The Supreme Court has adopted a different view in deciding whether the venue of Arbitration can be treated as the Judicial seat of Arbitration. The three-judge bench of Supreme Court consisting of Justice R.F. Nariman, Justice Aniruddha Bose and Justice V. Ramasubramanian has passed a judgement in the case of BGS SGS SOMA JV V. NHPC Ltd. overruling the judgement given in the case of Union of India V. Hardy Exploration and Productions India Inc.
In the present case, the Petitioner was awarded a construction project on river Subansri. The petitioner and the Respondent entered into an agreement and clause 67.3 of the agreement deals with the dispute resolution clause. Under this clause the parties decided that if any dispute arose then the party will resolve the dispute through arbitration and the arbitration proceedings shall be held in New Delhi/Faridabad and the language of arbitration will be English. The arbitration proceeding took place in Delhi. The Present case is an Appeal from the Judgment that 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.
The Supreme Court in the present case held 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” taking a different view that it held in Union of India V. Hardy Exploration and Productions India Inc. that the place of arbitration does not itself became the seat of arbitration and that a venue can become a seat if something else is added to concomitant. The Supreme Court based its reasoning by referring to the English Shashoua principle that was stated in Roger Shashoua & Ors. v. Mukesh Sharma & Ors. The Supreme Court stated that, “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.” Therefore, the Supreme Court has set aside the Judgement that was passed by the Punjab and Haryana High Court and ordered the section 34 petition to be presented in the courts of New Delhi.
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Judgment Link: BGS SGS SOMA JV v. NHPC Ltd.