which
applies to suits filed in courts, a reference to
“seat” is a concept by which a neutral venue
can be chosen by the parties to an arbitration
clause. The neutral venue may not in the
classical sense have jurisdiction — that is, no
part of the cause of action may have arisen at
the neutral venue and neither would any of
the provisions of Sections 16 to 21 of the Code
of Civil Procedure be attracted. In arbitration
law however, as has been held above, the
moment “seat” is determined, the fact that the
seat is at Mumbai would vest Mumbai courts
with exclusive jurisdiction for purposes of
regulating arbitral proceedings arising out of
the agreement between the parties.”
“20. It is well settled that where more than
one court has jurisdiction, it is open for the
parties to exclude all other courts……”
28. Having read the above paragraphs of Indus
Mobile Distribution (P) Ltd. (supra), it may be noted
that by reading Section 20(1) and Section 20(2), it was
held therein that the word “place” is equivalent to
“venue” to hold that the conspectus of the provisions of
Section 20 read with Section 2(1)(e) shows that the
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moment the seat is designated, it is akin to an exclusive
jurisdiction clause. Under the law of arbitration, unlike
the Code of Civil Procedure, which applies to suits filed
in courts, a reference to “seat” is a concept by which a
neutral venue can be chosen by the parties to an
arbitration clause. The neutral venue may not have
jurisdiction, i.e. no part of cause of action may have
arisen at the neutral venue and neither would any of the
provisions of Sections 16 to 20 of the Code of Civil
Procedure be attracted. In arbitration law, however, the
moment the “seat” is determined, the fact that the seat is
at Mumbai would vest Mumbai courts with exclusive
jurisdiction for the purpose of regulating arbitration
proceedings arising out of the agreement between the
parties. This was stated noticing that it is well settled
that “where more than one court has jurisdiction, it is
open for the parties to exclude all other courts”.
29. It was, thus, observed in paragraph ’53’ of BGS
SGS SOMA JV (supra) that :-
“53. In Indus Mobile Distribution (P) Ltd. [Indus
Mobile Distribution (P) Ltd. v. Datawind
Innovations (P) Ltd., (2017) 7 SCC 678 : (2017) 3
SCC (Civ) 760] , after clearing the air on the
meaning of Section 20 of the Arbitration Act, 1996,
the Court in para 19 (which has already been set
out hereinabove) made it clear that the moment a
seat is designated by agreement between the
parties, it is akin to an exclusive jurisdiction clause,
which would then vest the courts at the “seat” with
exclusive jurisdiction for purposes of regulating
arbitral proceedings arising out of the agreement
between the parties.”
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30. In the context of the above stated law, it was
further observed in paragraph ’82’ as under :-
“82. 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. 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 may lead to the conclusion,
other things being equal, that the venue so stated is
not the “seat” of arbitral proceedings, but only a
convenient place of meeting. 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. In an international context, if a
supranational body of rules is to govern the
arbitration, this would further be an indicia that
“the venue”, so stated, would be the seat of the
arbitral proceedings. In a national context, this
would be replaced by the Arbitration Act, 1996 as
applying to the “stated venue”, which then becomes
the “seat” for the purposes of arbitration.”
Thus, by reading the expression/statement in the
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agreement it was held that the language therein has to
be contrasted with the language of convenient place of
arbitration such as “tribunals are to meet or have
witnesses, experts or the parties” used in section 20(3)
of the Arbitration and Conciliation Act, 1996, where only
hearings are to take place at the venue, which may lead
to the conclusion or other things being equal with that
the venue so stated is not the “seat” of arbitral
proceedings, but only a convenient place of meeting.
31. It was noted in the facts of the said case that the
fact that the “arbitral proceedings” shall be held at a
particular venue would indicate that the parties intended
to anchor arbitral proceedings to a particular place,
signifying thereby that the place is the seat of the
arbitral proceedings. This is 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. It was, thus, held that 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
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award at that place. It was further observed that in the
national context, for the Arbitration Act, 1996, the
“stated venue” becomes the “seat” for the purposes of
arbitration.”
32. In light of the above discussion made in BGS SGS
SOMA JV (supra), we may further note the
observations in paragraphs ’95’ and ’96’ and ’98’
therein :-
“95. Coming to the impugned judgment in the
present appeals, it is clear that the reasoning
followed stems from the subject-matter test that
flows from the definition of “court” in Section 2(1)
(e)(i) of the Act. According to the impugned
judgment [NHPC Ltd. v. Jaiparkash Associates Ltd.,
2018 SCC OnLine P&H 1304 : (2019) 193 AIC
839] , since the agreement was executed at
Faridabad, part of the cause of action would arise
at Faridabad, clothing Faridabad courts with
jurisdiction for the purposes of filing a Section 34
petition. The second part of the reasoning is that
Faridabad is the place where the request for
reference to arbitration was received, as a result of
which part of the cause of action arose in
Faridabad, which ousts the jurisdiction of courts of
New Delhi, in which no part of the cause of action
arose.”
“96. We have extracted the arbitration agreement
in the present case (as contained in Clause 67.3 of
the agreement between the parties) in para 3 of
this judgment. As per the arbitration agreement, in
case a dispute was to arise with a foreign
contractor, Clause 67.3(ii) would apply. Under this
sub-clause, a dispute which would amount to an
“international commercial arbitration” within the
meaning of Section 2(1)(f) of the Arbitration Act,
1996, would have to be finally settled in accordancePage 26 of 76
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with the Arbitration Act, 1996 read with
the UNCITRAL Arbitration Rules, and in case of any
conflict, the Arbitration Act, 1996 is to prevail (as
an award made under Part I is considered a
domestic award under Section 2(7) of the
Arbitration Act, 1996 notwithstanding the fact that
it is an award made in an international commercial
arbitration). Applying
the Shashoua [Shashoua v. Sharma, 2009 EWHC
957 (Comm) : (2009) 2 Lloyd’s Law Rep 376]
principle delineated above, it is clear that if the
dispute was with a foreign contractor under Clause
67.3 of the agreement, the fact that arbitration
proceedings shall be held at New Delhi/Faridabad,
India in sub-clause (vi) of Clause 67.3, would
amount to the designation of either of these places
as the “seat” of arbitration, as a supranational body
of law is to be applied, namely,
the UNCITRAL Arbitration Rules, in conjunction with
the Arbitration Act, 1996. As such arbitration would
be an international commercial arbitration which
would be decided in India, the Arbitration Act, 1996
is to apply as well. There being no other contra
indication in such a situation, either New Delhi or
Faridabad, India is the designated “seat” under the
agreement, and it is thereafter for the parties to
choose as to in which of the two places the
arbitration is finally to be held.”
“98. However, 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
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exclusive jurisdiction clause so far as courts of the
“seat” are concerned.”
33. In Inox Renewables Ltd. (supra), challenge
before the Apex Court was to the jurisdiction of the
Commercial Court at Ahmedabad to entertain the
application under Section 34 of the Arbitration and
Conciliation Act, 1996. In the said case, the agreement
stated that the venue of the arbitration shall be Jaipur.
The High Court of Gujarat held that the Court at Jaipur,
Rajasthan would be the courts in which the Section 34
petition could be filed. The Apex Court while dealing
with the challenge referred to the statement made in the
arbitral award with respect to the venue/place of
arbitration noted that :-
“09. Having heard the learned counsel for both the
parties, it is first necessary to set out what the
learned arbitrator has held in the award with
respect to the venue/place of the arbitration. In
para 12.3, the learned arbitrator holds thus:
“12.3. There is no controversy as to the
constitution of the Tribunal between the
parties and the parties have agreed to get
their dispute resolved by a sole arbitrator. As
per arbitration agreement, the venue of the
arbitration was to be Jaipur. However, the
parties have mutually agreed, irrespective of a
specific clause as to the [venue, that the
place] of the arbitration would be at
Ahmedabad and not at Jaipur. The
proceedings, thus, have been conducted at
Ahmedabad on constitution of the Tribunal by
the learned Nominee Judge of the Hon’ble
High Court of Gujarat.”
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10. What is clear, therefore, as per this paragraph
is that by mutual agreement, parties have
specifically shifted the venue/place of arbitration
from Jaipur to Ahmedabad. This being so, is it not
possible to accede to the argument made by the
learned counsel for the respondent that this could
only have been done by written agreement and that
the arbitrator’s finding would really have reference
to a convenient venue and not the seat of
arbitration.”
34. Having said so, noticing the observations in
paragraphs 32, 48, 49, 53, 82 and 98 in BGS SGS
SOMA JV (supra), it was held in paragraph ’12 that :-
“12. This case would show that the moment the
seat is chosen as Ahmedabad, it is akin to an
exclusive jurisdiction clause, thereby vesting the
courts at Ahmedabad with exclusive jurisdiction to
deal with the arbitration. However, the learned
counsel for the respondent referred to and relied
upon paras 49 and 71 of the aforesaid judgment.
Para 49 only dealt with the aspect of concurrent
jurisdiction as dealt with in Balco v. Kaiser
Aluminium Technical Services Inc. [Balco v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC
552 : (2012) 4 SCC (Civ) 810] [“Balco”] which does
not arise on the facts of the present case. Para 71 is
equally irrelevant, in that, it is clear that the parties
have, by mutual agreement, entered into an
agreement to substitute the venue at Jaipur with
Ahmedabad as the place/seat of arbitration under
Section 20(1) of the Arbitration and Conciliation
Act, 1996.”
35. It was held that the appellant’s case that the
“venue” being shifted from Jaipur to Ahmedabad is
acceptable, inasmuch as, Jaipur does not continue to be
the seat of arbitration and Ahmedabad was the seat
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designated by the parties, and not a venue to hold
meetings. It was noted that once the arbitrator had
recorded by mutual agreement, Jaipur as “venue” had
gone and had been replaced by Ahmedabad. Referring to
the clause contained in clause 8.5 of the purchase order
therein, as a whole, it was held that it was not possible
to accept the submission of the learned advocate that
the jurisdiction of the courts in Rajasthan was
independent of the venue being at Jaipur. It was further
held that the courts in Rajasthan had been vested with
jurisdiction only because the seat of arbitration was to
be at Jaipur. Once the seat of arbitration was replaced
by mutual agreement to be at Ahmedabad, the courts at
Rajasthan were no longer vested with jurisdiction as
exclusive jurisdiction was then vested in the courts at
Ahmedabad, given the change in the seat of arbitration.
36. In order to understand the law stated in Inox
Renewables Ltd. (supra), the relevant clause 8.5 of the
purchase order, which was read and interpreted by the
Apex Court in paragraph ’17’ of the judgment, is relevant
to be extrated hereinunder along with the findings
returned in paragraph ’17’ as under :-
“3…..The arbitration clause is contained in clause
8.5 of the purchase order which reads as follows :-
8.5 All the dispute[s] and differences if any shall be
settled by arbitration in the manner hereinafter
provided.
Arbitration shall be conducted by three arbitrators;
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one each to be nominated by you and the owner
and third to be appointed as an umpire by both the
[arbitrators] in accordance to the Arbitration and
Conciliation Act, 1996. In case either party fails to
appoint an arbitrator within sixty days after receipt
of notice from the other party invoking the
arbitration clause, the arbitrator appointed by the
party invoking the arbitration clause shall become
the sole arbitrator to conduct the arbitration.
The venue of the arbitration shall be Jaipur.
The decisions of the majority of the arbitrators shall
be final and binding on both the parties. The
arbitrators may from time to time with the consent
of all the parties: extend the time for making the
award. In the event of any of the arbitrators dying,
neglecting, resigning or being unable to act for any
reason, it shall be lawfully binding for the party
concerned to nominate another arbitrator in place
to the outgoing arbitrator.
The arbitrator shall have full powers to review and/
or revise any decision, opinion, direction,
certification or valuation in accordance with the
agreement and neither party shall be limited in
proceedings before such arbitration to the evidence
or arguments for the purpose of obtaining the said
decision.
During settlement of disputes and arbitration
proceedings, both parties shall be obliged to carry
out their respective obligations under the
agreement.
In the event of arbitrators’ award being not
acceptable to either party, the parties shall be free
to seek lawful remedies under the law of India and
the jurisdiction for the same shall be courts in the
State of Rajasthan.”
“17. The reliance placed by the learned counsel for
the respondent on Indus Mobile [Indus MobilePage 31 of 76
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Distribution (P) Ltd. v. Datawind Innovations (P)
Ltd., (2017) 7 SCC 678 : (2017) 3 SCC (Civ) 760] ,
and in particular, on paras 18 and 19 thereof,
would also support the appellant’s case, inasmuch
as the “venue” being shifted from Jaipur to
Ahmedabad is really a shifting of the venue/place of
arbitration with reference to Section 20(1), and not
with reference to Section 20(3) of the Arbitration
and Conciliation Act, 1996, as it has been made
clear that Jaipur does not continue to be the seat of
arbitration and Ahmedabad is now the seat
designated by the parties, and not a venue to hold
meetings. The learned arbitrator has recorded that
by mutual agreement, Jaipur as a “venue” has gone
and has been replaced by Ahmedabad. As Clause
8.5 of the purchase order must be read as a whole,
it is not possible to accept the submission of Shri
Malkan that the jurisdiction of courts in Rajasthan
is independent of the venue being at Jaipur. The
two clauses must be read together as the courts in
Rajasthan have been vested with jurisdiction only
because the seat of arbitration was to be at Jaipur.
Once the seat of arbitration is replaced by mutual
agreement to be at Ahmedabad, the courts at
Rajasthan are no longer vested with jurisdiction as
exclusive jurisdiction is now vested in the courts at
Ahmedabad, given the change in the seat of
arbitration.”
37. From a careful reading of the judgment in Inox
Renewables Ltd. (supra), it is, thus, evident that the
Apex Court in holding that the parties have by mutual
agreement, entered into an agreement to substitute the
venue at Jaipur with Ahmedabad as the place/seat of
arbitration under Section 20(1) of the Arbitration and
Conciliation Act, 1996, has exhaustively referred to the
facts and circumstances of the said case, wherein mutual
agreement of the parties to shift the venue was recorded
in the arbitral award itself.
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38. In Hindustan Construction Company Ltd.
(supra), the Apex Court in construing the arbitration
clause in the agreement between the parties arrived at
the finding that the seat of arbitration was at New
Delhi, chosen by the parties. It was held that once the
seat of arbitration is designated, such clause then
becomes an exclusive jurisdiction clause as a result of
which only the courts where the seat is located would
have jurisdiction to the exclusion of all other courts.
39. In BBR (India) Private Ltd. (supra), the
question before the Apex Court was that whether
conducting the arbitration proceedings at Delhi, owing
to the appointment of a new arbitrator, would shift the
“jurisdictional seat of arbitration” from Panchkula in
Haryana, the place fixed by the first arbitrator for the
arbitration proceedings? It was noted by the Apex Court
that the arbitration clause in the agreement therein was
silent and did not stipulate the seat and venue of
arbitration. The contract and letter of intent were
executed in Panchkula in Haryana. The corporate office
of the respondent was also located at Panchkula
whereas, the registered office of the appellant was
located in Bengaluru, Karnataka. The appellant had
entered into a contract with the respondent wherein the
appellant was required to supply, install and undertake
stressing of cable stays for the 592 m long cable-stay
bridge being constructed by the respondent over the
River Ravi at Basouli, Jammu and Kashmir.
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40. On the dispute arose between the parties, the
matter was referred to arbitration and arbitrator so
appointed held holding in the first sitting that the venue
of the arbitration proceedings would be at Panchkula,
Hariyana. The respondent, however, was not present at
the proceeding and sought adjournment, which request
was accepted. Neither party objected to the place of
arbitration proceeding as fixed by the arbitral tribunal.
The arbitration proceeding were, thereafter, held at
Chandigarh where the parties were directed to complete
the pleadings and matter was adjourned for framing of
issues. Thereafter the arbitrator recused and a new
arbitrator was appointed. After taking over, the new
arbitrator recorded in its first procedural order that the
venue of the proceedings would be Delhi. In the said
proceeding, the appellant was not present. All
proceedings, thereafter, were held at Delhi and the
award was signed and pronounced at Delhi.
41. Two proceedings were initiated thereafter. The
appellant filed application under Section 34 of the
Arbitration Act, 1996 before the Delhi High Court
whereas the respondent filed Section 9 application
before the Additional District Judge, Panchkula after
passing of the award. The application under Section 9
of the Act was rejected by the Court at Panchkula on the
ground of lack of territorial jurisdiction holding that the
Court at Delhi where a prior petition under Section 34
had been filed by the appellant would be competent to
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entertain the application under Section 9, which was
subsequent petition and, thus, would be barred under
Section 42 of the Arbitration Act, 1996. The order
passed by the Civil Court had been set aside by the High
Court of Punjab and Hariyana holding that the courts at
Delhi did not have jurisdiction to entertain the petitions
under Section 34 of the Act, 1996, inasmuch as, the
parties were silent as to the “seat” of the arbitration
proceeding and the second arbitrator had not
determined Delhi to be the seat of arbitration.
Consequently, the courts at Panchkula had jurisdiction
to deal with the case. The order passed by the High
Court was taken up in appeal before the Apex Court,
where and referring to Section 2(1)(e) and Section 20,
the Apex Court has observed in paragraphs ’15’, ’16’,
’17’, ’18’, ’19’, ’20’, ’21’, ’22’ and ’23’ as under :-
“15. Interpretation of the term “court”, as defined
in clause (e) to sub-section (1) of Section 2 of the
Act, had come up for consideration before a
Constitutional Bench of five Judges in Balco v.
Kaiser Aluminium Technical Services Inc. [Balco v.
Kaiser Aluminium Technical Services Inc., (2012) 9
SCC 552 : (2012) 4 SCC (Civ) 810] , (for short
“Balco case”) which decision had examined the
distinction between “jurisdictional seat” and
“venue” in the context of international arbitration,
to hold that the expression “seat of arbitration” is
the centre of gravity in arbitration. However, this
does not mean that all arbitration proceedings must
take place at “the seat”. The arbitrators at times
hold meetings at more convenient locations.
Regarding the expression “court”, it was observed
that Section 2(2) of the Act does not make Part I
applicable to arbitrations seated outside India. ThePage 35 of 76
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expressions used in Section 2(2) [See para 20
below. By Act 3 of 2016 proviso to Section 2(2) of
the Act has been inserted with retrospective effect
from 23-10-2015, and the provision as
substituted/amended by Act 33 of 2019 for clause
(a), now reads–“(2) Scope.–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 apply to 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 recognised under the provisions
of Part II of this Act.”] of the Act do not permit an
interpretation to hold that Part I would also apply
to arbitrations held outside the territory of India.
16. Noticing the above interpretation, a three-Judge
Bench of this Court in BGS SGS Soma JV v. NHPC
Ltd. [BGS SGS Soma JV v. NHPC Ltd., (2020) 4
SCC 234 : (2020) 2 SCC (Civ) 606] has observed
that the expression “subject to arbitration” used in
clause (e) to sub-section (1) of Section 2 of the Act
cannot be confused with the “subject-matter of the
suit”. The term “subject-matter of the suit” in the
said provision is confined to Part I. The purpose of
the clause is to identify the courts having
supervisory control over the judicial proceedings.
Hence, the clause refers to a court which would be
essentially a court of “the seat” of the arbitration
process. Accordingly, clause (e) to sub-section (1)
of Section 2 has to be construed keeping in view
the provisions of Section 20 of the Act, which are,
in fact, determinative and relevant when we decide
the question of “the seat of an arbitration”. This
interpretation recognises the principle of “party
autonomy”, which is the edifice of arbitration. In
other words, the term “court” as defined in clause
(e) to sub-section (1) of Section 2, which refers to
the “subject-matter of arbitration”, is not
necessarily used as finally determinative of the
court’s territorial jurisdiction to entertain
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proceedings under the Act.
17. In BGS SGS Soma [BGS SGS Soma JV v. NHPC
Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] ,
this Court observed that any other construction of
the provisions would render Section 20 of the Act
nugatory. In view of the Court, the legislature had
given jurisdiction to two courts : the court which
should have jurisdiction where the cause of action
is located; and the court where the arbitration
takes place. This is necessary as, on some
occasions, the agreement may provide the “seat of
arbitration” that would be neutral to both the
parties. 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. In such circumstances, both the courts
should have jurisdiction viz. the courts within
whose jurisdiction “the subject-matter of the suit”
is situated and the courts within whose jurisdiction
the dispute resolution forum, that is, where the
Arbitral Tribunal is located.
18. Turning to Section 20 of the Act, sub-section (1)
in clear terms states that the parties can agree on
the place of arbitration. The word “free” has been
used to emphasise the autonomy and flexibility that
the parties enjoy to agree on a place of arbitration
which is unrestricted and need 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 agreement of the parties by which
they are entitled to fix and specify “the seat of
arbitration”, which then, by operation of law,
determines the jurisdictional court that will, in the
said case, exercise territorial jurisdiction. Sub-
section (2) comes into the picture only when the
parties have not agreed on the place of arbitration
as “the seat”. [ Section 20(2) also applies when “the
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seat” as mentioned in the agreement is only a
convenient venue.] In terms of sub-section (2) of
Section 20 the Arbitral Tribunal determines the
place of arbitration. The Arbitral Tribunal, while
doing so, can take into regard the circumstances of
the case, including the convenience of the parties.
Sub-section (3) of Section 20 of the Act enables the
Arbitral Tribunal, unless the parties have agreed to
the contrary, to meet at any place to conduct
hearing at a place of convenience in matters, such
as consultation among its members, for the
recording of witnesses, experts or hearing parties,
inspection of documents, goods, or property.
19. Relying upon the Constitutional Bench decision
in Balco [Balco v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC
(Civ) 810] , in BGS SGS Soma [BGS SGS Soma JV v.
NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ)
606] , 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 explain the
difference, in Balco [Balco v. Kaiser Aluminium
Technical Services Inc., (2012) 9 SCC 552 : (2012)
4 SCC (Civ) 810] , a case relating to international
arbitration, reference was made to several
judgments, albeit the judgment in Shashoua v.
Sharma [Shashoua v. Sharma, 2009 EWHC 957
(Comm)] was extensively quoted to observe that an
agreement as to the “seat of arbitration” draws in
the law of that country as the curial law and is
analogous to an exclusive jurisdiction clause. [C v.
D, 2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)]
The parties that have agreed to “the seat” must
challenge an interim or final award only in the
courts of the place designated as the “seat of
arbitration”. In other words, the choice of the “seat
of arbitration” must be the choice of a forum/court
for remedies seeking to attack the award.
20. The aforesaid principles relating to
international arbitration have been applied to
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domestic arbitrations. In this regard, we may refer
to para 38 of BGS SGS Soma [BGS SGS Soma JV v.
NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ)
606] , which reads as under : (SCC p. 274)
“38. A reading of paras 75, 76, 96, 110, 116,
123 and 194 of Balco [Balco v. Kaiser
Aluminium Technical Services Inc., (2012) 9
SCC 552 : (2012) 4 SCC (Civ) 810] would
show that where parties have selected the
seat of arbitration in their agreement, such
selection would then amount to an exclusive
jurisdiction clause, as the parties have now
indicated that the courts at the “seat” would
alone have jurisdiction to entertain challenges
against the arbitral award which have been
made at the seat. The example given in para
96 buttresses this proposition, and is
supported by the previous and subsequent
paragraphs pointed out hereinabove. The
Balco [Balco v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552 : (2012) 4
SCC (Civ) 810] judgment, when read as a
whole, applies the concept of “seat” as laid
down by the English judgments (and which is
in Section 20 of the Arbitration Act, 1996), by
harmoniously construing Section 20 with
Section 2(1)(e), so as to broaden the definition
of “court”, and bring within its ken courts of
the “seat” of the arbitration [ Section 3 of the
English Arbitration Act, 1996 defines “seat” as
follows:”3. The seat of the arbitration.–In this
Part “the seat of the arbitration” means the
juridical seat of the arbitration designated–
(a) by the parties to the arbitration
agreement, or (b) by any arbitral or other
institution or person vested by the parties
with powers in that regard, or (c) by the
Arbitral Tribunal if so authorised by the
parties, or determined, in the absence of any
such designation, having regard to the parties’
agreement and all the relevant
circumstances.”It will be noticed that this
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section closely approximates with Section 20
of the Indian Arbitration Act, 1996. The
meaning of “Court” is laid down in Section
105 of the English Arbitration Act, 1996
whereby the Lord Chancellor may, by order,
make provision allocating and specifying
proceedings under the Act which may go to
the High Court or to County Courts.] .”
21. The Court in BGS SGS Soma [BGS SGS Soma JV
v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC
(Civ) 606] , then proceeded to examine the
contention whether para 96 of Balco [Balco v.
Kaiser Aluminium Technical Services Inc., (2012) 9
SCC 552 : (2012) 4 SCC (Civ) 810] , which speaks
of concurrent jurisdiction of the courts, that is, the
jurisdiction of courts where the cause of action has
arisen wholly or partly, and the courts within the
jurisdiction in which the dispute resolution forum
— arbitration is located, to observe and elucidate
the legal position : (BGS SGS Soma case [BGS SGS
Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2
SCC (Civ) 606] , SCC pp. 274-75, para 40)
“40. Para 96 of Balco case [Balco v. Kaiser
Aluminium Technical Services Inc., (2012) 9
SCC 552 : (2012) 4 SCC (Civ) 810] is in
several parts. First and foremost, Section 2(1)
(e), which is the definition of “court” under
the Arbitration Act, 1996 was referred to, and
was construed keeping in view the provisions
in Section 20 of the Arbitration Act, 1996,
which give recognition to party autonomy in
choosing the seat of the arbitration
proceedings. Secondly, the Court went on to
state in two places in the said paragraph that
jurisdiction is given to two sets of courts,
namely, those courts which would have
jurisdiction where the cause of action is
located; and those courts where the
arbitration takes place. However, when it
came to providing a neutral place as the
“seat” of arbitration proceedings, the example
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given by the five-Judge Bench made it clear
that appeals under Section 37 of the
Arbitration Act, 1996 against interim orders
passed under Section 17 of the Arbitration
Act, 1996 would lie only 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 to state that this
would be irrespective of the fact that the
obligations to be performed under the
contract, that is, the cause of action, may
arise in part either at Mumbai or Kolkata. The
fact that the arbitration is to take place in
Delhi is of importance. However, the next
sentence in the said paragraph reiterates the
concurrent jurisdiction of both courts.”
22. BGS SGS Soma [BGS SGS Soma JV v. NHPC
Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606]
extensively refers to the judgment of this Court in
Indus Mobile Distribution (P) Ltd. v. Datawind
Innovations (P) Ltd. [Indus Mobile Distribution (P)
Ltd. v. Datawind Innovations (P) Ltd., (2017) 7 SCC
678 : (2017) 3 SCC (Civ) 760] , which decision
refers to the legislative history of Section 2(1)(e)
and Section 20 of the Act and the recommendations
of the 246th Law Commission Report, 2014. These
recommendations, it is observed, were not
implemented in consonance with the decision in
Balco [Balco v. Kaiser Aluminium Technical
Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC
(Civ) 810] , which, in no uncertain terms, refers to
the “place” as the “jurisdictional seat” for the
purpose of clause (e) to sub-section (2) of Section 2
of the Act. This judgment was subsequently
followed in Brahmani River Pellets Ltd. v. Kamachi
Industries Ltd. [Brahmani River Pellets Ltd. v.
Kamachi Industries Ltd., (2020) 5 SCC 462 : (2020)
3 SCC (Civ) 326].
23. It may, however, be noted that clause (e) to
sub-section (1) of Section 2 was amended by
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inserting sub-clause (ii) [ “2. (1)(e)(ii) in the case of
international commercial arbitration, the High
Court in exercise of its ordinary original civil
jurisdiction, having jurisdiction to decide the
questions forming the 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 of courts
subordinate to that High Court;”] with the specific
objective to solve the problem of conflict of
jurisdiction that would arise in cases where interim
measures are sought in India in cases of arbitration
seated outside India. In the context of domestic
arbitrations it must be held that once the “seat of
arbitration” has been fixed, then the courts at the
said location alone will have exclusive jurisdiction
to exercise the supervisory powers over the
arbitration. The courts at other locations would not
have jurisdiction, including the courts where cause
of action has arisen. As observed above and held in
BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd.,
(2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] , and
Indus Mobile [ In Indus Mobile Distribution (P) Ltd.
v. Datawind Innovations (P) Ltd., (2017) 7 SCC
678 : (2017) 3 SCC (Civ) 760, the Court after
clearing the air on the meaning of Section 20 of the
Arbitration Act, 1996 made it clear that the
moment a seat is designated by agreement between
the parties, it is akin to an exclusive jurisdiction
clause, which would then vest the courts at the
“seat” with exclusive jurisdiction for purposes of
regulating arbitral proceedings arising out of the
agreement between the parties.] , the moment the
parties by agreement designate “the seat”, it
becomes akin to an exclusive jurisdiction clause. It
would then vest the courts at “the seat” with
exclusive jurisdiction to regulate arbitration
proceedings arising out of the agreement between
the parties.”
42. It was, thus, held by the Apex Court in paragraph
23 that in the context of domestic arbitration, it must be
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held that once the “seat of arbitration” has been fixed,
then the courts at the said location alone will have
exclusive jurisdiction to exercise the supervisory powers
over the arbitration. The courts at other locations would
not have jurisdiction, including the courts where cause
of action has arisen. Referring to BGS SGS SOMA JV
(supra), and Indus Mobile Distribution (P) Ltd.
(supra), it was held that the moment the parties by
agreement designate the “seat”, it becomes akin to an
exclusive jurisdiction clause. It would then vest the
Courts at “the seat” with exclusive jurisdiction to
regulate the arbitration proceedings arising out of the
agreement between the parties.
43. The Apex Court has further noted that in BGS SGS
SOMA JV (supra), the test to determine the “seat of
arbitration” has been laid down in a situation where the
parties have not agreed on or have not fixed the juridical
seat of arbitration, in paragraph ’61’ of BGS SGS SOMA
JV (supra) as under :-
“61. It will thus be seen that wherever there is an
express designation of a “venue”, and no designation
of any alternative place as the “seat”, combined with
a supranational body of rules governing the
arbitration, and no other significant contrary indicia,
the inexorable conclusion is that the stated venue is
actually the juridical seat of the arbitral proceeding.”
44. It was further held that the law, as applicable
where the parties by agreement have not fixed the
“juridical seat” is crystallised in paragraph 82 of BGS
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SGS SOMA JV (supra), which has been extracted
hereinbefore in this judgment.
45. A careful reading of the observations in paragraph
’82’ in BGS SGS SOMA JV (supra), as noted and
emphasized in paragraph 25 in BBR (India) Private
Ltd. (supra), the test to determine the juridical seat of
arbitration has to be applied considering the language
employed in the agreement between the parties
containing arbitration clause. In respect of an
agreement, wherein the language can be such
“tribunals are to meet or have witnesses, experts or the
parties” (as occurred in sub-section (2) of Section 20 of
the Act’ 1996) referring to the stated place as only the
convenient place of meeting where hearings are to take
place, such place of meeting be taken as “venue” and the
“venue” so stated shall not be the seat of arbitral
proceedings, but only a convenient place of meeting.
However, where the language of agreement is
contrasted with such clause as in sub-section (3) of
Section 20, lead to the conclusion that the parties
intended to anchor arbitral proceedings to a particular
place, signifying thereby that the place is the seat of the
arbitral proceedings, such expression of intention in the
arbitral agreement 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.
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The stated venue would then become the “seat” for the
purpose of arbitration.
46. Having said that, it was further noted by the Apex
Court in BBR (India) Private Ltd. (supra) that the
first arbitral tribunal in its first order has stipulated that
the place of proceedings would be at Panchkula in
Haryana and in absence of significant indicia on the
application of Section 20(2) of the Arbitration Act, 1996,
the seat of Panchkula in Haryana would be the juridical
seat of arbitration by the arbitrator. As the seat was
fixed by the arbitral tribunal, the subsequent
proceedings having been held in Delhi, would not matter
and would not result in shifting of juridical seat. It was,
thus, concluded in paragraphs ’33’ and ’34’ as under :-
“33. At this stage, we must also deal with the
appellant’s argument that substantive proceedings
were held in Delhi and, therefore, it would be the
“seat of arbitration”. The proceedings before the
first arbitration at Panchkula, Haryana, were
restricted to filing of pleadings and documents. On
deeper consideration, this argument should be
rejected for the reasons recorded above, as it will
lead to confusion and uncertainty. The legal
question raised in the present case must be
answered objectively and not subjectively with
reference to the facts of a particular case.
Otherwise, there would be a lack of clarity and
consequent mix-up about the courts that would
exercise jurisdiction. There could be cases where
the arbitration proceedings are held at different
locations, but the “seat of arbitration”, as agreed by
the parties or as determined by the arbitrator, may
be different, and at that place — “the seat”, only a
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held. This would not matter and would not result in
shifting of the jurisdictional “seat”. Arbitrators can
fix the place of residence, place of work, or in case
of recusal, arbitration proceedings may be held at
two different places, as in the present case.
34. For clarity and certainty, which is required
when the question of territorial jurisdiction arises,
we would hold 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.”
47. The Apex Court has, concluded in BBR (India)
Private Ltd. (supra) in the facts of the said case, that
once the arbitrator had fixed the juridical seat under
Section 20(2) of the Arbitration Act, 1996, thereby the
Courts having jurisdiction over Panchkula in Haryana
would have exclusive jurisdiction. The Courts in Delhi
would not get jurisdiction as the juridical seat “seat of
arbitration” is Panchkula and not Delhi.
48. In Mankastu Impex Private Ltd.(supra), the
Apex Court was dealing with an application under
Section 11(6) of the Arbitration and Conciliation Act,
1996, for appointment of arbitrator in international
commercial dispute. The question was about the
interpretation of clause 17.2 of the Memorandum of
Understanding between the parties, which read as
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under:-
“17.2. Any dispute, controversy, difference or claim
arising out of or relating to this MoU, including the
existence, validity, interpretation, performance,
breach or termination thereof or any dispute
regarding non-contractual obligations arising out of
or relating to it shall be referred to and finally
resolved by arbitration administered in Hong
Kong.”
49. By reading the arbitration clause therein “The
place of arbitration shall be Hong Kong”, it was held
therein that the reference to Hong Kong as “place of
arbitration” is not a simple reference as to the “venue”
for the arbitral proceedings. Further, the words in
clause 17.2 that “arbitration administered in Hong Kong”
is an indicia that the seat of arbitration is at Hong Kong.
Once the parties have chosen “Hong Kong as the place
of arbitration to be administered in Hong Kong, the laws
of Hong Kong would govern the arbitration. The Indian
courts have no jurisdiction for appointment of the
arbitrator. It was further held that the stipulation in
clause 17.1 of the memorandum of understanding that
the “MoU is governed by the laws of India”, do not take
away or dilute the intention of parties in clause 17.2 that
the arbitration be administered in Hong Kong. The
words in clause 17.1 do not suggest that the seat of
arbitration is in New Delhi. It was, thus, observed in
paragraphs ’19’ and ’20’ as under :-
“19. The seat of arbitration is a vital aspect of any
arbitration proceedings. Significance of the seat ofPage 47 of 76
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arbitration is that it determines the applicable law
when deciding the arbitration proceedings and
arbitration procedure as well as judicial review
over the arbitration award. The situs is not just
about where an institution is based or where the
hearings will be held. But it is all about which court
would have the supervisory power over the
arbitration proceedings. In Enercon (India) Ltd. v.
Enercon GmbH [Enercon (India) Ltd. v. Enercon
GmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59] ,
the Supreme Court held that : (SCC pp. 43 & 46,
paras 97 & 107) “[T]he location of the seat will
determine the courts that will have exclusive
jurisdiction to oversee the arbitration proceedings.
It was further held that the seat normally carries
with it the choice of that country’s
arbitration/curial law.”
(emphasis supplied)
20. It is well settled that “seat of arbitration” and
“venue of arbitration” cannot be used
interchangeably. It has also been established that
mere expression “place of arbitration” cannot be
the basis to determine the intention of the parties
that they have intended that place as the “seat” of
arbitration. The intention of the parties as to the
“seat” should be determined from other clauses in
the agreement and the conduct of the parties.”
50. We may further refer to the decision of the Apex
Court in Ravi Ranjan Developers Pvt. Ltd. vs. Aditya
Kumar Chatterjee [(2022) SCC Online SC 568],
wherein the arbitration clause 37 of the Development
Agreement read as under :-
“37. That in case of any dispute or difference between
the parties arising out of and relating to this
development agreement, the same shall be settled by
reference of the disputes or differences to the
Arbitrators appointed by both the parties and suchPage 48 of 76
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Arbitration shall be conducted under the provisions of
the Indian Arbitration and Conciliation Act, 1996 as
amended from time to time and the sitting of the said
Arbitral Tribunal shall be at Kolkata.”
51. The High Court of Calcutta therein had allowed the
application under Section 11(6) of the Arbitration Act,
1996 for appointment of arbitration reading the
aforesaid clause, which stated that the sitting of the
arbitral tribunal shall be at Calcutta. The Apex Court
has, however, held that the Calcutta High Court had no
jurisdiction to pass the order of appointment of
arbitrator by noticing that the development agreement
was executed and registered outside the jurisdiction of
the High Court of Calcutta, the agreement pertaining to
development of a property located in Muzaffarpur
outside the jurisdiction of Calcutta High Court. The
appellant had its registered office in Patna, outside the
jursidiction of the Calcutta High Court. The appellant
has not established that it has carried on any business
within the jurisdiction of the Calcutta High Court. It was
considered that admittedly, no part of the cause of
action had arisen within the jurisdiction of the Calcutta
High Court. By reading Section 2(1) (e) of the
Arbitration and Conciliation Act, 1996, it was further
observed in paragraphs ’22’, ’23’, ’24’, ’25’, ’26’, ’27’ and
’28’ as under :-
“22. As argued by Mr. Sinha, the word ‘Court’ has
been defined, in case of an arbitration other than
international commercial arbitration, to mean thePage 49 of 76
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principal Civil Court of original jurisdiction in a
district and would include the High Court in
exercise of its ordinary original jurisdiction, having
jurisdiction to decide the questions forming the
subject matter of the arbitration, if the same had
been the subject matter of the suit, but it does not
include any Civil Court of a grade inferior to such
principal Civil Court or any Court of small causes.
23. Subject to the pecuniary or other limitations
prescribed by any law, suits for recovery of
immovable property or determination of any other
right to or interest in an immovable property or
compensation for wrong to immovable property, is
to be instituted in the Court, within the local limits
of whose jurisdiction, the property is situated.
Certain specific suits relating to immovable
property can be instituted either in the Court
within the limits of whose jurisdiction the property
is situated, or in the Court within the local limits of
whose jurisdiction the Defendant actually or
voluntarily resides or carries on business.
24. All other suits are to be instituted in a Court,
within the local limits of whose jurisdiction the
Defendant voluntarily resides or carries on
business. Where there is more than one Defendant,
a suit may be instituted in the Court within whose
jurisdiction any of the Defendants voluntarily
resides or carries on business. A suit may also be
instituted in a Court within whose jurisdiction the
cause of action arises either wholly or in part.
25. In the present case, no suit could have been
filed in any Court over which the Calcutta High
Court exercises jurisdiction, since as stated above,
the suit admittedly pertains to immovable property
situated at Muzaffarpur in Bihar, outside the
territorial jurisdiction of the Calcutta High Court
and admittedly, no part of the cause of action had
arisen within the territorial jurisdiction of the
Calcutta High Court. The Appellant who would be
in the position of Defendant in a suit, neitherPage 50 of 76
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resides nor carries on any business within the
jurisdiction of the Calcutta High Court.
26. Of course, under Section 11(6), an
application for appointment of an Arbitrator
necessarily has to be moved in the High Court,
irrespective of whether the High Court has the
jurisdiction to decide a suit in respect of the subject
matter of arbitration and irrespective of whether
the High Court at all has original jurisdiction to
entertain and decide suits. As such, the definition of
Court in Section 2(1)(e) of the A&C Act would not
be applicable in the case of a High Court exercising
jurisdiction under Section 11(6) of the A&C Act to
appoint an Arbitrator/Arbitral Tribunal.
27. At the same time, an application under
Section 11(6) of the A&C Act for appointment of an
Arbitrator/Arbitral Tribunal cannot be moved in any
High Court in India, irrespective of its territorial
jurisdiction. Section 11(6) of the A&C Act has to be
harmoniously read with Section 2(1)(e) of the A&C
Act and construed to mean, a High Court which
exercises superintendence/supervisory jurisdiction
over a Court within the meaning of Section 2(1)(e)
of the A&C Act.
28. It could never have been the intention of
Section 11(6) of the A&C Act that arbitration
proceedings should be initiated in any High Court
in India, irrespective of whether the Respondent
resided or carried on business within the
jurisdiction of that High Court, and irrespective of
whether any part of the cause of action arose
within the jurisdiction of that Court, to put an
opponent at a disadvantage and steal a march over
the opponent.”
52. The Apex Court in Ravi Ranjan (supra) has also
taken note of the decision in BGS SGS SOMA JV
(supra); Indus Mobile Distribution (P) Ltd. (supra);
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Hindustan Construction Company Ltd. (supra),
Constitution Bench judgment in Bharat Aluminium Co.
v. Kaiser Aluminium Technical Services Inc.[(2012)
9 SCC 552] to note that the question before the
Constitution Bench in ‘Bharat Aluminum’ was about
applicability of Part I of Arbitration and Conciliation Act
to arbitrations where the place of arbitration was outside
India. Section 2(2) of the Arbitration and Conciliation
Act places a threshold limitation on the applicability of
Part I, where the place of arbitration is not in India. It
was observed that the Constitution Bench in effect and
substance drew a distinction between the venue and
place of arbitration as contemplated under Section 20
and held that only if the agreement of the parties was
construed to provide for seat/place of arbitration in
India, would Part I of the 1996 Act be applicable. If the
seat/place were outside India, Part I would not apply
even though the venue or a few sittings may have been
in India or the cause of action may have arisen in India.
It was further observed that in BGS SGS SOMA JV
(supra), the decision was rendered by the Apex Court in
the context of section 2(2) of the Arbitration and
Conciliation Act, 1996 and the applicability of Part I of
the said Act to an international commercial arbitration,
where the seat of arbitration was not in India.
53. It was, thus, observed in paragraphs 42 and 43 as
under :-
“42. It can never be an absolute general
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proposition of law, that where an arbitration
agreement says that the place of arbitration is
Faridabad/Delhi and proceedings under Part I
of the A&C Act are also validly initiated in
Faridabad, the Court in Faridabad would,
notwithstanding Section 42 of the A&C Act,
lose its jurisdiction, just because arbitration is
later conducted in Delhi and Award is made in
Delhi.
43. This Court has perused the Development
Agreement. The contention of the Respondent
in the Affidavit in Opposition, that the parties
to the arbitration agreement had agreed to
submit to the jurisdiction of Calcutta High
Court, is not correct. The parties to the
arbitration agreement only agreed that the
sittings of the Arbitral Tribunal would be in
Kolkata. Kolkata was the venue for holding
the sittings of the Arbitral Tribunal.”
54. Further, referring to the observations in
paragraphs 19 and 20 in Mankastu Impex Private Ltd.
(supra), it was held in Ravi Ranjan (supra) that the
development agreement provided therein that the
sittings of arbitral tribunal would be conducted in
Calcutta, but the parties never agreed to submit to the
jurisdiction of the Calcutta High Court in respect of
disputes nor had the parties agreed upon Calcutta as the
seat of arbitration. Calcutta was only the venue for
sitting of the arbitral tribunal. While holding so, it was
further observed in paragraph 47 that when two or more
courts have jurisdiction to adjudicate disputes arising
out of an arbitration agreement, the parties might, by
agreement, decide to refer all disputes to any one court
to the exclusion of all other courts, which might
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otherwise have had jurisdiction to decide the disputes.
However, the parties cannot by consent, confer
jurisdiction on a court which inherently lacked
jurisdiction. In light of the clause of development
agreement, it was held that the parties do not agree to
refer their disputes to the jurisdiction of the Court in
Calcutta. It was not the intention of the parties that
Calcutta should be the seat of arbitration. Calcutta was
only intended to be the venue for arbitration seats. The
Calcutta High Court, thus, inherently lacked jurisdiction
to entertain the application under Section 11(6) of the
Arbitration Act for appointment of arbitrator.
55. Three other decisions relied upon by Ms. Rawal,
learned advocate appearing for the petitioner are also
relevant to be looked into.
56. In Swastik Gases (P) Ltd. (supra), the
arbitration clause was silent about the venue or seat of
arbitration whereas the jurisdiction clause 18 in the
agreement read that the “agreement shall be subject to
the jurisdiction of the courts at Calcutta”. The question
before the Apex Court was whether in view of the said
clause 18 of the agreement, the Calcutta High Court has
exclusive jurisdiction in respect of the application made
by the appellant under Section 11 of the Arbitration and
Conciliation Act, 1996? The Apex Court has observed
that when it comes to the question of territorial
jurisdiction relating to the application under Section 11
besides the legislative provisions of Section 2(1)(e) of
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the Arbitration and Conciliation Act, 1996, Section 20 of
the Code of Civil Procedure is also relevant in respect of
cause of action. In the facts of the said case therein it
was found that the part of cause of action had arisen in
Calcutta and parties by virtue of clause 18 of the
agreement have agreed to submit to the jurisdiction of
the courts at Calcutta, which shall mean that the Courts
at Calcutta alone shall have the jurisdiction. It was also
held that where the contract specifies the jurisdiction of
the Court at the particular place and such courts have
jurisdiction to deal with the matter an inference may be
drawn that the parties intended to exclude all other
courts. It was, thus, held that from the fact that the
ouster clause included in the agreement between the
parties conveys their clear intention to exclude the
jurisdiction of the Courts other than those mentioned in
the concerned clause, notwithstanding the absence of
the words “only”, “alone” or “exclusively” and the like.
57. In another decision in the State of West Bengal
(supra), the three Judge Bench of the Apex Court was
called upon to answer the question as to which Court
will have the jurisdiction to entertain and decide the
application under Section 34 of the Arbitration and
Conciliation Act, 1996. In the said case, the tender was
granted and the contract was executed for execution of
work of excavation of canal in District Jalpaiguri, West
Bengal. The respondent had filed an application under
Section 9 of the Arbitration and Conciliation Act, 1996
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for interim order in the High Court of Calcutta. The
interim order passed by the High Court continued from
time to time and was later confirmed. In the meantime,
the arbitrator was appointed under Section 11 of the
Arbitration and Conciliation Act, 1996. The arbitral
award was challenged before the Principal Civil Court at
Jalpaiguri, West Bengal. The respondent filed an
application under Article 227 of the Constitution of India
challenging the jurisdiction of the Civil Court at
Jalpaiguri on the ground that the parties had already
submitted to the ordinary original civil jurisdiction of the
Calcutta High Court and in view of Section 42 of the
Arbitration and Conciliation Act, 1996, the jurisdiction of
the Civil Court at Jalpaiguri to entertain the application
for setting aside of the award was excluded. The
Calcutta High Court in its ordinary original civil
jurisdiction is the only Court which can entertain the
application for setting aside the said award.
58. In the context of this dispute, the Apex Court while
reading Section 2(1)(e) has noted the definition in the
Arbitration Act, 1996 which fixes the court to be the
“principal civil court of original jurisdiction in a District
or the High court in exercise of its ordinary original civil
jurisdiction”. On reading of Section 2(1)(e) and Section
42 of the Arbitration Act, 1996, it was held therein that :-
“25. Our conclusions therefore on Section 2(1)(e)
and Section 42 of the Arbitration Act, 1996 are as
follows:
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(a) Section 2(1)(e) contains an exhaustive definition
marking out only the Principal Civil Court of
Original Jurisdiction in a district or a High Court
having original civil jurisdiction in the State, and no
other court as “court” for the purpose of Part I of
the Arbitration Act, 1996.
(b) The expression “with respect to an arbitration
agreement” makes it clear that Section 42 will
apply to all applications made whether before or
during arbitral proceedings or after an award is
pronounced under Part I of the 1996 Act.
(c) However, Section 42 only applies to applications
made under Part I if they are made to a court as
defined. Since applications made under Section 8
are made to judicial authorities and since
applications under Section 11 are made to the
Chief Justice or his designate, the judicial authority
and the Chief Justice or his designate not being
court as defined, such applications would be
outside Section 42.
(d) Section 9 applications being applications made
to a court and Section 34 applications to set aside
arbitral awards are applications which are within
Section 42.
(e) In no circumstances can the Supreme Court be
“court” for the purposes of Section 2(1)(e), and
whether the Supreme Court does or does not retain
seisin after appointing an arbitrator, applications
will follow the first application made before either a
High Court having original jurisdiction in the State
or a Principal Civil Court having original
jurisdiction in the district, as the case may be.
(f) Section 42 will apply to applications made after
the arbitral proceedings have come to an end
provided they are made under Part I.Page 57 of 76
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(g) If a first application is made to a court which is
neither a Principal Court of Original Jurisdiction in
a district or a High Court exercising original
jurisdiction in a State, such application not being to
a court as defined would be outside Section 42.
Also, an application made to a court without
subject-matter jurisdiction would be outside
Section 42.”
59. The third decision in Brahmani River Pellets Ltd.
(supra), the question was whether the Madras High
Court could exercise jurisdiction under Section 11(6) of
the Arbitration and Conciliation Act, 1996 despite the
fact that the agreement contains the clause that venue of
arbitration shall be Bhubaneswar. It was noted that
Section 2(1)(3) of the Arbitration Act, 1996 defines
“Court” with reference to the term “subject matter of the
suit”. As per Section 2(1)(e) of the Act if the “subject
matter of the suit” is situated within the arbitral
jurisdiction of two or more courts, the parties may agree
to confine the jurisdiction in one of the competent
courts. Referring to paragraph ’96’ of Balco (supra),
the Apex Court noted that the term “subject matter” in
Section 2(1)(e) of the Act is to identify the Court having
supervisory control over the arbitral proceedings. The
provisions of Section 2(1)(e) of the Act has to be read in
conjunction with Section 20 of the Act, which gives
recognition to the autonomy of the parties as to the
place of arbitration. As per Section 20 of the Arbitration
Act, 1996 the parties are free to agree on the place of
arbitration. Party autonomy has to be construed in the
context of parties choosing the Court, which is
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Bhubaneshwar as the venue of arbitration. It was held
that the intention of the parties to exclude all other
courts was clear and only Orissa High Court will have
the jurisdiction to entertain the petition filed under
Section 11(6) of the Arbitration Act, 1996.
60. Having exhaustively gone through the decisions of
the Apex Court, about the ‘seat’, ‘place/venue’ of
arbitration, determinative factors to decide the “seat of
arbitral proceedings” so as to exclude the jurisdiction of
one of the two competent courts having jurisdiction
under section 2(1) & (2) of the Arbitration Act, 1996, the
legal position can be culled out as under :-
(a)As per law stated in Balco (supra) (para 96)
pertaining to arbitration governed by Part I of the
Arbitration Act, i.e., where the “place of arbitration” is
in India:-
i. The term “subject matter” in Section 2(1)(e) is
confined to Part I. It has a reference and
connection with the process of dispute resolution.
Its purpose is to identify the courts having
supervisory control over the arbitration
proceedings. Hence, it refers to a Court, which
would essentially be a Court of the seat of the
arbitration process.
ii. The term “subject matter of the arbitration” cannot
be confused with “subject matter of the suit”. ThePage 59 of 76
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provisions in Section 2(1)(e) has to be construed
keeping in view of the provisions in Section 20 of
the Arbitration Act which gives recognition to party
autonomy.
iii. As explained in Balco (supra), the legislature has
intentionally given jurisdiction to two courts, i.e.
the Court which would have jurisdiction where the
cause of action is located and the courts where the
arbitration takes place. The Apex Court has
further observed in Balco(supra) that this was
necessary as on many occasion, the agreement may
provide for a seat of arbitration which would be
neutral to both the parties and, therefore, the
Courts where arbitration takes place would be
required to exercise supervisory control over the
arbitral process.
iv. The observations in paragraph ’96’ in
Balco(supra), thus, are in the context that as per
Section 20 of the Act, the parties are free to agree
on the “place of arbitration”. The agreement may
provide for a seat of arbitration at a place, which
would be neutral to both the parties. In such
circumstances, out of two Courts having
jurisdiction, i.e. the Court within whose jurisdiction
“subject matter of suit” is situated and the Court
within the jurisdiction of which the dispute
resolution, i.e. the “venue” of arbitration is located.
As per Section 20 of the Act, the party autonomyPage 60 of 76
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has to be construed in the context of parties
choosing a Court, which has jurisdiction out of two
or more competent courts having jurisdiction under
Section 2(1)(e) of the Arbitration.
(b) In Indus Mobile Distribution (P) Ltd. (supra),
the Apex Court after referring to Balco (supra) and
other decisions of the Apex Court, including the
amendment of the Act pursuant to the Law
Commission Report, has held that the amendment act
made it clear that in Sections 20(1) and 20(2) where
the word “place” is used, refers to “judicial seat”.
Whereas, in Section 20(3), the word “place” is
equivalent to “venue”. It was held therein that a
conspectus of all the provisions show that the moment
the seat is designated, it is akin to an exclusive
jurisdiction clause, inasmuch as, it is well settled that
where more than one court has jurisdiction, it is open
for the parties to exclude all other courts.
(c)In BGS SGS SOMA JV (supra), referring to para ’96’
of Balco (supra), it was observed that when it came
to provide a neutral place as the “seat” of arbitration
proceedings, irrespective of the fact that the
obligations to be performed under the contract, i.e.
the cause of action may arise at a different place, the
fact that the arbitration is to take place at the place
chosen by the parties, is of importance.
(d) BBR (India) Private Ltd. (supra), was a case
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where the Apex Court has dealt with a case where the
question was of fixation of seat under Section 20(2) by
the Arbitrator, it was, thus held therein that :-
i. In the context of domestic arbitration, it must be
held that once the seat of arbitration has been
fixed, then the Courts at the said location alone will
have exclusive jurisdiction to exercise the
supervisory control over the arbitration. The
Courts at other locations would not have
jurisdiction, including the Court where the cause of
action has arisen. The “seat” chosen by the parties
would then vest the courts at “the seat” with
exclusive jurisdiction to regulate arbitration
proceedings arising out of the agreement between
the parties.
ii. Further referring to BGS SGS SOMA JV (supra),
while holding Union of India v. Hardy Exploration
& Production (India) Inc.[(2019) 13 SCC 472] being
per incuriam as it contradicts the ratio of the law
laid down in Balco (supra), it was held that it
would be correct to hold that while exercising
jurisdiction under sub-section (2) of Section 20 of
the Act, an arbitrator is not to pass a detailed or a
considered decision. The place where the Arbitral
Tribunal holds the arbitration proceedings would,
by default, be the venue of arbitration and
consequently the “seat of arbitration”.
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iii. It was further held that when the arbitrator fixes
“the seat” in terms of sub-section (2) of Section 20
of the Act, “the seat” of the arbitration cannot be
changed except when and if the parties mutually
agree and state that the “seat of arbitration”
should be changed to another location. The
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
or treated as a change of jurisdictional or
relocation of “seat”, as any such situation would
lead to uncertainty and confusion as to the
jurisdictional “seat of arbitration”.
iv. The Apex Court held that “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”.
v. It was held that the law of arbitration does not
visualises repeated or constant shifting of the “seat
of arbitration”. In fact sub-section (3) of Section 20
draws a distinction between the venue of
arbitration and the seat of arbitration by stating
that for convenience and other reasons, the
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arbitration proceedings may be held at a place
different than the “seat of arbitration”, which
location is referred to as the venue of arbitration.
The place of jurisdiction or “the seat” must be
certain and static and not vague or changeable, as
the parties should not be in doubt as to the
jurisdiction of the courts for availing of judicial
remedies. This would be a risk of parties rushing to
the courts to get first hearing or conflicting
decisions, which is to be avoided.
vi. We may refer to para ’32’ in BBR (India) Private
Ltd. (supra), where the contention that the courts
where arbitration proceedings are being conducted
be given supervisory jurisdiction, was rejected by
noticing that the exercise of supervisory
jurisdiction by the courts where the arbitration
proceedings are being conducted is a relevant
consideration, but not a conclusive and
determinative factor when the venue is not the
“seat”. There would be situations where 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 that
majority or most of the hearing may have taken
place at a venue which is different from the “seat of
arbitration”. On balance, the aspect of certainty as
to the court’s jurisdiction must be given and
accorded priority over the contention that the
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supervisory courts located at the place akin to the
venue where the arbitration proceedings were
conducted or substantially conducted should be
preferred.
vii. The fact that at the place agreed by the parties as
“the seat”, only a few hearings or initial
proceedings may have been held would not matter
and would not result in shifting of the jurisdictional
“seat”.
viii. It was, finally concluded in BBR (India) Private
Ltd. (supra) that whenever the question of
territorial jurisdiction arises in the context of sub-
section (2) of Section 20, the “place” or “venue”
fixed for arbitration proceedings will be the
jurisdictional “seat” and the courts having
jurisdiction over the jurisdictional “seat” would
have exclusive jurisdiction. This principle would
have an exception where the parties by mutual
consent agree that the jurisdictional “seat” should
be changed and such consent must be express and
clearly understood and agreed by the parties.
61. Understanding the law stated and culled out from BGS
SGS SOMA JV (supra) and BBR (India) Private Ltd.
(supra) by reading Section 20 of the Arbitration and
Conciliation Act, 1996, we may record that there are
primarily three situations as stated by the Apex Court
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where the concept of exclusive jurisdiction of the Court
vis-a-vis the seat of arbitration would be attracted. The
first may be a situation where the parties have agreed on
the place of arbitration, which would be the cases
governed under sub-section (1) of Section 20 of the Act
and as sub-section (1) of Section 20 recognises party
autonomy, the moment the parties by agreement
designate “the seat” it becomes akin to an exclusive
jurisdiction clause. It would vest the court at “the seat”
with exclusive jurisdiction to regulate arbitration
proceedings arising out of the agreement between the
parties. To ascertain the applicability of sub-section (1)
of Section 20 of the Arbitration and Conciliation Act,
1996, the agreement containing arbitration clause
between the parties has to be read and understood.
62. Another situation may be when the parties by
mutual consent agree that the jurisdictional “seat”
should be changed, but such consent must be express
and clearly understood and agreed by the parties so as
to avoid any confusion or conflicting situation, also gives
primacy to party autonomy as recognised in sub-section
(1) of Section 20 of the Act’ 1996.
63. In a third situation where the parties have not
agreed on or have not fixed the jurisdictional seat of
arbitration, sub-section (2) of Section 20 would come
into play, where the arbitrator may fix “the seat” having
regard to the circumstances of the case including the
convenience of the parties. The law is that once the
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arbitrator fixes “the seat” in terms of sub-section (2) of
Section 20 of the Act, the arbitrator also cannot change
the “seat of the arbitration” except when and if parties
mutually agree and state that the “seat of arbitration”
should be changed to another location by an express
intention understood by the parties.
64. From a reading of sub-sections (1) and (2) of
Section 20, we find that both the provisions recognise
party autonomy. The fixation of seat of arbitration either
in the contract, which specifies the particular place as
the seat of arbitration or by the arbitrator in terms of
sub-section (2) of Section 20, in any case, must be on the
basic principle which recognises the party autonomy or
convenience of the parties. The place of jurisdiction or
the “seat” must be certain and static with clarity to the
parties as to the jurisdiction of the courts for availing of
judicial remedies in arbitration matters during or after
the proceedings. It may also be noted that though there
is no requirement for the arbitrator to pass a detailed
order or a considered decision so as to fix the place of
arbitration while exercising the jurisdiction under Sub-
section (2) of Section 20 of the Act, but where there are
more than one place or location, where the hearings or
proceedings of arbitration had taken place, it would be
relevant to fix the “seat of arbitration” for the purpose of
application of exclusive jurisdiction clause by
determining as to whether the parties by choice had
agreed to accord jurisdiction to a Court at a place other
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than the place where the cause of action has arisen. The
default fixation of “seat of arbitration” at a place where
the arbitral tribunal holds the arbitration proceedings
being the “venue of arbitration” and consequently, the
“seat of arbitration” would be attracted where there is
no contrary indicia and inexorable conclusion is that the
‘venue’ is actually ‘judicial seat’ of the arbitration
proceedings.
65. Having culled out the legal position of fixation of
the “seat of arbitration”, both sub-section (1) of Section
20 and sub-section (2) of Section 20 so as to attract
exclusive jurisdiction concept, in the facts and
circumstances of the present case, it is pertinent to note
that the arbitration clause 70 of the agreement arrived
between the parties stated that :-
“The venue of Arbitration shall be such place or
places as may be fixed by the Arbitrator in his sole
discretion.”
66. The language is “Venue of arbitration: shall be such
place or place as may be fixed by the arbitrator in his
sole discretion”, whereas the exclusive jurisdiction
clause 72 conferred the jurisdiction on the civil court of
the place where one of the causes, i.e. , where the
acceptance of tender has been issued or the place where
the work is executed/under execution, has arisen.
67. By reading of both the clauses, we may note that
though the parties have agreed to confer jurisdiction
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upon the courts having causes of action to decide any
dispute arising out of or in respect of the contract, but
the ‘venue’ or the ‘seat’ of arbitration has not been fixed
by the parties under the agreement so as to exclude the
jurisdiction of the Court having cause of action, as
agreed by the parties. In the same agreement, a
conjoint reading of clauses 70 and 72 of the agreement
arrived at between the parties, makes it clear that the
parties have agreed to submit to the jurisdiction of the
courts having cause of action to decide the dispute
arising out of or in respect of the contract. However, so
far as the fixation of “venue” or “seat of arbitration”, it
was left to the sole discretion of the arbitrator. The
above noted statement is Clause 70, which give the
discretion upon the arbitrator to decide the venue of
arbitration also speaks that the proceeding may be held
at more than one places as may be fixed by the
arbitrator. It is, thus, evident that the parties by mutual
agreement have never decided on the place of
arbitration, even if fixed by the arbitrator, which may be
considered to be the ‘seat of arbitration.
68. As regards, the “venue” of arbitration, which was
left to the discretion of the arbitrator, in the instant
case, there was no fixed venue where the arbitration
proceedings had taken place. From the additional
affidavit filed on behalf of the respondents, it may be
noted that the sole arbitrator appointed on 22.09.2017
as per the general conditions of contract by the Engineer
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in Chiefs Branch, Integrated Head Office of Ministry of
Defence (Armed), Kashmir House, New Delhi, had fixed
the first hearing of the case as on 12/13.02.2018 in the
office of the Chief Engineer (Navy), Mumbai. The next
dates of hearing were fixed on 27 and 28 of April, 2018
in the office of the Panel of Arbitrators, Chandigarh on
19.03.2018. The hearing was commenced on 27.08.2018
in the office of the Panel of Arbitrators, Chandigarh and
the award was published on 24.10.2018.
69. Reference has been made by the learned senior
counsel appearing for the respondent to the letter of
appointment of arbitrator dated 22.09.2017 wherein it
was requested that the arbitrator shall first decide on
the question of jurisdiction and arbitrability of the claims
as per the terms and conditions of the contract and
Section 16 of the Arbitration and Conciliation Act, 1996
and only thereafter, take up the claims for adjudication
on merits. It was argued that the arbitrator was aware
of the fact that it was required to decide the question of
jurisdiction first. We may note that vide communication
dated 12.01.2018, while fixing the dates of hearing as
12/13.02.2018, the sole arbitrator has indicated the
place/venue as the office of Chief Engineer (Navy),
Mumbai and also that the hearing will be continued on
the subsequent dates till completion. On the request for
adjournment made on behalf of the petitioner herein
vide letter dated 20.01.2018, the arbitrator sent a
communication dated 22.01.2018 communicating that
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hearing of the case fixed on 12/13.02.2018 was
postponed and the next date of hearing shall be
intimated later on.
70. The further dates fixed in the arbitral proceedings
as 27/28.04.2018 was intimated vide letter dated
19.03.2018 and the place/venue indicated therein was
the office of panel of arbitrators at Chandigarh. The
record of the arbitration case hearing held in the office
of panel of arbitrator at Chandigarh, placed before us,
indicates that the hearing of the case was commenced
on 27.04.2018. Apart from the above noted
communications and brief record of the proceedings of
arbitration, there is nothing on record, which would
indicate that the parties had ever consented or agreed to
fix the place/venue of arbitration in the office of panel of
arbitrators at Chandigarh. The place/venue where
hearing was held on 27/28.04.2018 and concluded was
neither the place/venue chosen by the parties under
Section 20(1) of the Arbitration and Conciliation Act,
1996 nor it can be said to be the place of arbitration
fixed by the arbitrator under sub-section (2) of Section
20 having regard to the circumstances of the case
including the convenience of the parties, so as to fix it as
the “seat of arbitration”, conveying intention of the
parties to exclude the jurisdiction of other courts having
competent jurisdiction under clause 72 of the general
conditions of contract agreed between the parties.
71. In our considered opinion, the observations made
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by the Apex Court in BBR (India) Private Ltd. (supra)
(para ’26’) that the place where the arbitral tribunal
holds the arbitral proceedings would, by default, be the
venue of arbitration and consequently, the “seat of
arbitration”, would not be attracted in the facts of the
present case, inasmuch as, the place/venue namely the
office of panel of arbitrators at Chandigarh, where the
arbitration proceedings were subsequently held on
27/28.04.2018, cannot be regarded as the seat fixed by
the arbitrator while exercising powers under sub-section
(2) of Section 20.
72. From a conjoint reading of clause 70 and clause 72
of the general conditions of contract, as also the record
of the arbitration proceedings, in the instant case, the
venue of arbitration in the office of panel of arbitrators
at Chandigarh where subsequent hearings had taken
place, can only be said to be the convenient place chosen
by the arbitrator as per his convenience and shall be
held to be the place of meeting of arbitral tribunal in
terms of sub-section (3) of Section 20. There is nothing
on record, which would indicate that the parties have
ever expressed their consent to fix the place/venue at
Chandigarh to be the seat of arbitration giving the
Courts at Chandigarh exclusive jurisdiction over the
arbitral proceedings nor it can be said to be a case
where the parties have clearly understood that the place
or venue for arbitration at Chandigarh where arbitration
proceeding has been held, has been fixed as the
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‘juridical seat’ in terms of sub-section (2) of Section 20
so as to given exclusive jurisdiction to the courts at
Chandigarh.
73. In the instant case, the arbitration proceedings
were conducted at two different places, but none of them
had been fixed by the arbitator in terms of sub-section
(2) of Section 20 of the Arbitration Act, 1996. Both the
parties were flexible as to the place/venue of the
arbitration and had left it to the discretion of the
arbitrator to hold hearing at one place or more than one,
whereas they have agreed to the extent that the courts
of the place from where the acceptance of the tender has
been issued or the place where the work is
executed/under execution, i.e. where any of the above
part of cause of action has arisen, shall have exclusive
jurisdiction to decide any dispute arising out of or in
respect of the contract. This statement in clause 72 of
the general conditions of contract agreed between the
parties would act as a contra indicia against the default
fixation of the seat of arbitration at the place of hearing
at Chandigarh, as per the contention of the learned
counsel for the petitioner.
74. There cannot be a dispute to the legal proposition
that “seat of arbitration” and “venue of arbitration
cannot be used interchangeably. It is also established
principle as stated in Mankastu Impex Private Ltd.
(supra), that mere expression, “place of arbitration”
cannot be the basis to determine the intention of the
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parties that they have intended that place as the seat of
arbitration. The intention of the parties as to the “seat”
should be determined from other clauses in the
agreement and conduct of the parties. The “seat of
arbitration” is a vital aspect of any arbitration
proceeding. The situs is not just about the place where
an institution is based or the hearing will be held. But it
is all about which court would have the supervisory
power over the arbitration proceedings. The location of
the seat will determine the courts that will have the
exclusive jurisdiction to oversee the arbitration
proceedings.
75. In the instant case, the intention of the parties as
to the determination of “seat of arbitration” cannot be
gathered from either the arbitration clause in the
agreement or the conduct of the parties. Mere fact that
both the parties had participated in the hearings held at
Chandigarh on the subsequent dates fixed by the sole
arbitrator in the office of the panel of arbitrators, would
not be a reason to hold that the location where hearing
was held shall be the “seat” to determine the courts at
Chandigarh to have exclusive jurisdiction to examine the
validity of the award under Section 34 of the Arbitration
Act, 1996.
76. Insofar as the reliance placed by the learned
counsel for the petitioner on the decision of this Court in
Instakart Services Private Ltd. (supra), suffice it to
note that the issues discussed therein were with
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reference to the territorial jurisdiction of the Court
under section 11(6) of the Arbitration Act, 1996 to
entertain the application for appointment of arbitrator
and has no reference to the provisions of sub-section (2)
of Section 20, which provides for fixation of seat by the
arbitrator after appointment. The discussion made
therein in light of the law laid down by the Apex Court in
Ravi Ranjan Developers Pvt. Ltd. (supra), therefore,
are not applicable in the present set of dispute.
77. In view of the above discussion, we find that the
Commercial Court while rejecting the application under
Section 34 of the Arbitration and Conciliation Act, 1996
on the ground of lack of jurisdiction has failed to take
into account the above discussed vital aspects of the
matter. Consequently, the order of rejection of the
application under Section 34 of the Arbitration and
Conciliation Act, 1996 dated 18.07.2022 passed by the
Additional District Judge, Porbandar in Civil Misc.
Application No. 20 of 2021 on Exhibit ‘1’, is hereby set
aside. The matter is remitted back to the competent
court to adjudicate on the merits of the application
under Section 34 of the Arbitration and Conciliation Act,
1996 by restoring it to its original number. The Special
Civil Application No. 5057 of 2024 invoking the
extraordinary supervisory jurisdiction of this Court
under Article 227 of the Constitution of India is hereby
allowed.
78. Insofar as the connected petition being Special
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Civil Application No. 15264 of 2024 filed by the award
holder, respondent herein against the order dated
06.04.2024 passed by the executing court in Commercial
Execution No. 126 of 21, it may be noted that the
arguments of the learned counsels for the parties were
extended mainly on the question of jurisdiction of the
Courts at Porbandar to examine the validity of the
arbitral award by entertaining the application under
Section 34 of the Arbitration and Conciliation Act, 1996.
With the above, the connected Special Civil Application
No.15264 of 2024 stands disposed of leaving it open to
the parties to raise all issues at the appropriate stage.
79. All pending Civil Applications stand disposed of,
accordingly.
(SUNITA AGARWAL, CJ )
(PRANAV TRIVEDI,J)
BIJOY B. PILLAI
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