once the “seat” has been chosen, which would then amount to an exclusive jurisdiction clause so far as Courts of the “seat” are concerned.
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 103 an ‘international commercial arbitration’ within the meaning of Section 2(1)(f) of the Arbitration Act, 1996, would have to be finally settled in accordance 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).
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.
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.
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 exclusive jurisdiction clause so far as Courts of the “seat” are concerned.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9307 OF 2019
(ARISING OUT OF SLP (CIVIL) NO.25618 OF 2018)
BGS SGS SOMA JV …Petitioner
Versus
NHPC LTD. …Respondent
WITH
CIVIL APPEAL NO. 9308 OF 2019
(ARISING OUT OF SLP (CIVIL) NO. 25848 OF 2018)
WITH
CIVIL APPEAL NO. 9309 OF 2019
(ARISING OUT OF SLP (CIVIL) NO. 28062 OF 2018)
J U D G M E N T
R.F. NARIMAN, J.
1. Leave granted.
2. Three appeals before us raise questions as to maintainability of appeals under Section 37 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as “the Arbitration Act, 1996”), and, given the
1
arbitration clause in these proceedings, whether the “seat” of the arbitration proceedings is New Delhi or Faridabad, consequent upon
which a petition under Section 34 of the Arbitration Act, 1996 may be
filed dependent on where the seat of arbitration is located.
3. At the outset, the facts in SLP (Civil) No.25618 of 2018 are set out as
follows. On 16.01.2004, the Petitioner was awarded a contract for
construction of Diversion Tunnels, Coffer Dams, Concrete Gravity
Dams, Plunge Pools and Cutoff Walls of Subansri Lower Hydroelectric Project on river Subansri, with an installed capacity of 2000 MW,
stated to be the largest Hydropower project yet in India. The project
site is located in the lower Subansri districts in the States of Assam
and Arunachal Pradesh. Clause 67.3 of the agreement between the
parties provides for dispute resolution through arbitration. Clause 67.3
reads as follows:
“Any dispute in respect of which the Employer
and the Contractor have failed to reach at an amicable settlement pursuant to Sub-Clause 67.1,
shall be finally settled by arbitration as set forth
below. The Arbitral Tribunal shall have full power
to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer.
(i) A dispute with an Indian Contractor shall
be finally settled in accordance with the In2
dian Arbitration and Conciliation Act, 1996,
or any statutory amendment thereof. The
arbitral tribunal shall consist of 3 arbitrators, one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators
so appointed by the Parties and shall act
as Presiding arbitrator. In case of failure of
the two arbitrators, appointed by the parties to reach upon a consensus within a
period of 30 days from the appointment of
the arbitrator appointed subsequently, the
Presiding arbitrator shall be appointed by
the President of the Institution of Engineers
(India). For the purposes of this SubClause, the term “Indian Contractor”
means a contractor who is registered in India and is a juridic person created under
Indian law as well as a joint venture between such a contractor and a Foreign
Contractor.
(ii) In the case of a dispute with a Foreign
Contractor, the dispute shall be finally settled in accordance with the provisions of
the Indian Arbitration and Conciliation Act,
1996 and read with UNCITRAL Arbitration
Rules. The arbitral tribunal shall consist of
three Arbitrators, one each to be appointed
by the Employer and the Contractor. The
third Arbitrator shall be chosen by the two
Arbitrators so appointed by the Parties and
shall act as Presiding arbitrator. In case of
failure of the two arbitrators appointed by
the parties to reach a consensus within a
period of 30 days from their appointment
on the Presiding Arbitrator to be appointed
subsequently, the Presiding arbitrator shall
be appointed by the President of the Institution of Engineers (India). For the pur3
poses of this Clause 67, the term “Foreign
Contractor” means a contractor who is not
registered in India and is not a juridic person created under Indian Law. In case of
any contradiction between Indian Arbitration and Conciliation Act, 1996 and UNCITRAL Arbitration Rules, the provisions in
the Indian Arbitration and Conciliation Act,
1996 shall prevail.
(iii) Arbitration may be commenced prior to or
after completion of the Works, provided
that the obligations of the Employers, the
Engineer, and the Contractor shall not be
altered by reason of the arbitration being
conducted during the progress of the
Works.
xxx xxx xxx
(v) If one of the parties fail to appoint its arbitrator in pursuance of sub-clause (i) and (ii)
above, within 30 days after receipt of the
notice of the appointment of its arbitrator
by the other party, then the President of the
Institution of Engineers (India), both in
cases of foreign contractors as well as Indian Contractors, shall appoint the arbitrator. A certified copy of the order of the
President of Institution of Engineers (India),
making such an appointment shall be furnished to each of the parties.
(vi) 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.
4
(vii) The decision of the majority of arbitrators
shall be final and binding upon both parties. The cost and expenses of Arbitration
shall be borne in such a manner as determined by the arbitral tribunal. However, the
expenses incurred by each party in connection with the preparation, presentation
etc. of its proceedings as also the fees and
expenses paid to the arbitrator appointed
by such party on its behalf shall be borne
by each party itself.”
4. On 16.05.2011, a Notice of Arbitration was issued by the Petitioner to
the Respondent, in regard to payment of compensation for losses suffered due to abnormal delays and additional costs as a result of hindrances caused by the Respondent. A three-member Arbitral Tribunal
was constituted as per clause 67.3 of the agreement under the Arbitration Act, 1996. Pursuant thereto, the Petitioner filed its Statement of
Claim seeking recovery of an amount of INR 986.60 crores plus CHF
1060619. Between August 2011 and August 2016, seventy-one sittings of the Arbitral Tribunal took place at New Delhi. The Tribunal
then delivered its unanimous award at New Delhi on 26.08.2016, by
which the claims of the Petitioner aggregating to INR
424,81,54,096.29 were allowed, together with simple interest at 14%
per annum till the date of actual payment. On 04.10.2016, in view of
certain computational and typographical errors in the arbitral award,
5
the figure of 424,81,54,096.29 was rectified to INR 424,70,52,126.66.
On 03.01.2017, being aggrieved by the arbitral award and the rectification thereto, the Respondent filed an application under Section 34
of the Arbitration Act, 1996 seeking to set aside these awards before
the Court of the District and Sessions Judge, Faridabad, Haryana. On
28.04.2017, the Petitioner filed an application under Section 151 read
with Order VII Rule 10 of the Code of Civil Procedure, 1908 (hereinafter referred to as the “CPC”) and Section 2(1)(e)(i) of the Arbitration Act, 1996, seeking a return of the petition filed under Section 34
for presentation before the appropriate Court at New Delhi and/or the
District Judge at Dhemaji, Assam. In November, 2017, after the constitution of a Special Commercial Court at Gurugram, the Section 34
petition filed at Faridabad was transferred to the said Gurugram Commercial Court and numbered as Arbitration Case No.74 (CIS No.
ARB/118/2017).
5. On 21.12.2017, the Special Commercial Court, Gurugram allowed the
application of the Petitioner, and returned the Section 34 petition for
presentation to the proper court having jurisdiction in New Delhi. On
15.02.2018, the Respondent filed an appeal under Section 37 of the
Arbitration Act, 1996 read with Section 13(1) of the Commercial
6
Courts Act, 2015 before the High Court of Punjab and Haryana at
Chandigarh. On 12.09.2018, the impugned judgment was delivered
by the Punjab and Haryana High Court, in which it was held that the
appeal filed under Section 37 of the Arbitration Act, 1996 was maintainable, and that Delhi being only a convenient venue where arbitral
proceedings were held and not the seat of the arbitration proceedings, Faridabad would have jurisdiction on the basis of the cause of
action having arisen in part in Faridabad. As a result, the appeal was
allowed and the judgment of the Special Commercial Court, Gurugram was set aside.
6. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearing on
behalf of the Petitioner in SLP (C) No.25618 of 2018, has assailed the
impugned High Court judgment on both counts. According to him, on
a combined reading of Section 13 of the Commercial Courts Act, 2015
and Section 37 of the Arbitration Act, 1996, it becomes clear that Section 13 of the Commercial Courts Act, 2015 only provides the forum
for challenge, whereas Section 37 of the Arbitration Act, 1996 - which
is expressly referred to in the proviso to Section 13(1) of the Commercial Courts Act, 2015 - circumscribes the right of appeal. He contended that this when read with Section 5 of the Arbitration Act, 1996,
7
makes it clear that only certain judgments and orders are appealable,
and no appeal lies under any provision outside Section 37 of the Arbitration Act, 1996. He contended that the High Court was manifestly
wrong when it said that the present appeal was appealable under
Section 37(1)(c) of the Arbitration Act, 1996 as being an appeal
against an order refusing to set aside an arbitral award under Section
34 of the Arbitration Act, 1996. According to Dr. Singhvi, an order
which allows an application under Section 151 read with Order VII
Rule 10 of the CPC can by no stretch of the imagination amount to an
order refusing to set aside an arbitral award under Section 34 of the
Arbitration Act, 1996. For this proposition, he strongly relied upon on
our judgment in Kandla Export Corporation & Anr. v. M/s OCI Corporation & Anr. (2018) 14 SCC 715. On the second point, he read
out the impugned judgment in detail, and stated that the ultimate conclusion that New Delhi was only a “venue” and not the “seat” of the arbitration was incorrect, as the parties have chosen to have sittings at
New Delhi, as a result of which it is clear that the Arbitral Tribunal considered that the award made at New Delhi would be made at “the
seat” of the arbitral proceedings between the parties. He further
added that it was clear that even if both New Delhi and Faridabad had
8
jurisdiction, New Delhi being the choice of the parties, the principle
contained in Hakam Singh v. M/s. Gammon (India) Ltd., (1971) 1
SCC 286, would govern. He referred in copious detail to many judgments of this Court, including the Five Judge Bench in Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc.,
(2012) 9 SCC 552, Indus Mobile Distribution Private Limited v.
Datawind Innovations Private Limited & Ors., (2017) 7 SCC 678,
and various other judgments to buttress his submissions. According
to him, the recent judgment delivered in Union of India v. Hardy Exploration and Production (India) Inc. 2018 SCC Online SC 1640
queers the pitch, in that it is directly contrary to the Five Judge bench
decision in BALCO (supra). It is only as a result of the confusion
caused by judgments such as Hardy Exploration and Production
(India) Inc. (supra) that the impugned judgment has arrived at the
wrong conclusion that New Delhi is not the “seat”, but only the
“venue” of the present arbitral proceedings. He, therefore, in the
course of his submissions argued that this confusion should be removed, and exhorted us to declare that Hardy Exploration and Production (India) Inc. (supra) was not correctly decided, being contrary
to the larger bench in BALCO (supra).
9
7. Dr. Singhvi in the course of his submissions also referred pointedly to
paragraph 96 of BALCO (supra), and argued that not only was the
example given in the said paragraph contrary to the theory of concurrent jurisdiction propounded therein, but was also contrary to subsequent paragraphs in the said judgment, in which it was clearly held
that a clause in an agreement stating the “seat” of arbitration is akin to
an exclusive jurisdiction clause, which would put paid to any theory of
concurrent jurisdiction. As a matter of fact, two subsequent decisions
have understood the ratio of BALCO (supra) to be that once the
“seat” is indicated in an arbitration agreement, it is akin to an exclusive jurisdiction clause, which would oust the jurisdiction of courts
other than courts at the seat. For this purpose he expressly referred
to and relied upon Reliance Industries Ltd. v. Union of India (2014)
7 SCC 603 and Indus Mobile Distribution Pvt. Ltd. (supra).
8. Shri Arunabh Chowdhury, appearing in SLP (Civil) No. 25848 of 2018,
argued that unlike the first SLP argued by Dr. Singhvi, in his case, the
Notice for Arbitration was sent to the Assam site-office of the Respondent, and not routed through the Assam office to be sent to the Head
Office at Faridabad, thereby making the observations based on Section 21 of the Arbitration Act,1996 in the impugned judgment inappli10
cable on the facts of his case. He supported Dr. Singhvi’s argument
that the appeal filed under Section 37 of the Arbitration Act, 1996
would not be maintainable, and cited several judgments, which will be
dealt with a little later.
9. Shri Ankit Chaturvedi, appearing in SLP (Civil) No. 28062 of 2018,
stressed one important difference in the facts of his case, which is,
that the arbitral award made in his case expressly referred to Section
31(4) of the Arbitration Act, 1996, and stated that the place of arbitration, as determined in accordance with Section 20 of the Arbitration
Act, 1996, was New Delhi. Therefore, this being the “seat” as determined by the Arbitral Tribunal in this case, a challenge under Section
34 of the Arbitration Act, 1996 could only be made in the courts at
New Delhi.
10. Smt. Maninder Acharya, learned Additional Solicitor General, supported the judgment under appeal. She first argued that the reasoning
of the impugned judgment, that an order passed under Section 151
read with Order VII Rule 10 of the CPC would amount to a refusal to
set aside an arbitral award, is correct, and relied heavily upon a Division Bench judgment of the Delhi High Court in Antrix Corporation
Ltd. v. Devas Multimedia Pvt. Ltd. 2018 SCC Online Del 9338 for
11
this purpose. On the second point, she argued that the arbitration
clause did not expressly state that either New Delhi or Faridabad was
to be the seat of the Arbitral Tribunal. Therefore, the arbitration clause
only referred to a convenient venue, and the fact that the sittings were
held at New Delhi, therefore, would not make New Delhi the seat of
the arbitration under Section 20(1) of the Arbitration Act, 1996. According to her, since the agreements in the present case were signed
in Faridabad, and since notices were sent by the Petitioners to the
Respondent’s Faridabad office, part of the cause of action clearly
arose in Faridabad, as a result of which the courts in Faridabad would
be clothed with jurisdiction to decide a Section 34 application. She
stressed the fact that in BALCO (supra), even assuming that New
Delhi was the seat of arbitration, both New Delhi and Faridabad would
have concurrent jurisdiction - New Delhi being a neutral forum in
which no part of the cause of action arose, and Faridabad being a
chosen forum where a part of the cause of action has arisen. When
read with Section 42 of the Arbitration Act, 1996, since the Court at
Faridabad was first approached by filing an application under Section
34 of the Arbitration Act,1996, that Court alone would have jurisdiction, as a result of which the impugned judgment ought to be affirmed.
12
Maintainability of the appeals under Section 37 of the Arbitration
Act, 1996
11. Section 37(1) of the Arbitration Act, 1996 reads as follows:
“37. Appealable Orders.-
(1)An appeal shall lie from the following orders (and
from no others) to the Court authorised by law to
hear appeals from original decrees of the Court
passing the order, namely:-
(a)refusing to refer the parties to arbitration under
section 8;
(b)granting or refusing to grant any measure under
section 9;
(c)setting aside or refusing to set aside an arbitral
award under section 34.”
12. Section 13 of the Commercial Courts Act, 2015 reads as follows:
“13. Appeals from decrees of Commercial Courts
and Commercial Divisions.-
(1)Any person aggrieved by the judgment or order of
a Commercial Court below the level of a District
Judge may appeal to the Commercial Appellate
Court within a period of sixty days from the date of
judgment or order.
(1A)Any person aggrieved by the judgment or order of
a Commercial Court at the level of District Judge
exercising original civil jurisdiction or, as the case
may be, Commercial Division Bench of a High
Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty
days from the date of the judgment of order:
13
Provided that an appeal shall lie from such orders
passed by the Commercial Division or a Commercial Court that are specifically enumerated in Order
XLIII of the Code of Civil Procedure, 1908 (5 of
1908) as amended by this Act and Section 37 of
the Arbitration and Conciliation Act, 1996 (26 of
1996).
(2)Notwithstanding anything contained in any other
law for the time being in force or Letters Patent of
a High Court, no appeal shall lie from any other order or decree of a Commercial Division or Commercial Court otherwise than in accordance with
the provisions of the Act.”
13. The interplay between Section 37 of the Arbitration Act, 1996 and
Section 13 of the Commercial Courts Act, 2015, has been laid down
in some detail in the judgment in Kandla Export Corporation
(supra). The precise question that arose in Kandla Export Corporation (supra) was as to whether an appeal, which was not maintainable under Section 50 of the Arbitration Act,1996, is nonetheless
maintainable under Section 13(1) of the Commercial Courts Act,
2015. In this context, after setting out various provisions of the Commercial Courts Act, 2015 and the Arbitration Act, 1996, this Court
held:
“13. Section 13(1) of the Commercial Courts Act, with
which we are immediately concerned in these appeals, is in two parts. The main provision is, as has
been correctly submitted by Shri Giri, a provision
14
which provides for appeals from judgments, orders
and decrees of the Commercial Division of the High
Court. To this main provision, an exception is carved
out by the proviso…”
14. The proviso goes on to state that an appeal shall
lie from such orders passed by the Commercial Division of the High Court that are specifically enumerated under Order 43 of the Code of Civil Procedure
Code, 1908, and Section 37 of the Arbitration Act. It
will at once be noticed that orders that are not specifically enumerated under Order 43 CPC would, therefore, not be appealable, and appeals that are mentioned in Section 37 of the Arbitration Act alone are
appeals that can be made to the Commercial Appellate Division of a High Court.
15. Thus, an order which refers parties to arbitration
under Section 8, not being appealable under Section
37(1)(a), would not be appealable under Section
13(1) of the Commercial Courts Act. Similarly, an appeal rejecting a plea referred to in sub-sections (2)
and (3) of Section 16 of the Arbitration Act would
equally not be appealable under Section 37(2)(a)
and, therefore, under Section 13(1) of the Commercial Courts Act.
xxx xxx xxx
20. Given the judgment of this Court in Fuerst Day
Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports
Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] ,
which Parliament is presumed to know when it enacted the Arbitration Amendment Act, 2015, and given
the fact that no change was made in Section 50 of the
Arbitration Act when the Commercial Courts Act was
brought into force, it is clear that Section 50 is a provision contained in a self-contained code on matters
pertaining to arbitration, and which is exhaustive in
nature. It carries the negative import mentioned in
15
para 89 of Fuerst Day Lawson [Fuerst Day Lawson
Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011)
4 SCC (Civ) 178] that appeals which are not mentioned therein, are not permissible. This being the
case, it is clear that Section 13(1) of the Commercial
Courts Act, being a general provision vis-à-vis arbitration relating to appeals arising out of commercial disputes, would obviously not apply to cases covered by
Section 50 of the Arbitration Act.
21. However, the question still arises as to why Section 37 of the Arbitration Act was expressly included in
the proviso to Section 13(1) of the Commercial Courts
Act, which is equally a special provision of appeal
contained in a self-contained code, which in any case
would be outside Section 13(1) of the Commercial
Courts Act. One answer is that this was done ex
abundanti cautela. Another answer may be that as
Section 37 itself was amended by the Arbitration
Amendment Act, 2015, which came into force on the
same day as the Commercial Courts Act, Parliament
thought, in its wisdom, that it was necessary to emphasise that the amended Section 37 would have
precedence over the general provision contained in
Section 13(1) of the Commercial Courts Act. Incidentally, the amendment of 2015 introduced one more
category into the category of appealable orders in the
Arbitration Act, namely, a category where an order is
made under Section 8 refusing to refer parties to arbitration. Parliament may have found it necessary to
emphasise the fact that an order referring parties to
arbitration under Section 8 is not appealable under
Section 37(1)(a) and would, therefore, not be appealable under Section 13(1) of the Commercial Courts
Act. Whatever may be the ultimate reason for including Section 37 of the Arbitration Act in the proviso to
Section 13(1), the ratio decidendi of the judgment
in Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC
(Civ) 178] would apply, and this being so, appeals
16
filed under Section 50 of the Arbitration Act would
have to follow the drill of Section 50 alone.
22. This, in fact, follows from the language of Section
50 itself. In all arbitration cases of enforcement of foreign awards, it is Section 50 alone that provides an
appeal. Having provided for an appeal, the forum of
appeal is left “to the Court authorised by law to hear
appeals from such orders”. Section 50 properly read
would, therefore, mean that if an appeal lies under
the said provision, then alone would Section 13(1) of
the Commercial Courts Act be attracted as laying
down the forum which will hear and decide such an
appeal.
xxx xxx xxx
27. The matter can be looked at from a slightly different angle. Given the objects of both the statutes, it is
clear that arbitration itself is meant to be a speedy
resolution of disputes between parties. Equally, enforcement of foreign awards should take place as
soon as possible if India is to remain as an equal
partner, commercially speaking, in the international
community. In point of fact, the raison d'être for the
enactment of the Commercial Courts Act is that commercial disputes involving high amounts of money
should be speedily decided. Given the objects of both
the enactments, if we were to provide an additional
appeal, when Section 50 does away with an appeal
so as to speedily enforce foreign awards, we would
be turning the Arbitration Act and the Commercial
Courts Act on their heads. Admittedly, if the amount
contained in a foreign award to be enforced in India
were less than Rs 1 crore, and a Single Judge of a
High Court were to enforce such award, no appeal
would lie, in keeping with the object of speedy enforcement of foreign awards. However, if, in the same
fact circumstance, a foreign award were to be for Rs
1 crore or more, if the appellants are correct, enforce17
ment of such award would be further delayed by providing an appeal under Section 13(1) of the Commercial Courts Act. Any such interpretation would lead to
absurdity, and would be directly contrary to the object
sought to be achieved by the Commercial Courts Act
viz. speedy resolution of disputes of a commercial nature involving a sum of Rs 1 crore and over. For this
reason also, we feel that Section 13(1) of the Commercial Courts Act must be construed in accordance
with the object sought to be achieved by the Act. Any
construction of Section 13 of the Commercial Courts
Act, which would lead to further delay, instead of an
expeditious enforcement of a foreign award must,
therefore, be eschewed. Even on applying the doctrine of harmonious construction of both statutes, it is
clear that they are best harmonised by giving effect to
the special statute i.e. the Arbitration Act, vis-à-vis the
more general statute, namely, the Commercial Courts
Act, being left to operate in spheres other than arbitration.”
14. Given the fact that there is no independent right of appeal under Section 13(1) of the Commercial Courts Act, 2015, which merely provides
the forum of filing appeals, it is the parameters of Section 37 of the Arbitration Act,1996 alone which have to be looked at in order to determine whether the present appeals were maintainable. Section 37(1)
makes it clear that appeals shall only lie from the orders set out in
sub-clauses (a), (b) and (c) and from no others. The pigeonhole that
the High Court in the impugned judgement has chosen to say that the
appeals in the present cases were maintainable is sub-clause (c). According to the High Court, even where a Section 34 application is or18
dered to be returned to the appropriate Court, such order would
amount to an order “refusing to set aside an arbitral award under Section 34”.
15. Interestingly, under the proviso to Section 13(1A) of the Commercial
Courts Act, 2015, Order XLIII of the CPC is also mentioned. Order
XLIII Rule(1)(a) reads as follows:
“1. Appeal from orders.- An appeal shall lie from the
following orders under the provisions of Section 104,
namely-
(a)an order under Rule 10 of Order VII returning a
plaint to be presented to the proper Court except
where the procedure specified in rule 10A of Order
VII has been followed;”
16. This provision is conspicuous by its absence in Section 37 of the Arbitration Act, 1996, which alone can be looked at for the purpose of filing appeals against orders setting aside, or refusing to set aside
awards under Section 34. Also, what is missed by the impugned judgment is the words “under Section 34”. Thus, the refusal to set aside
an arbitral award must be under Section 34, i.e., after the grounds set
out in Section 34 have been applied to the arbitral award in question,
and after the Court has turned down such grounds. Admittedly, on
the facts of these cases, there was no adjudication under Section 34
of the Arbitration Act, 1996 - all that was done was that the Special
19
Commercial Court at Gurugram allowed an application filed under
Section 151 read with Order VII Rule 10 CPC, determining that the
Special Commercial Court at Gurugram had no jurisdiction to proceed further with the Section 34 application, and therefore, such application would have to be returned to the competent court situate at
New Delhi.
17. Shri Anurabh Chowdhury referred to a number of judgments in which
a well-settled proposition was elucidated, i.e. that an appeal is a creature of statute, and must either be found within the four corners of the
statute, or not be there be at all. In support thereof, he referred to Municipal Corporation of Delhi & Ors. v. International Security & Intelligence Agency Ltd. (2004) 3 SCC 250 (at paragraphs 14 and
15), and Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner and Ors. (2013) 16 SCC 1 (at paragraph 20). He also referred to a recent Delhi High Court judgment reported as South Delhi
Municipal Corporation v. Tech Mahindra EFA (OS) (Comm.) 3 of
2019, in which the Delhi High Court held that an order of a Single
Judge, which directed the deposit of 50% of the awarded amount,
would not be appealable under Section 37 of the Arbitration Act, 1996
20
read with the Commercial Courts Act, 2015. In the course of discussion the Delhi High Court said:
“12. In view of the above discussions, we conclude
that the present appeal is not maintainable. The appellant’s remedy clearly lies elsewhere. An attempt
was made to urge that no litigant can be deprived of
remedy if there is a grievance: ubi jus ibi remedium;
however, that argument is wholly without substance
because an appeal, it has been repeatedly emphasised, is a specific creation of statute and cannot be
claimed as a matter of right. This was explained
pithily in Ganga Bai v. Vijay Kumar, (1974) 2 SCC
393, in the following terms:
“There is a basic distinction between the right of suit
and the right of appeal. There is an inherent right in
every person to bring suit of a civil nature and unless
the suit is barred by statute one may, at one’s peril,
bring a suit of one’s choice. It is no answer to a suit
howsoever frivolous the claim, that the law confers no
right to sue. A suit for its maintainability requires no
authority of law and it is enough that no statute bars
the suit. But the position in regard to appeals is quite
the opposite. The right of appeal inheres in no one
and therefore an appeal for its maintainability must
have the clear authority of law. That explains why the
right of appeal is described as a creature of statute.
13. In view of the above discussion, it is held that the
present appeal is plainly not maintainable by virtue of
provisions of the Commercial Courts Act, 2015; the
appeal is therefore dismissed. No costs.”
18. Shri Chowdhury also referred to another Delhi High Court judgment
reported as Hamanprit Singh Sidhu v. Arcadia Shares & Stock
Brokers Pvt. Ltd 2016 234 DLT 30 (DB), in which a learned Single
21
Judge of the Delhi High Court allowed an application for condonation
of delay in filing a Section 34 petition. The Division Bench, in holding
that an appeal against such an order would not be maintainable under
Section 37 of the Arbitration Act, 1996, read with the Commercial
Courts Act, 2015 held:
“10. Coming to Section 37(1), it is evident that an appeal can lie from Coming to Section 37(1), it is evident that an appeal can lie from only the orders specified in clauses (a), (b) or (c). In other words, an appeal under Section 37 would only be maintainable
against (a) an order refusing to refer the parties to arbitration under Section 8 of the A&C Act; (b) an order
granting or refusing to grant any measure under Section 9 of the A&C Act; or (c) an order setting aside or
refusing to set aside an arbitral award under Section
34 of the A&C Act. The impugned order is clearly not
relatable to Sections 8 or 9 of the A&C Act. It was
sought to be contended by the learned counsel for
the appellant that the present appeal would fall within
Section 37(1) (c) which relates to an order "setting
aside" or "refusing to set aside" an arbitral award under Section 34. We are unable to accept this proposition. By virtue of the impugned order, the arbitral
award dated 10.09.2013 has not been set aside. Nor
has the court, at this stage, refused to set aside the
said arbitral award under Section 34 of the A&C Act.
In fact, the appellant in whose favour the award has
been made, would only be aggrieved if the award
were to have been set aside in whole or in part. That
has not happened. What the learned single Judge
has done is to have condoned the delay in re-filing of
the petition under Section 34. This has not, in any
way, impacted the award.”
22
19. The reasoning in this judgment commends itself to us, as a distinction
is made between judgments which either set aside, or refuse to set
aside, an arbitral award after the court applies its mind to Section 34
of the Arbitration Act, 1996, as against preliminary orders of condonation of delay, which do not in any way impact the arbitral award that
has been assailed.
20. However, Smt. Acharya relied heavily upon the Division Bench judgment of the Delhi High Court in Antrix Corporation Ltd. (supra). On
the facts of that case, on 28.02.2017, a learned Single Judge of the
Delhi High Court ruled that Antrix’s petition under Section 9 of the Arbitration Act, 1996 before the Bangalore Court was not maintainable,
and that Devas’ petition under Section 9 was maintainable, the bar
under Section 42 of the Arbitration Act, 1996 being inapplicable. The
order also held that consequently, Antrix’s petition under Section 34 of
the Arbitration Act, 1996 before the Bangalore City Civil Court would
not be maintainable, inasmuch as Devas’ petition filed in Delhi under
Section 9 was filed earlier. The learned Single Judge then listed the
matter for hearing on merits and directed Antrix to file an affidavit of
an authorised officer, enclosing therewith its audited Balance Sheets,
and Profit and Loss Accounts for the past three years. Antrix then ap23
pealed against this order, to which a preliminary objection was taken,
stating that this appeal would not be maintainable under Section 37 of
the Arbitration Act, 1996. After setting out Section 13 of the Commercial Courts Act, 2015 and Sections 37 and 42 of the Arbitration Act,
1996, the Division Bench noticed Hamanprit Singh Sidhu (supra) in
paragraph 39, without at all adverting to paragraph 10 of the judgment
(which is set out hereinabove). Thereafter, the Court held as follows:
“42. While undeniably, the Learned Single Judge in
the impugned order has not decided the Section 9 petition finally and had listed the matter for hearing on
merits, Antrix states that the impugned order is indistinguishable from an order under Section 9. Devas
however, argued that the sequence of events has not
been completed. Antrix should face an adverse order
under Section 9 before it can approach this court in
appeal. On this issue, significant reliance has been
placed on the decision of the Madras High Court
in Samson Maritime (supra). In that case, the Court
held:
“Learned counsel appearing for the respondent made
an attempt to contend that the application seeking for
furnishing of details of assets cannot be construed as
an interim measure or interim relief contemplated under section 9 of the said Act. I am not convinced to
accept the said contention for the reason that those
details are sought for by the applicant only to seek for
consequential or follow up relief in the event of the respondent's failure to furnish securities. Therefore, as
the relief sought for in this application is having a direct bearing on the relief sought for in the other applications seeking for furnishing securities, it cannot be
said that this relief seeking for details of the assets is
24
outside the scope of Section 9. Therefore, I find that
the application filed seeking for details of the assets
is also maintainable.”
43. The Court in Samson Maritime (supra) reasoned
that an application seeking for furnishing of details of
assets would also amount to an interim measure under Section 9, because the reason that those details
are sought are only to seek consequential or follow
up relief in the event of the respondent's failure to furnish securities. Therefore, an order mandating a party
to disclose his assets or file his accounts would also
be an interim measure within the meaning of Section
9. In this case, through Paragraph 57 of the impugned order, the Learned Single Judge had directed
Antrix to file an affidavit of an authorised officer, enclosing therewith its audited balance sheets and profit
and loss accounts for the past three years. Keeping in
mind the view of the Court in Samson Maritime (supra), which this Court is in agreement with,
this would also in effect be a Section 9 order as those
details are sought for the purpose of adjudicating
whether consequential relief could be given to Devas
of securing the amount due from the arbitral award
against Antrix. Moreover, this Court cannot take a
doctrinaire and unbending approach in this matter,
when it is clear that Antrix has suffered all but one remaining blow through the impugned order, and therefore, the Court should not wait till it suffers the final
blow (that of the final Section 9 order) before it can
assume jurisdiction over the appeal. The court's direction to Antrix furnish an affidavit along with the particulars sought, is to aid its order with respect to a
possible distraint, attachment or further such consequential order towards interim relief. Such an order
would not be made unless the court directs this as a
prelude, or important step towards the inevitable interim order, which would be just consequential.
Therefore, the Court finds that Antrix's appeal against
the impugned order is maintainable.
25
44. This court also finds merit in Antrix's argument
that as regards the single judge's observations that
the Bangalore court cannot proceed with the matter,
the impugned order is really final. It precludes in effect, Antrix from proceeding with its Section 34 petition before that court (in turn based on the pending
Section 9 petition before that court). If Antrix were to
accept the ruling, the effect would be to denude the
Bangalore court of jurisdiction. It was contended-and
correctly, in this court's opinion that whereas a court
acts within jurisdiction in deciding whether it has or
does not have jurisdiction over a cause of a matter,
the declaration by it about the lack of jurisdiction of
another court, based on the appreciation of the matter
before the latter court is undeniably an adverse order.
Allowing that to stand would prejudice Antrix for all
times.”
21. It can be seen that the reasoning in this judgment would have no application to the facts of the present case. The Division Bench held that
directing Antrix to file an affidavit, enclosing therewith its audited Balance Sheets and Profit and Loss Account for the last three years, is itself an interim order passed under Section 9 of the Arbitration Act,
1996. The further reasoning of the Court that the direction to Antrix to
furnish an affidavit is to aid a future interim order, which would be just
consequential, does not commend itself to us. A step towards an interim order would not amount to granting, or refusing to grant, any
measure under Section 9 of the Arbitration Act, 1996. The case is also
distinguishable for the reason that, as regards the Bangalore Court,
26
which cannot proceed further with the matter, the impugned order
therein is really final and would, therefore, also be appealable under
Section 37. For all these reasons, this judgment is wholly distinguishable and would not apply to the facts of the present case. We may
also advert to the fact that our judgment in Kandla (supra) was delivered on 07.02.2018, and was missed by the Division Bench in Antrix
Corporation Ltd. (supra), as the Division Bench had reserved judgment on 06.12.2017, even though it ultimately pronounced the judgment on 30.05.2018. The judgment in South Delhi Municipal Corporation (supra) was decided after reference was made to Kandla
(supra), resulting in a deposit order being held to be not appealable
under Section 37 of the Arbitration Act, 1996.
22. It is clear, therefore, that the appeals filed in the present case do not
fall within Section 37 of the Arbitration Act,1996 and are not maintainable.
23. We now examine the second part of the challenge made by the Petitioners to the impugned judgment, which relates to the determination
of the “seat” of the arbitral proceedings between the parties. The impugned judgment of the Punjab and Haryana High Court referred to
BALCO (supra) and Indus Mobile Distribution Pvt. Ltd. (supra),
27
and other judgments of this Court, in order to arrive at the conclusion
that the arbitration clause in the present case does not refer to the
“seat” of arbitration, but only refers to the “venue” of arbitration. Consequently, the impugned judgment holds that since a part of the
cause of action had arisen in Faridabad, and the Faridabad Commercial Court was approached first, the Faridabad Court alone would
have jurisdiction over the arbitral proceedings, and the courts at New
Delhi would have no such jurisdiction. The correctness of these
propositions has been vehemently assailed before us, and it is therefore important to lay down the law on what constitutes the “juridical
seat” of arbitral proceedings, and whether, once the seat is delineated
by the arbitration agreement, courts at the place of the seat would
alone thereafter have exclusive jurisdiction over the arbitral proceedings.
The juridical seat of the arbitral proceedings
28
24. The Arbitration Act, 1940 did not refer to the “juridical seat” of the arbitral proceedings at all. Under the scheme of the Arbitration Act, 1940,
Section 14 stated as follows:
“14. Award to be signed and filed.-
(1)When the arbitrators or umpire have made their
award, they shall sign it and shall give notice in
writing to the parties of the making and signing
thereof and of the amount of fees and charges
payable in respect of the arbitration and award.
(2)The arbitrators or umpire shall, at the request of
any party to the arbitration agreement or any person claiming under such party or if so directed by
the Court and upon payment of the fees and
charges due in respect of the arbitration and
award and of the costs and charges of filing the
award, cause the award or a signed copy of it, together with any depositions and documents which
may have been taken and proved before them, to
be filed in Court, and the Court shall thereupon
give notice to the parties of the filing of the award.
(3) Where the arbitrators or umpire state a special
case under clause (b) of Section 13, the Court, after giving notice to the parties and hearing them,
shall pronounce its opinion thereon and such
opinion shall be added to, and shall form part of,
the award.
25. When the award was signed and filed in Court, a judgment in terms of
the award had then to be made as follows:
“17. Judgment in terms of award.- Where the Court
sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set
aside the award, the Court shall, after the time for
29
making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgement according
to the award, and upon the judgment so pronounced
a decree shall follow, and no appeal shall lie from
such a decree except on the ground that it is in excess of, or not otherwise in accordance with, the
award.”
26. It was in this setting that “Court” was defined by Section 2(c) of the Arbitration Act, 1940 as follows:
“2. Definitions.- In this Act, unless there is anything
repugnant in the subject or the context,
xxx xxx xxx
(c)“Court” means a Civil Court having jurisdiction to
decide the questions forming the subject-matter of
the reference if the same had been the subjectmatter of a suit, but does not, except for the purpose of arbitration proceedings under Section 21,
include a Small Cause Court;”
27. Section 31, which dealt with the Court in which an award may be filed
then stated as follows:
“31. Jurisdiction.
(1)Subject to the provisions of this Act, an award may
be filed in any Court having jurisdiction in the matter to which the reference relates.
(2)Notwithstanding anything contained in any other
law for the time being in force and save as otherwise provided in this Act, all questions regarding
the validity, effect or existence of an award or an
arbitration agreement between the parties to the
30
agreement- or persons claiming under them shall
be decided by the Court in which the award under
the agreement has been, or may be, filed, and by
no other Court.
(3)All applications regarding the conduct of arbitration
proceedings or otherwise arising out of such proceedings shall be made to the Court where the
award has been, or may be, filed, and to no other
Court.
(4)Notwithstanding anything contained elsewhere in
this Act or in any other law for the time being in
force, where in any reference any application under this Act has been made in a Court competent
to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings-, and all subsequent applications arising, out of that reference,
and the arbitration proceedings shall be made in
that Court and in no other Court.”
28. It will be noticed that in this statutory setting, the “place” in which the
award is made is not referred to at all. Given this fact, the “Court” was
defined as any Civil Court having jurisdiction to decide questions
forming the subject matter of the reference to arbitration if the same
had been the subject matter of a suit.
29. The UNCITRAL Model Law on International Commercial Arbitration
(as adopted by the United Nations Commission on International Trade
Law on 21 June 1985) (hereinafter referred to as the “UNCITRAL
Model Law”) was then adopted by this country. The UNCITRAL Model
31
Law introduced the concept of “place” or “seat” of the arbitral proceedings as follows:
“Article 1. Scope of application
xxx xxx xxx
(2)The provisions of this Law, except articles 8, 9, 35
and 36, apply only if the place of arbitration is in
the territory of this State.
xxx xxx xxx
Article 2. Definitions and rules of interpretation
xxx xxx xxx
(c)“court” means a body or organ of the judicial system of a State;
xxx xxx xxx
Article 6. Court or other authority for certain functions of arbitration assistance and supervision
The functions referred to in articles 11(3), 11(4),
13(3), 14, 16(3) and 34(2) shall be performed by ...
[Each State enacting this model law specifies the
court, courts or, where referred to therein, other authority competent to perform these functions.]
xxx xxx xxx
Article 20. Place of arbitration
(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having
32
regard to the circumstances of the case, including the
convenience of the parties.
(2) Notwithstanding the provisions of paragraph (1) of
this article, 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 goods, other property or documents.
xxx xxx xxx
Article 31. Form and contents of award
xxx xxx xxx
(3) The award shall state its date and the place of arbitration as determined in accordance with article
20(1). The award shall be deemed to have been
made at that place.”
30. The Arbitration Act, 1996 repealed the Arbitration Act, 1940. As is
stated in its preamble, the Arbitration Act, 1996 adopted provisions of
the UNCITRAL Model Law, as they had made a significant contribution to the establishment of a unified legal framework for the fair and
efficient settlement of disputes arising in international commercial relations.
31. The Arbitration Act, 1996 refers to “the place” of arbitration and defines ‘Court’, and indicates which Courts have jurisdiction in relation to
arbitral proceedings in several sections in Part I. Section 2(1)(e) and
Section 2(2) of the Arbitration Act, 1996 are as follows:
33
“2.Definitions.-
(1) In this Part, unless the context otherwise requires,-
xxx xxx xxx
(e)“Court” means-
(i) in case of an arbitration other than international commercial arbitration, 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;
(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 a suit 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;
xxx xxx xxx
(2) This part shall apply where the place of arbitration is in India.
Provided that subject to an agreement to the
contrary, the provisions of sections 9, 27 and
clause (a) 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
34
made or to be made in such place is enforceable
and recognised under the provisions of Part II of
this Act.
32. Sections 20, 31(4) and 42 of the Arbitration Act, 1996 read as follows:
“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, goods or other property.”
“31. Form and contents of arbitral award.-
xxx xxx xxx
(4)The arbitral award shall state its date and the place of
arbitration as determined in accordance with section
20 and the award shall be deemed to have been
made at that place.”
“42. Jurisdiction.- Notwithstanding anything contained
elsewhere in this Part or any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in
any Court, that Court alone shall have jurisdiction over
the arbitral proceedings and all subsequent applications
arising out of that agreement and the arbitral proceedings shall be made in that Court and no other Court.”
35
33. It will thus be seen that the new provisions contained in Sections 20
and 31(4) of the Arbitration Act, 1996 are a replication of Articles 20
and 31(3) of the UNCITRAL Model Law, in which pride of place is
given to the juridical seat of the arbitral proceedings. However, the
definition of “court” in Section 2(1)(e) of the Arbitration Act, 1996 continues the definition contained in the Arbitration Act, 1940, but replaces any and every civil court by only the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of
its ordinary civil jurisdiction. Section 42 of the Arbitration Act, 1996
also substantially follows the drill of Section 31(4) of the Arbitration
Act, 1940.
34. It can thus be seen that given the new concept of “juridical seat” of
the arbitral proceedings, and the importance given by the Arbitration
Act, 1996 to this “seat”, the arbitral award is now not only to state its
date, but also the place of arbitration as determined in accordance
with Section 20. However, the definition of “Court” contained in Section 2(1)(c) of the Arbitration Act, 1940, continued as such in the Arbitration Act, 1996, though narrowed to mean only principal civil court
and the High Court in exercise of their original ordinary civil jurisdiction. Thus, the concept of juridical seat of the arbitral proceedings and
36
its relationship to the jurisdiction of courts which are then to look into
matters relating to the arbitral proceedings - including challenges to
arbitral awards - was unclear, and had to be developed in accordance
with international practice on a case by case basis by this Court.
35. Some of the early decisions of this Court did not properly distinguish
between “seat” and “venue” of an arbitral proceeding. The Five Judge
Bench in BALCO (supra) dealt with this problem as follows:
“75. We are also unable to accept the submission of
the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration
as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in
most of the national laws, arbitrations are anchored to
the seat/place/situs of arbitration. Redfern in Para
3.54 concludes that “the seat of the arbitration is thus
intended to be its centre of gravity.” [Blackaby, Partasides, Redfern and Hunter (Eds.), Redfern and
Hunter on International Arbitration (5th Edn., Oxford
University Press, Oxford/New York 2009).] This, however, does not mean that all the proceedings of the
arbitration have to take place at the seat of the arbitration. The arbitrators at times hold meetings at more
convenient locations. This is necessary as arbitrators
often come from different countries. It may, therefore,
on occasions be convenient to hold some of the
meetings in a location which may be convenient to all.
Such a situation was examined by the Court of Appeal in England in Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del
Peru [(1988) 1 Lloyd's Rep 116 (CA)] wherein at p.
121 it is observed as follows:
37
“The preceding discussion has been on the basis that
there is only one ‘place’ of arbitration. This will be the
place chosen by or on behalf of the parties; and it will
be designated in the arbitration agreement or the
terms of reference or the minutes of proceedings or in
some other way as the place or ‘seat’ of the
arbitration. This does not mean, however, that the
Arbitral Tribunal must hold all its meetings or hearings
at the place of arbitration. International commercial
arbitration often involves people of many different
nationalities, from many different countries. In these
circumstances, it is by no means unusual for an
Arbitral Tribunal to hold meetings—or even hearings
—in a place other than the designated place of
arbitration, either for its own convenience or for the
convenience of the parties or their witnesses…. It
may be more convenient for an Arbitral Tribunal
sitting in one country to conduct a hearing in another
country — for instance, for the purpose of taking
evidence…. In such circumstances each move of the
Arbitral Tribunal does not of itself mean that the seat
of arbitration changes. The seat of arbitration remains
the place initially agreed by or on behalf of the
parties.”
76. It must be pointed out that the law of the seat or
place where the arbitration is held, is normally the law
to govern that arbitration. The territorial link between
the place of arbitration and the law governing that
arbitration is well established in the international
instruments, namely, the New York Convention of
1958 and the UNCITRAL Model Law of 1985. It is true
that the terms “seat” and “place” are often used
interchangeably. In Redfern and Hunter on
International Arbitration [ Blackaby, Partasides,
Redfern and Hunter (Eds.), Redfern and Hunter on
International Arbitration (5th Edn., Oxford University
Press, Oxford/New York 2009).] (Para 3.51), the seat
theory is defined thus: “The concept that an
arbitration is governed by the law of the place in
38
which it is held, which is the ‘seat’ (or ‘forum’ or locus
arbitri) of the arbitration, is well established in both
the theory and practice of international arbitration. In
fact, the Geneva Protocol, 1923 states:
“2. The arbitral procedure, including the constitution
of the Arbitral Tribunal, shall be governed by the will
of the parties and by the law of the country in whose
territory the arbitration takes place.”
The New York Convention maintains the reference to
“the law of the country where the arbitration took
place” [Article V(1)(d)] and, synonymously to “the law
of the country where the award is made” [Articles V(1)
(a) and (e)]. The aforesaid observations clearly show
that the New York Convention continues the clear
territorial link between the place of arbitration and the
law governing that arbitration. The author further
points out that this territorial link is again maintained
in the Model Law which provides in Article 1(2) that:
“1. (2) the provision of this Law, except Articles 8, 9,
35 and 36, apply only if the place of arbitration is in
the territory of the State.”
Just as the Arbitration Act, 1996 maintains the
territorial link between the place of arbitration and its
law of arbitration, the law in Switzerland and England
also maintain a clear link between the seat of
arbitration and the lex arbitri. The Swiss Law states:
“176(I). (1) The provision of this chapter shall apply to
any arbitration if the seat of the Arbitral Tribunal is in
Switzerland and if, at the time when the arbitration
agreement was concluded, at least one of the parties
had neither its domicile nor its habitual residence in
Switzerland.” [See the Swiss Private International
Law Act, 1987, Ch. 12, Article 176 (I)(1).]
39
These observations were subsequently followed
in Union of India v. McDonnell Douglas
Corpn. [(1993) 2 Lloyd's Rep 48]
xxx xxx xxx
95. Learned Counsel for the Appellants have submitted that Section 2(1)(e), Section 20 and Section 28
read with Section 45 and Section 48(1)(e) make it
clear that Part I is not limited only to arbitrations
which take place in India. These provisions indicate
that Arbitration Act, 1996 is subject matter centric and
not exclusively seat centric. Therefore, "seat" is not
the "centre of gravity" so far as the Arbitration Act,
1996 is concerned. We are of the considered opinion
that the aforesaid provisions have to be interpreted by
keeping the principle of territoriality at the forefront.
We have earlier observed that Section 2(2) does not
make Part I applicable to arbitrations seated or held
outside India. In view of the expression used in Section 2(2), the maxim expressum facit cessare tacitum,
would not permit by interpretation to hold that Part I
would also apply to arbitrations held outside the territory of India. The expression "this Part shall apply
where the place of arbitration is in India" necessarily
excludes application of Part I to arbitration seated or
held outside India. It appears to us that neither of the
provisions relied upon by the Learned Counsel for the
Appellants would make any section of Part I applicable to arbitration seated outside India. It will be apposite now to consider each of the aforesaid provisions
in turn.
96. Section 2(1)(e) of the Arbitration Act, 1996 reads
as under:
“2. Definitions
(1) In this Part, unless the context otherwise requires
40
(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 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
41
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 is located.
xxx xxx xxx
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) authorizes 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
42
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 supplied)
36. The Court then went on to refer to several English judgments and
specifically italicised several parts of the judgment in Roger
Shashoua & Ors. v. Mukesh Sharma [2009] EWHC 957 (Comm) as
follows:
“110. Examining the fact situation in the case, the
Court observed as follows:
The basis for the court's grant of an anti-suit injunction of the kind sought depended upon the seat of the
arbitration. An agreement as to the seat of an arbitration brought in the law of that country as the curial
law and was analogous to an exclusive jurisdiction
clause. Not only was there agreement to the curial
law of the seat, but also to the Courts of the seat having supervisory jurisdiction over the arbitration, so
that, by agreeing to the seat, the parties agreed that
any challenge to an interim or final award was to be
made only in the courts of the place designated as
the seat of the arbitration.
Although, 'venue' was not synonymous with 'seat', in
an arbitration clause which provided for arbitration to
be conducted in accordance with the Rules of the ICC
in Paris (a supranational body of rules), a provision
43
that 'the venue of arbitration shall be London, United
Kingdom' did amount to the designation of a juridical
seat...”
In Paragraph 54, it is further observed as follows:
There was a little debate about the possibility of the
issues relating to the alleged submission by the
claimants to the jurisdiction of the High Court of Delhi
being heard by that court, because it was best fitted
to determine such issues under Indian Law. Whilst I
found this idea attractive initially, we are persuaded
that it would be wrong in principle to allow this and
that it would create undue practical problems in any
event. On the basis of what I have already decided,
England is the seat of the arbitration and since this
carries with it something akin to an exclusive jurisdiction clause, as a matter of principle the foreign court
should not decide matters which are for this Court to
decide in the context of an anti-suit injunction.
In making the aforesaid observations, the Court relied
on judgments of the Court of Appeal in C v. D (2007)
EWCA Civ 1282 (CA).”
(emphasis in original)
37. Finally, the conclusion drawn in paragraph 116 was as follows:
“116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the
choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that
country relating to the conduct and supervision of arbitrations will apply to the proceedings
38. Also, in paragraph 123, the Court held as follows:
“123. Thus, it is clear that the regulation of conduct of
arbitration and challenge to an award would have to
be done by the courts of the country in which the
arbitration is being conducted. Such a court is then
the supervisory court possessed of the power to
44
annul the award. This is in keeping with the scheme
of the international instruments, such as the Geneva
Convention and the New York Convention as well as
the UNCITRAL Model Law. It also recognises the
territorial principle which gives effect to the sovereign
right of a country to regulate, through its national
courts, an adjudicatory duty being performed in its
own country. By way of a comparative example, we
may reiterate the observations made by the Court of
Appeal, England in C v. D [2008 Bus LR 843 : 2007
EWCA Civ 1282 (CA)] wherein it is observed that:
“It follows from this that a choice of seat for the
arbitration must be a choice of forum for remedies
seeking to attack the award.”
In the aforesaid case, the Court of Appeal had
approved the observations made in A v. B [(2007) 1
All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237]
wherein it is observed that:
“… an agreement as to the seat of an arbitration is
analogous to an exclusive jurisdiction clause. Any
claim for a remedy … as to the validity of an existing
interim or final award is agreed to be made only in
the courts of the place designated as the seat of
arbitration.”
39. The Court then concluded in paragraph 194 as follows:
194. In view of the above discussion, we are of the
considered opinion that the Arbitration Act, 1996 has
accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law. Section 2(2)
makes a declaration that Part I of the Arbitration Act,
1996 shall apply to all arbitrations which take place
within India. We are of the considered opinion that
Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be
45
subject to the jurisdiction of the Indian courts when
the same are sought to be enforced in India in accordance with the provisions contained in Part II of the
Arbitration Act, 1996. In our opinion, the provisions
contained in the Arbitration Act, 1996 make it crystal
clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act,
1996.
40. A reading of paragraphs 75, 76, 96, 110, 116, 123 and 194 of BALCO
(supra) 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 paragraph 96 buttresses this proposition, and is
supported by the previous and subsequent paragraphs pointed out
hereinabove. The BALCO judgment (supra), 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 arbitration1
.
1 Section 3 of the English Arbitration Act, 1996 defines “seat” as follows:
46
41. However, this proposition is contradicted when paragraph 96 speaks
of the concurrent jurisdiction of Courts within whose jurisdiction the
cause of action arises wholly or in part, and Courts within the jurisdiction of which the dispute resolution i.e. arbitration, is located.
42. Paragraph 96 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
“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 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.
47
came to providing a neutral place as the “seat” of arbitration proceedings, the example 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.
43. This Court has held that judgments of Courts are not to be construed
as statutes, neither are they to be read as Euclid’s theorems. All observations made must be read in the context in which they appear.
This was felicitously put in Amar Nath Om Prakash v. State of Punjab (1985) 1 SCC 345, where this Court stated:
“10. There is one other significant sentence in Sreenivasa General Traders v. State of A.P [(1983) 4 SCC
353 : AIR 1983 SC 1246] with which we must express
our agreement, It was said: (SCC p. 377, para 27)
48
“With utmost respect, these observations of the
learned Judge are not to be read as Euclid's theorems, nor as provisions of a statute. These observations must be read in the context in which they appear.”
We consider it proper to say, as we have already said
in other cases, that judgments of courts are not to be
construed as statutes. To interpret words, phrases
and provisions of a statute, it may become necessary
for Judges to embark into lengthy discussions but the
discussion is meant to explain and not to define.
Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words
are not to be interpreted as statutes.
In London Graving Dock Co. Ltd. v. Horton [1951 AC
737, 761 : (1951)-2 All ER 1, 14 (HL)] Lord MacDermott observed:
“The matter cannot, of course, be settled merely by
treating the ipsissima verba of Willes, J., as though
they were part of an Act of Parliament and applying
the rules of interpretation appropriate thereto. This is
not to detract from the great weight to be given to the
language actually used by that most distinguished
Judge....
In Home Office v. Dorset Yacht Co. Ltd. [(1970) 2 All
ER 294 : (1970) 2 WLR 1140 : 1970 AC 1004 (HL)]
Lord Reid said:
“Lord Atkin's speech [Donoghue v. Stevension, 1932
All ER Rep 1, 11 : 1932 AC 562, 580 : 101 LJPC
119 : 147 LT 281 (HL)] ... is not to be treated as if it
was a statutory definition. It will require qualification in
new circumstances.”
Megarry, J. in (1971) 1 WLR 1062 observed:
“One must not, of course, construe even a reserved
judgment of even Russell, L.J. as if it were an Act of
Parliament.”
And, in Herrington v. British Railways Board [(1972) 2
WLR 537: (1972) 1 All Er 749 : 1972 AC 877 (HL)]
Lord Morris said: “There is always peril in treating the
words of a speech or a judgment as though they were
49
words in a legislative enactment, and it is to be remembered that judicial utterances are made in the
setting of the facts of a particular case.”
(emphasis supplied)
44. More recently, this Court in Union of India v. Amrit Lal Manchanda
(2004) 3 SCC 75 held as follows:
“15. Cases involving challenges to orders of detention
before and after execution of the order stand on different footings. Courts should not place reliance on
decisions without discussing as to how the factual situation fits in with the fact situation of the decision on
which reliance is placed. Observations of courts are
neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their
context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes.
To interpret words, phrases and provisions of a
statute, it may become necessary for judges to embark into lengthy discussions but the discussion is
meant to explain and not to define. Judges interpret
statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes.”
(emphasis supplied)
45. In any case, a judgment must be read as a whole, so that conflicting
parts may be harmonised to reveal the true ratio of the judgment.
However, if this is not possible, and it is found that the internal conflicts within the judgment cannot be resolved, then the first endeavour
that must be made is to see whether a ratio decidendi can be culled
out without the conflicting portion. If not, then, as held by Lord Den50
ning in Harper and Ors. v. National Coal Board (1974) 2 All ER 441,
the binding nature of the precedent on the point on which there is a
conflict in a judgment, comes under a cloud.2
46. If paragraphs 75, 76, 96, 110, 116, 123 and 194 of BALCO (supra)
are to be read together, what becomes clear is that Section 2(1)(e)
2
In Harper (supra), the decision in Central Asbestos Co. Ltd. vs. Dodd (1972) 2
All ER 1135, a House of Lords judgment, had to be applied. It was found that two
learned Law Lords decided the question of law in favour of Dodd, whereas two
learned Law Lords decided the question of law against Dodd, stating that his
claim was barred. As Lord Denning stated, the fifth Law Lord, Lord Pearson, was
the odd man out, in that he agreed with the two learned Law Lords that the law
did not support Dodd’s case, but agreed with the minority judges that Dodd’s
claim was not barred. This being the case, Lord Denning spoke of the
precedential value of Dodd’s case as follows:
“How then do we stand on the law? We have listened to a most helpful
discussion by Mr. McCullough on the doctrine of precedent. One thing is clear.
We can only accept a line of reasoning which supports the actual decision of the
House of Lords. By no possibility can we accept any reasoning which would
show the decision itself to be wrong. The second proposition is that if we can
discover the reasoning on which the majority based their decision, then we
should accept that as binding upon us. The third proposition is that, if we can
discover the reasoning on which the minority base their decision, we should
reject it. It must be wrong because it led them to the wrong result. The fourth
proposition is that, if we cannot discover the reasoning on which the majority
based their decision, we are not bound by it. We are free to adopt any reasoning
which appears to us to be correct, so long as it supports the actual decision of
the House.
In support of those propositions, I would refer to the speech of Lord
Dunedin in Great Western Railway Co. v. Owners of S.S. Mostyn [1928] A.C. 57,
73–74, and of Lord MacDermott in Walsh v. Curry [1955] N.I. 112, 124–125, and
of Viscount Simonds in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446,
468–469. Applying the propositions to Smith v. Central Asbestos Co. Ltd.
[Dodd's case] [1973] A.C. 518, the position stands thus: (1) the actual decision of
the House in favour of Dodd must be accepted as correct, We cannot accept any
line of reasoning which would show it to be wrong. We cannot therefore accept
51
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
(supra). 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.
47. It was not until this Court’s judgment in Indus Mobile Distribution
Private Limited (supra) 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 Section 20(1) and (2) would refer to the
the reasoning of a minority of two — Lord Simon of Glaisdale and Lord Salmon
— on the law. It must be wrong because it led them to the wrong result. (2) We
ought to accept the reasoning of the three in the majority if we can discover it.
But it is not discoverable. The three were divided. Lord Reid and Lord Morris of
Borth-y-Gest took one view of the law. Lord Pearson took another. We cannot
say that Lord Reid and Lard Morris of Borth-y-Gest were correct: because we
know that their reasoning on the law was in conflict with the reasoning of the
other three. We cannot say that Lord Pearson was correct: because we know
that the reasoning which he accepted on the law led the other two (Lord Simon
of Glaisdale and Lord Salmon) to a wrong conclusion. So we cannot say that any
of the three in the majority was correct. (3) The result is that there is no
discernible ratio among the majority of the House of Lords. In these
circumstances I think we are at liberty to adopt the reasoning which appears to
us to be correct.”
52
“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 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.
48. This Court in Indus Mobile Distribution Private Limited (supra), 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:
“17. In amendments to be made to the Act, the Law
Commission recommended the following:
“Amendment of Section 20
In Section 20, delete the word "Place" and add the
words "Seat and Venue" before the words "of arbitration".
(i) In Sub-section (1), after the words "agree on the"
delete the word "place" and add words "seat and
venue"
53
(ii) In Sub-section (3), after the words "meet at any"
delete the word "place" and add word "venue".
[NOTE: The departure from the existing phrase
"place" of arbitration is proposed to make the
wording of the Act consistent with the international
usage of the concept of a "seat" of arbitration, to
denote the legal home of the arbitration. The
amendment further legislatively distinguishes between the "[legal] seat" from a "[mere] venue" of
arbitration.]
Amendment of Section 31
17. In Section 31
(i) In Sub-section (4), after the words "its date and
the" delete the word "place" and add the word
"seat".”
18. The amended Act, does not, however, contain the
aforesaid amendments, presumably because the
BALCO 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 Section
20(1) and 20 (2) where the word "place" is used,
refers to "juridical seat", whereas in Section 20 (3),
the word "place" is 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
54
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 Section 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 parties to exclude all
other courts. For an exhaustive analysis of the case
law, see Swastik Gases Private Limited v. Indian Oil
Corporation Limited (2013) 9 SCC 32. This was followed in a recent judgment in B.E. Simoese Von
Staraburg Niedenthal and Anr. v. Chhattisgarh Investment Limited: (2015) 12 SCC 225. Having regard to
the above, it is clear that Mumbai courts alone have
jurisdiction to the exclusion of all other courts in the
country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is
set aside. The injunction confirmed by the impugned
judgment will continue for a period of four weeks from
the date of pronouncement of this judgment, so that
the Respondents may take necessary steps Under
Section 9 in the Mumbai Court. Appeals are disposed
of accordingly.”
This judgment has recently been followed in Brahmani River Pellets
Ltd. v. Kamachi Industries Ltd. 2019 SCC Online SC 929 at paragraph 15.
55
49. In fact, the Law Commission Report, 2014 also recommended an
amendment in the definition of “Court” under Section 2(1)(e) of the Arbitration Act, 1996, so that in the case of international commercial arbitrations held in India, the High Court alone should be the “Court” for
the purposes of the Arbitration Act, 1996, even where such a High
Court does not exercise ordinary original jurisdiction. The recommendation made by the Law Commission, which was followed, leading to
an amendment of the Arbitration Act, 1996, is as follows:
“26. It is recommended that in case of international
commercial arbitrations, where there is a significant
foreign element to the transaction and at least one of
the parties is foreign, the relevant “Court” which is
competent to entertain proceedings arising out of the
arbitration agreement, should be the High Court, even
where such a High Court does not exercise ordinary
civil jurisdiction. It is expected that this would ensure
that international commercial arbitrations, involving
foreign parties, will be heard expeditiously and by
commercial oriented judges at the High Court level…”
Amendment of Section 2
1. In Section 2 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the principal Act),-
xxx xxx xxx
(ii) In sub-section (1), clause (e), after the words
“Court means-” add sub-section (i) beginning with
the words “in the case of an arbitration other than
international commercial arbitration,” before the
56
words “the principal Civil Court of original jurisdiction”
In sub-section (1), clause (e) replace sub-clause
(ii) by following:
“(ii) in the case of an international commercial arbitration, the High Court exercising jurisdiction over
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 subjectmatter of the arbitration if the same had been the
subject-matter of a suit, but does not include any
Court of a grade inferior to such High Court, or in
cases involving grant of interim measures in respect of arbitrations outside India, the High Court
exercising jurisdiction over the court having jurisdiction to grant such measures as per the laws of
India, and includes the High Court in exercise of its
ordinary original civil jurisdiction.”
[NOTE: This is to solve the problem of conflict of
jurisdiction that would arise in cases where interim
measures are sought in India in cases of arbitrations seated outside India. This also ensures that
in International Commercial Arbitrations, jurisdiction is exercised by the High Court, even if such
High Court does not exercise ordinary original civil
jurisdiction.]”
50. The aforesaid amendment carried out in the definition of “Court” is
also a step showing the right direction, namely, that in international
commercial arbitrations held in India, the High Court alone is to exercise jurisdiction over such proceedings, even where no part of the
cause of action may have arisen within the jurisdiction of such High
Court, such High Court not having ordinary original jurisdiction. In
57
such cases, the “place” where the award is delivered alone is looked
at, and the High Court given jurisdiction to supervise the arbitration
proceedings, on the footing of its jurisdiction to hear appeals from decrees of courts subordinate to it, which is only on the basis of territorial jurisdiction which in turn relates to the “place” where the award is
made. In the light of this important change in the law, Section 2(1)(e)
(i) of the Arbitration Act, 1996 must also be construed in the manner
indicated by this judgment.
51. Take the consequence of the opposite conclusion, in the light of the
facts of a given example, as follows. New Delhi is specifically designated to be the seat of the arbitration in the arbitration clause between the parties. Part of the cause of action, however, arises in several places, including where the contract is partially to be performed,
let us say, in a remote part of Uttarakhand. If concurrent jurisdiction
were to be the order of the day, despite the seat having been located
and specifically chosen by the parties, party autonomy would suffer,
which BALCO (supra) specifically states cannot be the case. Thus, if
an application is made to a District Court in a remote corner of the Uttarakhand hills, which then becomes the Court for the purposes of
Section 42 of the Arbitration Act, 1996 where even Section 34 applica58
tions have then to be made, the result would be contrary to the stated
intention of the parties - as even though the parties have contemplated that a neutral place be chosen as the seat so that the Courts of
that place alone would have jurisdiction, yet, any one of five other
Courts in which a part of the cause of action arises, including Courts
in remote corners of the country, would also be clothed with jurisdiction. This obviously cannot be the case. If, therefore, the conflicting
portion of the judgment of BALCO (supra) in paragraph 96 is kept
aside for a moment, the very fact that parties have chosen a place to
be the seat would necessarily carry with it the decision of both parties
that the Courts at the seat would exclusively have jurisdiction over the
entire arbitral process.
52. In fact, subsequent Division Benches of this Court have understood
the law to be that once the seat of arbitration is chosen, it amounts to
an exclusive jurisdiction clause, insofar as the Courts at that seat are
concerned. In Enercon (India) Ltd. and Ors. v. Enercon GmbH and
Anr. (2014) 5 SCC 1, this Court approved the dictum in Roger
Shashoua (supra) as follows:
“126. Examining the fact situation in the case, the
Court in Shashoua case [Shashoua v. Sharma,
(2009) 2 Lloyd's Law Rep 376] observed as
follows:
59
“The basis for the court's grant of an anti-suit
injunction of the kind sought depended upon
the seat of the arbitration. An agreement as to the
seat of an arbitration brought in the law of that
country as the curial law and was analogous to an
exclusive jurisdiction clause. Not only was there
agreement to the curial law of the seat, but also to
the courts of the seat having supervisory
jurisdiction over the arbitration, so that, by
agreeing to the seat, the parties agreed that any
challenge to an interim or final award was to be
made only in the courts of the place designated as
the seat of the arbitration.
Although, ‘venue’ was not synonymous with ‘seat’,
in an arbitration clause which provided for
arbitration to be conducted in accordance with the
Rules of the ICC in Paris (a supranational body of
rules), a provision that ‘the venue of arbitration
shall be London, United Kingdom’ did amount to
the designation of a juridical seat….”
In para 54, it is further observed as follows:
“There was a little debate about the possibility of
the issues relating to the alleged submission by
the claimants to the jurisdiction of the High Court
of Delhi being heard by that Court, because it was
best fitted to determine such issues under the
Indian law. Whilst I found this idea attractive
initially, we are persuaded that it would be wrong
in principle to allow this and that it would create
undue practical problems in any event. On the
basis of what I have already decided, England is
the seat of the arbitration and since this carries
with it something akin to an exclusive jurisdiction
clause, as a matter of principle the foreign court
should not decide matters which are for this Court
to decide in the context of an anti-suit injunction.”
53. The Court then concluded:
“138. Once the seat of arbitration has been fixed in
India, it would be in the nature of exclusive jurisdic60
tion to exercise the supervisory powers over the arbitration...”
54. In Reliance Industries Ltd. (supra), this Court held:
“45. In our opinion, it is too late in the day to contend
that the seat of arbitration is not analogous to an exclusive jurisdiction clause. This view of ours will find
support from numerous judgments of this Court. Once
the parties had consciously agreed that the juridical
seat of the arbitration would be London and that the
arbitration agreement will be governed by the laws of
England, it was no longer open to them to contend
that the provisions of Part I of the Arbitration Act
would also be applicable to the arbitration agreement.
This Court in Videocon Industries Ltd. [(2011) 6 SCC
161 : (2011) 3 SCC (Civ) 257] has clearly held as follows: (SCC p. 178, para 33)
“33. In the present case also, the parties had agreed
that notwithstanding Article 33.1, the arbitration
agreement contained in Article 34 shall be governed
by laws of England. This necessarily implies that the
parties had agreed to exclude the provisions of Part I
of the Act. As a corollary to the above conclusion, we
hold that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under Section 9 of the Act and the mere fact
that the appellant had earlier filed similar petitions
was not sufficient to clothe that High Court with the jurisdiction to entertain the petition filed by the respondents.”
xxx xxx xxx
55. The effect of choice of seat of arbitration was
considered by the Court of Appeal in C v. D [2008
Bus LR 843 : (2008) 1 Lloyd's Law 239 : 2007 EWCA
Civ 1282] . This judgment has been specifically
approved by this Court in Balco [BALCO v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC 552
: (2012) 4 SCC (Civ) 810] and reiterated
61
in Enercon [Enercon (India) Ltd. v. Enercon GmbH,
(2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59 : (2014) 1
ALR 257] . In C v. D [2008 Bus LR 843 : (2008) 1
Lloyd's Law 239 : 2007 EWCA Civ 1282] , the Court
of Appeal has observed: (Bus LR p. 851, para 16)
“Primary conclusion
16. I shall deal with Mr Hirst's arguments in due
course but, in my judgment, they fail to grapple with
the central point at issue which is whether or not, by
choosing London as the seat of the arbitration, the
parties must be taken to have agreed that
proceedings on the award should be only those
permitted by English law. In my view they must be
taken to have so agreed for the reasons given by the
Judge. The whole purpose of the balance achieved
by the Bermuda form (English arbitration but applying
New York law to issues arising under the policy) is
that judicial remedies in respect of the award should
be those permitted by English law and only those so
permitted. Mr Hirst could not say (and did not say)
that English judicial remedies for lack of jurisdiction
on procedural irregularities under Sections 67 and 68
of the 1996 Act were not permitted; he was reduced
to saying that New York judicial remedies
were also permitted. That, however, would be a
recipe for litigation and (what is worse) confusion
which cannot have been intended by the parties. No
doubt New York law has its own judicial remedies for
want of jurisdiction and serious irregularity but it could
scarcely be supposed that a party aggrieved by one
part of an award could proceed in one jurisdiction and
a party aggrieved by another part of an award could
proceed in another jurisdiction. Similarly, in the case
of a single complaint about an award, it could not be
supposed that the aggrieved party could complain in
one jurisdiction and the satisfied party be entitled to
ask the other jurisdiction to declare its satisfaction
with the award. There would be a serious risk of
parties rushing to get the first judgment or of
62
conflicting decisions which the parties cannot have
contemplated.”
56. The aforesaid observations in C v. D [2008 Bus
LR 843 : (2008) 1 Lloyd's Law 239 : 2007 EWCA Civ
1282] were subsequently followed by the High Court
of Justice, Queen's Bench Division, Commercial
Court (England) in Sulamerica Cia Nacional de
Seguros SA v. Enesa Engelharia SA —
Enesa [(2013) 1 WLR 102 : 2012 EWCA Civ 638 :
2012 WL 14764] . In laying down the same
proposition, the High Court noticed that the issue in
that case depended upon the weight to be given to
the provision in Condition 12 of the insurance policy
that “the seat of the arbitration shall be London,
England”. It was observed that this necessarily
carried with it the English Court's supervisory
jurisdiction over the arbitration process. It was
observed that:
“this follows from the express terms of the Arbitration
Act, 1996 and, in particular, the provisions of Section
2 which provide that Part I of the Arbitration Act, 1996
applies where the seat of the arbitration is in England
and Wales or Northern Ireland. This immediately
establishes a strong connection between the
arbitration agreement itself and the law of England. It
is for this reason that recent authorities have laid
stress upon the locations of the seat of the arbitration
as an important factor in determining the proper law
of the arbitration agreement.””
55. In Indus Mobile Distribution Private Limited and Ors. (supra), after
clearing the air on the meaning of Section 20 of the Arbitration Act,
1996, the Court in paragraph 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
63
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.
56. Despite the aforesaid judgments of this Court, discordant notes have
been struck by some of the High Courts. In Antrix Corporation Ltd.
(supra), a Division Bench of the Delhi High Court, after setting out
paragraph 96 of BALCO (supra), then followed the reasoning of
judgements of the Bombay High Court, in stating that the ratio decidendi of the 5 Judge Bench in BALCO (supra) is that Courts would
have concurrent jurisdiction, notwithstanding the designation of the
seat of arbitration by agreement between the parties. The Delhi High
Court stated:
“52. Having held that the statement in paragraph 96
of BALCO (supra) would apply to the present case as
well, this court has to examine its legal consequence
in light of the law declared in BALCO (supra). It is
important to note that in the said paragraph (extracted
above), the Supreme Court has noted that Section
2(1)(e) of the Arbitration Act confers jurisdiction to two
courts over the arbitral process - the courts having
subject matter jurisdiction and the courts of the seat.
This is evident both from the substantive holding of
the paragraph as well as the example given by the
Court. The Court notes that “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 is further reinforced by
64
the example that the Court gave later in the same
paragraph. In the example where the parties are from
Mumbai and Kolkata and the obligations under the
contract are to be performed at either Mumbai or
Kolkata, and the parties have designated Delhi as the
seat of the arbitration, in such a situation, both courts
would have jurisdiction, i.e. within whose jurisdiction
the subject matter of the suit is situated (either
Mumbai or Kolkata) and the court within the
jurisdiction of which the dispute resolution, i.e.,
arbitration is located (which is Delhi). Moreover, the
fact that the court interpreted the term “subject matter
of the suit” in the paragraph, also gives credence to
the interpretation that the court recognized that
Section 2(1)(e) gives jurisdiction to both the cause of
action courts, and the court at the seat of the
arbitration. If the Court were of the opinion that only
the courts at the seat would have jurisdiction under
Section 2(1)(e) and no other court, then it would be
wholly unnecessary for the court to interpret the
term “subject matter of the suit”, since that court
would anyway not have jurisdiction. In sum therefore,
paragraph 96 of BALCO (supra) gives jurisdiction to
both courts at the seat and the courts within whose
jurisdiction the cause of action arises, if the dispute
were the subject matter of a suit. This is what the
Bombay High Court in Konkola Copper Mines (supra)
also interpreted BALCO (supra) as holding:
“The Supreme Court held that the provisions of
Section 2(1)(e) are purely jurisdictional in nature and
can have no relevance to the question whether any
part of the cause of action has taken place outside
India. The observations which have been extracted
above, clearly establish that the Court where the
arbitration takes place would be required to exercise
supervisory control over the arbitral process. The
Supreme Court has held that Parliament has given
jurisdiction to two courts - the Court which would
have jurisdiction where the cause of action is located
65
and the Court where the arbitration takes place. This
is evident from the example which is contained in the
above quoted extract from the decision.”
57. Having so stated, the Division Bench then went on to give a restricted
meaning to Indus Mobile Distribution Private Ltd. (supra) in paragraph 56 as follows:
“56. In Datawind (supra), as the facts and the question framed by the Court in the second paragraph of
its decision suggest, the Court was faced with a situation where the parties had designated both the
seat and specified an exclusive forum selection
clause. Therefore, its findings have to be interpreted
in that light. In fact, were this Court to find otherwise,
and interpret Datawind (supra) as holding that the
designation of seat alone would amount to an exclusive forum selection clause in domestic arbitrations,
then this would run contrary to the five-Judge decision in BALCO (supra), which as noticed above, gave
jurisdiction under Section 2(1)(e) to two courts - one
of which was the court of the seat, thereby clearly implying that the designation of a seat would not
amount to an exclusive forum selection clause…”
58. The Court then went on to state:
“58. The court is of the opinion that in this case, only
if the parties had designated the seat as New
Delhi and also provided an exclusive forum selection
clause in favour of the courts at New Delhi, could it be
said that this court would have exclusive jurisdiction
over all applications filed under the Arbitration Act. Indeed, it is open to parties to an arbitration to designate a particular forum as the exclusive forum to
which all applications under the Act would lie. This
would merely be an exercise of the right of the parties
to choose one among multiple competent forums as
the exclusive forum. This is a clearly permissible ex66
ercise of the right of party autonomy as held by the
Supreme Court in Swastik Gases v. Indian Oil Corporation Ltd., (2013) 9 SCC 32. Conversely, merely
choosing a seat, cannot amount to exercising such a
right of exclusive forum selection.
59. This court is of opinion that, holding otherwise
would in effect render Section 42 of the Arbitration Act
ineffective and useless. Section 42 of the Act presupposes that there is more than one competent forum to
hear applications under the Arbitration Act, and hence
to ensure efficacy of dispute resolution, this provision
enacts that the court, which is first seized of any such
application under the Act, would be the only court
possessing jurisdiction to hear all subsequent applications. If seat were equivalent to an exclusive forum
selection clause in Part-I arbitrations, then every time
parties would designate a seat, that would in effect
mean that Section 42 would have no application.
Thus, only those few situations where parties do not
actually designate any seat (and thus no exclusive
competence is conferred on one forum) would Section 42 have any role. In fact, often, when parties do
not agree upon a seat in the arbitration agreement,
for convenience, the arbitral tribunal designates a
particular seat of the arbitration, or the agreement
vests the discretion in the tribunal to decide the seat
(and not just the “venue”). In all those circumstances
then as well, the decision of the tribunal to agree
upon a “seat” would amount to an exclusive jurisdiction clause and Section 42 would have no application.
This would dilute Section 42 and would accordingly,
be contrary to Parliamentary intent. Undoubtedly, in
the present case, the parties have only chosen the
seat as New Delhi and have not specified an exclusive forum selection clause. Therefore, it cannot be
said that the courts in Delhi have exclusive competence to entertain applications under the Arbitration
Act in the present dispute. The jurisdiction of the
courts where the cause of action arises, which in this
67
case, is the Bangalore City Civil Court, cannot be said
to have been excluded therefore. Accordingly, question (ii) is also answered in favour of Antrix...”
59. The view of the Delhi High Court in Antrix Corporation Ltd. (supra),
which followed judgments of the Bombay High Court, does not commend itself to us. First and foremost, it is incorrect to state that the example given by the Court in paragraph 96 of BALCO (supra) reinforces the concurrent jurisdiction aspect of the said paragraph. As
has been pointed out by us, the conclusion that the Delhi as well as
the Mumbai or Kolkata Courts would have jurisdiction in the example
given in the said paragraph is wholly incorrect, given the sentence,
“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”. The sentence which follows this is out of sync with this sentence, and the
other paragraphs of the judgment. Thus, BALCO (supra) does not
“unmistakably” hold that two Courts have concurrent jurisdiction, i.e.,
the seat Court and the Court within whose jurisdiction the cause of
action arises. What is missed by these High Court judgments is the
subsequent paragraphs in BALCO (supra), which clearly and unmistakably state that the choosing of a “seat” amounts to the choosing of
68
the exclusive jurisdiction of the Courts at which the “seat” is located.
What is also missed are the judgments of this Court in Enercon (India) Ltd. (supra) and Reliance Industries (supra).
60. Equally, the ratio of the judgment in Indus Mobile Distribution Private Ltd. (supra), is contained in paragraphs 19 and 20. Two separate and distinct reasons are given in Indus Mobile Distribution Private Ltd. (supra) for arriving at the conclusion that the Courts at
Mumbai alone would have jurisdiction. The first reason, which is independent of the second, is that as the seat of the arbitration was designated as Mumbai, it would carry with it the fact that Courts at Mumbai
alone would have jurisdiction over the arbitration process. The second
reason given was that in any case, following the Hakam Singh
(supra) principle, where more than one Court can be said to have jurisdiction, the agreement itself designated the Mumbai Courts as having exclusive jurisdiction. It is thus wholly incorrect to state that Indus
Mobile Distribution Private Ltd. (supra) has a limited ratio decidendi contained in paragraph 20 alone, and that paragraph 19, if read
by itself, would run contrary to the 5 Judge Bench decision in BALCO
(supra).
69
61. Equally incorrect is the finding in Antrix Corporation Ltd. (supra)
that Section 42 of the Arbitration Act, 1996 would be rendered ineffective and useless. Section 42 is meant to avoid conflicts in jurisdiction
of Courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one Court exclusively.
This is why the section begins with a non-obstante clause, and then
goes on to state “…where with respect to an arbitration agreement
any application under this Part has been made in a Court…” It is obvious that the application made under this part to a Court must be a
Court which has jurisdiction to decide such application. The subsequent holdings of this Court, that where a seat is designated in an
agreement, the Courts of the seat alone have jurisdiction, would require that all applications under Part I be made only in the Court
where the seat is located, and that Court alone then has jurisdiction
over the arbitral proceedings and all subsequent applications arising
out of the arbitral agreement. So read, Section 42 is not rendered ineffective or useless. Also, where it is found on the facts of a particular
case that either no “seat” is designated by agreement, or the socalled “seat” is only a convenient “venue”, then there may be several
Courts where a part of the cause of action arises that may have juris70
diction. Again, an application under Section 9 of the Arbitration Act,
1996 may be preferred before a court in which part of the cause of action arises in a case where parties have not agreed on the “seat” of
arbitration, and before such “seat” may have been determined, on the
facts of a particular case, by the Arbitral Tribunal under Section 20(2)
of the Arbitration Act, 1996. In both these situations, the earliest application having been made to a Court in which a part of the cause of
action arises would then be the exclusive Court under Section 42,
which would have control over the arbitral proceedings. For all these
reasons, the law stated by the Bombay and Delhi High Courts in this
regard is incorrect and is overruled.
Tests for determination of “seat”
62. The judgments of the English Courts have examined the concept of
the “juridical seat” of the arbitral proceedings, and have laid down
several important tests in order to determine whether the “seat” of the
arbitral proceedings has, in fact, been indicated in the agreement between the parties. The judgment of Cooke, J., in Roger Shashoua
(supra), states:
“34. “London Arbitration is a well known phenomenon
which is often chosen by foreign nationals with a different law, such as the law of New York, governing
71
the substantive rights of the parties. This is because
of the legislative framework and supervisory powers
of the courts here which many parties are keen to
adopt. When therefore there is an express designation of the arbitration venue as London 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, to my mind, that London is the
juridical seat and English law the curial law. In my
judgment it is clear that either London has been designated by the parties to the arbitration agreement as
the seat of the arbitration, or, having regard to the
parties’ agreement and all the relevant circumstances, it is the seat to be determined in accordance
with the final fall back provision of section 3 of the arbitration act.”
63. 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.
64. In Enercon GmbH v. Enercon (India) Ltd. [2012] EWHC 689, the
arbitration clause between the parties read as follows:
“18.3 All proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be London. The arbitrators may (but
shall not be obliged to) award costs and reasonable
expenses (including reasonable fees of counsel) to
the Party(ies) that substantially prevail on merit. The
72
provisions of the Indian Arbitration and Conciliation
Act, 1996 shall apply.”
65. The Court began its discussion on the “seat” of the arbitration by
referring to Roger Shashoua (supra), and then referring to ‘The Conflict of Laws’, Dicey, Morris & Collins, 14th Ed. as follows:
“Moreover, as Cooke J. noted, this conclusion is consistent with the views expressed in The Conflict of
Laws, Dicey, Morris & Collins, 14th Edition at ¶16–
035 where the authors state that the seat “is in most
cases sufficiently indicated by the country chosen as
the place of the arbitration. For such a choice of place
not to be given effect as a choice of seat, there will
need to be clear evidence that the parties … agreed
to choose another seat for the arbitration and that
such a choice will be effective to endow the courts of
that country with jurisdiction to supervise and support
the arbitration” .
Apart from the last sentence in clause 18.3 (ie “The
provisions of the Indian Arbitration and Conciliation
Act 1996 shall apply”), it seems to me that the conclusion that London is the “seat” of any arbitration thereunder is beyond any possible doubt. Thus the main
issue is whether this last sentence is to be regarded
as “significant contrary indicia” (using the language of
Cooke J.) so as to place the “seat” of the arbitration in
India. A similar issue was considered by Saville J in
Union v of India v McDonnell [1993] 2 Lloyd's Rep 48
which, of course, pre-dates the English 1996 Act .
The arbitration agreement in that case provided as
follows: “In the event of a dispute arising out of or in
connection with this agreement…the same shall be
referred to an Arbitration Tribunal…The arbitration
shall be conducted in accordance with the procedure
provided in the Indian Arbitration Act of 1940 or any
enactment or modification thereof. The arbitration
73
shall be conducted in the English language…The
seat of the arbitration proceedings shall be London,
United Kingdom.” Saville J expressed the view that
the arguments on both sides were “finely balanced”
but in effect concluded that the reference to the Indian Arbitration Act 1940 did not have the effect of
changing the “seat” of the arbitration designated by
the parties. Rather, the phrase referring to the 1940
Act was to be reconciled with the rest of the clause by
reading it as referring to the internal conduct of the arbitration as opposed to the external supervision of the
arbitration by the Courts.”
(emphasis supplied)
66. The Court then held that although the word “venue” is not synonymous with “seat”, on the facts of that case, London - though described
as the “venue” - was really the “seat” of the arbitration. This was for
the reason that London was a neutral place in which neither party
worked for gain, and in which no part of the cause of action arose. It
was thus understood to be a neutral place in which the proceedings
could be “anchored”. Secondly, the Court stressed on the expression
“arbitration proceedings” in clause 18.3, which the Court held to be an
expression which included not just one or more individual hearings,
but the arbitral proceedings as a whole, culminating in the making of
an award. The Court held:
“Second, the language in clause 18.3 refers to the
“arbitration proceedings”. That is an expression which
includes not just one or more individual or particular
hearings but the arbitration proceedings as a whole
74
including the making of an award. In other words the
parties were anchoring the whole arbitration process
in London right up to and including the making of an
award. The place designated for the making of an
award is a designation of seat. Moreover the language in clause 18.3 does not refer to the venue of all
hearings “taking place” in London. Clause 18.3 instead provides that the venue of the arbitration proceedings “shall be” London. This again suggests the
parties intended to anchor the arbitration proceedings
to and in London rather than simply physically locating the arbitration hearings in London. Indeed in a
case where evidence might need to be taken or perhaps more likely inspected in India it would make no
commercial sense to construe the provision as mandating all hearings to take place in a physical place as
opposed to anchoring the arbitral process to and in a
designated place. All agreements including an arbitration agreement should be construed to accord with
business common sense. In my view, there is no
business common sense to construe the arbitration
agreement (as contended for by EIL) in a manner
which would simply deprive the arbitrators of an important discretion that they possess to hear evidence
in a convenient geographical location.
Third, Mr Joseph QC submitted that the last sentence
of clause 18.3 can be reconciled with the choice of
London as the seat. First, he submitted that it can be
read as referring simply to Part II of the Indian 1996
Act ie the enforcement provisions. Mr Edey QC's response was that if that is all the last sentence meant,
then it would be superfluous. However, I do not consider that any such superfluity carries much, if any,
weight. Alternatively, Mr Joseph QC submitted that it
can be read as referring only to those provisions of
the Indian 1996 Act which were not inconsistent with
the English 1996 Act.”
(emphasis supplied)
75
67. The Court then held that the reference to the Indian Arbitration Act,
1996 would not make London the “venue” and India the “seat” of the
arbitral process for several reasons, including the fact that in earlier
agreements between the same parties, the seat of arbitral proceedings was India, which was changed by this agreement to London - the
explanation for this change being to render an award enforceable in
India under the provisions of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York, 1958).
68. In Shagang South-Asia (Hong Kong) Trading Co. Ltd. v. Daewoo
Logistics [2015] EWHC 194, the Queen’s Bench Division (Commercial Courts) dealt with a ‘Fixture Note’ in which the Respondent
agreed to charter a vessel to Shangang, China. The Fixture Note provided:
“Clause 23. ARBITRATION TO BE HELD IN
HONGKONG. ENGLISH LAW TO BE APPLIED.”
69. After referring to Roger Shashoua (supra) and Enercon GmbH
(supra), the Court held:
“In my judgment the approach adopted in Shashoua v
Sharma and in other cases is appropriate in this case
also. An agreement that the arbitration is ‘to be held
in Hong Kong’ would ordinarily carry with it an implied
choice of Hong Kong as the seat of the arbitration and of the application of Hong Kong law as the
curial law. Clear words or ‘significant contrary indicia’
76
are necessary to establish that some other seat or curial law has been agreed.”
70. In Process and Indusrial Developments Ltd. v. Nigeria [2019]
EWHC 2241 the Court was concerned with a dispute that arose out of
a gas supply and processing agreement. The arbitration clause in that
case read as follows:
“The Parties agree that if any difference or dispute
arises between them concerning the interpretation or
performance of this Agreement and if they fail to settle such difference or dispute amicably, then a Party
may serve on the other a notice of arbitration under
the rules of the Nigerian Arbitration and Conciliation
Act (Cap A18 LFN 2004) which, except as otherwise
provided herein, shall apply to any dispute between
such Parties under this Agreement. Within thirty (30)
days of the notice of arbitration being issued by the
initiating Party, the Parties shall each appoint an arbitrator and the arbitrators thus appointed by the Parties shall within fifteen (15) days from the date the
last arbitrator was appointed, appoint a third arbitrator to complete the tribunal. …
The arbitration award shall be final and binding upon
the Parties. The award shall be delivered within two
months after the appointment of the third arbitrator or
within such extended period as may be agreed by the
Parties. The costs of the arbitration shall be borne
equally by the Parties. Each Party shall, however,
bear its own lawyers' fees. The venue of the arbitration shall be London, England or otherwise as agreed
by the Parties. The arbitration proceedings and
record shall be in the English language.”
77
71. The Court then held that the gas supply agreement provided for the
seat of the arbitration to be in London, inter alia, for the following reasons:
“ It is significant that clause 20 refers to the venue "of
the arbitration" as being London. The arbitra-
tion would continue up to and including the final
award. Clause 20 does not refer to London as being
the venue for some or all of the hearings. It does not
use the language used in s. 16(2) ACA of where the
tribunal may "meet" or may "hear witnesses, experts
or the parties". I consider that the provision repre-
sented an anchoring of the entire arbitration to London rather than providing that the hearings should
take place there.
Clause 20 provides that the venue of the arbitration "shall be" London "or otherwise as agreed between the parties". If the reference to venue was simply to where the hearings should take place, this
would be an inconvenient provision and one which
the parties are unlikely to have intended. It would
mean that hearings had to take place in London, however inconvenient that might be for a particular hearing, unless the parties agreed otherwise. The question of where hearings should be conveniently held is,
however, one which the arbitrators ordinarily have the
power to decide, as indeed is envisaged in s. 16(2)
ACA. That is likely to be a much more convenient arrangement. Clearly if the parties were in agreement
as to where a particular hearing were to take place,
that would be likely to be very influential on the arbitral tribunal. But if for whatever reason they were not
in agreement, and it is not unknown for parties to arbitration to become at loggerheads about very many
matters, then it is convenient for the arbitrators to be
able to decide. If that arrangement was to be displaced it would, in my judgment, have to be spelled
78
out clearly. Accordingly, the reference to the "venue"
as being London or otherwise as agreed between the
parties, is better read as providing that the seat of
the arbitration is to be England, unless the parties
agree to change it. This would still allow the arbitrators to decide where particular hearings should take
place, while providing for an anchor to England for
supervisory purposes, unless changed.”
(emphasis supplied)
72. Coming to the judgments of our Courts, this Court in Dozco India (P)
Ltd. v. Doosan Infracore Co. Ltd. (2011) 16 SCC 179, was concerned with the following arbitration clause contained in the agreement between the parties:
“Article 22. Governing Laws — 22.1: This agreement
shall be governed by and construed in accordance
with the laws of The Republic of Korea.
Article 23. Arbitration — 23.1: All disputes arising in
connection with this agreement shall be finally settled
by arbitration in Seoul, Korea (or such other place as
the parties may agree in writing), pursuant to the
rules of agreement then in force of the International
Chamber of Commerce.”
73. The Court then held:
“18. In my opinion, there is essential difference between
the clauses referred to in Citation Infowares
Ltd. v. Equinox Corpn. [(2009) 7 SCC 220] as also
in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail
Ltd. [(2008) 10 SCC 308] on one hand and Article 23.1
in the present case, on the other. Shri Gurukrishna
Kumar rightly pointed out that the advantage of the
bracketed portion cannot be taken, particularly, in view
79
of the decision in Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del
Peru [(1988) 1 Lloyd's Rep 116 (CA)] wherein it was
held:
“All contracts which provide for arbitration and contain a
foreign element may involve three potentially relevant
systems of law: (1) the law governing the substantive
contract; (2) the law governing the agreement to
arbitrate and the performance of that agreement; (3) the
law governing the conduct of the arbitration. In the
majority of the cases all three will be the same, but (1)
will often be different from (2) and (3) and occasionally,
but rarely, (2) may also differ from (3).”
That is exactly the case here. The language of Article
23.1 clearly suggests that all the three laws are the laws
of The Republic of Korea with the seat of arbitration in
Seoul, Korea and the arbitration to be conducted in
accordance with the Rules of the International Chamber
of Commerce.
19. In respect of the bracketed portion in Article 23.1,
however, it is to be seen that it was observed in Naviera
case [(1988) 1 Lloyd's Rep 116 (CA)] :
“… It seems clear that the submissions advanced below
confused the legal ‘seat’, etc. of an arbitration with the
geographically convenient place or places for holding
hearings. This distinction is nowadays a common
feature of international arbitrations and is helpfully
explained in Redfern and Hunter [Ed.: Redfern and
Hunter on International Arbitration.] in the following
passage under the heading ‘The Place of Arbitration’:
‘The preceding discussion has been on the basis that
there is only one “place” of arbitration. This will be the
place chosen by or on behalf of the parties; and it will be
designated in the arbitration agreement or the terms of
reference or the minutes of proceedings or in some
80
other way as the place or “seat” of the arbitration. This
does not mean, however, that the Arbitral Tribunal must
hold all its meetings or hearings at the place of
arbitration. International commercial arbitration often
involves people of many different nationalities, from
many different countries. In these circumstances, it is by
no means unusual for an Arbitral Tribunal to hold
meetings — or even hearings — in a place other than
the designated place of arbitration, either for its own
convenience or for the convenience of the parties or
their witnesses….
It may be more convenient for an Arbitral Tribunal sitting
in one country to conduct a hearing in another country
— for instance, for the purpose of taking evidence…. In
such circumstances, each move of the Arbitral Tribunal
does not of itself mean that the seat of the arbitration
changes. The seat of the arbitration remains the place
initially agreed by or on behalf of the parties.’
These aspects need to be borne in mind when one
comes to the Judge's construction of this policy.”
It would be clear from this that the bracketed portion in
the article was not for deciding upon the seat of the
arbitration, but for the convenience of the parties in case
they find to hold the arbitration proceedings somewhere
else than Seoul, Korea. The part which has been quoted
above from Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del
Peru [(1988) 1 Lloyd's Rep 116 (CA)] supports this
inference.
20. In that view, my inferences are that:
(i) The clear language of Articles 22 and 23 of the
distributorship agreement between the parties in this
case spells out a clear agreement between the parties
excluding Part I of the Act.
(ii) The law laid down in Bhatia International v. Bulk
Trading S.A. [(2002) 4 SCC 105] and Indtel Technical
Services (P) Ltd. v. W.S. Atkins Rail Ltd. [(2008) 10 SCC
308] , as also in Citation Infowares Ltd. v. Equinox
81
Corpn. [(2009) 7 SCC 220] is not applicable to the
present case.
(iii) Since the interpretation of Article 23.1 suggests that
the law governing the arbitration will be Korean Law and
the seat of arbitration will be Seoul in Korea, there will
be no question of applicability of Section 11(6) of the Act
and the appointment of arbitrator in terms of that
provision.”
74. In Videocon Industries Ltd. v. Union of India (2011) 6 SCC 161,
this Court was concerned with an arbitration agreement between the
parties as follows:
“34.12. Venue and law of arbitration agreement.—The
venue of sole expert, conciliation or arbitration
proceedings pursuant to this article, unless the parties
otherwise agree, shall be Kuala Lumpur, Malaysia, and
shall be conducted in the English language. Insofar as
practicable, the parties shall continue to implement the
terms of this contract notwithstanding the initiation of
arbitral proceedings and any pending claim or dispute.
Notwithstanding the provisions of Article 33.1, the
arbitration agreement contained in this Article 34 shall
be governed by the laws of England.”
75. Referring to Sections 3 and 53 of the English Arbitration Act, 1996,
the Court held:
“20. We shall first consider the question whether Kuala
Lumpur was the designated seat or juridical seat of
arbitration and the same had been shifted to London. In
terms of Article 34.12 of the PSC entered into by 5
parties, the seat of arbitration was Kuala Lumpur,
Malaysia. However, due to outbreak of epidemic SARS,
the Arbitral Tribunal decided to hold its sittings first at
Amsterdam and then at London and the parties did not
82
object to this. In the proceedings held on 14-10-2003
and 15-10-2003 at London, the Arbitral Tribunal
recorded the consent of the parties for shifting the
juridical seat of arbitration to London. Whether this
amounted to shifting of the physical or juridical seat of
arbitration from Kuala Lumpur to London? The decision
of this would depend on a holistic consideration of the
relevant clauses of the PSC.
21. Though, it may appear repetitive, we deem it
necessary to mention that as per the terms of
agreement, the seat of arbitration was Kuala Lumpur. If
the parties wanted to amend Article 34.12, they could
have done so only by a written instrument which was
required to be signed by all of them. Admittedly, neither
was there any agreement between the parties to the
PSC to shift the juridical seat of arbitration from Kuala
Lumpur to London nor was any written instrument
signed by them for amending Article 34.12. Therefore,
the mere fact that the parties to the particular arbitration
had agreed for shifting of the seat of arbitration to
London cannot be interpreted as anything except
physical change of the venue of arbitration from Kuala
Lumpur to London.”
76. In Enercon (India) Ltd. (supra), this Court was concerned with an
arbitration clause which stated that the venue shall be in London. The
Court held, on the facts of that case, that since the substantive law of
the contract, the curial law of the proceedings, and the law governing
the arbitration agreement were all India, the seat would be India -
London only being the venue for holding meetings. The Court then
held, following the Naviera Amazonica Peruana S.A. v. Compania
83
Internacional De Seguros Del Peru (1988) 1 Lloyd’s Rep 116 (CA)
case, that the lex fori of the arbitral proceedings, namely, the place in
which arbitration is to be held, must be considered to be the seat of
the arbitral proceedings, other things being equal, as follows:
“100. On the facts of the case, it was observed
in Naviera Amazonica case [Naviera Amazonica
Peruana S.A. v. Compania Internacional De Seguros
Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] that since
there was no contest on Law 1 and Law 2, the entire
issue turned on Law 3, “the law governing the conduct
of the arbitration”. This is usually referred to as
the curial or procedural law, or the lex fori. Thereafter,
the Court approvingly quoted the following observation
from Dicey & Morris on the Conflict of Laws (11th Edn.):
“English law does not recognise the concept of a
delocalised arbitration or of arbitral procedures floating
in the transnational firmament, unconnected with any
municipal system of law.” It is further held that
“accordingly every arbitration must have a ‘seat’ or
‘locus arbitri’ or ‘forum’ which subjects its procedural
rules to the municipal law which is there in force”. The
Court thereafter culls out the following principle:
“Where the parties have failed to choose the law
governing the arbitration proceedings, those
proceedings must be considered, at any rate prima
facie, as being governed by the law of the country in
which the arbitration is held, on the ground that it is the
country most closely connected with the proceedings.”
The aforesaid classic statement of the conflict of law
rules as quoted in Dicey & Morris on the Conflict of
Laws (11th Edn.), Vol. 1, was approved by the House of
Lords in James Miller & Partners Ltd. v. Whitworth
Street Estates (Manchester) Ltd. [1970 AC 583 : (1970)
84
2 WLR 728 : (1970) 1 All ER 796 : (1970) 1 Lloyd's Rep
269 (HL)] and Mustill, J. in Black Clawson International
Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. [(1981)
2 Lloyd's Rep 446 at p. 453] , a little later characterised
the same proposition as “the law of the place where the
reference is conducted, the lex fori”. The position of law
in India is the same.
77. The Court then examined Braes of Doune Wind Farm (Scotland) v.
Alfred McAlpine Business Services Ltd. [2008] EWHC 436 (TCC)
in some detail, and concluded in paragraph 118 as follows:
“118. In Braes of Doune [Braes of Doune Wind Farm
(Scotland) Ltd. v. Alfred McAlpine Business Services
Ltd., [2008] Bus LR D 137 (QBD) : 2008 EWHC 426
(TCC)] , detailed examination was undertaken by the
Court to discern the intention of the parties as to
whether the place mentioned refers to venue or
the seat of the arbitration. The factual situation in the
present case is not as difficult or complex as the parties
herein have only designated London as a venue.
Therefore, if one has to apply the reasoning and logic of
Akenhead, J., the conclusion would be irresistible that
the parties have designated India as the seat. This is
even more so as the parties have not agreed that the
courts in London will have exclusive jurisdiction to
resolve any dispute arising out of or in connection with
the contract, which was specifically provided in Clause
1.4.1 of the EPC contract examined by Akenhead, J.
in Braes of Doune [Braes of Doune Wind Farm
(Scotland) Ltd. v. Alfred McAlpine Business Services
Ltd., [2008] Bus LR D 137 (QBD) : 2008 EWHC 426
(TCC)] . In the present case, except for London being
chosen as a convenient place/venue for holding the
meetings of the arbitration, there is no other factor
connecting the arbitration proceedings to London.”
85
78. The Court then made a reference to C v. D [2007] EWCA Civ. 182,
where the Court, following C v. D (supra), held:
“122. Longmore, J. of the Court of Appeal observed:
(C v. D case [[2008] Bus LR 843 : 2007 EWCA Civ
1282] , Bus LR p. 851, paras 16-17)
“16. I shall deal with Mr Hirst's arguments in due course
but, in my judgment, they fail to grapple with the central
point at issue which is whether or not, by choosing
London as the seat of the arbitration, the parties must
be taken to have agreed that proceedings on the award
should be only those permitted by English law. In my
view they must be taken to have so agreed for the
reasons given by the Judge. The whole purpose of the
balance achieved by the Bermuda Form (English
arbitration but applying New York law to issues arising
under the policy) is that judicial remedies in respect of
the award should be those permitted by English law and
only those so permitted. Mr Hirst could not say (and did
not say) that English judicial remedies for lack of
jurisdiction on procedural irregularities under Sections
67 and 68 of the Indian Arbitration Act, 1996 were not
permitted; he was reduced to saying that New York
judicial remedies were also [Ed.: The word “also” has
been emphasised in original.] permitted. That, however,
would be a recipe for litigation and (what is worse)
confusion which cannot have been intended by the
parties. No doubt New York law has its own judicial
remedies for want of jurisdiction and serious irregularity
but it could scarcely be supposed that a party aggrieved
by one part of an award could proceed in one
jurisdiction and a party aggrieved by another part of an
award could proceed in another jurisdiction. Similarly, in
the case of a single complaint about an award, it could
not be supposed that the aggrieved party could
complain in one jurisdiction and the satisfied party be
entitled to ask the other jurisdiction to declare its
86
satisfaction with the award. There would be a serious
risk of parties rushing to get the first judgment or of
conflicting decisions which the parties cannot have
contemplated.
17. It follows from this that a choice of seat for the
arbitration must be a choice of forum for remedies
seeking to attack the award.”
On the facts of the case, the Court held that the seat of
the arbitration was in England and accordingly
entertained the challenge to the award.”
79. Reference was made to Roger Shashoua (supra) in paragraphs 124
to 128, and then to various other judgments, including BALCO
(supra), as follows:
“134. It is accepted by most of the experts in the law
relating to international arbitration that in almost all the
national laws, arbitrations are anchored to
the seat/place/situs of arbitration. Redfern and Hunter
on International Arbitration (5th Edn., Oxford University
Press, Oxford/New York 2009), in Para 3.54 concludes
that “the seat of the arbitration is thus intended to be its
centre of gravity”. In BALCO [Bharat Aluminium
Co. v. Kaiser Aluminium Technical Services Inc., (2012)
9 SCC 552 : (2012) 4 SCC (Civ) 810] , it is further
noticed that this does not mean that all proceedings of
the arbitration are to be held at the seat of arbitration.
The arbitrators are at liberty to hold meetings at a place
which is of convenience to all concerned. This may
become necessary as arbitrators often come from
different countries. Therefore, it may be convenient to
hold all or some of the meetings of the arbitration in a
location other than where the seat of arbitration is
located. In BALCO, the relevant passage from Redfern
and Hunter has been quoted which is as under: (SCC p.
598, para 75)
87
“75. … ‘The preceding discussion has been on the basis
that there is only one “place” of arbitration. This will be
the place chosen by or on behalf of the parties; and it
will be designated in the arbitration agreement or the
terms of reference or the minutes of proceedings or in
some other way as the place or “seat” of the arbitration.
This does not mean, however, that the Arbitral
Tribunal must hold all its meetings or hearings at the
place of arbitration. International commercial arbitration
often involves people of many different nationalities,
from many different countries. In these circumstances, it
is by no means unusual for an Arbitral Tribunal to hold
meetings—or even hearings—in a place other than the
designated place of arbitration, either for its own
convenience or for the convenience of the parties or
their witnesses…. It may be more convenient for an
Arbitral Tribunal sitting in one country to conduct a
hearing in another country — for instance, for the
purpose of taking evidence…. In such circumstances
each move of the Arbitral Tribunal does not of itself
mean that the seat of arbitration changes. The seat of
arbitration remains the place initially agreed by or on
behalf of the parties.’ (Naviera case [Naviera
Amazonica Peruana S.A. v. Compania Internacional De
Seguros Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] ,
Lloyd's Rep p. 121)”
These observations have also been noticed in Union of
India v. McDonnell Douglas Corpn. [(1993) 2 Lloyd's
Rep 48]”
80. The Court finally concluded:
“135. In the present case, even though the venue of
arbitration proceedings has been fixed in London, it
cannot be presumed that the parties have intended
the seat to be also in London. In an international
commercial arbitration, venue can often be different
from the seat of arbitration. In such circumstances, the
88
hearing of the arbitration will be conducted at
the venue fixed by the parties, but this would not bring
about a change in the seat of the arbitration. This is
precisely the ratio in Braes of Doune [Braes of Doune
Wind Farm (Scotland) Ltd. v. Alfred McAlpine Business
Services Ltd., [2008] Bus LR D 137 (QBD) : 2008
EWHC 426 (TCC)] . Therefore, in the present case, the
seat would remain in India.”
81. In Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. and
Anr. (2015) 9 SCC 172, the Court dealt with an arbitration clause between the parties which read as follows:
“5. If any dispute or difference should arise under this
charter, general average/arbitration in London to apply,
one to be appointed by each of the parties hereto, the
third by the two so chosen, and their decision or that of
any two of them, shall be final and binding, and this
agreement may, for enforcing the same, be made a rule
of court. Said three parties to be commercial men who
are the members of the London Arbitrators Association.
This contract is to be governed and construed according
to the English law. For disputes where total amount
claimed by either party does not exceed US $50,000 the
arbitration should be conducted in accordance with
small claims procedure of the London Maritime
Arbitration Association.”
82. After referring, in extenso, to a large number of English decisions and
the decisions of this Court, the Court concluded:
“48. In the present case, the agreement stipulates that
the contract is to be governed and construed according
to the English law. This occurs in the arbitration clause.
Mr Viswanathan, learned Senior Counsel, would submit
that this part has to be interpreted as a part of “curial
89
law” and not as a “proper law” or “substantive law”. It is
his submission that it cannot be equated with the seat of
arbitration. As we perceive, it forms as a part of the
arbitration clause. There is ample indication through
various phrases like “arbitration in London to apply”,
arbitrators are to be the members of the “London
Arbitration Association” and the contract “to be
governed and construed according to the English law”.
It is worth noting that there is no other stipulation
relating to the applicability of any law to the agreement.
There is no other clause anywhere in the contract. That
apart, it is also postulated that if the dispute is for an
amount less than US $50,000 then, the arbitration
should be conducted in accordance with small claims
procedure of the London Maritime Arbitration
Association. When the aforesaid stipulations are read
and appreciated in the contextual perspective, “the
presumed intention” of the parties is clear as crystal that
the juridical seat of arbitration would be London.”
83. Most recently, in Brahmani River Pellets (supra), this Court in a domestic arbitration considered clause 18 - which was the arbitration
agreement between the parties - and which stated that arbitration
shall be under Indian Arbitration and Conciliation Act, 1996, and the
venue of arbitration shall be Bhubaneswar. After citing several judgments of this Court and then referring to Indus Mobile Distribution
(supra), the Court held:
“18. Where the contract specifies the jurisdiction of
the court at a particular place, only such court will
have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the
present case, the parties have agreed that the
“venue” of arbitration shall be at Bhubaneswar. Con90
sidering the agreement of the parties having
Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As
held in Swastik, non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and
does not make any material difference.
19. When the parties have agreed to the have the
“venue” of arbitration at Bhubaneshwar, the Madras
High Court erred in assuming the jurisdiction under
Section 11(6) of the Act. Since only the Orissa High
Court will have the jurisdiction to entertain the petition
filed under Section 11(6) of the Act, the impugned order is liable to be set aside.”
84. 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
91
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.
Correctness of the judgment in Hardy Exploration and Production (India) Ltd.
85. Roger Shashoua (supra) was expressly referred to in paragraphs
108 and 109 of BALCO (supra), and followed in paragraph 110 as ex92
tracted above. BALCO (supra) then summed up the legal position as
follows:
“116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the
choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that
country relating to the conduct and supervision of arbitrations will apply to the proceedings.
117. It would, therefore, follow that if the arbitration
agreement is found or held to provide for a seat /
place of arbitration outside India, then the provision
that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable Indian Courts to
exercise supervisory jurisdiction over the arbitration
or the award. It would only mean that the parties have
contractually imported from the Arbitration Act, 1996,
those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English Procedural Law/Curial Law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat / place in India.”
86. In Roger Shashoua & Ors. v. Mukesh Sharma & Ors., (2017) 14
SCC 722, a Division Bench of this Court, after referring to a number
of judgments, referred to the English Shashoua judgment3
as follows:
“46. As stated earlier, in Shashoua Cooke, J., in the
course of analysis, held that "London arbitration" is a
well known phenomenon which is often chosen by
foreign nationals with a different law, such as the law
of New York, governing the substantive rights of the
parties and it is because of the legislative framework
and supervisory powers of the courts here which
3
[2009] EWHC 957 (Comm).
93
many parties are keen to adopt. The learned Judge
has further held that when there is an express designation of the arbitration venue as London 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 London is the juridical seat and English law the curial law.”
87. The Division bench then turned down an argument that BALCO
(supra) had not expressly approved the Shashoua principle, as follows:
“54. We had earlier extracted extensively from the
said judgment, as we find, the Court after adverting to
various aspects, has categorically held that the High
Court had not followed Shashoua principle. The various decisions referred to in Enercon (India) Ltd.
(supra), the analysis made and the propositions deduced leads to an indubitable conclusion that
Shashoua principle has been accepted by Enercon
(India) Ltd. (supra). It is also to be noted that in
BALCO, the Constitution Bench has not merely reproduced few paragraphs from Shashoua but has also
referred to other decisions on which Shashoua has
placed reliance upon. As we notice, there is analysis
of earlier judgments, though it does not specifically
state that "propositions laid down in Shashoua are
accepted". On a clear reading, the ratio of the decision in BALCO, in the ultimate eventuate, reflects that
the Shashoua principle has been accepted and the
two-Judge Bench in Enercon (India) Ltd. (supra), after
succinctly analyzing it, has stated that the said principles have been accepted by the Constitution Bench.
Therefore, we are unable to accept the submission of
Mr. Chidambaram that the finding recorded in Enercon (India) Ltd. (supra) that Shashoua principle has
been accepted in BALCO should be declared as per
incuriam.”
94
88. The Court then set out the arbitration clause and the governing law on
the facts of the case as follows:
“69. Though we have opined that Shashoua principle
has been accepted in BALCO and Enercon (India)
Ltd. (supra), yet we think it apt to refer to the clauses
in the agreement and scrutinize whether there is any
scope to hold that the courts in India could have entertained the petition. Clause 14 of the shareholders
agreement (SHA) refers to arbitration. The said
Clause reads thus:
14. ARBITRATION
14.1 ...Each party shall nominate one arbitrator and in
the event of any difference between the two arbitrators, a third arbitrator/umpire shall be appointed. The
arbitration proceedings shall be in accordance with
the Rules of Conciliation and Arbitration of the International Chamber of Commerce Paris.
14.2 Proceedings in such arbitrations shall be conducted in the English language.
14.3 The arbitration award shall be substantiated in
writing and shall be final and binding on the parties.
14.4 The venue of the arbitration shall be London,
United Kingdom."
70. Clause 17.6 deals with governing law, which
reads as follows:
17.6 GOVERNING LAW
This Agreement shall be governed by and construed
in accordance with the laws of India.”
89. The court then went on to state:
95
“72. It is worthy to note that the arbitration agreement
is not silent as to what law and procedure is to be followed. On the contrary, Clause 14.1 lays down that
the arbitration proceedings shall be in accordance
with the Rules of Conciliation and Arbitration of the
ICC. In Enercon (India) Ltd. (supra), the two-Judge
Bench referring to Shashoua case accepted the view
of Cooke, J. that the phrase "venue of arbitration shall
be in London, UK" was accompanied by the provision
in the arbitration Clause or arbitration to be conducted
in accordance with the Rules of ICC in Paris. The
two-Judge Bench accepted the Rules of ICC, Paris
which is supernational body of Rules as has been
noted by Cooke, J. and that is how it has accepted
that the parties have not simply provided for the location of hearings to be in London. To elaborate, the
distinction between the venue and the seat remains.
But when a Court finds there is prescription for venue
and something else, it has to be adjudged on the
facts of each case to determine the juridical seat. As
in the instant case, the agreement in question has
been interpreted and it has been held that London is
not mentioned as the mere location but the courts in
London will have the jurisdiction, another interpretative perception as projected by the learned senior
Counsel is unacceptable.
xxx xxx xxx
76. In view of the aforesaid analysis, we allow the appeals and set aside the judgment of the High Court of
Delhi that has held that courts in India have jurisdiction, and has also determined that Gautam Budh Nagar has no jurisdiction and the petition Under Section
34 has to be filed before the Delhi High Court. Once
the courts in India have no jurisdiction, the aforesaid
conclusions are to be nullified and we so do. In the
facts and circumstances of the case, there shall be no
order as to costs.”
90. The stage is now set for consideration of the recent judgment of a
Three Judge Bench of this Court in Hardy Exploration and Produc96
tion (India) Inc. (supra). The precise question that had been referred
to the Three Judge Bench in Hardy Exploration and Production (India) Inc. (supra) was as to whether the ratio of Sumitomo Heavy Industries Ltd. v. ONGC Ltd. & Ors. (1998) 1 SCC 305 - a judgment
delivered under the Arbitration Act, 1940 - would have any impact on
the “juridical seat” doctrine in arbitration law, as developed in England
and by our courts. The Three Judge Bench answered the reference
as follows:
“27. In view of the aforesaid development of law,
there is no confusion with regard to what the seat of
arbitration and venue of arbitration mean. There is no
shadow of doubt that the arbitration Clause has to be
read in a holistic manner so as to determine the jurisdiction of the Court. That apart, if there is mention of
venue and something else is appended thereto, depending on the nature of the prescription, the Court
can come to a conclusion that there is implied exclusion of Part I of the Act. The principle laid down in
Sumitomo Heavy Industries Ltd. (supra) has been referred to in Reliance Industries Limited (II) and distinguished. In any case, it has no applicability to a controversy under the Act. The said controversy has to
be governed by the BALCO principle or by the agreement or by the principle of implied exclusion as has
been held in Bhatia International.
28. Thus, we answer the reference accordingly.”
91. Having answered the reference, the Court then went on to consider
the arbitration clause in the facts of that case, which was set out in
paragraph 30 as follows:
97
“30. Article 33 deals with "Sole expert, conciliation
and arbitrator". Article 33.9 and 33.12 read thus:
33.9 Arbitration proceedings shall be conducted in
accordance with the UNICITRAL Model Law on
International Commercial Arbitration of 1985 except
that in the event of any conflict between the Rules
and the provisions of this Article 33, the provisions of
this Article 33 shall govern.
xxx xxx xxx
33.12 The venue of conciliation or arbitration
proceedings pursuant to this Article unless the parties
otherwise agree, shall be Kuala Lumpur and shall be
conducted in English language. Insofar as practicable
the parties shall continue to implement the terms of
this contract notwithstanding the initiation of
arbitration proceedings and any pending claim or
dispute.”
92. The Court then went on to see for itself Articles 20 and 31 of the
UNCITRAL Model Law and then went on to state that under the
UNCITRAL Model Law, either the juridical seat of the arbitral
proceedings is indicated in the agreement between the parties, or if it
is not, must be determined by the Arbitral Tribunal. Holding that the
arbitration clause, on the facts of that case, referred to the “venue” as
Kuala Lumpur, the Court went on to hold that there was no
determination of any “juridical seat” by agreement, and would
therefore have to be determined by the Arbitral Tribunal. As there was
no such determination by the Arbitral Tribunal, the Court then
concluded:
98
“40. The said test clearly means that the expression
of determination signifies an expressive opinion. In
the instant case, there has been no adjudication and
expression of an opinion. Thus, the word 'place'
cannot be used as seat. To elaborate, a venue can
become a seat if something else is added to it as a
concomitant. But a place unlike seat, at least as is
seen in the contract, can become a seat if one of the
conditions precedent is satisfied. It does not ipso
facto assume the status of seat. Thus understood,
Kuala Lumpur is not the seat or place of arbitration
and the interchangeable use will not apply in stricto
sensu.
41. In view of the aforesaid analysis, the irresistible
conclusion is that the Courts in India have jurisdiction
and, therefore, the order passed by the Delhi High
Court is set aside. Resultantly, the appeal stands
allowed and the High Court is requested to deal with
the application preferred Under Section 34 of the Act
as expeditiously as possible. There shall be no order
as to costs.”
93. The Three Judge Bench in Hardy Exploration and Production (India) Inc (supra) failed to apply the Shashoua principle to the arbitration clause in question. Had the Shashoua principle been applied, the
answer would have been that Kuala Lumpur, which was stated to be
the “venue” of arbitration proceedings, being governed by the UNCITRAL Model Law, would be governed by a supranational set of rules,
and there being no other contrary indicator, it would be clear that
Kuala Lumpur would therefore be the juridical “seat” of the arbitration.
99
94. As we have seen hereinabove, the judgement of Cooke, J. in Roger
Shashoua and Ors. v. Mukesh Sharma4
, was expressly approved by
the 5-Judge Bench in BALCO (supra), as was stated by the Supreme
Court of India in Roger Shashoua and Ors. v. Mukesh Sharma and
Ors.5
By failing to apply the Shashoua principle to the arbitration
clause in question, the Three Judge Bench in Hardy Exploration and
Production (India) Inc (supra) has not followed the law as to determination of a “juridical seat”, laid down by a Five Judge Bench of this
Court in BALCO (supra). The result in Hardy Exploration and Production (India) Inc (supra) is that a foreign award that would be delivered in Kuala Lumpur, would now be liable to be challenged in the
Courts at Kuala Lumpur, and also be challenged in the courts in India,
under Section 34 of Part I of the Arbitration Act, 1996. This is exactly
the situation that this Court encountered when it decided the case of
Venture Global Engineering v. Satyam Computer Services Ltd. &
Anr., (2008) 4 SCC 190. The Five Judge Bench in BALCO (supra)
expressly overruled Venture Global Engineering (supra) as follows:
“143…With these observations, the matter was remanded back to the trial court to dispose of the suit
on merits. The submissions made by K.K. Venugopal,
as noticed in para 42, epitomise the kind of chaos
4
[2009] EWHC 957 (Comm)
5
(2017) 14 SCC 722
100
which would be created by two court systems, in two
different countries, exercising concurrent jurisdiction
over the same dispute. There would be a clear risk of
conflicting decisions. This would add to the problems
relating to enforcement of such decisions. Such a situation would undermine the policy underlying the
New York Convention or the UNCITRAL Model Law.
Therefore, we are of the opinion that appropriate
manner to interpret the aforesaid provision is that “alternative two” will become available only if “alternative
one” is not available.
xxx xxx xxx
“154. At this stage, we may notice that in spite of the
aforesaid international understanding of the second
limb of Article V(1)(e), this Court has proceeded on a
number of occasions to annul an award on the basis
that parties had chosen Indian law to govern the substance of their dispute. The aforesaid view has been
expressed in Bhatia International [(2002) 4 SCC 105]
and Venture Global Engg. [(2008) 4 SCC 190] In our
opinion, accepting such an interpretation would be to
ignore the spirit underlying the New York Convention
which embodies a consensus evolved to encourage
consensual resolution of complicated, intricate and in
many cases very sensitive international commercial
disputes. Therefore, the interpretation which hinders
such a process ought not to be accepted. This also
seems to be the view of the national courts in different jurisdictions across the world. For the reasons
stated above, we are also unable to agree with the
conclusions recorded by this Court in Venture Global
Engg. [(2008) 4 SCC 190] that the foreign award
could be annulled on the exclusive grounds that the
Indian law governed the substance of the dispute.
Such an opinion is not borne out by the huge body of
judicial precedents in different jurisdictions of the
world.”
95. The Five Judge Bench then went on to state:
101
“195. With utmost respect, we are unable to agree
with the conclusions recorded in the judgments of this
Court in Bhatia International (supra) and Venture
Global Engineering (supra). In our opinion, the provision contained in Section 2(2) of the Arbitration Act,
1996 is not in conflict with any of the provisions either
in Part I or in Part II of the Arbitration Act, 1996. In a
foreign seated international commercial arbitration, no
application for interim relief would be maintainable
under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all
arbitrations which take place in India. Similarly, no
suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.”
96. The decision in Hardy Exploration and Production (India) Inc.
(supra) is therefore contrary to the Five Judge Bench in BALCO
(supra), in that it failed to apply the Shashoua principle to the arbitration clause in question. The Hardy Exploration and Production (India) Inc. (supra) decision would lead to the result that a foreign award
would not only be subject to challenge in the country in which it was
made, but also subject to challenge under Section 34 of Part I of the
Arbitration Act, 1996, which would lead to the chaos spoken of in
paragraph 143 of BALCO (supra), with the concomitant risk of conflicting decisions, as held in Venture Global Engineering (supra)
[overruled in BALCO (supra)], which would add to problems relating
to enforcement, and undermine the policy underlying the New York
102
Convention and the UNCITRAL Model Law. We, therefore, declare
that the judgment in Hardy Exploration and Production (India) Inc.
(supra), being contrary to the Five Judge Bench in BALCO (supra),
cannot be considered to be good law.
97. 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, 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.
98. We have extracted the arbitration agreement in the present case (as
contained in Clause 67.3 of the agreement between the parties) in
paragraph 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
103
an ‘international commercial arbitration’ within the meaning of Section
2(1)(f) of the Arbitration Act, 1996, would have to be finally settled in
accordance 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 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.
104
99. 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…”, thereby 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.
105
100.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 exclusive jurisdiction clause so far as
Courts of the “seat” are concerned.
101.Consequently, the impugned judgment is set aside, and the Section
34 petition is ordered to be presented in the Courts in New Delhi, as
was held by the learned Single Judge of the Special Commercial
Court at Gurugram.
102.The appeals are allowed in the aforesaid terms.
……………………………J.
(R.F. Nariman)
……………………………J.
(Aniruddha Bose)
……………………………J.
New Delhi; (V. Ramasubramanian)
December 10, 2019
106
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 103 an ‘international commercial arbitration’ within the meaning of Section 2(1)(f) of the Arbitration Act, 1996, would have to be finally settled in accordance 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).
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.
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.
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 exclusive jurisdiction clause so far as Courts of the “seat” are concerned.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9307 OF 2019
(ARISING OUT OF SLP (CIVIL) NO.25618 OF 2018)
BGS SGS SOMA JV …Petitioner
Versus
NHPC LTD. …Respondent
WITH
CIVIL APPEAL NO. 9308 OF 2019
(ARISING OUT OF SLP (CIVIL) NO. 25848 OF 2018)
WITH
CIVIL APPEAL NO. 9309 OF 2019
(ARISING OUT OF SLP (CIVIL) NO. 28062 OF 2018)
J U D G M E N T
R.F. NARIMAN, J.
1. Leave granted.
2. Three appeals before us raise questions as to maintainability of appeals under Section 37 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as “the Arbitration Act, 1996”), and, given the
1
arbitration clause in these proceedings, whether the “seat” of the arbitration proceedings is New Delhi or Faridabad, consequent upon
which a petition under Section 34 of the Arbitration Act, 1996 may be
filed dependent on where the seat of arbitration is located.
3. At the outset, the facts in SLP (Civil) No.25618 of 2018 are set out as
follows. On 16.01.2004, the Petitioner was awarded a contract for
construction of Diversion Tunnels, Coffer Dams, Concrete Gravity
Dams, Plunge Pools and Cutoff Walls of Subansri Lower Hydroelectric Project on river Subansri, with an installed capacity of 2000 MW,
stated to be the largest Hydropower project yet in India. The project
site is located in the lower Subansri districts in the States of Assam
and Arunachal Pradesh. Clause 67.3 of the agreement between the
parties provides for dispute resolution through arbitration. Clause 67.3
reads as follows:
“Any dispute in respect of which the Employer
and the Contractor have failed to reach at an amicable settlement pursuant to Sub-Clause 67.1,
shall be finally settled by arbitration as set forth
below. The Arbitral Tribunal shall have full power
to open up, review and revise any decision, opinion, instruction, determination, certificate or valuation of the Engineer.
(i) A dispute with an Indian Contractor shall
be finally settled in accordance with the In2
dian Arbitration and Conciliation Act, 1996,
or any statutory amendment thereof. The
arbitral tribunal shall consist of 3 arbitrators, one each to be appointed by the Employer and the Contractor. The third Arbitrator shall be chosen by the two Arbitrators
so appointed by the Parties and shall act
as Presiding arbitrator. In case of failure of
the two arbitrators, appointed by the parties to reach upon a consensus within a
period of 30 days from the appointment of
the arbitrator appointed subsequently, the
Presiding arbitrator shall be appointed by
the President of the Institution of Engineers
(India). For the purposes of this SubClause, the term “Indian Contractor”
means a contractor who is registered in India and is a juridic person created under
Indian law as well as a joint venture between such a contractor and a Foreign
Contractor.
(ii) In the case of a dispute with a Foreign
Contractor, the dispute shall be finally settled in accordance with the provisions of
the Indian Arbitration and Conciliation Act,
1996 and read with UNCITRAL Arbitration
Rules. The arbitral tribunal shall consist of
three Arbitrators, one each to be appointed
by the Employer and the Contractor. The
third Arbitrator shall be chosen by the two
Arbitrators so appointed by the Parties and
shall act as Presiding arbitrator. In case of
failure of the two arbitrators appointed by
the parties to reach a consensus within a
period of 30 days from their appointment
on the Presiding Arbitrator to be appointed
subsequently, the Presiding arbitrator shall
be appointed by the President of the Institution of Engineers (India). For the pur3
poses of this Clause 67, the term “Foreign
Contractor” means a contractor who is not
registered in India and is not a juridic person created under Indian Law. In case of
any contradiction between Indian Arbitration and Conciliation Act, 1996 and UNCITRAL Arbitration Rules, the provisions in
the Indian Arbitration and Conciliation Act,
1996 shall prevail.
(iii) Arbitration may be commenced prior to or
after completion of the Works, provided
that the obligations of the Employers, the
Engineer, and the Contractor shall not be
altered by reason of the arbitration being
conducted during the progress of the
Works.
xxx xxx xxx
(v) If one of the parties fail to appoint its arbitrator in pursuance of sub-clause (i) and (ii)
above, within 30 days after receipt of the
notice of the appointment of its arbitrator
by the other party, then the President of the
Institution of Engineers (India), both in
cases of foreign contractors as well as Indian Contractors, shall appoint the arbitrator. A certified copy of the order of the
President of Institution of Engineers (India),
making such an appointment shall be furnished to each of the parties.
(vi) 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.
4
(vii) The decision of the majority of arbitrators
shall be final and binding upon both parties. The cost and expenses of Arbitration
shall be borne in such a manner as determined by the arbitral tribunal. However, the
expenses incurred by each party in connection with the preparation, presentation
etc. of its proceedings as also the fees and
expenses paid to the arbitrator appointed
by such party on its behalf shall be borne
by each party itself.”
4. On 16.05.2011, a Notice of Arbitration was issued by the Petitioner to
the Respondent, in regard to payment of compensation for losses suffered due to abnormal delays and additional costs as a result of hindrances caused by the Respondent. A three-member Arbitral Tribunal
was constituted as per clause 67.3 of the agreement under the Arbitration Act, 1996. Pursuant thereto, the Petitioner filed its Statement of
Claim seeking recovery of an amount of INR 986.60 crores plus CHF
1060619. Between August 2011 and August 2016, seventy-one sittings of the Arbitral Tribunal took place at New Delhi. The Tribunal
then delivered its unanimous award at New Delhi on 26.08.2016, by
which the claims of the Petitioner aggregating to INR
424,81,54,096.29 were allowed, together with simple interest at 14%
per annum till the date of actual payment. On 04.10.2016, in view of
certain computational and typographical errors in the arbitral award,
5
the figure of 424,81,54,096.29 was rectified to INR 424,70,52,126.66.
On 03.01.2017, being aggrieved by the arbitral award and the rectification thereto, the Respondent filed an application under Section 34
of the Arbitration Act, 1996 seeking to set aside these awards before
the Court of the District and Sessions Judge, Faridabad, Haryana. On
28.04.2017, the Petitioner filed an application under Section 151 read
with Order VII Rule 10 of the Code of Civil Procedure, 1908 (hereinafter referred to as the “CPC”) and Section 2(1)(e)(i) of the Arbitration Act, 1996, seeking a return of the petition filed under Section 34
for presentation before the appropriate Court at New Delhi and/or the
District Judge at Dhemaji, Assam. In November, 2017, after the constitution of a Special Commercial Court at Gurugram, the Section 34
petition filed at Faridabad was transferred to the said Gurugram Commercial Court and numbered as Arbitration Case No.74 (CIS No.
ARB/118/2017).
5. On 21.12.2017, the Special Commercial Court, Gurugram allowed the
application of the Petitioner, and returned the Section 34 petition for
presentation to the proper court having jurisdiction in New Delhi. On
15.02.2018, the Respondent filed an appeal under Section 37 of the
Arbitration Act, 1996 read with Section 13(1) of the Commercial
6
Courts Act, 2015 before the High Court of Punjab and Haryana at
Chandigarh. On 12.09.2018, the impugned judgment was delivered
by the Punjab and Haryana High Court, in which it was held that the
appeal filed under Section 37 of the Arbitration Act, 1996 was maintainable, and that Delhi being only a convenient venue where arbitral
proceedings were held and not the seat of the arbitration proceedings, Faridabad would have jurisdiction on the basis of the cause of
action having arisen in part in Faridabad. As a result, the appeal was
allowed and the judgment of the Special Commercial Court, Gurugram was set aside.
6. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearing on
behalf of the Petitioner in SLP (C) No.25618 of 2018, has assailed the
impugned High Court judgment on both counts. According to him, on
a combined reading of Section 13 of the Commercial Courts Act, 2015
and Section 37 of the Arbitration Act, 1996, it becomes clear that Section 13 of the Commercial Courts Act, 2015 only provides the forum
for challenge, whereas Section 37 of the Arbitration Act, 1996 - which
is expressly referred to in the proviso to Section 13(1) of the Commercial Courts Act, 2015 - circumscribes the right of appeal. He contended that this when read with Section 5 of the Arbitration Act, 1996,
7
makes it clear that only certain judgments and orders are appealable,
and no appeal lies under any provision outside Section 37 of the Arbitration Act, 1996. He contended that the High Court was manifestly
wrong when it said that the present appeal was appealable under
Section 37(1)(c) of the Arbitration Act, 1996 as being an appeal
against an order refusing to set aside an arbitral award under Section
34 of the Arbitration Act, 1996. According to Dr. Singhvi, an order
which allows an application under Section 151 read with Order VII
Rule 10 of the CPC can by no stretch of the imagination amount to an
order refusing to set aside an arbitral award under Section 34 of the
Arbitration Act, 1996. For this proposition, he strongly relied upon on
our judgment in Kandla Export Corporation & Anr. v. M/s OCI Corporation & Anr. (2018) 14 SCC 715. On the second point, he read
out the impugned judgment in detail, and stated that the ultimate conclusion that New Delhi was only a “venue” and not the “seat” of the arbitration was incorrect, as the parties have chosen to have sittings at
New Delhi, as a result of which it is clear that the Arbitral Tribunal considered that the award made at New Delhi would be made at “the
seat” of the arbitral proceedings between the parties. He further
added that it was clear that even if both New Delhi and Faridabad had
8
jurisdiction, New Delhi being the choice of the parties, the principle
contained in Hakam Singh v. M/s. Gammon (India) Ltd., (1971) 1
SCC 286, would govern. He referred in copious detail to many judgments of this Court, including the Five Judge Bench in Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium Technical Service, Inc.,
(2012) 9 SCC 552, Indus Mobile Distribution Private Limited v.
Datawind Innovations Private Limited & Ors., (2017) 7 SCC 678,
and various other judgments to buttress his submissions. According
to him, the recent judgment delivered in Union of India v. Hardy Exploration and Production (India) Inc. 2018 SCC Online SC 1640
queers the pitch, in that it is directly contrary to the Five Judge bench
decision in BALCO (supra). It is only as a result of the confusion
caused by judgments such as Hardy Exploration and Production
(India) Inc. (supra) that the impugned judgment has arrived at the
wrong conclusion that New Delhi is not the “seat”, but only the
“venue” of the present arbitral proceedings. He, therefore, in the
course of his submissions argued that this confusion should be removed, and exhorted us to declare that Hardy Exploration and Production (India) Inc. (supra) was not correctly decided, being contrary
to the larger bench in BALCO (supra).
9
7. Dr. Singhvi in the course of his submissions also referred pointedly to
paragraph 96 of BALCO (supra), and argued that not only was the
example given in the said paragraph contrary to the theory of concurrent jurisdiction propounded therein, but was also contrary to subsequent paragraphs in the said judgment, in which it was clearly held
that a clause in an agreement stating the “seat” of arbitration is akin to
an exclusive jurisdiction clause, which would put paid to any theory of
concurrent jurisdiction. As a matter of fact, two subsequent decisions
have understood the ratio of BALCO (supra) to be that once the
“seat” is indicated in an arbitration agreement, it is akin to an exclusive jurisdiction clause, which would oust the jurisdiction of courts
other than courts at the seat. For this purpose he expressly referred
to and relied upon Reliance Industries Ltd. v. Union of India (2014)
7 SCC 603 and Indus Mobile Distribution Pvt. Ltd. (supra).
8. Shri Arunabh Chowdhury, appearing in SLP (Civil) No. 25848 of 2018,
argued that unlike the first SLP argued by Dr. Singhvi, in his case, the
Notice for Arbitration was sent to the Assam site-office of the Respondent, and not routed through the Assam office to be sent to the Head
Office at Faridabad, thereby making the observations based on Section 21 of the Arbitration Act,1996 in the impugned judgment inappli10
cable on the facts of his case. He supported Dr. Singhvi’s argument
that the appeal filed under Section 37 of the Arbitration Act, 1996
would not be maintainable, and cited several judgments, which will be
dealt with a little later.
9. Shri Ankit Chaturvedi, appearing in SLP (Civil) No. 28062 of 2018,
stressed one important difference in the facts of his case, which is,
that the arbitral award made in his case expressly referred to Section
31(4) of the Arbitration Act, 1996, and stated that the place of arbitration, as determined in accordance with Section 20 of the Arbitration
Act, 1996, was New Delhi. Therefore, this being the “seat” as determined by the Arbitral Tribunal in this case, a challenge under Section
34 of the Arbitration Act, 1996 could only be made in the courts at
New Delhi.
10. Smt. Maninder Acharya, learned Additional Solicitor General, supported the judgment under appeal. She first argued that the reasoning
of the impugned judgment, that an order passed under Section 151
read with Order VII Rule 10 of the CPC would amount to a refusal to
set aside an arbitral award, is correct, and relied heavily upon a Division Bench judgment of the Delhi High Court in Antrix Corporation
Ltd. v. Devas Multimedia Pvt. Ltd. 2018 SCC Online Del 9338 for
11
this purpose. On the second point, she argued that the arbitration
clause did not expressly state that either New Delhi or Faridabad was
to be the seat of the Arbitral Tribunal. Therefore, the arbitration clause
only referred to a convenient venue, and the fact that the sittings were
held at New Delhi, therefore, would not make New Delhi the seat of
the arbitration under Section 20(1) of the Arbitration Act, 1996. According to her, since the agreements in the present case were signed
in Faridabad, and since notices were sent by the Petitioners to the
Respondent’s Faridabad office, part of the cause of action clearly
arose in Faridabad, as a result of which the courts in Faridabad would
be clothed with jurisdiction to decide a Section 34 application. She
stressed the fact that in BALCO (supra), even assuming that New
Delhi was the seat of arbitration, both New Delhi and Faridabad would
have concurrent jurisdiction - New Delhi being a neutral forum in
which no part of the cause of action arose, and Faridabad being a
chosen forum where a part of the cause of action has arisen. When
read with Section 42 of the Arbitration Act, 1996, since the Court at
Faridabad was first approached by filing an application under Section
34 of the Arbitration Act,1996, that Court alone would have jurisdiction, as a result of which the impugned judgment ought to be affirmed.
12
Maintainability of the appeals under Section 37 of the Arbitration
Act, 1996
11. Section 37(1) of the Arbitration Act, 1996 reads as follows:
“37. Appealable Orders.-
(1)An appeal shall lie from the following orders (and
from no others) to the Court authorised by law to
hear appeals from original decrees of the Court
passing the order, namely:-
(a)refusing to refer the parties to arbitration under
section 8;
(b)granting or refusing to grant any measure under
section 9;
(c)setting aside or refusing to set aside an arbitral
award under section 34.”
12. Section 13 of the Commercial Courts Act, 2015 reads as follows:
“13. Appeals from decrees of Commercial Courts
and Commercial Divisions.-
(1)Any person aggrieved by the judgment or order of
a Commercial Court below the level of a District
Judge may appeal to the Commercial Appellate
Court within a period of sixty days from the date of
judgment or order.
(1A)Any person aggrieved by the judgment or order of
a Commercial Court at the level of District Judge
exercising original civil jurisdiction or, as the case
may be, Commercial Division Bench of a High
Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty
days from the date of the judgment of order:
13
Provided that an appeal shall lie from such orders
passed by the Commercial Division or a Commercial Court that are specifically enumerated in Order
XLIII of the Code of Civil Procedure, 1908 (5 of
1908) as amended by this Act and Section 37 of
the Arbitration and Conciliation Act, 1996 (26 of
1996).
(2)Notwithstanding anything contained in any other
law for the time being in force or Letters Patent of
a High Court, no appeal shall lie from any other order or decree of a Commercial Division or Commercial Court otherwise than in accordance with
the provisions of the Act.”
13. The interplay between Section 37 of the Arbitration Act, 1996 and
Section 13 of the Commercial Courts Act, 2015, has been laid down
in some detail in the judgment in Kandla Export Corporation
(supra). The precise question that arose in Kandla Export Corporation (supra) was as to whether an appeal, which was not maintainable under Section 50 of the Arbitration Act,1996, is nonetheless
maintainable under Section 13(1) of the Commercial Courts Act,
2015. In this context, after setting out various provisions of the Commercial Courts Act, 2015 and the Arbitration Act, 1996, this Court
held:
“13. Section 13(1) of the Commercial Courts Act, with
which we are immediately concerned in these appeals, is in two parts. The main provision is, as has
been correctly submitted by Shri Giri, a provision
14
which provides for appeals from judgments, orders
and decrees of the Commercial Division of the High
Court. To this main provision, an exception is carved
out by the proviso…”
14. The proviso goes on to state that an appeal shall
lie from such orders passed by the Commercial Division of the High Court that are specifically enumerated under Order 43 of the Code of Civil Procedure
Code, 1908, and Section 37 of the Arbitration Act. It
will at once be noticed that orders that are not specifically enumerated under Order 43 CPC would, therefore, not be appealable, and appeals that are mentioned in Section 37 of the Arbitration Act alone are
appeals that can be made to the Commercial Appellate Division of a High Court.
15. Thus, an order which refers parties to arbitration
under Section 8, not being appealable under Section
37(1)(a), would not be appealable under Section
13(1) of the Commercial Courts Act. Similarly, an appeal rejecting a plea referred to in sub-sections (2)
and (3) of Section 16 of the Arbitration Act would
equally not be appealable under Section 37(2)(a)
and, therefore, under Section 13(1) of the Commercial Courts Act.
xxx xxx xxx
20. Given the judgment of this Court in Fuerst Day
Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports
Ltd., (2011) 8 SCC 333 : (2011) 4 SCC (Civ) 178] ,
which Parliament is presumed to know when it enacted the Arbitration Amendment Act, 2015, and given
the fact that no change was made in Section 50 of the
Arbitration Act when the Commercial Courts Act was
brought into force, it is clear that Section 50 is a provision contained in a self-contained code on matters
pertaining to arbitration, and which is exhaustive in
nature. It carries the negative import mentioned in
15
para 89 of Fuerst Day Lawson [Fuerst Day Lawson
Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011)
4 SCC (Civ) 178] that appeals which are not mentioned therein, are not permissible. This being the
case, it is clear that Section 13(1) of the Commercial
Courts Act, being a general provision vis-à-vis arbitration relating to appeals arising out of commercial disputes, would obviously not apply to cases covered by
Section 50 of the Arbitration Act.
21. However, the question still arises as to why Section 37 of the Arbitration Act was expressly included in
the proviso to Section 13(1) of the Commercial Courts
Act, which is equally a special provision of appeal
contained in a self-contained code, which in any case
would be outside Section 13(1) of the Commercial
Courts Act. One answer is that this was done ex
abundanti cautela. Another answer may be that as
Section 37 itself was amended by the Arbitration
Amendment Act, 2015, which came into force on the
same day as the Commercial Courts Act, Parliament
thought, in its wisdom, that it was necessary to emphasise that the amended Section 37 would have
precedence over the general provision contained in
Section 13(1) of the Commercial Courts Act. Incidentally, the amendment of 2015 introduced one more
category into the category of appealable orders in the
Arbitration Act, namely, a category where an order is
made under Section 8 refusing to refer parties to arbitration. Parliament may have found it necessary to
emphasise the fact that an order referring parties to
arbitration under Section 8 is not appealable under
Section 37(1)(a) and would, therefore, not be appealable under Section 13(1) of the Commercial Courts
Act. Whatever may be the ultimate reason for including Section 37 of the Arbitration Act in the proviso to
Section 13(1), the ratio decidendi of the judgment
in Fuerst Day Lawson [Fuerst Day Lawson Ltd. v. Jindal Exports Ltd., (2011) 8 SCC 333 : (2011) 4 SCC
(Civ) 178] would apply, and this being so, appeals
16
filed under Section 50 of the Arbitration Act would
have to follow the drill of Section 50 alone.
22. This, in fact, follows from the language of Section
50 itself. In all arbitration cases of enforcement of foreign awards, it is Section 50 alone that provides an
appeal. Having provided for an appeal, the forum of
appeal is left “to the Court authorised by law to hear
appeals from such orders”. Section 50 properly read
would, therefore, mean that if an appeal lies under
the said provision, then alone would Section 13(1) of
the Commercial Courts Act be attracted as laying
down the forum which will hear and decide such an
appeal.
xxx xxx xxx
27. The matter can be looked at from a slightly different angle. Given the objects of both the statutes, it is
clear that arbitration itself is meant to be a speedy
resolution of disputes between parties. Equally, enforcement of foreign awards should take place as
soon as possible if India is to remain as an equal
partner, commercially speaking, in the international
community. In point of fact, the raison d'être for the
enactment of the Commercial Courts Act is that commercial disputes involving high amounts of money
should be speedily decided. Given the objects of both
the enactments, if we were to provide an additional
appeal, when Section 50 does away with an appeal
so as to speedily enforce foreign awards, we would
be turning the Arbitration Act and the Commercial
Courts Act on their heads. Admittedly, if the amount
contained in a foreign award to be enforced in India
were less than Rs 1 crore, and a Single Judge of a
High Court were to enforce such award, no appeal
would lie, in keeping with the object of speedy enforcement of foreign awards. However, if, in the same
fact circumstance, a foreign award were to be for Rs
1 crore or more, if the appellants are correct, enforce17
ment of such award would be further delayed by providing an appeal under Section 13(1) of the Commercial Courts Act. Any such interpretation would lead to
absurdity, and would be directly contrary to the object
sought to be achieved by the Commercial Courts Act
viz. speedy resolution of disputes of a commercial nature involving a sum of Rs 1 crore and over. For this
reason also, we feel that Section 13(1) of the Commercial Courts Act must be construed in accordance
with the object sought to be achieved by the Act. Any
construction of Section 13 of the Commercial Courts
Act, which would lead to further delay, instead of an
expeditious enforcement of a foreign award must,
therefore, be eschewed. Even on applying the doctrine of harmonious construction of both statutes, it is
clear that they are best harmonised by giving effect to
the special statute i.e. the Arbitration Act, vis-à-vis the
more general statute, namely, the Commercial Courts
Act, being left to operate in spheres other than arbitration.”
14. Given the fact that there is no independent right of appeal under Section 13(1) of the Commercial Courts Act, 2015, which merely provides
the forum of filing appeals, it is the parameters of Section 37 of the Arbitration Act,1996 alone which have to be looked at in order to determine whether the present appeals were maintainable. Section 37(1)
makes it clear that appeals shall only lie from the orders set out in
sub-clauses (a), (b) and (c) and from no others. The pigeonhole that
the High Court in the impugned judgement has chosen to say that the
appeals in the present cases were maintainable is sub-clause (c). According to the High Court, even where a Section 34 application is or18
dered to be returned to the appropriate Court, such order would
amount to an order “refusing to set aside an arbitral award under Section 34”.
15. Interestingly, under the proviso to Section 13(1A) of the Commercial
Courts Act, 2015, Order XLIII of the CPC is also mentioned. Order
XLIII Rule(1)(a) reads as follows:
“1. Appeal from orders.- An appeal shall lie from the
following orders under the provisions of Section 104,
namely-
(a)an order under Rule 10 of Order VII returning a
plaint to be presented to the proper Court except
where the procedure specified in rule 10A of Order
VII has been followed;”
16. This provision is conspicuous by its absence in Section 37 of the Arbitration Act, 1996, which alone can be looked at for the purpose of filing appeals against orders setting aside, or refusing to set aside
awards under Section 34. Also, what is missed by the impugned judgment is the words “under Section 34”. Thus, the refusal to set aside
an arbitral award must be under Section 34, i.e., after the grounds set
out in Section 34 have been applied to the arbitral award in question,
and after the Court has turned down such grounds. Admittedly, on
the facts of these cases, there was no adjudication under Section 34
of the Arbitration Act, 1996 - all that was done was that the Special
19
Commercial Court at Gurugram allowed an application filed under
Section 151 read with Order VII Rule 10 CPC, determining that the
Special Commercial Court at Gurugram had no jurisdiction to proceed further with the Section 34 application, and therefore, such application would have to be returned to the competent court situate at
New Delhi.
17. Shri Anurabh Chowdhury referred to a number of judgments in which
a well-settled proposition was elucidated, i.e. that an appeal is a creature of statute, and must either be found within the four corners of the
statute, or not be there be at all. In support thereof, he referred to Municipal Corporation of Delhi & Ors. v. International Security & Intelligence Agency Ltd. (2004) 3 SCC 250 (at paragraphs 14 and
15), and Arcot Textile Mills Ltd. v. Regional Provident Fund Commissioner and Ors. (2013) 16 SCC 1 (at paragraph 20). He also referred to a recent Delhi High Court judgment reported as South Delhi
Municipal Corporation v. Tech Mahindra EFA (OS) (Comm.) 3 of
2019, in which the Delhi High Court held that an order of a Single
Judge, which directed the deposit of 50% of the awarded amount,
would not be appealable under Section 37 of the Arbitration Act, 1996
20
read with the Commercial Courts Act, 2015. In the course of discussion the Delhi High Court said:
“12. In view of the above discussions, we conclude
that the present appeal is not maintainable. The appellant’s remedy clearly lies elsewhere. An attempt
was made to urge that no litigant can be deprived of
remedy if there is a grievance: ubi jus ibi remedium;
however, that argument is wholly without substance
because an appeal, it has been repeatedly emphasised, is a specific creation of statute and cannot be
claimed as a matter of right. This was explained
pithily in Ganga Bai v. Vijay Kumar, (1974) 2 SCC
393, in the following terms:
“There is a basic distinction between the right of suit
and the right of appeal. There is an inherent right in
every person to bring suit of a civil nature and unless
the suit is barred by statute one may, at one’s peril,
bring a suit of one’s choice. It is no answer to a suit
howsoever frivolous the claim, that the law confers no
right to sue. A suit for its maintainability requires no
authority of law and it is enough that no statute bars
the suit. But the position in regard to appeals is quite
the opposite. The right of appeal inheres in no one
and therefore an appeal for its maintainability must
have the clear authority of law. That explains why the
right of appeal is described as a creature of statute.
13. In view of the above discussion, it is held that the
present appeal is plainly not maintainable by virtue of
provisions of the Commercial Courts Act, 2015; the
appeal is therefore dismissed. No costs.”
18. Shri Chowdhury also referred to another Delhi High Court judgment
reported as Hamanprit Singh Sidhu v. Arcadia Shares & Stock
Brokers Pvt. Ltd 2016 234 DLT 30 (DB), in which a learned Single
21
Judge of the Delhi High Court allowed an application for condonation
of delay in filing a Section 34 petition. The Division Bench, in holding
that an appeal against such an order would not be maintainable under
Section 37 of the Arbitration Act, 1996, read with the Commercial
Courts Act, 2015 held:
“10. Coming to Section 37(1), it is evident that an appeal can lie from Coming to Section 37(1), it is evident that an appeal can lie from only the orders specified in clauses (a), (b) or (c). In other words, an appeal under Section 37 would only be maintainable
against (a) an order refusing to refer the parties to arbitration under Section 8 of the A&C Act; (b) an order
granting or refusing to grant any measure under Section 9 of the A&C Act; or (c) an order setting aside or
refusing to set aside an arbitral award under Section
34 of the A&C Act. The impugned order is clearly not
relatable to Sections 8 or 9 of the A&C Act. It was
sought to be contended by the learned counsel for
the appellant that the present appeal would fall within
Section 37(1) (c) which relates to an order "setting
aside" or "refusing to set aside" an arbitral award under Section 34. We are unable to accept this proposition. By virtue of the impugned order, the arbitral
award dated 10.09.2013 has not been set aside. Nor
has the court, at this stage, refused to set aside the
said arbitral award under Section 34 of the A&C Act.
In fact, the appellant in whose favour the award has
been made, would only be aggrieved if the award
were to have been set aside in whole or in part. That
has not happened. What the learned single Judge
has done is to have condoned the delay in re-filing of
the petition under Section 34. This has not, in any
way, impacted the award.”
22
19. The reasoning in this judgment commends itself to us, as a distinction
is made between judgments which either set aside, or refuse to set
aside, an arbitral award after the court applies its mind to Section 34
of the Arbitration Act, 1996, as against preliminary orders of condonation of delay, which do not in any way impact the arbitral award that
has been assailed.
20. However, Smt. Acharya relied heavily upon the Division Bench judgment of the Delhi High Court in Antrix Corporation Ltd. (supra). On
the facts of that case, on 28.02.2017, a learned Single Judge of the
Delhi High Court ruled that Antrix’s petition under Section 9 of the Arbitration Act, 1996 before the Bangalore Court was not maintainable,
and that Devas’ petition under Section 9 was maintainable, the bar
under Section 42 of the Arbitration Act, 1996 being inapplicable. The
order also held that consequently, Antrix’s petition under Section 34 of
the Arbitration Act, 1996 before the Bangalore City Civil Court would
not be maintainable, inasmuch as Devas’ petition filed in Delhi under
Section 9 was filed earlier. The learned Single Judge then listed the
matter for hearing on merits and directed Antrix to file an affidavit of
an authorised officer, enclosing therewith its audited Balance Sheets,
and Profit and Loss Accounts for the past three years. Antrix then ap23
pealed against this order, to which a preliminary objection was taken,
stating that this appeal would not be maintainable under Section 37 of
the Arbitration Act, 1996. After setting out Section 13 of the Commercial Courts Act, 2015 and Sections 37 and 42 of the Arbitration Act,
1996, the Division Bench noticed Hamanprit Singh Sidhu (supra) in
paragraph 39, without at all adverting to paragraph 10 of the judgment
(which is set out hereinabove). Thereafter, the Court held as follows:
“42. While undeniably, the Learned Single Judge in
the impugned order has not decided the Section 9 petition finally and had listed the matter for hearing on
merits, Antrix states that the impugned order is indistinguishable from an order under Section 9. Devas
however, argued that the sequence of events has not
been completed. Antrix should face an adverse order
under Section 9 before it can approach this court in
appeal. On this issue, significant reliance has been
placed on the decision of the Madras High Court
in Samson Maritime (supra). In that case, the Court
held:
“Learned counsel appearing for the respondent made
an attempt to contend that the application seeking for
furnishing of details of assets cannot be construed as
an interim measure or interim relief contemplated under section 9 of the said Act. I am not convinced to
accept the said contention for the reason that those
details are sought for by the applicant only to seek for
consequential or follow up relief in the event of the respondent's failure to furnish securities. Therefore, as
the relief sought for in this application is having a direct bearing on the relief sought for in the other applications seeking for furnishing securities, it cannot be
said that this relief seeking for details of the assets is
24
outside the scope of Section 9. Therefore, I find that
the application filed seeking for details of the assets
is also maintainable.”
43. The Court in Samson Maritime (supra) reasoned
that an application seeking for furnishing of details of
assets would also amount to an interim measure under Section 9, because the reason that those details
are sought are only to seek consequential or follow
up relief in the event of the respondent's failure to furnish securities. Therefore, an order mandating a party
to disclose his assets or file his accounts would also
be an interim measure within the meaning of Section
9. In this case, through Paragraph 57 of the impugned order, the Learned Single Judge had directed
Antrix to file an affidavit of an authorised officer, enclosing therewith its audited balance sheets and profit
and loss accounts for the past three years. Keeping in
mind the view of the Court in Samson Maritime (supra), which this Court is in agreement with,
this would also in effect be a Section 9 order as those
details are sought for the purpose of adjudicating
whether consequential relief could be given to Devas
of securing the amount due from the arbitral award
against Antrix. Moreover, this Court cannot take a
doctrinaire and unbending approach in this matter,
when it is clear that Antrix has suffered all but one remaining blow through the impugned order, and therefore, the Court should not wait till it suffers the final
blow (that of the final Section 9 order) before it can
assume jurisdiction over the appeal. The court's direction to Antrix furnish an affidavit along with the particulars sought, is to aid its order with respect to a
possible distraint, attachment or further such consequential order towards interim relief. Such an order
would not be made unless the court directs this as a
prelude, or important step towards the inevitable interim order, which would be just consequential.
Therefore, the Court finds that Antrix's appeal against
the impugned order is maintainable.
25
44. This court also finds merit in Antrix's argument
that as regards the single judge's observations that
the Bangalore court cannot proceed with the matter,
the impugned order is really final. It precludes in effect, Antrix from proceeding with its Section 34 petition before that court (in turn based on the pending
Section 9 petition before that court). If Antrix were to
accept the ruling, the effect would be to denude the
Bangalore court of jurisdiction. It was contended-and
correctly, in this court's opinion that whereas a court
acts within jurisdiction in deciding whether it has or
does not have jurisdiction over a cause of a matter,
the declaration by it about the lack of jurisdiction of
another court, based on the appreciation of the matter
before the latter court is undeniably an adverse order.
Allowing that to stand would prejudice Antrix for all
times.”
21. It can be seen that the reasoning in this judgment would have no application to the facts of the present case. The Division Bench held that
directing Antrix to file an affidavit, enclosing therewith its audited Balance Sheets and Profit and Loss Account for the last three years, is itself an interim order passed under Section 9 of the Arbitration Act,
1996. The further reasoning of the Court that the direction to Antrix to
furnish an affidavit is to aid a future interim order, which would be just
consequential, does not commend itself to us. A step towards an interim order would not amount to granting, or refusing to grant, any
measure under Section 9 of the Arbitration Act, 1996. The case is also
distinguishable for the reason that, as regards the Bangalore Court,
26
which cannot proceed further with the matter, the impugned order
therein is really final and would, therefore, also be appealable under
Section 37. For all these reasons, this judgment is wholly distinguishable and would not apply to the facts of the present case. We may
also advert to the fact that our judgment in Kandla (supra) was delivered on 07.02.2018, and was missed by the Division Bench in Antrix
Corporation Ltd. (supra), as the Division Bench had reserved judgment on 06.12.2017, even though it ultimately pronounced the judgment on 30.05.2018. The judgment in South Delhi Municipal Corporation (supra) was decided after reference was made to Kandla
(supra), resulting in a deposit order being held to be not appealable
under Section 37 of the Arbitration Act, 1996.
22. It is clear, therefore, that the appeals filed in the present case do not
fall within Section 37 of the Arbitration Act,1996 and are not maintainable.
23. We now examine the second part of the challenge made by the Petitioners to the impugned judgment, which relates to the determination
of the “seat” of the arbitral proceedings between the parties. The impugned judgment of the Punjab and Haryana High Court referred to
BALCO (supra) and Indus Mobile Distribution Pvt. Ltd. (supra),
27
and other judgments of this Court, in order to arrive at the conclusion
that the arbitration clause in the present case does not refer to the
“seat” of arbitration, but only refers to the “venue” of arbitration. Consequently, the impugned judgment holds that since a part of the
cause of action had arisen in Faridabad, and the Faridabad Commercial Court was approached first, the Faridabad Court alone would
have jurisdiction over the arbitral proceedings, and the courts at New
Delhi would have no such jurisdiction. The correctness of these
propositions has been vehemently assailed before us, and it is therefore important to lay down the law on what constitutes the “juridical
seat” of arbitral proceedings, and whether, once the seat is delineated
by the arbitration agreement, courts at the place of the seat would
alone thereafter have exclusive jurisdiction over the arbitral proceedings.
The juridical seat of the arbitral proceedings
28
24. The Arbitration Act, 1940 did not refer to the “juridical seat” of the arbitral proceedings at all. Under the scheme of the Arbitration Act, 1940,
Section 14 stated as follows:
“14. Award to be signed and filed.-
(1)When the arbitrators or umpire have made their
award, they shall sign it and shall give notice in
writing to the parties of the making and signing
thereof and of the amount of fees and charges
payable in respect of the arbitration and award.
(2)The arbitrators or umpire shall, at the request of
any party to the arbitration agreement or any person claiming under such party or if so directed by
the Court and upon payment of the fees and
charges due in respect of the arbitration and
award and of the costs and charges of filing the
award, cause the award or a signed copy of it, together with any depositions and documents which
may have been taken and proved before them, to
be filed in Court, and the Court shall thereupon
give notice to the parties of the filing of the award.
(3) Where the arbitrators or umpire state a special
case under clause (b) of Section 13, the Court, after giving notice to the parties and hearing them,
shall pronounce its opinion thereon and such
opinion shall be added to, and shall form part of,
the award.
25. When the award was signed and filed in Court, a judgment in terms of
the award had then to be made as follows:
“17. Judgment in terms of award.- Where the Court
sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set
aside the award, the Court shall, after the time for
29
making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgement according
to the award, and upon the judgment so pronounced
a decree shall follow, and no appeal shall lie from
such a decree except on the ground that it is in excess of, or not otherwise in accordance with, the
award.”
26. It was in this setting that “Court” was defined by Section 2(c) of the Arbitration Act, 1940 as follows:
“2. Definitions.- In this Act, unless there is anything
repugnant in the subject or the context,
xxx xxx xxx
(c)“Court” means a Civil Court having jurisdiction to
decide the questions forming the subject-matter of
the reference if the same had been the subjectmatter of a suit, but does not, except for the purpose of arbitration proceedings under Section 21,
include a Small Cause Court;”
27. Section 31, which dealt with the Court in which an award may be filed
then stated as follows:
“31. Jurisdiction.
(1)Subject to the provisions of this Act, an award may
be filed in any Court having jurisdiction in the matter to which the reference relates.
(2)Notwithstanding anything contained in any other
law for the time being in force and save as otherwise provided in this Act, all questions regarding
the validity, effect or existence of an award or an
arbitration agreement between the parties to the
30
agreement- or persons claiming under them shall
be decided by the Court in which the award under
the agreement has been, or may be, filed, and by
no other Court.
(3)All applications regarding the conduct of arbitration
proceedings or otherwise arising out of such proceedings shall be made to the Court where the
award has been, or may be, filed, and to no other
Court.
(4)Notwithstanding anything contained elsewhere in
this Act or in any other law for the time being in
force, where in any reference any application under this Act has been made in a Court competent
to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings-, and all subsequent applications arising, out of that reference,
and the arbitration proceedings shall be made in
that Court and in no other Court.”
28. It will be noticed that in this statutory setting, the “place” in which the
award is made is not referred to at all. Given this fact, the “Court” was
defined as any Civil Court having jurisdiction to decide questions
forming the subject matter of the reference to arbitration if the same
had been the subject matter of a suit.
29. The UNCITRAL Model Law on International Commercial Arbitration
(as adopted by the United Nations Commission on International Trade
Law on 21 June 1985) (hereinafter referred to as the “UNCITRAL
Model Law”) was then adopted by this country. The UNCITRAL Model
31
Law introduced the concept of “place” or “seat” of the arbitral proceedings as follows:
“Article 1. Scope of application
xxx xxx xxx
(2)The provisions of this Law, except articles 8, 9, 35
and 36, apply only if the place of arbitration is in
the territory of this State.
xxx xxx xxx
Article 2. Definitions and rules of interpretation
xxx xxx xxx
(c)“court” means a body or organ of the judicial system of a State;
xxx xxx xxx
Article 6. Court or other authority for certain functions of arbitration assistance and supervision
The functions referred to in articles 11(3), 11(4),
13(3), 14, 16(3) and 34(2) shall be performed by ...
[Each State enacting this model law specifies the
court, courts or, where referred to therein, other authority competent to perform these functions.]
xxx xxx xxx
Article 20. Place of arbitration
(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having
32
regard to the circumstances of the case, including the
convenience of the parties.
(2) Notwithstanding the provisions of paragraph (1) of
this article, 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 goods, other property or documents.
xxx xxx xxx
Article 31. Form and contents of award
xxx xxx xxx
(3) The award shall state its date and the place of arbitration as determined in accordance with article
20(1). The award shall be deemed to have been
made at that place.”
30. The Arbitration Act, 1996 repealed the Arbitration Act, 1940. As is
stated in its preamble, the Arbitration Act, 1996 adopted provisions of
the UNCITRAL Model Law, as they had made a significant contribution to the establishment of a unified legal framework for the fair and
efficient settlement of disputes arising in international commercial relations.
31. The Arbitration Act, 1996 refers to “the place” of arbitration and defines ‘Court’, and indicates which Courts have jurisdiction in relation to
arbitral proceedings in several sections in Part I. Section 2(1)(e) and
Section 2(2) of the Arbitration Act, 1996 are as follows:
33
“2.Definitions.-
(1) In this Part, unless the context otherwise requires,-
xxx xxx xxx
(e)“Court” means-
(i) in case of an arbitration other than international commercial arbitration, 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;
(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 a suit 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;
xxx xxx xxx
(2) This part shall apply where the place of arbitration is in India.
Provided that subject to an agreement to the
contrary, the provisions of sections 9, 27 and
clause (a) 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
34
made or to be made in such place is enforceable
and recognised under the provisions of Part II of
this Act.
32. Sections 20, 31(4) and 42 of the Arbitration Act, 1996 read as follows:
“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, goods or other property.”
“31. Form and contents of arbitral award.-
xxx xxx xxx
(4)The arbitral award shall state its date and the place of
arbitration as determined in accordance with section
20 and the award shall be deemed to have been
made at that place.”
“42. Jurisdiction.- Notwithstanding anything contained
elsewhere in this Part or any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in
any Court, that Court alone shall have jurisdiction over
the arbitral proceedings and all subsequent applications
arising out of that agreement and the arbitral proceedings shall be made in that Court and no other Court.”
35
33. It will thus be seen that the new provisions contained in Sections 20
and 31(4) of the Arbitration Act, 1996 are a replication of Articles 20
and 31(3) of the UNCITRAL Model Law, in which pride of place is
given to the juridical seat of the arbitral proceedings. However, the
definition of “court” in Section 2(1)(e) of the Arbitration Act, 1996 continues the definition contained in the Arbitration Act, 1940, but replaces any and every civil court by only the principal civil court of original jurisdiction in a district, and includes the High Court in exercise of
its ordinary civil jurisdiction. Section 42 of the Arbitration Act, 1996
also substantially follows the drill of Section 31(4) of the Arbitration
Act, 1940.
34. It can thus be seen that given the new concept of “juridical seat” of
the arbitral proceedings, and the importance given by the Arbitration
Act, 1996 to this “seat”, the arbitral award is now not only to state its
date, but also the place of arbitration as determined in accordance
with Section 20. However, the definition of “Court” contained in Section 2(1)(c) of the Arbitration Act, 1940, continued as such in the Arbitration Act, 1996, though narrowed to mean only principal civil court
and the High Court in exercise of their original ordinary civil jurisdiction. Thus, the concept of juridical seat of the arbitral proceedings and
36
its relationship to the jurisdiction of courts which are then to look into
matters relating to the arbitral proceedings - including challenges to
arbitral awards - was unclear, and had to be developed in accordance
with international practice on a case by case basis by this Court.
35. Some of the early decisions of this Court did not properly distinguish
between “seat” and “venue” of an arbitral proceeding. The Five Judge
Bench in BALCO (supra) dealt with this problem as follows:
“75. We are also unable to accept the submission of
the learned counsel for the appellants that the Arbitration Act, 1996 does not make seat of the arbitration
as the centre of gravity of the arbitration. On the contrary, it is accepted by most of the experts that in
most of the national laws, arbitrations are anchored to
the seat/place/situs of arbitration. Redfern in Para
3.54 concludes that “the seat of the arbitration is thus
intended to be its centre of gravity.” [Blackaby, Partasides, Redfern and Hunter (Eds.), Redfern and
Hunter on International Arbitration (5th Edn., Oxford
University Press, Oxford/New York 2009).] This, however, does not mean that all the proceedings of the
arbitration have to take place at the seat of the arbitration. The arbitrators at times hold meetings at more
convenient locations. This is necessary as arbitrators
often come from different countries. It may, therefore,
on occasions be convenient to hold some of the
meetings in a location which may be convenient to all.
Such a situation was examined by the Court of Appeal in England in Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del
Peru [(1988) 1 Lloyd's Rep 116 (CA)] wherein at p.
121 it is observed as follows:
37
“The preceding discussion has been on the basis that
there is only one ‘place’ of arbitration. This will be the
place chosen by or on behalf of the parties; and it will
be designated in the arbitration agreement or the
terms of reference or the minutes of proceedings or in
some other way as the place or ‘seat’ of the
arbitration. This does not mean, however, that the
Arbitral Tribunal must hold all its meetings or hearings
at the place of arbitration. International commercial
arbitration often involves people of many different
nationalities, from many different countries. In these
circumstances, it is by no means unusual for an
Arbitral Tribunal to hold meetings—or even hearings
—in a place other than the designated place of
arbitration, either for its own convenience or for the
convenience of the parties or their witnesses…. It
may be more convenient for an Arbitral Tribunal
sitting in one country to conduct a hearing in another
country — for instance, for the purpose of taking
evidence…. In such circumstances each move of the
Arbitral Tribunal does not of itself mean that the seat
of arbitration changes. The seat of arbitration remains
the place initially agreed by or on behalf of the
parties.”
76. It must be pointed out that the law of the seat or
place where the arbitration is held, is normally the law
to govern that arbitration. The territorial link between
the place of arbitration and the law governing that
arbitration is well established in the international
instruments, namely, the New York Convention of
1958 and the UNCITRAL Model Law of 1985. It is true
that the terms “seat” and “place” are often used
interchangeably. In Redfern and Hunter on
International Arbitration [ Blackaby, Partasides,
Redfern and Hunter (Eds.), Redfern and Hunter on
International Arbitration (5th Edn., Oxford University
Press, Oxford/New York 2009).] (Para 3.51), the seat
theory is defined thus: “The concept that an
arbitration is governed by the law of the place in
38
which it is held, which is the ‘seat’ (or ‘forum’ or locus
arbitri) of the arbitration, is well established in both
the theory and practice of international arbitration. In
fact, the Geneva Protocol, 1923 states:
“2. The arbitral procedure, including the constitution
of the Arbitral Tribunal, shall be governed by the will
of the parties and by the law of the country in whose
territory the arbitration takes place.”
The New York Convention maintains the reference to
“the law of the country where the arbitration took
place” [Article V(1)(d)] and, synonymously to “the law
of the country where the award is made” [Articles V(1)
(a) and (e)]. The aforesaid observations clearly show
that the New York Convention continues the clear
territorial link between the place of arbitration and the
law governing that arbitration. The author further
points out that this territorial link is again maintained
in the Model Law which provides in Article 1(2) that:
“1. (2) the provision of this Law, except Articles 8, 9,
35 and 36, apply only if the place of arbitration is in
the territory of the State.”
Just as the Arbitration Act, 1996 maintains the
territorial link between the place of arbitration and its
law of arbitration, the law in Switzerland and England
also maintain a clear link between the seat of
arbitration and the lex arbitri. The Swiss Law states:
“176(I). (1) The provision of this chapter shall apply to
any arbitration if the seat of the Arbitral Tribunal is in
Switzerland and if, at the time when the arbitration
agreement was concluded, at least one of the parties
had neither its domicile nor its habitual residence in
Switzerland.” [See the Swiss Private International
Law Act, 1987, Ch. 12, Article 176 (I)(1).]
39
These observations were subsequently followed
in Union of India v. McDonnell Douglas
Corpn. [(1993) 2 Lloyd's Rep 48]
xxx xxx xxx
95. Learned Counsel for the Appellants have submitted that Section 2(1)(e), Section 20 and Section 28
read with Section 45 and Section 48(1)(e) make it
clear that Part I is not limited only to arbitrations
which take place in India. These provisions indicate
that Arbitration Act, 1996 is subject matter centric and
not exclusively seat centric. Therefore, "seat" is not
the "centre of gravity" so far as the Arbitration Act,
1996 is concerned. We are of the considered opinion
that the aforesaid provisions have to be interpreted by
keeping the principle of territoriality at the forefront.
We have earlier observed that Section 2(2) does not
make Part I applicable to arbitrations seated or held
outside India. In view of the expression used in Section 2(2), the maxim expressum facit cessare tacitum,
would not permit by interpretation to hold that Part I
would also apply to arbitrations held outside the territory of India. The expression "this Part shall apply
where the place of arbitration is in India" necessarily
excludes application of Part I to arbitration seated or
held outside India. It appears to us that neither of the
provisions relied upon by the Learned Counsel for the
Appellants would make any section of Part I applicable to arbitration seated outside India. It will be apposite now to consider each of the aforesaid provisions
in turn.
96. Section 2(1)(e) of the Arbitration Act, 1996 reads
as under:
“2. Definitions
(1) In this Part, unless the context otherwise requires
40
(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 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
41
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 is located.
xxx xxx xxx
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) authorizes 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
42
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 supplied)
36. The Court then went on to refer to several English judgments and
specifically italicised several parts of the judgment in Roger
Shashoua & Ors. v. Mukesh Sharma [2009] EWHC 957 (Comm) as
follows:
“110. Examining the fact situation in the case, the
Court observed as follows:
The basis for the court's grant of an anti-suit injunction of the kind sought depended upon the seat of the
arbitration. An agreement as to the seat of an arbitration brought in the law of that country as the curial
law and was analogous to an exclusive jurisdiction
clause. Not only was there agreement to the curial
law of the seat, but also to the Courts of the seat having supervisory jurisdiction over the arbitration, so
that, by agreeing to the seat, the parties agreed that
any challenge to an interim or final award was to be
made only in the courts of the place designated as
the seat of the arbitration.
Although, 'venue' was not synonymous with 'seat', in
an arbitration clause which provided for arbitration to
be conducted in accordance with the Rules of the ICC
in Paris (a supranational body of rules), a provision
43
that 'the venue of arbitration shall be London, United
Kingdom' did amount to the designation of a juridical
seat...”
In Paragraph 54, it is further observed as follows:
There was a little debate about the possibility of the
issues relating to the alleged submission by the
claimants to the jurisdiction of the High Court of Delhi
being heard by that court, because it was best fitted
to determine such issues under Indian Law. Whilst I
found this idea attractive initially, we are persuaded
that it would be wrong in principle to allow this and
that it would create undue practical problems in any
event. On the basis of what I have already decided,
England is the seat of the arbitration and since this
carries with it something akin to an exclusive jurisdiction clause, as a matter of principle the foreign court
should not decide matters which are for this Court to
decide in the context of an anti-suit injunction.
In making the aforesaid observations, the Court relied
on judgments of the Court of Appeal in C v. D (2007)
EWCA Civ 1282 (CA).”
(emphasis in original)
37. Finally, the conclusion drawn in paragraph 116 was as follows:
“116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the
choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that
country relating to the conduct and supervision of arbitrations will apply to the proceedings
38. Also, in paragraph 123, the Court held as follows:
“123. Thus, it is clear that the regulation of conduct of
arbitration and challenge to an award would have to
be done by the courts of the country in which the
arbitration is being conducted. Such a court is then
the supervisory court possessed of the power to
44
annul the award. This is in keeping with the scheme
of the international instruments, such as the Geneva
Convention and the New York Convention as well as
the UNCITRAL Model Law. It also recognises the
territorial principle which gives effect to the sovereign
right of a country to regulate, through its national
courts, an adjudicatory duty being performed in its
own country. By way of a comparative example, we
may reiterate the observations made by the Court of
Appeal, England in C v. D [2008 Bus LR 843 : 2007
EWCA Civ 1282 (CA)] wherein it is observed that:
“It follows from this that a choice of seat for the
arbitration must be a choice of forum for remedies
seeking to attack the award.”
In the aforesaid case, the Court of Appeal had
approved the observations made in A v. B [(2007) 1
All ER (Comm) 591 : (2007) 1 Lloyd's Rep 237]
wherein it is observed that:
“… an agreement as to the seat of an arbitration is
analogous to an exclusive jurisdiction clause. Any
claim for a remedy … as to the validity of an existing
interim or final award is agreed to be made only in
the courts of the place designated as the seat of
arbitration.”
39. The Court then concluded in paragraph 194 as follows:
194. In view of the above discussion, we are of the
considered opinion that the Arbitration Act, 1996 has
accepted the territoriality principle which has been
adopted in the UNCITRAL Model Law. Section 2(2)
makes a declaration that Part I of the Arbitration Act,
1996 shall apply to all arbitrations which take place
within India. We are of the considered opinion that
Part I of the Arbitration Act, 1996 would have no application to international commercial arbitration held outside India. Therefore, such awards would only be
45
subject to the jurisdiction of the Indian courts when
the same are sought to be enforced in India in accordance with the provisions contained in Part II of the
Arbitration Act, 1996. In our opinion, the provisions
contained in the Arbitration Act, 1996 make it crystal
clear that there can be no overlapping or intermingling of the provisions contained in Part I with the provisions contained in Part II of the Arbitration Act,
1996.
40. A reading of paragraphs 75, 76, 96, 110, 116, 123 and 194 of BALCO
(supra) 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 paragraph 96 buttresses this proposition, and is
supported by the previous and subsequent paragraphs pointed out
hereinabove. The BALCO judgment (supra), 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 arbitration1
.
1 Section 3 of the English Arbitration Act, 1996 defines “seat” as follows:
46
41. However, this proposition is contradicted when paragraph 96 speaks
of the concurrent jurisdiction of Courts within whose jurisdiction the
cause of action arises wholly or in part, and Courts within the jurisdiction of which the dispute resolution i.e. arbitration, is located.
42. Paragraph 96 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
“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 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.
47
came to providing a neutral place as the “seat” of arbitration proceedings, the example 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.
43. This Court has held that judgments of Courts are not to be construed
as statutes, neither are they to be read as Euclid’s theorems. All observations made must be read in the context in which they appear.
This was felicitously put in Amar Nath Om Prakash v. State of Punjab (1985) 1 SCC 345, where this Court stated:
“10. There is one other significant sentence in Sreenivasa General Traders v. State of A.P [(1983) 4 SCC
353 : AIR 1983 SC 1246] with which we must express
our agreement, It was said: (SCC p. 377, para 27)
48
“With utmost respect, these observations of the
learned Judge are not to be read as Euclid's theorems, nor as provisions of a statute. These observations must be read in the context in which they appear.”
We consider it proper to say, as we have already said
in other cases, that judgments of courts are not to be
construed as statutes. To interpret words, phrases
and provisions of a statute, it may become necessary
for Judges to embark into lengthy discussions but the
discussion is meant to explain and not to define.
Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words
are not to be interpreted as statutes.
In London Graving Dock Co. Ltd. v. Horton [1951 AC
737, 761 : (1951)-2 All ER 1, 14 (HL)] Lord MacDermott observed:
“The matter cannot, of course, be settled merely by
treating the ipsissima verba of Willes, J., as though
they were part of an Act of Parliament and applying
the rules of interpretation appropriate thereto. This is
not to detract from the great weight to be given to the
language actually used by that most distinguished
Judge....
In Home Office v. Dorset Yacht Co. Ltd. [(1970) 2 All
ER 294 : (1970) 2 WLR 1140 : 1970 AC 1004 (HL)]
Lord Reid said:
“Lord Atkin's speech [Donoghue v. Stevension, 1932
All ER Rep 1, 11 : 1932 AC 562, 580 : 101 LJPC
119 : 147 LT 281 (HL)] ... is not to be treated as if it
was a statutory definition. It will require qualification in
new circumstances.”
Megarry, J. in (1971) 1 WLR 1062 observed:
“One must not, of course, construe even a reserved
judgment of even Russell, L.J. as if it were an Act of
Parliament.”
And, in Herrington v. British Railways Board [(1972) 2
WLR 537: (1972) 1 All Er 749 : 1972 AC 877 (HL)]
Lord Morris said: “There is always peril in treating the
words of a speech or a judgment as though they were
49
words in a legislative enactment, and it is to be remembered that judicial utterances are made in the
setting of the facts of a particular case.”
(emphasis supplied)
44. More recently, this Court in Union of India v. Amrit Lal Manchanda
(2004) 3 SCC 75 held as follows:
“15. Cases involving challenges to orders of detention
before and after execution of the order stand on different footings. Courts should not place reliance on
decisions without discussing as to how the factual situation fits in with the fact situation of the decision on
which reliance is placed. Observations of courts are
neither to be read as Euclid's theorems nor as provisions of the statute and that too taken out of their
context. These observations must be read in the context in which they appear to have been stated. Judgments of courts are not to be construed as statutes.
To interpret words, phrases and provisions of a
statute, it may become necessary for judges to embark into lengthy discussions but the discussion is
meant to explain and not to define. Judges interpret
statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes.”
(emphasis supplied)
45. In any case, a judgment must be read as a whole, so that conflicting
parts may be harmonised to reveal the true ratio of the judgment.
However, if this is not possible, and it is found that the internal conflicts within the judgment cannot be resolved, then the first endeavour
that must be made is to see whether a ratio decidendi can be culled
out without the conflicting portion. If not, then, as held by Lord Den50
ning in Harper and Ors. v. National Coal Board (1974) 2 All ER 441,
the binding nature of the precedent on the point on which there is a
conflict in a judgment, comes under a cloud.2
46. If paragraphs 75, 76, 96, 110, 116, 123 and 194 of BALCO (supra)
are to be read together, what becomes clear is that Section 2(1)(e)
2
In Harper (supra), the decision in Central Asbestos Co. Ltd. vs. Dodd (1972) 2
All ER 1135, a House of Lords judgment, had to be applied. It was found that two
learned Law Lords decided the question of law in favour of Dodd, whereas two
learned Law Lords decided the question of law against Dodd, stating that his
claim was barred. As Lord Denning stated, the fifth Law Lord, Lord Pearson, was
the odd man out, in that he agreed with the two learned Law Lords that the law
did not support Dodd’s case, but agreed with the minority judges that Dodd’s
claim was not barred. This being the case, Lord Denning spoke of the
precedential value of Dodd’s case as follows:
“How then do we stand on the law? We have listened to a most helpful
discussion by Mr. McCullough on the doctrine of precedent. One thing is clear.
We can only accept a line of reasoning which supports the actual decision of the
House of Lords. By no possibility can we accept any reasoning which would
show the decision itself to be wrong. The second proposition is that if we can
discover the reasoning on which the majority based their decision, then we
should accept that as binding upon us. The third proposition is that, if we can
discover the reasoning on which the minority base their decision, we should
reject it. It must be wrong because it led them to the wrong result. The fourth
proposition is that, if we cannot discover the reasoning on which the majority
based their decision, we are not bound by it. We are free to adopt any reasoning
which appears to us to be correct, so long as it supports the actual decision of
the House.
In support of those propositions, I would refer to the speech of Lord
Dunedin in Great Western Railway Co. v. Owners of S.S. Mostyn [1928] A.C. 57,
73–74, and of Lord MacDermott in Walsh v. Curry [1955] N.I. 112, 124–125, and
of Viscount Simonds in Midland Silicones Ltd. v. Scruttons Ltd. [1962] A.C. 446,
468–469. Applying the propositions to Smith v. Central Asbestos Co. Ltd.
[Dodd's case] [1973] A.C. 518, the position stands thus: (1) the actual decision of
the House in favour of Dodd must be accepted as correct, We cannot accept any
line of reasoning which would show it to be wrong. We cannot therefore accept
51
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
(supra). 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.
47. It was not until this Court’s judgment in Indus Mobile Distribution
Private Limited (supra) 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 Section 20(1) and (2) would refer to the
the reasoning of a minority of two — Lord Simon of Glaisdale and Lord Salmon
— on the law. It must be wrong because it led them to the wrong result. (2) We
ought to accept the reasoning of the three in the majority if we can discover it.
But it is not discoverable. The three were divided. Lord Reid and Lord Morris of
Borth-y-Gest took one view of the law. Lord Pearson took another. We cannot
say that Lord Reid and Lard Morris of Borth-y-Gest were correct: because we
know that their reasoning on the law was in conflict with the reasoning of the
other three. We cannot say that Lord Pearson was correct: because we know
that the reasoning which he accepted on the law led the other two (Lord Simon
of Glaisdale and Lord Salmon) to a wrong conclusion. So we cannot say that any
of the three in the majority was correct. (3) The result is that there is no
discernible ratio among the majority of the House of Lords. In these
circumstances I think we are at liberty to adopt the reasoning which appears to
us to be correct.”
52
“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 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.
48. This Court in Indus Mobile Distribution Private Limited (supra), 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:
“17. In amendments to be made to the Act, the Law
Commission recommended the following:
“Amendment of Section 20
In Section 20, delete the word "Place" and add the
words "Seat and Venue" before the words "of arbitration".
(i) In Sub-section (1), after the words "agree on the"
delete the word "place" and add words "seat and
venue"
53
(ii) In Sub-section (3), after the words "meet at any"
delete the word "place" and add word "venue".
[NOTE: The departure from the existing phrase
"place" of arbitration is proposed to make the
wording of the Act consistent with the international
usage of the concept of a "seat" of arbitration, to
denote the legal home of the arbitration. The
amendment further legislatively distinguishes between the "[legal] seat" from a "[mere] venue" of
arbitration.]
Amendment of Section 31
17. In Section 31
(i) In Sub-section (4), after the words "its date and
the" delete the word "place" and add the word
"seat".”
18. The amended Act, does not, however, contain the
aforesaid amendments, presumably because the
BALCO 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 Section
20(1) and 20 (2) where the word "place" is used,
refers to "juridical seat", whereas in Section 20 (3),
the word "place" is 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
54
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 Section 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 parties to exclude all
other courts. For an exhaustive analysis of the case
law, see Swastik Gases Private Limited v. Indian Oil
Corporation Limited (2013) 9 SCC 32. This was followed in a recent judgment in B.E. Simoese Von
Staraburg Niedenthal and Anr. v. Chhattisgarh Investment Limited: (2015) 12 SCC 225. Having regard to
the above, it is clear that Mumbai courts alone have
jurisdiction to the exclusion of all other courts in the
country, as the juridical seat of arbitration is at Mumbai. This being the case, the impugned judgment is
set aside. The injunction confirmed by the impugned
judgment will continue for a period of four weeks from
the date of pronouncement of this judgment, so that
the Respondents may take necessary steps Under
Section 9 in the Mumbai Court. Appeals are disposed
of accordingly.”
This judgment has recently been followed in Brahmani River Pellets
Ltd. v. Kamachi Industries Ltd. 2019 SCC Online SC 929 at paragraph 15.
55
49. In fact, the Law Commission Report, 2014 also recommended an
amendment in the definition of “Court” under Section 2(1)(e) of the Arbitration Act, 1996, so that in the case of international commercial arbitrations held in India, the High Court alone should be the “Court” for
the purposes of the Arbitration Act, 1996, even where such a High
Court does not exercise ordinary original jurisdiction. The recommendation made by the Law Commission, which was followed, leading to
an amendment of the Arbitration Act, 1996, is as follows:
“26. It is recommended that in case of international
commercial arbitrations, where there is a significant
foreign element to the transaction and at least one of
the parties is foreign, the relevant “Court” which is
competent to entertain proceedings arising out of the
arbitration agreement, should be the High Court, even
where such a High Court does not exercise ordinary
civil jurisdiction. It is expected that this would ensure
that international commercial arbitrations, involving
foreign parties, will be heard expeditiously and by
commercial oriented judges at the High Court level…”
Amendment of Section 2
1. In Section 2 of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as the principal Act),-
xxx xxx xxx
(ii) In sub-section (1), clause (e), after the words
“Court means-” add sub-section (i) beginning with
the words “in the case of an arbitration other than
international commercial arbitration,” before the
56
words “the principal Civil Court of original jurisdiction”
In sub-section (1), clause (e) replace sub-clause
(ii) by following:
“(ii) in the case of an international commercial arbitration, the High Court exercising jurisdiction over
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 subjectmatter of the arbitration if the same had been the
subject-matter of a suit, but does not include any
Court of a grade inferior to such High Court, or in
cases involving grant of interim measures in respect of arbitrations outside India, the High Court
exercising jurisdiction over the court having jurisdiction to grant such measures as per the laws of
India, and includes the High Court in exercise of its
ordinary original civil jurisdiction.”
[NOTE: This is to solve the problem of conflict of
jurisdiction that would arise in cases where interim
measures are sought in India in cases of arbitrations seated outside India. This also ensures that
in International Commercial Arbitrations, jurisdiction is exercised by the High Court, even if such
High Court does not exercise ordinary original civil
jurisdiction.]”
50. The aforesaid amendment carried out in the definition of “Court” is
also a step showing the right direction, namely, that in international
commercial arbitrations held in India, the High Court alone is to exercise jurisdiction over such proceedings, even where no part of the
cause of action may have arisen within the jurisdiction of such High
Court, such High Court not having ordinary original jurisdiction. In
57
such cases, the “place” where the award is delivered alone is looked
at, and the High Court given jurisdiction to supervise the arbitration
proceedings, on the footing of its jurisdiction to hear appeals from decrees of courts subordinate to it, which is only on the basis of territorial jurisdiction which in turn relates to the “place” where the award is
made. In the light of this important change in the law, Section 2(1)(e)
(i) of the Arbitration Act, 1996 must also be construed in the manner
indicated by this judgment.
51. Take the consequence of the opposite conclusion, in the light of the
facts of a given example, as follows. New Delhi is specifically designated to be the seat of the arbitration in the arbitration clause between the parties. Part of the cause of action, however, arises in several places, including where the contract is partially to be performed,
let us say, in a remote part of Uttarakhand. If concurrent jurisdiction
were to be the order of the day, despite the seat having been located
and specifically chosen by the parties, party autonomy would suffer,
which BALCO (supra) specifically states cannot be the case. Thus, if
an application is made to a District Court in a remote corner of the Uttarakhand hills, which then becomes the Court for the purposes of
Section 42 of the Arbitration Act, 1996 where even Section 34 applica58
tions have then to be made, the result would be contrary to the stated
intention of the parties - as even though the parties have contemplated that a neutral place be chosen as the seat so that the Courts of
that place alone would have jurisdiction, yet, any one of five other
Courts in which a part of the cause of action arises, including Courts
in remote corners of the country, would also be clothed with jurisdiction. This obviously cannot be the case. If, therefore, the conflicting
portion of the judgment of BALCO (supra) in paragraph 96 is kept
aside for a moment, the very fact that parties have chosen a place to
be the seat would necessarily carry with it the decision of both parties
that the Courts at the seat would exclusively have jurisdiction over the
entire arbitral process.
52. In fact, subsequent Division Benches of this Court have understood
the law to be that once the seat of arbitration is chosen, it amounts to
an exclusive jurisdiction clause, insofar as the Courts at that seat are
concerned. In Enercon (India) Ltd. and Ors. v. Enercon GmbH and
Anr. (2014) 5 SCC 1, this Court approved the dictum in Roger
Shashoua (supra) as follows:
“126. Examining the fact situation in the case, the
Court in Shashoua case [Shashoua v. Sharma,
(2009) 2 Lloyd's Law Rep 376] observed as
follows:
59
“The basis for the court's grant of an anti-suit
injunction of the kind sought depended upon
the seat of the arbitration. An agreement as to the
seat of an arbitration brought in the law of that
country as the curial law and was analogous to an
exclusive jurisdiction clause. Not only was there
agreement to the curial law of the seat, but also to
the courts of the seat having supervisory
jurisdiction over the arbitration, so that, by
agreeing to the seat, the parties agreed that any
challenge to an interim or final award was to be
made only in the courts of the place designated as
the seat of the arbitration.
Although, ‘venue’ was not synonymous with ‘seat’,
in an arbitration clause which provided for
arbitration to be conducted in accordance with the
Rules of the ICC in Paris (a supranational body of
rules), a provision that ‘the venue of arbitration
shall be London, United Kingdom’ did amount to
the designation of a juridical seat….”
In para 54, it is further observed as follows:
“There was a little debate about the possibility of
the issues relating to the alleged submission by
the claimants to the jurisdiction of the High Court
of Delhi being heard by that Court, because it was
best fitted to determine such issues under the
Indian law. Whilst I found this idea attractive
initially, we are persuaded that it would be wrong
in principle to allow this and that it would create
undue practical problems in any event. On the
basis of what I have already decided, England is
the seat of the arbitration and since this carries
with it something akin to an exclusive jurisdiction
clause, as a matter of principle the foreign court
should not decide matters which are for this Court
to decide in the context of an anti-suit injunction.”
53. The Court then concluded:
“138. Once the seat of arbitration has been fixed in
India, it would be in the nature of exclusive jurisdic60
tion to exercise the supervisory powers over the arbitration...”
54. In Reliance Industries Ltd. (supra), this Court held:
“45. In our opinion, it is too late in the day to contend
that the seat of arbitration is not analogous to an exclusive jurisdiction clause. This view of ours will find
support from numerous judgments of this Court. Once
the parties had consciously agreed that the juridical
seat of the arbitration would be London and that the
arbitration agreement will be governed by the laws of
England, it was no longer open to them to contend
that the provisions of Part I of the Arbitration Act
would also be applicable to the arbitration agreement.
This Court in Videocon Industries Ltd. [(2011) 6 SCC
161 : (2011) 3 SCC (Civ) 257] has clearly held as follows: (SCC p. 178, para 33)
“33. In the present case also, the parties had agreed
that notwithstanding Article 33.1, the arbitration
agreement contained in Article 34 shall be governed
by laws of England. This necessarily implies that the
parties had agreed to exclude the provisions of Part I
of the Act. As a corollary to the above conclusion, we
hold that the Delhi High Court did not have the jurisdiction to entertain the petition filed by the respondents under Section 9 of the Act and the mere fact
that the appellant had earlier filed similar petitions
was not sufficient to clothe that High Court with the jurisdiction to entertain the petition filed by the respondents.”
xxx xxx xxx
55. The effect of choice of seat of arbitration was
considered by the Court of Appeal in C v. D [2008
Bus LR 843 : (2008) 1 Lloyd's Law 239 : 2007 EWCA
Civ 1282] . This judgment has been specifically
approved by this Court in Balco [BALCO v. Kaiser
Aluminium Technical Services Inc., (2012) 9 SCC 552
: (2012) 4 SCC (Civ) 810] and reiterated
61
in Enercon [Enercon (India) Ltd. v. Enercon GmbH,
(2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59 : (2014) 1
ALR 257] . In C v. D [2008 Bus LR 843 : (2008) 1
Lloyd's Law 239 : 2007 EWCA Civ 1282] , the Court
of Appeal has observed: (Bus LR p. 851, para 16)
“Primary conclusion
16. I shall deal with Mr Hirst's arguments in due
course but, in my judgment, they fail to grapple with
the central point at issue which is whether or not, by
choosing London as the seat of the arbitration, the
parties must be taken to have agreed that
proceedings on the award should be only those
permitted by English law. In my view they must be
taken to have so agreed for the reasons given by the
Judge. The whole purpose of the balance achieved
by the Bermuda form (English arbitration but applying
New York law to issues arising under the policy) is
that judicial remedies in respect of the award should
be those permitted by English law and only those so
permitted. Mr Hirst could not say (and did not say)
that English judicial remedies for lack of jurisdiction
on procedural irregularities under Sections 67 and 68
of the 1996 Act were not permitted; he was reduced
to saying that New York judicial remedies
were also permitted. That, however, would be a
recipe for litigation and (what is worse) confusion
which cannot have been intended by the parties. No
doubt New York law has its own judicial remedies for
want of jurisdiction and serious irregularity but it could
scarcely be supposed that a party aggrieved by one
part of an award could proceed in one jurisdiction and
a party aggrieved by another part of an award could
proceed in another jurisdiction. Similarly, in the case
of a single complaint about an award, it could not be
supposed that the aggrieved party could complain in
one jurisdiction and the satisfied party be entitled to
ask the other jurisdiction to declare its satisfaction
with the award. There would be a serious risk of
parties rushing to get the first judgment or of
62
conflicting decisions which the parties cannot have
contemplated.”
56. The aforesaid observations in C v. D [2008 Bus
LR 843 : (2008) 1 Lloyd's Law 239 : 2007 EWCA Civ
1282] were subsequently followed by the High Court
of Justice, Queen's Bench Division, Commercial
Court (England) in Sulamerica Cia Nacional de
Seguros SA v. Enesa Engelharia SA —
Enesa [(2013) 1 WLR 102 : 2012 EWCA Civ 638 :
2012 WL 14764] . In laying down the same
proposition, the High Court noticed that the issue in
that case depended upon the weight to be given to
the provision in Condition 12 of the insurance policy
that “the seat of the arbitration shall be London,
England”. It was observed that this necessarily
carried with it the English Court's supervisory
jurisdiction over the arbitration process. It was
observed that:
“this follows from the express terms of the Arbitration
Act, 1996 and, in particular, the provisions of Section
2 which provide that Part I of the Arbitration Act, 1996
applies where the seat of the arbitration is in England
and Wales or Northern Ireland. This immediately
establishes a strong connection between the
arbitration agreement itself and the law of England. It
is for this reason that recent authorities have laid
stress upon the locations of the seat of the arbitration
as an important factor in determining the proper law
of the arbitration agreement.””
55. In Indus Mobile Distribution Private Limited and Ors. (supra), after
clearing the air on the meaning of Section 20 of the Arbitration Act,
1996, the Court in paragraph 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
63
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.
56. Despite the aforesaid judgments of this Court, discordant notes have
been struck by some of the High Courts. In Antrix Corporation Ltd.
(supra), a Division Bench of the Delhi High Court, after setting out
paragraph 96 of BALCO (supra), then followed the reasoning of
judgements of the Bombay High Court, in stating that the ratio decidendi of the 5 Judge Bench in BALCO (supra) is that Courts would
have concurrent jurisdiction, notwithstanding the designation of the
seat of arbitration by agreement between the parties. The Delhi High
Court stated:
“52. Having held that the statement in paragraph 96
of BALCO (supra) would apply to the present case as
well, this court has to examine its legal consequence
in light of the law declared in BALCO (supra). It is
important to note that in the said paragraph (extracted
above), the Supreme Court has noted that Section
2(1)(e) of the Arbitration Act confers jurisdiction to two
courts over the arbitral process - the courts having
subject matter jurisdiction and the courts of the seat.
This is evident both from the substantive holding of
the paragraph as well as the example given by the
Court. The Court notes that “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 is further reinforced by
64
the example that the Court gave later in the same
paragraph. In the example where the parties are from
Mumbai and Kolkata and the obligations under the
contract are to be performed at either Mumbai or
Kolkata, and the parties have designated Delhi as the
seat of the arbitration, in such a situation, both courts
would have jurisdiction, i.e. within whose jurisdiction
the subject matter of the suit is situated (either
Mumbai or Kolkata) and the court within the
jurisdiction of which the dispute resolution, i.e.,
arbitration is located (which is Delhi). Moreover, the
fact that the court interpreted the term “subject matter
of the suit” in the paragraph, also gives credence to
the interpretation that the court recognized that
Section 2(1)(e) gives jurisdiction to both the cause of
action courts, and the court at the seat of the
arbitration. If the Court were of the opinion that only
the courts at the seat would have jurisdiction under
Section 2(1)(e) and no other court, then it would be
wholly unnecessary for the court to interpret the
term “subject matter of the suit”, since that court
would anyway not have jurisdiction. In sum therefore,
paragraph 96 of BALCO (supra) gives jurisdiction to
both courts at the seat and the courts within whose
jurisdiction the cause of action arises, if the dispute
were the subject matter of a suit. This is what the
Bombay High Court in Konkola Copper Mines (supra)
also interpreted BALCO (supra) as holding:
“The Supreme Court held that the provisions of
Section 2(1)(e) are purely jurisdictional in nature and
can have no relevance to the question whether any
part of the cause of action has taken place outside
India. The observations which have been extracted
above, clearly establish that the Court where the
arbitration takes place would be required to exercise
supervisory control over the arbitral process. The
Supreme Court has held that Parliament has given
jurisdiction to two courts - the Court which would
have jurisdiction where the cause of action is located
65
and the Court where the arbitration takes place. This
is evident from the example which is contained in the
above quoted extract from the decision.”
57. Having so stated, the Division Bench then went on to give a restricted
meaning to Indus Mobile Distribution Private Ltd. (supra) in paragraph 56 as follows:
“56. In Datawind (supra), as the facts and the question framed by the Court in the second paragraph of
its decision suggest, the Court was faced with a situation where the parties had designated both the
seat and specified an exclusive forum selection
clause. Therefore, its findings have to be interpreted
in that light. In fact, were this Court to find otherwise,
and interpret Datawind (supra) as holding that the
designation of seat alone would amount to an exclusive forum selection clause in domestic arbitrations,
then this would run contrary to the five-Judge decision in BALCO (supra), which as noticed above, gave
jurisdiction under Section 2(1)(e) to two courts - one
of which was the court of the seat, thereby clearly implying that the designation of a seat would not
amount to an exclusive forum selection clause…”
58. The Court then went on to state:
“58. The court is of the opinion that in this case, only
if the parties had designated the seat as New
Delhi and also provided an exclusive forum selection
clause in favour of the courts at New Delhi, could it be
said that this court would have exclusive jurisdiction
over all applications filed under the Arbitration Act. Indeed, it is open to parties to an arbitration to designate a particular forum as the exclusive forum to
which all applications under the Act would lie. This
would merely be an exercise of the right of the parties
to choose one among multiple competent forums as
the exclusive forum. This is a clearly permissible ex66
ercise of the right of party autonomy as held by the
Supreme Court in Swastik Gases v. Indian Oil Corporation Ltd., (2013) 9 SCC 32. Conversely, merely
choosing a seat, cannot amount to exercising such a
right of exclusive forum selection.
59. This court is of opinion that, holding otherwise
would in effect render Section 42 of the Arbitration Act
ineffective and useless. Section 42 of the Act presupposes that there is more than one competent forum to
hear applications under the Arbitration Act, and hence
to ensure efficacy of dispute resolution, this provision
enacts that the court, which is first seized of any such
application under the Act, would be the only court
possessing jurisdiction to hear all subsequent applications. If seat were equivalent to an exclusive forum
selection clause in Part-I arbitrations, then every time
parties would designate a seat, that would in effect
mean that Section 42 would have no application.
Thus, only those few situations where parties do not
actually designate any seat (and thus no exclusive
competence is conferred on one forum) would Section 42 have any role. In fact, often, when parties do
not agree upon a seat in the arbitration agreement,
for convenience, the arbitral tribunal designates a
particular seat of the arbitration, or the agreement
vests the discretion in the tribunal to decide the seat
(and not just the “venue”). In all those circumstances
then as well, the decision of the tribunal to agree
upon a “seat” would amount to an exclusive jurisdiction clause and Section 42 would have no application.
This would dilute Section 42 and would accordingly,
be contrary to Parliamentary intent. Undoubtedly, in
the present case, the parties have only chosen the
seat as New Delhi and have not specified an exclusive forum selection clause. Therefore, it cannot be
said that the courts in Delhi have exclusive competence to entertain applications under the Arbitration
Act in the present dispute. The jurisdiction of the
courts where the cause of action arises, which in this
67
case, is the Bangalore City Civil Court, cannot be said
to have been excluded therefore. Accordingly, question (ii) is also answered in favour of Antrix...”
59. The view of the Delhi High Court in Antrix Corporation Ltd. (supra),
which followed judgments of the Bombay High Court, does not commend itself to us. First and foremost, it is incorrect to state that the example given by the Court in paragraph 96 of BALCO (supra) reinforces the concurrent jurisdiction aspect of the said paragraph. As
has been pointed out by us, the conclusion that the Delhi as well as
the Mumbai or Kolkata Courts would have jurisdiction in the example
given in the said paragraph is wholly incorrect, given the sentence,
“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”. The sentence which follows this is out of sync with this sentence, and the
other paragraphs of the judgment. Thus, BALCO (supra) does not
“unmistakably” hold that two Courts have concurrent jurisdiction, i.e.,
the seat Court and the Court within whose jurisdiction the cause of
action arises. What is missed by these High Court judgments is the
subsequent paragraphs in BALCO (supra), which clearly and unmistakably state that the choosing of a “seat” amounts to the choosing of
68
the exclusive jurisdiction of the Courts at which the “seat” is located.
What is also missed are the judgments of this Court in Enercon (India) Ltd. (supra) and Reliance Industries (supra).
60. Equally, the ratio of the judgment in Indus Mobile Distribution Private Ltd. (supra), is contained in paragraphs 19 and 20. Two separate and distinct reasons are given in Indus Mobile Distribution Private Ltd. (supra) for arriving at the conclusion that the Courts at
Mumbai alone would have jurisdiction. The first reason, which is independent of the second, is that as the seat of the arbitration was designated as Mumbai, it would carry with it the fact that Courts at Mumbai
alone would have jurisdiction over the arbitration process. The second
reason given was that in any case, following the Hakam Singh
(supra) principle, where more than one Court can be said to have jurisdiction, the agreement itself designated the Mumbai Courts as having exclusive jurisdiction. It is thus wholly incorrect to state that Indus
Mobile Distribution Private Ltd. (supra) has a limited ratio decidendi contained in paragraph 20 alone, and that paragraph 19, if read
by itself, would run contrary to the 5 Judge Bench decision in BALCO
(supra).
69
61. Equally incorrect is the finding in Antrix Corporation Ltd. (supra)
that Section 42 of the Arbitration Act, 1996 would be rendered ineffective and useless. Section 42 is meant to avoid conflicts in jurisdiction
of Courts by placing the supervisory jurisdiction over all arbitral proceedings in connection with the arbitration in one Court exclusively.
This is why the section begins with a non-obstante clause, and then
goes on to state “…where with respect to an arbitration agreement
any application under this Part has been made in a Court…” It is obvious that the application made under this part to a Court must be a
Court which has jurisdiction to decide such application. The subsequent holdings of this Court, that where a seat is designated in an
agreement, the Courts of the seat alone have jurisdiction, would require that all applications under Part I be made only in the Court
where the seat is located, and that Court alone then has jurisdiction
over the arbitral proceedings and all subsequent applications arising
out of the arbitral agreement. So read, Section 42 is not rendered ineffective or useless. Also, where it is found on the facts of a particular
case that either no “seat” is designated by agreement, or the socalled “seat” is only a convenient “venue”, then there may be several
Courts where a part of the cause of action arises that may have juris70
diction. Again, an application under Section 9 of the Arbitration Act,
1996 may be preferred before a court in which part of the cause of action arises in a case where parties have not agreed on the “seat” of
arbitration, and before such “seat” may have been determined, on the
facts of a particular case, by the Arbitral Tribunal under Section 20(2)
of the Arbitration Act, 1996. In both these situations, the earliest application having been made to a Court in which a part of the cause of
action arises would then be the exclusive Court under Section 42,
which would have control over the arbitral proceedings. For all these
reasons, the law stated by the Bombay and Delhi High Courts in this
regard is incorrect and is overruled.
Tests for determination of “seat”
62. The judgments of the English Courts have examined the concept of
the “juridical seat” of the arbitral proceedings, and have laid down
several important tests in order to determine whether the “seat” of the
arbitral proceedings has, in fact, been indicated in the agreement between the parties. The judgment of Cooke, J., in Roger Shashoua
(supra), states:
“34. “London Arbitration is a well known phenomenon
which is often chosen by foreign nationals with a different law, such as the law of New York, governing
71
the substantive rights of the parties. This is because
of the legislative framework and supervisory powers
of the courts here which many parties are keen to
adopt. When therefore there is an express designation of the arbitration venue as London 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, to my mind, that London is the
juridical seat and English law the curial law. In my
judgment it is clear that either London has been designated by the parties to the arbitration agreement as
the seat of the arbitration, or, having regard to the
parties’ agreement and all the relevant circumstances, it is the seat to be determined in accordance
with the final fall back provision of section 3 of the arbitration act.”
63. 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.
64. In Enercon GmbH v. Enercon (India) Ltd. [2012] EWHC 689, the
arbitration clause between the parties read as follows:
“18.3 All proceedings in such arbitration shall be conducted in English. The venue of the arbitration proceedings shall be London. The arbitrators may (but
shall not be obliged to) award costs and reasonable
expenses (including reasonable fees of counsel) to
the Party(ies) that substantially prevail on merit. The
72
provisions of the Indian Arbitration and Conciliation
Act, 1996 shall apply.”
65. The Court began its discussion on the “seat” of the arbitration by
referring to Roger Shashoua (supra), and then referring to ‘The Conflict of Laws’, Dicey, Morris & Collins, 14th Ed. as follows:
“Moreover, as Cooke J. noted, this conclusion is consistent with the views expressed in The Conflict of
Laws, Dicey, Morris & Collins, 14th Edition at ¶16–
035 where the authors state that the seat “is in most
cases sufficiently indicated by the country chosen as
the place of the arbitration. For such a choice of place
not to be given effect as a choice of seat, there will
need to be clear evidence that the parties … agreed
to choose another seat for the arbitration and that
such a choice will be effective to endow the courts of
that country with jurisdiction to supervise and support
the arbitration” .
Apart from the last sentence in clause 18.3 (ie “The
provisions of the Indian Arbitration and Conciliation
Act 1996 shall apply”), it seems to me that the conclusion that London is the “seat” of any arbitration thereunder is beyond any possible doubt. Thus the main
issue is whether this last sentence is to be regarded
as “significant contrary indicia” (using the language of
Cooke J.) so as to place the “seat” of the arbitration in
India. A similar issue was considered by Saville J in
Union v of India v McDonnell [1993] 2 Lloyd's Rep 48
which, of course, pre-dates the English 1996 Act .
The arbitration agreement in that case provided as
follows: “In the event of a dispute arising out of or in
connection with this agreement…the same shall be
referred to an Arbitration Tribunal…The arbitration
shall be conducted in accordance with the procedure
provided in the Indian Arbitration Act of 1940 or any
enactment or modification thereof. The arbitration
73
shall be conducted in the English language…The
seat of the arbitration proceedings shall be London,
United Kingdom.” Saville J expressed the view that
the arguments on both sides were “finely balanced”
but in effect concluded that the reference to the Indian Arbitration Act 1940 did not have the effect of
changing the “seat” of the arbitration designated by
the parties. Rather, the phrase referring to the 1940
Act was to be reconciled with the rest of the clause by
reading it as referring to the internal conduct of the arbitration as opposed to the external supervision of the
arbitration by the Courts.”
(emphasis supplied)
66. The Court then held that although the word “venue” is not synonymous with “seat”, on the facts of that case, London - though described
as the “venue” - was really the “seat” of the arbitration. This was for
the reason that London was a neutral place in which neither party
worked for gain, and in which no part of the cause of action arose. It
was thus understood to be a neutral place in which the proceedings
could be “anchored”. Secondly, the Court stressed on the expression
“arbitration proceedings” in clause 18.3, which the Court held to be an
expression which included not just one or more individual hearings,
but the arbitral proceedings as a whole, culminating in the making of
an award. The Court held:
“Second, the language in clause 18.3 refers to the
“arbitration proceedings”. That is an expression which
includes not just one or more individual or particular
hearings but the arbitration proceedings as a whole
74
including the making of an award. In other words the
parties were anchoring the whole arbitration process
in London right up to and including the making of an
award. The place designated for the making of an
award is a designation of seat. Moreover the language in clause 18.3 does not refer to the venue of all
hearings “taking place” in London. Clause 18.3 instead provides that the venue of the arbitration proceedings “shall be” London. This again suggests the
parties intended to anchor the arbitration proceedings
to and in London rather than simply physically locating the arbitration hearings in London. Indeed in a
case where evidence might need to be taken or perhaps more likely inspected in India it would make no
commercial sense to construe the provision as mandating all hearings to take place in a physical place as
opposed to anchoring the arbitral process to and in a
designated place. All agreements including an arbitration agreement should be construed to accord with
business common sense. In my view, there is no
business common sense to construe the arbitration
agreement (as contended for by EIL) in a manner
which would simply deprive the arbitrators of an important discretion that they possess to hear evidence
in a convenient geographical location.
Third, Mr Joseph QC submitted that the last sentence
of clause 18.3 can be reconciled with the choice of
London as the seat. First, he submitted that it can be
read as referring simply to Part II of the Indian 1996
Act ie the enforcement provisions. Mr Edey QC's response was that if that is all the last sentence meant,
then it would be superfluous. However, I do not consider that any such superfluity carries much, if any,
weight. Alternatively, Mr Joseph QC submitted that it
can be read as referring only to those provisions of
the Indian 1996 Act which were not inconsistent with
the English 1996 Act.”
(emphasis supplied)
75
67. The Court then held that the reference to the Indian Arbitration Act,
1996 would not make London the “venue” and India the “seat” of the
arbitral process for several reasons, including the fact that in earlier
agreements between the same parties, the seat of arbitral proceedings was India, which was changed by this agreement to London - the
explanation for this change being to render an award enforceable in
India under the provisions of the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (New York, 1958).
68. In Shagang South-Asia (Hong Kong) Trading Co. Ltd. v. Daewoo
Logistics [2015] EWHC 194, the Queen’s Bench Division (Commercial Courts) dealt with a ‘Fixture Note’ in which the Respondent
agreed to charter a vessel to Shangang, China. The Fixture Note provided:
“Clause 23. ARBITRATION TO BE HELD IN
HONGKONG. ENGLISH LAW TO BE APPLIED.”
69. After referring to Roger Shashoua (supra) and Enercon GmbH
(supra), the Court held:
“In my judgment the approach adopted in Shashoua v
Sharma and in other cases is appropriate in this case
also. An agreement that the arbitration is ‘to be held
in Hong Kong’ would ordinarily carry with it an implied
choice of Hong Kong as the seat of the arbitration and of the application of Hong Kong law as the
curial law. Clear words or ‘significant contrary indicia’
76
are necessary to establish that some other seat or curial law has been agreed.”
70. In Process and Indusrial Developments Ltd. v. Nigeria [2019]
EWHC 2241 the Court was concerned with a dispute that arose out of
a gas supply and processing agreement. The arbitration clause in that
case read as follows:
“The Parties agree that if any difference or dispute
arises between them concerning the interpretation or
performance of this Agreement and if they fail to settle such difference or dispute amicably, then a Party
may serve on the other a notice of arbitration under
the rules of the Nigerian Arbitration and Conciliation
Act (Cap A18 LFN 2004) which, except as otherwise
provided herein, shall apply to any dispute between
such Parties under this Agreement. Within thirty (30)
days of the notice of arbitration being issued by the
initiating Party, the Parties shall each appoint an arbitrator and the arbitrators thus appointed by the Parties shall within fifteen (15) days from the date the
last arbitrator was appointed, appoint a third arbitrator to complete the tribunal. …
The arbitration award shall be final and binding upon
the Parties. The award shall be delivered within two
months after the appointment of the third arbitrator or
within such extended period as may be agreed by the
Parties. The costs of the arbitration shall be borne
equally by the Parties. Each Party shall, however,
bear its own lawyers' fees. The venue of the arbitration shall be London, England or otherwise as agreed
by the Parties. The arbitration proceedings and
record shall be in the English language.”
77
71. The Court then held that the gas supply agreement provided for the
seat of the arbitration to be in London, inter alia, for the following reasons:
“ It is significant that clause 20 refers to the venue "of
the arbitration" as being London. The arbitra-
tion would continue up to and including the final
award. Clause 20 does not refer to London as being
the venue for some or all of the hearings. It does not
use the language used in s. 16(2) ACA of where the
tribunal may "meet" or may "hear witnesses, experts
or the parties". I consider that the provision repre-
sented an anchoring of the entire arbitration to London rather than providing that the hearings should
take place there.
Clause 20 provides that the venue of the arbitration "shall be" London "or otherwise as agreed between the parties". If the reference to venue was simply to where the hearings should take place, this
would be an inconvenient provision and one which
the parties are unlikely to have intended. It would
mean that hearings had to take place in London, however inconvenient that might be for a particular hearing, unless the parties agreed otherwise. The question of where hearings should be conveniently held is,
however, one which the arbitrators ordinarily have the
power to decide, as indeed is envisaged in s. 16(2)
ACA. That is likely to be a much more convenient arrangement. Clearly if the parties were in agreement
as to where a particular hearing were to take place,
that would be likely to be very influential on the arbitral tribunal. But if for whatever reason they were not
in agreement, and it is not unknown for parties to arbitration to become at loggerheads about very many
matters, then it is convenient for the arbitrators to be
able to decide. If that arrangement was to be displaced it would, in my judgment, have to be spelled
78
out clearly. Accordingly, the reference to the "venue"
as being London or otherwise as agreed between the
parties, is better read as providing that the seat of
the arbitration is to be England, unless the parties
agree to change it. This would still allow the arbitrators to decide where particular hearings should take
place, while providing for an anchor to England for
supervisory purposes, unless changed.”
(emphasis supplied)
72. Coming to the judgments of our Courts, this Court in Dozco India (P)
Ltd. v. Doosan Infracore Co. Ltd. (2011) 16 SCC 179, was concerned with the following arbitration clause contained in the agreement between the parties:
“Article 22. Governing Laws — 22.1: This agreement
shall be governed by and construed in accordance
with the laws of The Republic of Korea.
Article 23. Arbitration — 23.1: All disputes arising in
connection with this agreement shall be finally settled
by arbitration in Seoul, Korea (or such other place as
the parties may agree in writing), pursuant to the
rules of agreement then in force of the International
Chamber of Commerce.”
73. The Court then held:
“18. In my opinion, there is essential difference between
the clauses referred to in Citation Infowares
Ltd. v. Equinox Corpn. [(2009) 7 SCC 220] as also
in Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail
Ltd. [(2008) 10 SCC 308] on one hand and Article 23.1
in the present case, on the other. Shri Gurukrishna
Kumar rightly pointed out that the advantage of the
bracketed portion cannot be taken, particularly, in view
79
of the decision in Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del
Peru [(1988) 1 Lloyd's Rep 116 (CA)] wherein it was
held:
“All contracts which provide for arbitration and contain a
foreign element may involve three potentially relevant
systems of law: (1) the law governing the substantive
contract; (2) the law governing the agreement to
arbitrate and the performance of that agreement; (3) the
law governing the conduct of the arbitration. In the
majority of the cases all three will be the same, but (1)
will often be different from (2) and (3) and occasionally,
but rarely, (2) may also differ from (3).”
That is exactly the case here. The language of Article
23.1 clearly suggests that all the three laws are the laws
of The Republic of Korea with the seat of arbitration in
Seoul, Korea and the arbitration to be conducted in
accordance with the Rules of the International Chamber
of Commerce.
19. In respect of the bracketed portion in Article 23.1,
however, it is to be seen that it was observed in Naviera
case [(1988) 1 Lloyd's Rep 116 (CA)] :
“… It seems clear that the submissions advanced below
confused the legal ‘seat’, etc. of an arbitration with the
geographically convenient place or places for holding
hearings. This distinction is nowadays a common
feature of international arbitrations and is helpfully
explained in Redfern and Hunter [Ed.: Redfern and
Hunter on International Arbitration.] in the following
passage under the heading ‘The Place of Arbitration’:
‘The preceding discussion has been on the basis that
there is only one “place” of arbitration. This will be the
place chosen by or on behalf of the parties; and it will be
designated in the arbitration agreement or the terms of
reference or the minutes of proceedings or in some
80
other way as the place or “seat” of the arbitration. This
does not mean, however, that the Arbitral Tribunal must
hold all its meetings or hearings at the place of
arbitration. International commercial arbitration often
involves people of many different nationalities, from
many different countries. In these circumstances, it is by
no means unusual for an Arbitral Tribunal to hold
meetings — or even hearings — in a place other than
the designated place of arbitration, either for its own
convenience or for the convenience of the parties or
their witnesses….
It may be more convenient for an Arbitral Tribunal sitting
in one country to conduct a hearing in another country
— for instance, for the purpose of taking evidence…. In
such circumstances, each move of the Arbitral Tribunal
does not of itself mean that the seat of the arbitration
changes. The seat of the arbitration remains the place
initially agreed by or on behalf of the parties.’
These aspects need to be borne in mind when one
comes to the Judge's construction of this policy.”
It would be clear from this that the bracketed portion in
the article was not for deciding upon the seat of the
arbitration, but for the convenience of the parties in case
they find to hold the arbitration proceedings somewhere
else than Seoul, Korea. The part which has been quoted
above from Naviera Amazonica Peruana
S.A. v. Compania International de Seguros del
Peru [(1988) 1 Lloyd's Rep 116 (CA)] supports this
inference.
20. In that view, my inferences are that:
(i) The clear language of Articles 22 and 23 of the
distributorship agreement between the parties in this
case spells out a clear agreement between the parties
excluding Part I of the Act.
(ii) The law laid down in Bhatia International v. Bulk
Trading S.A. [(2002) 4 SCC 105] and Indtel Technical
Services (P) Ltd. v. W.S. Atkins Rail Ltd. [(2008) 10 SCC
308] , as also in Citation Infowares Ltd. v. Equinox
81
Corpn. [(2009) 7 SCC 220] is not applicable to the
present case.
(iii) Since the interpretation of Article 23.1 suggests that
the law governing the arbitration will be Korean Law and
the seat of arbitration will be Seoul in Korea, there will
be no question of applicability of Section 11(6) of the Act
and the appointment of arbitrator in terms of that
provision.”
74. In Videocon Industries Ltd. v. Union of India (2011) 6 SCC 161,
this Court was concerned with an arbitration agreement between the
parties as follows:
“34.12. Venue and law of arbitration agreement.—The
venue of sole expert, conciliation or arbitration
proceedings pursuant to this article, unless the parties
otherwise agree, shall be Kuala Lumpur, Malaysia, and
shall be conducted in the English language. Insofar as
practicable, the parties shall continue to implement the
terms of this contract notwithstanding the initiation of
arbitral proceedings and any pending claim or dispute.
Notwithstanding the provisions of Article 33.1, the
arbitration agreement contained in this Article 34 shall
be governed by the laws of England.”
75. Referring to Sections 3 and 53 of the English Arbitration Act, 1996,
the Court held:
“20. We shall first consider the question whether Kuala
Lumpur was the designated seat or juridical seat of
arbitration and the same had been shifted to London. In
terms of Article 34.12 of the PSC entered into by 5
parties, the seat of arbitration was Kuala Lumpur,
Malaysia. However, due to outbreak of epidemic SARS,
the Arbitral Tribunal decided to hold its sittings first at
Amsterdam and then at London and the parties did not
82
object to this. In the proceedings held on 14-10-2003
and 15-10-2003 at London, the Arbitral Tribunal
recorded the consent of the parties for shifting the
juridical seat of arbitration to London. Whether this
amounted to shifting of the physical or juridical seat of
arbitration from Kuala Lumpur to London? The decision
of this would depend on a holistic consideration of the
relevant clauses of the PSC.
21. Though, it may appear repetitive, we deem it
necessary to mention that as per the terms of
agreement, the seat of arbitration was Kuala Lumpur. If
the parties wanted to amend Article 34.12, they could
have done so only by a written instrument which was
required to be signed by all of them. Admittedly, neither
was there any agreement between the parties to the
PSC to shift the juridical seat of arbitration from Kuala
Lumpur to London nor was any written instrument
signed by them for amending Article 34.12. Therefore,
the mere fact that the parties to the particular arbitration
had agreed for shifting of the seat of arbitration to
London cannot be interpreted as anything except
physical change of the venue of arbitration from Kuala
Lumpur to London.”
76. In Enercon (India) Ltd. (supra), this Court was concerned with an
arbitration clause which stated that the venue shall be in London. The
Court held, on the facts of that case, that since the substantive law of
the contract, the curial law of the proceedings, and the law governing
the arbitration agreement were all India, the seat would be India -
London only being the venue for holding meetings. The Court then
held, following the Naviera Amazonica Peruana S.A. v. Compania
83
Internacional De Seguros Del Peru (1988) 1 Lloyd’s Rep 116 (CA)
case, that the lex fori of the arbitral proceedings, namely, the place in
which arbitration is to be held, must be considered to be the seat of
the arbitral proceedings, other things being equal, as follows:
“100. On the facts of the case, it was observed
in Naviera Amazonica case [Naviera Amazonica
Peruana S.A. v. Compania Internacional De Seguros
Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] that since
there was no contest on Law 1 and Law 2, the entire
issue turned on Law 3, “the law governing the conduct
of the arbitration”. This is usually referred to as
the curial or procedural law, or the lex fori. Thereafter,
the Court approvingly quoted the following observation
from Dicey & Morris on the Conflict of Laws (11th Edn.):
“English law does not recognise the concept of a
delocalised arbitration or of arbitral procedures floating
in the transnational firmament, unconnected with any
municipal system of law.” It is further held that
“accordingly every arbitration must have a ‘seat’ or
‘locus arbitri’ or ‘forum’ which subjects its procedural
rules to the municipal law which is there in force”. The
Court thereafter culls out the following principle:
“Where the parties have failed to choose the law
governing the arbitration proceedings, those
proceedings must be considered, at any rate prima
facie, as being governed by the law of the country in
which the arbitration is held, on the ground that it is the
country most closely connected with the proceedings.”
The aforesaid classic statement of the conflict of law
rules as quoted in Dicey & Morris on the Conflict of
Laws (11th Edn.), Vol. 1, was approved by the House of
Lords in James Miller & Partners Ltd. v. Whitworth
Street Estates (Manchester) Ltd. [1970 AC 583 : (1970)
84
2 WLR 728 : (1970) 1 All ER 796 : (1970) 1 Lloyd's Rep
269 (HL)] and Mustill, J. in Black Clawson International
Ltd. v. Papierwerke Waldhof-Aschaffenburg A.G. [(1981)
2 Lloyd's Rep 446 at p. 453] , a little later characterised
the same proposition as “the law of the place where the
reference is conducted, the lex fori”. The position of law
in India is the same.
77. The Court then examined Braes of Doune Wind Farm (Scotland) v.
Alfred McAlpine Business Services Ltd. [2008] EWHC 436 (TCC)
in some detail, and concluded in paragraph 118 as follows:
“118. In Braes of Doune [Braes of Doune Wind Farm
(Scotland) Ltd. v. Alfred McAlpine Business Services
Ltd., [2008] Bus LR D 137 (QBD) : 2008 EWHC 426
(TCC)] , detailed examination was undertaken by the
Court to discern the intention of the parties as to
whether the place mentioned refers to venue or
the seat of the arbitration. The factual situation in the
present case is not as difficult or complex as the parties
herein have only designated London as a venue.
Therefore, if one has to apply the reasoning and logic of
Akenhead, J., the conclusion would be irresistible that
the parties have designated India as the seat. This is
even more so as the parties have not agreed that the
courts in London will have exclusive jurisdiction to
resolve any dispute arising out of or in connection with
the contract, which was specifically provided in Clause
1.4.1 of the EPC contract examined by Akenhead, J.
in Braes of Doune [Braes of Doune Wind Farm
(Scotland) Ltd. v. Alfred McAlpine Business Services
Ltd., [2008] Bus LR D 137 (QBD) : 2008 EWHC 426
(TCC)] . In the present case, except for London being
chosen as a convenient place/venue for holding the
meetings of the arbitration, there is no other factor
connecting the arbitration proceedings to London.”
85
78. The Court then made a reference to C v. D [2007] EWCA Civ. 182,
where the Court, following C v. D (supra), held:
“122. Longmore, J. of the Court of Appeal observed:
(C v. D case [[2008] Bus LR 843 : 2007 EWCA Civ
1282] , Bus LR p. 851, paras 16-17)
“16. I shall deal with Mr Hirst's arguments in due course
but, in my judgment, they fail to grapple with the central
point at issue which is whether or not, by choosing
London as the seat of the arbitration, the parties must
be taken to have agreed that proceedings on the award
should be only those permitted by English law. In my
view they must be taken to have so agreed for the
reasons given by the Judge. The whole purpose of the
balance achieved by the Bermuda Form (English
arbitration but applying New York law to issues arising
under the policy) is that judicial remedies in respect of
the award should be those permitted by English law and
only those so permitted. Mr Hirst could not say (and did
not say) that English judicial remedies for lack of
jurisdiction on procedural irregularities under Sections
67 and 68 of the Indian Arbitration Act, 1996 were not
permitted; he was reduced to saying that New York
judicial remedies were also [Ed.: The word “also” has
been emphasised in original.] permitted. That, however,
would be a recipe for litigation and (what is worse)
confusion which cannot have been intended by the
parties. No doubt New York law has its own judicial
remedies for want of jurisdiction and serious irregularity
but it could scarcely be supposed that a party aggrieved
by one part of an award could proceed in one
jurisdiction and a party aggrieved by another part of an
award could proceed in another jurisdiction. Similarly, in
the case of a single complaint about an award, it could
not be supposed that the aggrieved party could
complain in one jurisdiction and the satisfied party be
entitled to ask the other jurisdiction to declare its
86
satisfaction with the award. There would be a serious
risk of parties rushing to get the first judgment or of
conflicting decisions which the parties cannot have
contemplated.
17. It follows from this that a choice of seat for the
arbitration must be a choice of forum for remedies
seeking to attack the award.”
On the facts of the case, the Court held that the seat of
the arbitration was in England and accordingly
entertained the challenge to the award.”
79. Reference was made to Roger Shashoua (supra) in paragraphs 124
to 128, and then to various other judgments, including BALCO
(supra), as follows:
“134. It is accepted by most of the experts in the law
relating to international arbitration that in almost all the
national laws, arbitrations are anchored to
the seat/place/situs of arbitration. Redfern and Hunter
on International Arbitration (5th Edn., Oxford University
Press, Oxford/New York 2009), in Para 3.54 concludes
that “the seat of the arbitration is thus intended to be its
centre of gravity”. In BALCO [Bharat Aluminium
Co. v. Kaiser Aluminium Technical Services Inc., (2012)
9 SCC 552 : (2012) 4 SCC (Civ) 810] , it is further
noticed that this does not mean that all proceedings of
the arbitration are to be held at the seat of arbitration.
The arbitrators are at liberty to hold meetings at a place
which is of convenience to all concerned. This may
become necessary as arbitrators often come from
different countries. Therefore, it may be convenient to
hold all or some of the meetings of the arbitration in a
location other than where the seat of arbitration is
located. In BALCO, the relevant passage from Redfern
and Hunter has been quoted which is as under: (SCC p.
598, para 75)
87
“75. … ‘The preceding discussion has been on the basis
that there is only one “place” of arbitration. This will be
the place chosen by or on behalf of the parties; and it
will be designated in the arbitration agreement or the
terms of reference or the minutes of proceedings or in
some other way as the place or “seat” of the arbitration.
This does not mean, however, that the Arbitral
Tribunal must hold all its meetings or hearings at the
place of arbitration. International commercial arbitration
often involves people of many different nationalities,
from many different countries. In these circumstances, it
is by no means unusual for an Arbitral Tribunal to hold
meetings—or even hearings—in a place other than the
designated place of arbitration, either for its own
convenience or for the convenience of the parties or
their witnesses…. It may be more convenient for an
Arbitral Tribunal sitting in one country to conduct a
hearing in another country — for instance, for the
purpose of taking evidence…. In such circumstances
each move of the Arbitral Tribunal does not of itself
mean that the seat of arbitration changes. The seat of
arbitration remains the place initially agreed by or on
behalf of the parties.’ (Naviera case [Naviera
Amazonica Peruana S.A. v. Compania Internacional De
Seguros Del Peru, (1988) 1 Lloyd's Rep 116 (CA)] ,
Lloyd's Rep p. 121)”
These observations have also been noticed in Union of
India v. McDonnell Douglas Corpn. [(1993) 2 Lloyd's
Rep 48]”
80. The Court finally concluded:
“135. In the present case, even though the venue of
arbitration proceedings has been fixed in London, it
cannot be presumed that the parties have intended
the seat to be also in London. In an international
commercial arbitration, venue can often be different
from the seat of arbitration. In such circumstances, the
88
hearing of the arbitration will be conducted at
the venue fixed by the parties, but this would not bring
about a change in the seat of the arbitration. This is
precisely the ratio in Braes of Doune [Braes of Doune
Wind Farm (Scotland) Ltd. v. Alfred McAlpine Business
Services Ltd., [2008] Bus LR D 137 (QBD) : 2008
EWHC 426 (TCC)] . Therefore, in the present case, the
seat would remain in India.”
81. In Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd. and
Anr. (2015) 9 SCC 172, the Court dealt with an arbitration clause between the parties which read as follows:
“5. If any dispute or difference should arise under this
charter, general average/arbitration in London to apply,
one to be appointed by each of the parties hereto, the
third by the two so chosen, and their decision or that of
any two of them, shall be final and binding, and this
agreement may, for enforcing the same, be made a rule
of court. Said three parties to be commercial men who
are the members of the London Arbitrators Association.
This contract is to be governed and construed according
to the English law. For disputes where total amount
claimed by either party does not exceed US $50,000 the
arbitration should be conducted in accordance with
small claims procedure of the London Maritime
Arbitration Association.”
82. After referring, in extenso, to a large number of English decisions and
the decisions of this Court, the Court concluded:
“48. In the present case, the agreement stipulates that
the contract is to be governed and construed according
to the English law. This occurs in the arbitration clause.
Mr Viswanathan, learned Senior Counsel, would submit
that this part has to be interpreted as a part of “curial
89
law” and not as a “proper law” or “substantive law”. It is
his submission that it cannot be equated with the seat of
arbitration. As we perceive, it forms as a part of the
arbitration clause. There is ample indication through
various phrases like “arbitration in London to apply”,
arbitrators are to be the members of the “London
Arbitration Association” and the contract “to be
governed and construed according to the English law”.
It is worth noting that there is no other stipulation
relating to the applicability of any law to the agreement.
There is no other clause anywhere in the contract. That
apart, it is also postulated that if the dispute is for an
amount less than US $50,000 then, the arbitration
should be conducted in accordance with small claims
procedure of the London Maritime Arbitration
Association. When the aforesaid stipulations are read
and appreciated in the contextual perspective, “the
presumed intention” of the parties is clear as crystal that
the juridical seat of arbitration would be London.”
83. Most recently, in Brahmani River Pellets (supra), this Court in a domestic arbitration considered clause 18 - which was the arbitration
agreement between the parties - and which stated that arbitration
shall be under Indian Arbitration and Conciliation Act, 1996, and the
venue of arbitration shall be Bhubaneswar. After citing several judgments of this Court and then referring to Indus Mobile Distribution
(supra), the Court held:
“18. Where the contract specifies the jurisdiction of
the court at a particular place, only such court will
have the jurisdiction to deal with the matter and parties intended to exclude all other courts. In the
present case, the parties have agreed that the
“venue” of arbitration shall be at Bhubaneswar. Con90
sidering the agreement of the parties having
Bhubaneswar as the venue of arbitration, the intention of the parties is to exclude all other courts. As
held in Swastik, non-use of words like “exclusive jurisdiction”, “only”, “exclusive”, “alone” is not decisive and
does not make any material difference.
19. When the parties have agreed to the have the
“venue” of arbitration at Bhubaneshwar, the Madras
High Court erred in assuming the jurisdiction under
Section 11(6) of the Act. Since only the Orissa High
Court will have the jurisdiction to entertain the petition
filed under Section 11(6) of the Act, the impugned order is liable to be set aside.”
84. 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
91
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.
Correctness of the judgment in Hardy Exploration and Production (India) Ltd.
85. Roger Shashoua (supra) was expressly referred to in paragraphs
108 and 109 of BALCO (supra), and followed in paragraph 110 as ex92
tracted above. BALCO (supra) then summed up the legal position as
follows:
“116. The legal position that emerges from a conspectus of all the decisions, seems to be, that the
choice of another country as the seat of arbitration inevitably imports an acceptance that the law of that
country relating to the conduct and supervision of arbitrations will apply to the proceedings.
117. It would, therefore, follow that if the arbitration
agreement is found or held to provide for a seat /
place of arbitration outside India, then the provision
that the Arbitration Act, 1996 would govern the arbitration proceedings, would not make Part I of the Arbitration Act, 1996 applicable or enable Indian Courts to
exercise supervisory jurisdiction over the arbitration
or the award. It would only mean that the parties have
contractually imported from the Arbitration Act, 1996,
those provisions which are concerned with the internal conduct of their arbitration and which are not inconsistent with the mandatory provisions of the English Procedural Law/Curial Law. This necessarily follows from the fact that Part I applies only to arbitrations having their seat / place in India.”
86. In Roger Shashoua & Ors. v. Mukesh Sharma & Ors., (2017) 14
SCC 722, a Division Bench of this Court, after referring to a number
of judgments, referred to the English Shashoua judgment3
as follows:
“46. As stated earlier, in Shashoua Cooke, J., in the
course of analysis, held that "London arbitration" is a
well known phenomenon which is often chosen by
foreign nationals with a different law, such as the law
of New York, governing the substantive rights of the
parties and it is because of the legislative framework
and supervisory powers of the courts here which
3
[2009] EWHC 957 (Comm).
93
many parties are keen to adopt. The learned Judge
has further held that when there is an express designation of the arbitration venue as London 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 London is the juridical seat and English law the curial law.”
87. The Division bench then turned down an argument that BALCO
(supra) had not expressly approved the Shashoua principle, as follows:
“54. We had earlier extracted extensively from the
said judgment, as we find, the Court after adverting to
various aspects, has categorically held that the High
Court had not followed Shashoua principle. The various decisions referred to in Enercon (India) Ltd.
(supra), the analysis made and the propositions deduced leads to an indubitable conclusion that
Shashoua principle has been accepted by Enercon
(India) Ltd. (supra). It is also to be noted that in
BALCO, the Constitution Bench has not merely reproduced few paragraphs from Shashoua but has also
referred to other decisions on which Shashoua has
placed reliance upon. As we notice, there is analysis
of earlier judgments, though it does not specifically
state that "propositions laid down in Shashoua are
accepted". On a clear reading, the ratio of the decision in BALCO, in the ultimate eventuate, reflects that
the Shashoua principle has been accepted and the
two-Judge Bench in Enercon (India) Ltd. (supra), after
succinctly analyzing it, has stated that the said principles have been accepted by the Constitution Bench.
Therefore, we are unable to accept the submission of
Mr. Chidambaram that the finding recorded in Enercon (India) Ltd. (supra) that Shashoua principle has
been accepted in BALCO should be declared as per
incuriam.”
94
88. The Court then set out the arbitration clause and the governing law on
the facts of the case as follows:
“69. Though we have opined that Shashoua principle
has been accepted in BALCO and Enercon (India)
Ltd. (supra), yet we think it apt to refer to the clauses
in the agreement and scrutinize whether there is any
scope to hold that the courts in India could have entertained the petition. Clause 14 of the shareholders
agreement (SHA) refers to arbitration. The said
Clause reads thus:
14. ARBITRATION
14.1 ...Each party shall nominate one arbitrator and in
the event of any difference between the two arbitrators, a third arbitrator/umpire shall be appointed. The
arbitration proceedings shall be in accordance with
the Rules of Conciliation and Arbitration of the International Chamber of Commerce Paris.
14.2 Proceedings in such arbitrations shall be conducted in the English language.
14.3 The arbitration award shall be substantiated in
writing and shall be final and binding on the parties.
14.4 The venue of the arbitration shall be London,
United Kingdom."
70. Clause 17.6 deals with governing law, which
reads as follows:
17.6 GOVERNING LAW
This Agreement shall be governed by and construed
in accordance with the laws of India.”
89. The court then went on to state:
95
“72. It is worthy to note that the arbitration agreement
is not silent as to what law and procedure is to be followed. On the contrary, Clause 14.1 lays down that
the arbitration proceedings shall be in accordance
with the Rules of Conciliation and Arbitration of the
ICC. In Enercon (India) Ltd. (supra), the two-Judge
Bench referring to Shashoua case accepted the view
of Cooke, J. that the phrase "venue of arbitration shall
be in London, UK" was accompanied by the provision
in the arbitration Clause or arbitration to be conducted
in accordance with the Rules of ICC in Paris. The
two-Judge Bench accepted the Rules of ICC, Paris
which is supernational body of Rules as has been
noted by Cooke, J. and that is how it has accepted
that the parties have not simply provided for the location of hearings to be in London. To elaborate, the
distinction between the venue and the seat remains.
But when a Court finds there is prescription for venue
and something else, it has to be adjudged on the
facts of each case to determine the juridical seat. As
in the instant case, the agreement in question has
been interpreted and it has been held that London is
not mentioned as the mere location but the courts in
London will have the jurisdiction, another interpretative perception as projected by the learned senior
Counsel is unacceptable.
xxx xxx xxx
76. In view of the aforesaid analysis, we allow the appeals and set aside the judgment of the High Court of
Delhi that has held that courts in India have jurisdiction, and has also determined that Gautam Budh Nagar has no jurisdiction and the petition Under Section
34 has to be filed before the Delhi High Court. Once
the courts in India have no jurisdiction, the aforesaid
conclusions are to be nullified and we so do. In the
facts and circumstances of the case, there shall be no
order as to costs.”
90. The stage is now set for consideration of the recent judgment of a
Three Judge Bench of this Court in Hardy Exploration and Produc96
tion (India) Inc. (supra). The precise question that had been referred
to the Three Judge Bench in Hardy Exploration and Production (India) Inc. (supra) was as to whether the ratio of Sumitomo Heavy Industries Ltd. v. ONGC Ltd. & Ors. (1998) 1 SCC 305 - a judgment
delivered under the Arbitration Act, 1940 - would have any impact on
the “juridical seat” doctrine in arbitration law, as developed in England
and by our courts. The Three Judge Bench answered the reference
as follows:
“27. In view of the aforesaid development of law,
there is no confusion with regard to what the seat of
arbitration and venue of arbitration mean. There is no
shadow of doubt that the arbitration Clause has to be
read in a holistic manner so as to determine the jurisdiction of the Court. That apart, if there is mention of
venue and something else is appended thereto, depending on the nature of the prescription, the Court
can come to a conclusion that there is implied exclusion of Part I of the Act. The principle laid down in
Sumitomo Heavy Industries Ltd. (supra) has been referred to in Reliance Industries Limited (II) and distinguished. In any case, it has no applicability to a controversy under the Act. The said controversy has to
be governed by the BALCO principle or by the agreement or by the principle of implied exclusion as has
been held in Bhatia International.
28. Thus, we answer the reference accordingly.”
91. Having answered the reference, the Court then went on to consider
the arbitration clause in the facts of that case, which was set out in
paragraph 30 as follows:
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“30. Article 33 deals with "Sole expert, conciliation
and arbitrator". Article 33.9 and 33.12 read thus:
33.9 Arbitration proceedings shall be conducted in
accordance with the UNICITRAL Model Law on
International Commercial Arbitration of 1985 except
that in the event of any conflict between the Rules
and the provisions of this Article 33, the provisions of
this Article 33 shall govern.
xxx xxx xxx
33.12 The venue of conciliation or arbitration
proceedings pursuant to this Article unless the parties
otherwise agree, shall be Kuala Lumpur and shall be
conducted in English language. Insofar as practicable
the parties shall continue to implement the terms of
this contract notwithstanding the initiation of
arbitration proceedings and any pending claim or
dispute.”
92. The Court then went on to see for itself Articles 20 and 31 of the
UNCITRAL Model Law and then went on to state that under the
UNCITRAL Model Law, either the juridical seat of the arbitral
proceedings is indicated in the agreement between the parties, or if it
is not, must be determined by the Arbitral Tribunal. Holding that the
arbitration clause, on the facts of that case, referred to the “venue” as
Kuala Lumpur, the Court went on to hold that there was no
determination of any “juridical seat” by agreement, and would
therefore have to be determined by the Arbitral Tribunal. As there was
no such determination by the Arbitral Tribunal, the Court then
concluded:
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“40. The said test clearly means that the expression
of determination signifies an expressive opinion. In
the instant case, there has been no adjudication and
expression of an opinion. Thus, the word 'place'
cannot be used as seat. To elaborate, a venue can
become a seat if something else is added to it as a
concomitant. But a place unlike seat, at least as is
seen in the contract, can become a seat if one of the
conditions precedent is satisfied. It does not ipso
facto assume the status of seat. Thus understood,
Kuala Lumpur is not the seat or place of arbitration
and the interchangeable use will not apply in stricto
sensu.
41. In view of the aforesaid analysis, the irresistible
conclusion is that the Courts in India have jurisdiction
and, therefore, the order passed by the Delhi High
Court is set aside. Resultantly, the appeal stands
allowed and the High Court is requested to deal with
the application preferred Under Section 34 of the Act
as expeditiously as possible. There shall be no order
as to costs.”
93. The Three Judge Bench in Hardy Exploration and Production (India) Inc (supra) failed to apply the Shashoua principle to the arbitration clause in question. Had the Shashoua principle been applied, the
answer would have been that Kuala Lumpur, which was stated to be
the “venue” of arbitration proceedings, being governed by the UNCITRAL Model Law, would be governed by a supranational set of rules,
and there being no other contrary indicator, it would be clear that
Kuala Lumpur would therefore be the juridical “seat” of the arbitration.
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94. As we have seen hereinabove, the judgement of Cooke, J. in Roger
Shashoua and Ors. v. Mukesh Sharma4
, was expressly approved by
the 5-Judge Bench in BALCO (supra), as was stated by the Supreme
Court of India in Roger Shashoua and Ors. v. Mukesh Sharma and
Ors.5
By failing to apply the Shashoua principle to the arbitration
clause in question, the Three Judge Bench in Hardy Exploration and
Production (India) Inc (supra) has not followed the law as to determination of a “juridical seat”, laid down by a Five Judge Bench of this
Court in BALCO (supra). The result in Hardy Exploration and Production (India) Inc (supra) is that a foreign award that would be delivered in Kuala Lumpur, would now be liable to be challenged in the
Courts at Kuala Lumpur, and also be challenged in the courts in India,
under Section 34 of Part I of the Arbitration Act, 1996. This is exactly
the situation that this Court encountered when it decided the case of
Venture Global Engineering v. Satyam Computer Services Ltd. &
Anr., (2008) 4 SCC 190. The Five Judge Bench in BALCO (supra)
expressly overruled Venture Global Engineering (supra) as follows:
“143…With these observations, the matter was remanded back to the trial court to dispose of the suit
on merits. The submissions made by K.K. Venugopal,
as noticed in para 42, epitomise the kind of chaos
4
[2009] EWHC 957 (Comm)
5
(2017) 14 SCC 722
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which would be created by two court systems, in two
different countries, exercising concurrent jurisdiction
over the same dispute. There would be a clear risk of
conflicting decisions. This would add to the problems
relating to enforcement of such decisions. Such a situation would undermine the policy underlying the
New York Convention or the UNCITRAL Model Law.
Therefore, we are of the opinion that appropriate
manner to interpret the aforesaid provision is that “alternative two” will become available only if “alternative
one” is not available.
xxx xxx xxx
“154. At this stage, we may notice that in spite of the
aforesaid international understanding of the second
limb of Article V(1)(e), this Court has proceeded on a
number of occasions to annul an award on the basis
that parties had chosen Indian law to govern the substance of their dispute. The aforesaid view has been
expressed in Bhatia International [(2002) 4 SCC 105]
and Venture Global Engg. [(2008) 4 SCC 190] In our
opinion, accepting such an interpretation would be to
ignore the spirit underlying the New York Convention
which embodies a consensus evolved to encourage
consensual resolution of complicated, intricate and in
many cases very sensitive international commercial
disputes. Therefore, the interpretation which hinders
such a process ought not to be accepted. This also
seems to be the view of the national courts in different jurisdictions across the world. For the reasons
stated above, we are also unable to agree with the
conclusions recorded by this Court in Venture Global
Engg. [(2008) 4 SCC 190] that the foreign award
could be annulled on the exclusive grounds that the
Indian law governed the substance of the dispute.
Such an opinion is not borne out by the huge body of
judicial precedents in different jurisdictions of the
world.”
95. The Five Judge Bench then went on to state:
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“195. With utmost respect, we are unable to agree
with the conclusions recorded in the judgments of this
Court in Bhatia International (supra) and Venture
Global Engineering (supra). In our opinion, the provision contained in Section 2(2) of the Arbitration Act,
1996 is not in conflict with any of the provisions either
in Part I or in Part II of the Arbitration Act, 1996. In a
foreign seated international commercial arbitration, no
application for interim relief would be maintainable
under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is limited to all
arbitrations which take place in India. Similarly, no
suit for interim injunction simplicitor would be maintainable in India, on the basis of an international commercial arbitration with a seat outside India.”
96. The decision in Hardy Exploration and Production (India) Inc.
(supra) is therefore contrary to the Five Judge Bench in BALCO
(supra), in that it failed to apply the Shashoua principle to the arbitration clause in question. The Hardy Exploration and Production (India) Inc. (supra) decision would lead to the result that a foreign award
would not only be subject to challenge in the country in which it was
made, but also subject to challenge under Section 34 of Part I of the
Arbitration Act, 1996, which would lead to the chaos spoken of in
paragraph 143 of BALCO (supra), with the concomitant risk of conflicting decisions, as held in Venture Global Engineering (supra)
[overruled in BALCO (supra)], which would add to problems relating
to enforcement, and undermine the policy underlying the New York
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Convention and the UNCITRAL Model Law. We, therefore, declare
that the judgment in Hardy Exploration and Production (India) Inc.
(supra), being contrary to the Five Judge Bench in BALCO (supra),
cannot be considered to be good law.
97. 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, 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.
98. We have extracted the arbitration agreement in the present case (as
contained in Clause 67.3 of the agreement between the parties) in
paragraph 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
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an ‘international commercial arbitration’ within the meaning of Section
2(1)(f) of the Arbitration Act, 1996, would have to be finally settled in
accordance 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 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.
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99. 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…”, thereby 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.
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100.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 exclusive jurisdiction clause so far as
Courts of the “seat” are concerned.
101.Consequently, the impugned judgment is set aside, and the Section
34 petition is ordered to be presented in the Courts in New Delhi, as
was held by the learned Single Judge of the Special Commercial
Court at Gurugram.
102.The appeals are allowed in the aforesaid terms.
……………………………J.
(R.F. Nariman)
……………………………J.
(Aniruddha Bose)
……………………………J.
New Delhi; (V. Ramasubramanian)
December 10, 2019
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