BBR (INDIA) PRIVATE LIMITED VS S.P. SINGLA CONSTRUCTIONS PRIVATE LIMITED

BBR (INDIA) PRIVATE LIMITED VS S.P. SINGLA CONSTRUCTIONS PRIVATE LIMITED

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

 CIVIL APPEAL NOS. 4130-4131 OF 2022

(ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NOS. 30019-30020 OF 2019)

BBR (INDIA) PRIVATE LIMITED ..... APPELLANT

VERSUS

S.P. SINGLA CONSTRUCTIONS

PRIVATE LIMITED ..... RESPONDENT

J U D G M E N T

SANJIV KHANNA, J.

Leave granted.

2. The short and interesting issue which arises in the present

appeals is – whether conducting the arbitration proceedings at

Delhi, owing to the appointment of a new arbitrator,1

 would shift

the ‘jurisdictional seat of arbitration’ from Panchkula in Haryana,

the place fixed by the first arbitrator2

 for the arbitration

proceedings?

3. Before we refer to the statutory provisions and the case law

precedents, facts in brief, relevant to decide the aforesaid

1 Mr. Justice (Retd) T.S. Doabia

2 Mr. Justice (Retd.) N.C. Jain

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 1 of 28

question, are required to be stated. The appellant – BBR (India)

Private Limited, and the respondent – S.P. Singla Constructions

Private Limited, had entered into a contract dated 30th June 2011,

under which the appellant was required to supply, install and

undertake stressing of cable strays for the 592 metre long cable

stay bridge being constructed by the respondent over the river

Ravi at Basouli, Jammu and Kashmir. Letter of intent dated 30th

June 2011 issued under the contract had an arbitration clause for

resolution of disputes by a sole arbitrator, which reads thus:

“Dispute Resolution and Arbitration

Save where the decision of the contractor is final and

binding on the subcontract any dispute difference

arising between the contractor and sub-contractor

relating to any matter. In first instance shall be

attempted to be resolved by the arbitration of the sole

arbitrator to be appointed by the managing director of

S.P. Singla Constructions Pvt. Ltd.

This letter of intent is being issued to you in two

original you are requested return one original duty

signed in token of your acceptance, which shall

constitute a valid agreement for the work till such time

a formal agreement is signed between you and us.”

4. The arbitration clause is silent and does not stipulate the seat or

venue of arbitration. The contract and letter of intent were

executed at Panchkula in Haryana. The corporate office of the

respondent is also located at Panchkula. However, the registered

office of the appellant is located in Bengaluru, Karnataka.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 2 of 28

5. As disputes arose between the parties, the matter was referred to

arbitration, and Mr. Justice (Retd.) N.C. Jain was appointed as the

sole arbitrator. In the first sitting held on 5th August 2014, the

arbitral tribunal held that the venue of the proceedings would be

H.No. 292, Sector-6, Panchkula, Haryana. The respondent was

not present at the proceedings and had submitted a written

request for an adjournment, which request was accepted. Neither

party had objected to the place of arbitration proceedings as fixed

by the arbitral tribunal. Arbitration proceedings were thereafter

held at H.No. 52, Sector-8A, Chandigarh, on 16th December 2014,

where the parties were directed to complete the pleadings, and

the matter was adjourned for the framing of issues on 22nd

February 2015. In the proceedings held on 29th May 2015, Mr.

Justice (Retd.) N.C. Jain recused recording that he did not want to

continue as the arbitrator for personal reasons. The records

received thus far would be handed over to the new arbitrator.

Pleadings were completed by then.

6. Thereupon, Mr. Justice (Retd.) T.S. Doabia took over as the sole

arbitrator and recorded his consent in this regard in the first

procedural order dated 30th June 2015. The order stated that the

venue of the proceedings would be Delhi. Apparently, the

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 3 of 28

appellant was not present and accordingly, the respondent was

directed by the arbitral tribunal to take steps to intimate the

appellant.

7. The next order dated 18th July 2015 mentions that the parties had

filed the claim petition and the statement of defence along with the

counterclaim before Mr. Justice (Retd.) N.C. Jain. Rejoinder had

also been filed before the previous arbitrator. The parties were

directed to file their evidence by way of affidavits for which

timelines were fixed. The records from the previous arbitrator were

required to be collected by the respondent and placed before the

new arbitrator.

8. Thereafter, hearings were held, witnesses were cross-examined,

and the arguments were addressed by the parties at Delhi. The

order dated 22nd January 2016, states that the award would be

pronounced on 29th January 2016 at the address at New Delhi and

that the parties should send their representatives, failing which,

the award would be sent by email followed by a signed copy

through post.

9. The award was signed and pronounced at Delhi on 29th January

2016, whereunder the respondent was awarded a sum of

Rs.3,35,86,577/- with interest at the rate of 15% per annum.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 4 of 28

10. Thereafter, two proceedings were initiated. The respondent filed

an application for interim orders under Section 93

 of the Arbitration

and Conciliation Act, 19964

 before the Additional District Judge,

Panchkula, on 7th May 2016. The appellant filed a petition under

Section 345

 of the Act before the Delhi High Court on 28th April

3 9. Interim measures, etc., by Court.—

(1) A party may, before or during arbitral proceedings or at any time after the making of the

arbitral award but before it is enforced in accordance with section 36, apply to a court—

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes

of arbitral proceedings; or

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

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the

arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subjectmatter of the dispute in arbitration, or as to which any question may arise therein and authorising for

any of the aforesaid purposes any person to enter upon any land or building in the possession of any

party, or authorising any samples to be taken or any observation to be made, or experiment to be

tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and

convenient, and the Court shall have the same power for making orders as it has for the purpose of,

and in relation to, any proceedings before it.

(2) Where, before the commencement of the arbitral proceedings, a Court passes an order

for any interim measure of protection under sub-section (1), the arbitral proceedings shall be

commenced within a period of ninety days from the date of such order or within such further time as

the Court may determine.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an

application under sub-section (1), unless the Court finds that circumstances exist which may not

render the remedy provided under section 17 efficacious.

4 For short, “the Act”.

5 34. Application for setting aside arbitral award.—

(1) Recourse to a Court against an arbitral award may be made only by an application for

setting aside such award in accordance with sub-section (2) and sub-section (3).

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

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

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it

or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an

arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms

of the submission to arbitration, or it contains decisions on matters beyond the scope of the

submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be

separated from those not so submitted, only that part of the arbitral award which contains decisions

on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance

with the agreement of the parties, unless such agreement was in conflict with a provision of this Part

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 5 of 28

2016. Thus, the appellant and respondent invoked the jurisdiction

of two different courts. Resultantly, the question of the

‘jurisdictional seat of arbitration’ assumes importance, which must

be appropriately answered.

11. The petition filed by the respondent under Section 9 of the Act

before the Additional District Judge, Panchkula, was dismissed

vide order dated 14th December 2016, on the ground of lack of

territorial jurisdiction, inter alia, recording that the jurisdiction to

from which the parties cannot derogate, or, failing such agreement, was not in accordance with this

Part; or

(b) the Court finds that—

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law

for the time being in force, or

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

Explanation 1.—For the avoidance of any doubt, it is clarified that an award is in conflict with

the public policy of India, only if,—

(i) the making of the award was induced or affected by fraud or corruption or was in violation

of section 75 or section 81; or

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

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

Explanation 2.—For the avoidance of doubt, the test as to whether there is a contravention

with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.

(2A) An arbitral award arising out of arbitrations other than international commercial

arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent

illegality appearing on the face of the award: Provided that an award shall not be set aside merely on

the ground of an erroneous application of the law or by reappreciation of evidence.

(3) An application for setting aside may not be made after three months have elapsed from

the date on which the party making that application had received the arbitral award or, if a request

had been made under section 33, from the date on which that request had been disposed of by the

arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient

cause from making the application within the said period of three months it may entertain the

application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate

and it is so requested by a party, adjourn the proceedings for a period of time determined by it in

order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such

other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral

award

(5) An application under this section shall be filed by a party only after issuing a prior notice

to the other party and such application shall be accompanied by an affidavit by the applicant

endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event,

within a period of one year from the date on which the notice referred to in sub-section (5) is served

upon the other party.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 6 of 28

entertain the application vests solely with the Delhi High Court,

where a prior petition under Section 34 had been filed, and was

pending. The petition under Section 9, being a subsequent

petition, would be barred under Section 42 of the Act.

12. However, this order has been set aside by the High Court of

Punjab and Haryana vide order dated 14th October 2019, with the

finding that the courts of Delhi do not have the jurisdiction to

entertain the objections under Section 34 of the Act. To this effect,

the High Court of Punjab and Haryana has recorded that the

agreement between the parties was silent as to ‘the seat’ of the

arbitration proceedings, and the second arbitrator Mr. Justice

(Retd.) T.S. Doabia, vide his first order dated 30th June 2015, had

not determined Delhi to be the ‘seat of arbitration’. Relying on the

decision of this Court in State of West Bengal and Others v.

Associated Contractors,

6

 the High Court held that the courts at

Panchkula had jurisdiction to deal with the case. The review

application filed by the appellant was dismissed vide order dated

8

th November 2019.

13. These orders, passed by the High Court of Punjab and Haryana,

have been assailed before us by the appellant in these appeals.

6 (2015) 1 SCC 32

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 7 of 28

By order dated 9th January 2020, notice was issued in the present

appeals.

14. Section 2 (1) (e) of the Act, which defines the term ‘court’; Section

20 on the ‘place of arbitration’; as well as Section 42 read thus:

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

otherwise requires,—

xx xx xx

(e) “Court” means— (i) in the 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;”

xx xx xx

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

arbitration.

(2) Failing any agreement referred to in sub-section

(1), the 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.

xx xx xx

42. Jurisdiction.— Notwithstanding anything contained

elsewhere in this Part or in any other law for the time

being in force, where with respect to an arbitration

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 8 of 28

agreement any application under this Part has been

made in a 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 in no other Court.”

15. Interpretation of the term ‘court’, as defined in sub-clause (e) to

sub-section (1) of Section 2 of the Act, had come up for

consideration before a Constitutional Bench of five Judges in the

case of Bhartiya Aluminium Company v. Kaiser Aluminium

Technical Services Inc,

7

 which decision had examined the

distinction between ‘jurisdictional seat’ and ‘venue’ in the context

of international arbitration, to hold that the expression ‘seat of

arbitration’ is the centre of gravity in arbitration. However, this

does not mean that all arbitration proceedings must take place at

‘the seat’. The arbitrators at times hold meetings at more

convenient locations. Regarding the expression ‘court’, it was

observed that Section 2(2) of the Act does not make Part-I

applicable to arbitrations seated outside India. The expressions

used in Section 2(2)8

 of the Act do not permit an interpretation to

hold that Part-I would also apply to arbitrations held outside the

7 (2012) 9 SCC 552; BALCO case, for short.

8 See paragraph 20 below. By Act 3 of 2016 proviso to Section 2(2) of the Act has been inserted with

retrospective effect from 23rd October 2015, and the provision as substituted/ameded by Act 33 of

2019 for clause(a), now reads-

“(2) This Part shall apply where the place of arbitration is in India:

Provided that subject to an agreement to the contrary, the provisions of sections 9,

27 and clause (b) of sub-section (1) and sub-section (3) of section 37 shall also apply to

international commercial arbitration, even if the place of arbitration is outside India, and an

arbitral award made or to be made in such place is enforceable and recognised under the

provisions of Part II of this Act.”

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 9 of 28

territory of India. Noticing the above interpretation, a three Judges

Bench of this Court in BGS SGS Soma JV v. NHPC Limited9 has

observed that the expression ‘subject to arbitration’ used in clause

(e) to sub-section (1) of Section 2 of the Act cannot be confused

with the ‘subject matter of the suit’. The term ‘subject matter of the

suit’ in the said provision is confined to Part-I. The purpose of the

clause is to identify the courts having supervisory control over the

judicial proceedings. Hence, the clause refers to a court which

would be essentially a court of ‘the seat’ of the arbitration process.

Accordingly, clause (e) to sub-section (1) of Section 2 has to be

construed keeping in view the provisions of Section 20 of the Act,

which are, in fact, determinative and relevant when we decide the

question of ‘the seat of an arbitration’. This interpretation

recognises the principle of ‘party autonomy’, which is the edifice of

arbitration. In other words, the term ‘court’ as defined in clause (e)

to sub-section (1) of Section 2, which refers to the ‘subject matter

of arbitration’, is not necessarily used as finally determinative of

the court's territorial jurisdiction to entertain proceedings under the

Act. In BGS SGS Soma (supra), this Court observed that any

other construction of the provisions would render Section 20 of the

Act nugatory. In view of the Court, the legislature had given

9 (2020) 4 SCC 224

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 10 of 28

jurisdiction to two courts: the court which should have jurisdiction

where the cause of action is located; and the court where the

arbitration takes place. This is necessary as, on some occasions,

the agreement may provide the ‘seat of arbitration’ that would be

neutral to both the parties. The courts where the arbitration takes

place would be required to exercise supervisory control over the

arbitral process. The ‘seat of arbitration’ need not be the place

where any cause of action has arisen, in the sense that the ‘seat

of arbitration may be different from the place where obligations

are/had to be performed under the contract. In such

circumstances, both the courts should have jurisdiction, viz., the

courts within whose jurisdiction ‘the subject matter of the suit’ is

situated and the courts within whose jurisdiction the dispute

resolution forum, that is, where the arbitral tribunal is located.

16. Turning to Section 20 of the Act, sub-section (1) in clear terms

states that the parties can agree on the place of arbitration. The

word ‘free’ has been used to emphasise the autonomy and

flexibility that the parties enjoy to agree on a place of arbitration

which is unrestricted and need not be confined to the place where

the ‘subject matter of the suit’ is situated. Sub-section (1) to

Section 20 gives primacy to the agreement of the parties by which

they are entitled to fix and specify ‘the seat of arbitration’, which

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 11 of 28

then, by operation of law, determines the jurisdictional court that

will, in the said case, exercise territorial jurisdiction. Sub-section

(2) comes into the picture only when the parties have not agreed

on the place of arbitration as ‘the seat’.10 In terms of sub-section

(2) of Section 20 the arbitral tribunal determines the place of

arbitration. The arbitral tribunal, while doing so, can take into

regard the circumstances of the case, including the convenience

of the parties. Sub-section (3) of Section 20 of the Act enables the

arbitral tribunal, unless the parties have agreed to the contrary, to

meet at any place to conduct hearing at a place of convenience in

matters, such as consultation among its members, for the

recording of witnesses, experts or hearing parties, inspection of

documents, goods, or property.

17. Relying upon the Constitutional Bench decision in BALCO

(supra), in BGS SGS Soma (supra), it has been held that subsection (3) of Section 20 refers to ‘venue’ whereas the ‘place’

mentioned in sub-section (1) and sub-section (2) refers to the

‘jurisdictional seat’. To explain the difference, in BALCO (supra), a

case relating to international arbitration, reference was made to

several judgments, albeit the judgment in Shashoua v. Sharma11

10 Section 20(2) also applies when ‘the seat’ as mentioned in the agreement is only a convenient

venue.

11 (2009) EWHC 957 (Comm.)

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 12 of 28

was extensively quoted to observe that an agreement as to the

‘seat of arbitration’ draws in the law of that country as the curial

law and is analogous to an exclusive jurisdiction clause.12 The

parties that have agreed to ‘the seat’ must challenge an interim or

final award only in the courts of the place designated as the ‘seat

of arbitration’. In other words, the choice of the ‘seat of arbitration’

must be the choice of a forum/court for remedies seeking to attack

the award.

18. The aforesaid principles relating to international arbitration have

been applied to domestic arbitrations. In this regard, we may refer

to paragraph 38 of BGS SGS Soma (supra), which reads as

under:

“38. A reading of paras 75, 76, 96, 110, 116, 123 and

194 of BALCO would show that where parties have

selected the seat of arbitration in their agreement,

such selection would then amount to an exclusive

jurisdiction clause, as the parties have now indicated

that the courts at the “seat” would alone have

jurisdiction to entertain challenges against the arbitral

award which have been made at the seat. The

example given in para 96 buttresses this proposition,

and is supported by the previous and subsequent

paragraphs pointed out hereinabove.

The BALCO judgment, when read as a whole, applies

the concept of “seat” as laid down by the English

judgments (and which is in Section 20 of the

Arbitration Act, 1996), by harmoniously construing

Section 20 with Section 2(1)(e), so as to broaden the

definition of “court”, and bring within its ken courts of

the “seat” of the arbitration.”

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

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 13 of 28

19. The Court in BGS SGS Soma (supra), then proceeded to

examine the contention whether paragraph 96 of BALCO (supra),

which speaks of concurrent jurisdiction of the courts, that is, the

jurisdiction of courts where the cause of action has arisen wholly

or partly, and the courts within the jurisdiction in which the dispute

resolution forum – arbitration is located, to observe and elucidate

the legal position:

“40. Para 96 of BALCO case is in several parts. First

and foremost, Section 2(1)(e), which is the definition of

“court” under the Arbitration Act, 1996 was referred to,

and was construed keeping in view the provisions in

Section 20 of the Arbitration Act, 1996, which give

recognition to party autonomy in choosing the seat of

the arbitration proceedings. Secondly, the Court went

on to state in two places in the said paragraph that

jurisdiction is given to two sets of courts, namely, those

courts which would have jurisdiction where the cause

of action is located; and those courts where the

arbitration takes place. However, when it came to

providing a neutral place as the “seat” of arbitration

proceedings, the example 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”.

20. BGS SGS Soma (supra) extensively refers to the judgment of this

Court in Indus Mobile Distribution Private Limited v. Datawind

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 14 of 28

Innovations Private Limited and Others,

13 which decision refers

to the legislative history of Section 2(1)(e) and Section 20 of the

Act and the recommendations of the 246th Law Commission

Report, 2014. These recommendations, it is observed, were not

implemented in consonance with the decision in BALCO (supra),

which, in no uncertain terms, refers to the ‘place’ as the

‘jurisdictional seat’ for the purpose of clause (e) to sub-section (2)

of Section 2 of the Act. This judgment was subsequently followed

in Brahmani River Pellets Limited v. Kamachi Industries

Limited.

14 It may, however, be noted that clause (e) to sub-section

(1) of Section 2 was amended by inserting sub-clause (ii)15 with

the specific objective to solve the problem of conflict of jurisdiction

that would arise in cases where interim measures are sought in

India in cases of arbitration seated outside India. In the context of

domestic arbitrations it must be held that once the ‘seat of

arbitration’ has been fixed, then the courts at the said location

alone will have exclusive jurisdiction to exercise the supervisory

powers over the arbitration. The courts at other locations would

not have jurisdiction, including the courts where cause of action

13 (2017) 7 SCC 678

14 (2020) 5 SCC 462

15 (ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary

original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the

arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having

jurisdiction to hear appeals from decrees of courts subordinate to that High Court;

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 15 of 28

has arisen. As observed above and held in BGS SGS Soma

(supra), and Indus Mobile (supra),16 the moment the parties by

agreement designate ‘the seat’, it becomes akin to an exclusive

jurisdiction clause. It would then vest the courts at ‘the seat’ with

exclusive jurisdiction to regulate arbitration proceedings arising

out of the agreement between the parties.

21. The Court in BGS SGS Soma (supra) has also dealt with the

situation where the parties have not agreed on or have not fixed

the jurisdictional ‘seat of arbitration’, and has laid down the

following test to determine the ‘seat of arbitration’ which would

determine the location of the court that would exercise supervisory

jurisdiction. The test is simple and reads:

“61. It will thus be seen that wherever there is an

express designation of a “venue”, and no designation

of any alternative place as the “seat”, combined with a

supranational body of rules governing the arbitration,

and no other significant contrary indicia, the inexorable

conclusion is that the stated venue is actually the

juridical seat of the arbitral proceeding.”

For formulating the test reference was made to several

Indian and foreign judgments to emphasise that where the parties

had failed to choose the ‘jurisdictional seat’17 which would be

16 In Indus Mobile Distribution (P) Ltd., the Court after clearing the air on the meaning of Section 20

of the Arbitration Act, 1996 made it clear that the moment a seat is designated by agreement

between the parties, it is akin to an exclusive jurisdiction clause, which would then vest the courts at

the “seat” with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the

agreement between the parties.

17 BGS SGS Soma (supra) case also examines and explains case law where the courts have held

that so called ‘seat’ mentioned in the agreement is convenient ‘venue’ an aspect with which we are

not concerned in the present case.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 16 of 28

governing the arbitral proceedings, the proceedings must be

considered at any rate prima facie as being governed and subject

to jurisdiction of the court where the arbitration is being held, on

the ground that the said court is most likely to be connected with

the proceedings.18 Accordingly, in BGS SGS Soma (supra), the

law as applicable, where the parties by agreement have not fixed

the jurisdictional ‘seat’, is crystallised as under:

“82. On a conspectus of the aforesaid judgments, it

may be concluded that whenever there is the

designation of a place of arbitration in an arbitration

clause as being the “venue” of the arbitration

proceedings, the expression “arbitration proceedings”

would make it clear that the “venue” is really the “seat”

of the arbitral proceedings, as the aforesaid

expression does not include just one or more

individual or particular hearing, but the arbitration

proceedings as a whole, including the making of an

award at that place. This language has to be

contrasted with language such as “tribunals are to

meet or have witnesses, experts or the parties” where

only hearings are to take place in the “venue”, which

may lead to the conclusion, other things being equal,

that the venue so stated is not the “seat” of arbitral

proceedings, but only a convenient place of meeting.

Further, the fact that the arbitral proceedings “shall be

held” at a particular venue would also indicate that the

parties intended to anchor arbitral proceedings to a

particular place, signifying thereby, that that place is

the seat of the arbitral proceedings. This, coupled with

there being no other significant contrary indicia that

the stated venue is merely a “venue” and not the

“seat” of the arbitral proceedings, would then

conclusively show that such a clause designates a

“seat” of the arbitral proceedings. In an international

context, if a supranational body of rules is to govern

the arbitration, this would further be an indicia that “the

venue”, so stated, would be the seat of the arbitral

proceedings. In a national context, this would be

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

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 17 of 28

replaced by the Arbitration Act, 1996 as applying to the

“stated venue”, which then becomes the “seat” for the

purposes of arbitration.”

22. BGS SGS Soma (supra) also refers to decision of this Court in

Union of India v. Hardy Exploration and Production (India)

Inc.,

19

 which had held that the choice of the venue of arbitration did

not imply that it had become the ‘seat of arbitration’ and that the

venue could not by itself assume the status of ‘the seat’; instead a

venue could become ‘the seat’ only if “something else is added to it

as a concomitant”. According to BGS SGS Soma (supra), the

reasoning given in Hardy Exploration (supra) is per incuriam as it

contradicts the ratio and law laid down in BALCO (supra). Hence,

BGS SGS Soma (supra) holds that it would be correct to hold that

while exercising jurisdiction under sub-section (2) of Section 20 of

the Act, an arbitrator is not to pass a detailed or a considered

decision. The place where the arbitral tribunal holds the arbitration

proceedings would, by default, be the venue of arbitration and

consequently the ‘seat of arbitration’.

23. When we turn to the facts of the present case, if the arbitration

proceedings were held throughout in Panchkula, there would have

been no difficulty in holding that Delhi is not the jurisdictional ‘seat’.

19 (2019) 13 SCC 472 – In this case the parties had not chosen the seat of arbitration and the

arbitral tribunal had also not determined the seat of arbitration. Therefore it was held that the choice

of Kuala Lumpur as the venue of arbitration did not imply that Kuala Lumpur had become the seat of

arbitration.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 18 of 28

But that was not to be, as on recusal of Mr. Justice (Retd.) N.C.

Jain and post the appointment of Mr. Justice (Retd.) T.S.Doabia

arbitration proceedings were held at Delhi. In the context of the

present case and noticing the first order passed by the arbitral

tribunal on 5th August 2014 stipulating that the place of the

proceedings would be Panchkula in Haryana and in the absence of

other significant indica on application of Section 20(2) of the Act,

the city of Panchkula in Haryana would be the jurisdictional ‘seat’ of

arbitration. As ‘the seat’ was fixed vide the order dated 5th August,

2014, the courts in Delhi would not have jurisdiction.

24. The appellant, however, contends that on the appointment of the

new arbitrator, namely, Mr. Justice (Retd.) T.S. Doabia, and

thereupon the venue being fixed at Delhi, the jurisdictional ‘seat of

arbitration’ had changed from Panchkula in Haryana to Delhi.

Reliance in this regard is placed upon the decision of this Court in

Inox Renewables Ltd v. Jayesh Electricals Ltd.,

20 in which the

‘seat of arbitration’ fixed by the parties was Jaipur, but the courts

at Ahmedabad had entertained the challenge to the award. The

appellant submits that the courts at Ahmedabad had exercised

jurisdiction, which was upheld on the ground that the arbitration

proceedings were conducted in Ahmedabad. Thus the ‘seat of

20 (2019) SCC OnLine SC 2036

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 19 of 28

arbitration’ changed and had got relocated from Jaipur to

Ahmedabad. This, in the context of the decision in Inox

Renewables Ltd (supra), is undoubtedly correct, but the aforesaid

decision cannot be read as a precept in cases governed by subsection (2) of Section 20 of the Act. Inox Renewables (supra) was

a case governed under sub-section (1) of Section 20 of the Act,

that is, where parties by the agreement had fixed the jurisdictional

‘seat’ at Jaipur, Rajasthan, but thereafter, by mutual consent, had

decided to change the venue of proceedings to Ahmedabad prior

to the commencement of the arbitration. This evidently resulted in

the decision of this Court accepting that the jurisdictional ‘seat of

arbitration’ was Ahmedabad. This decision would apply in case the

parties, by consent, agree mutually that the ‘seat of arbitration’

would be located at a particular place. The said exercise would be

in terms of sub-section (1) of Section 20 of the Act, which

endorses and emphasises on party autonomy and choice that

determines the ‘seat of arbitration’. It would not apply when the

arbitrator fixes ‘the seat’ in terms of sub-section (2) of Section 20

of the Act. Once the arbitrator fixes ‘the seat’ in terms of subsection (2) of Section 20 of the Act, the arbitrator cannot change

‘the seat’ of the arbitration, except when and if the parties mutually

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 20 of 28

agree and state that the ‘seat of arbitration’ should be changed to

another location, which is not so in the present case.

25. There are good reasons why we feel that subsequent hearings or

proceedings at a different location other than the place fixed by

the arbitrator as the ‘seat of arbitration’ should not be regarded

and treated as a change or relocation of jurisdictional ‘seat’. This

would, in our opinion, lead to uncertainty and confusion resulting

in avoidable esoteric and hermetic litigation as to the jurisdictional

‘seat of arbitration’. ‘The seat’ once fixed by the arbitral tribunal

under Section 20(2), should remain static and fixed, whereas the

‘venue’ of arbitration can change and move from ‘the seat’ to a

new location. Venue is not constant and stationary and can move

and change in terms of sub-section (3) to Section 20 of the Act.

Change of venue does not result in change or relocation of the

‘seat of arbitration’.

26. It is highly desirable in commercial matters, in fact in all cases,

that there should be certainty as to the court that should exercise

jurisdiction. We do not think the law of arbitration visualises

repeated or constant shifting of the ‘seat of arbitration’. In fact,

sub-section (3) of Section 20 specifically states and draws a

distinction between the venue of arbitration and the ‘seat of

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 21 of 28

arbitration’ by stating that for convenience and other reasons, the

arbitration proceedings may be held at a place different than the

‘seat of arbitration’, which location is referred to the venue of

arbitration. If we accept this contention of the appellant, we would,

as observed in the case of C v. D (supra), create a recipe for

litigation and (what is worse) confusion which was not intended by

the Act. The place of jurisdiction or ‘the seat’ must be certain and

static and not vague or changeable, as the parties should not be

in doubt as to the jurisdiction of the courts for availing of judicial

remedies. Further, there would be a risk of parties rushing to the

courts to get first hearing or conflicting decisions that the law does

not contemplate and is to be avoided.

27. A secondary contention to support the said plea on the ground

that the courts where arbitration proceedings are being conducted

should be given supervisory powers, on in-depth consideration,

must be rejected as feeble when we juxtapose the unacceptable

practicable consequences that emerge. Exercise of supervisory

jurisdiction by the courts where the arbitration proceedings are

being conducted is a relevant consideration, but not a conclusive

and determinative factor when the venue is not ‘the seat’. ‘The

seat’ determines the jurisdiction of the courts. There would be

situations where the venue of arbitration in terms of sub-section

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 22 of 28

(3) of Section 20 would be different from the place of the

jurisdictional ‘seat’, and it is equally possible majority or most of

the hearing may have taken place at a venue which is different

from the ‘seat of arbitration’. Further, on balance, we find that the

aspect of certainty as to the court's jurisdiction must be given and

accorded priority over the contention that the supervisory courts

located at the place akin to the venue where the arbitration

proceedings were conducted or substantially conducted should be

preferred.

28. At this stage, we must also deal with the appellant's argument that

substantive proceedings were held in Delhi and, therefore, it

would be the ‘seat of arbitration’. The proceedings before the first

arbitration at Panchkula, Haryana, were restricted to filing of

pleadings and documents. On deeper consideration, this

argument should be rejected for the reasons recorded above, as it

will lead to confusion and uncertainty. The legal question raised in

the present case must be answered objectively and not

subjectively with reference to the facts of a particular case.

Otherwise, there would be a lack of clarity and consequent mix-up

about the courts that would exercise jurisdiction. There could be

cases where the arbitration proceedings are held at different

locations, but the ‘seat of arbitration’, as agreed by the parties or

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 23 of 28

as determined by the arbitrator, may be different, and at that place

– ‘the seat’, only a few hearings or initial proceedings may have

been held. This would not matter and would not result in shifting of

the jurisdictional ‘seat’. Arbitrators can fix the place of residence,

place of work, or in case of recusal, arbitration proceedings may

be held at two different places, as in the present case. For clarity

and certainty, which is required when the question of territorial

jurisdiction arises, we would hold that the place or the venue fixed

for arbitration proceedings, when sub-section (2) of Section 20

applies, will be the jurisdictional ‘seat’ and the courts having

jurisdiction over the jurisdictional ‘seat’ would have exclusive

jurisdiction. This principle would have exception that would apply

when by mutual consent the parties agree that the jurisdictional

‘seat’ should be changed, and such consent must be express and

clearly understood and agreed by the parties.

29. We have quoted Section 42 of the Act. Section 42 was also

examined in BGS SGS Soma (supra) and the view expressed by

the Delhi High Court in Antrix Corpn. Ltd. v. Devas Multimedia

(P) Ltd.21 was overruled observing that the Section 42 is meant to

avoid conflicts of jurisdiction of courts by placing the supervisory

jurisdiction over all arbitration proceedings in connection with the

21 (2018) SCC OnLine Del 9338

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 24 of 28

arbitration proceedings with one court exclusively. The aforesaid

observation supports our reasoning that once the jurisdictional

‘seat’ of arbitration is fixed in terms of sub-section (2) of Section

20 of the Act, then, without the express mutual consent of the

parties to the arbitration, ‘the seat’ cannot be changed. Therefore,

the appointment of a new arbitrator who holds the arbitration

proceedings at a different location would not change the

jurisdictional ‘seat’ already fixed by the earlier or first arbitrator.

The place of arbitration in such an event should be treated as a

venue where arbitration proceedings are held.

30. We would now reproduce paragraph 59 of the judgment in BGS

SGS Soma (supra), which examines Section 42 of the Act and

reads as under:

“59. Equally incorrect is the finding in Antrix Corpn.

Ltd. 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

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 25 of 28

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 so-called “seat” is only a convenient “venue”, then

there may be several courts where a part of the cause

of action arises that may have jurisdiction. 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.”

31. We have already referred to the first few sentences of the

aforementioned paragraph and explained the reasoning in the

context of the present case. The paragraph BGS SGS Soma

(supra) also explains the non-obstante effect as incorporated in

Section 42 to hold that it is evident that the application made

under Part-I must be to a court which has a jurisdiction to decide

such application. Where ‘the seat’ is designated in the agreement,

the courts of ‘the seat’ alone will have the jurisdiction. Thus, all

applications under Part-I will be made in the court where ‘the seat’

is located as that court would alone have jurisdiction over the

arbitration proceedings and all subsequent proceedings arising

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 26 of 28

out of the arbitration proceedings. The quotation also clarifies that

when either no ‘seat’ is designated by an 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

jurisdiction. An application under Section 9 of the Act may be

preferred before the court in which a part of cause of action arises

in the case where parties had not agreed on the ‘seat of

arbitration’. This is possible in the absence of an agreement fixing

‘the seat’, as an application under Section 9 may be filed before

‘the seat’ is determined by the arbitral tribunal under Section 20(2)

of the Act. Consequently, in such situations, the court where the

earliest application has been made, being the court in which a part

or entire of the cause of action arises, would then be the exclusive

court under Section 42 of the Act. Accordingly, such a court would

have control over the arbitration proceedings.22

32. Section 42 is to no avail as it does not help the case propounded

by the appellant, as in the present case the arbitrator had fixed the

jurisdictional ‘seat’ under Section 20(2) of the Act before any party

had moved the court under the Act, being a court where a part or

whole of the cause of action had arisen. The appellant had moved

the Delhi High Court under Section 34 of the Act after the arbitral

22 We are not examining and are not required to decide the question- whether there is a difference

between the expression ‘court’ and the ‘Chief Justice or his nominee’ in the present case.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 27 of 28

tribunal vide the order dated 5

th August 2014 had fixed the

jurisdictional ‘seat’ at Panchkula in Haryana. Consequently, the

appellant cannot, based on fastest finger first principle, claim that

the courts in Delhi get exclusive jurisdiction in view of Section 42

of the Act. The reason is simple that before the application under

Section 34 was filed, the jurisdictional ‘seat’ of arbitration had

been determined and fixed under sub-section (2) to Section 20

and thereby, the courts having jurisdiction over Panchkula in

Haryana, have exclusive jurisdiction. The courts in Delhi would not

get jurisdiction as the jurisdictional ‘seat of arbitration’ is

Panchkula and not Delhi.

33. In view of the aforesaid discussion and reasons, we do not find

any merit in the present appeals, and the same are dismissed

without any order as to costs.

......................................J.

(AJAY RASTOGI)

…...................................J.

(SANJIV KHANNA)

NEW DELHI;

MAY 18, 2022.

Civil Appeals a/o. of SLP (C) Nos.30019-20 of 2019 Page 28 of 28