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The Supreme Court recently held that change in place of conducting arbitration proceedings due to the appointment of a new arbitrator does not shift the ‘jurisdictional seat of arbitration.

"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", the top court noted.

It was further observed 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’ as it would lead to uncertainty and confusion resulting in avoidable esoteric and hermetic litigation as to the jurisdictional ‘seat of arbitration’.

The law of arbitration does not visualise repeated or constant shifting of the ‘seat of arbitration’, the top court further held.

Facts:

BBR (India) Private Limited, and S.P. Singla Constructions Private Limited, had entered into a contract under which BBR was required to supply, install and undertake stressing of cablestrays for the 592 metres long cable-stay bridge being constructed by Singla over the river Ravi at Basouli, Jammu and Kashmir.

The contract and letter of intent (LoI) were executed at Panchkula in Haryana. The corporate office of Singla was also located at Panchkula and the registered office of BBR was located in Bengaluru, Karnataka. An arbitration clause mentioned in the LoI was silent on the seat or venue of arbitration.

As disputes arose between the parties, the matter was referred to arbitration, and Justice (Retd.) NC 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.

After Jain recused himself, Justice (Retd.) T.S. Doabia took over as the sole arbitrator and an order stating that the venue of the proceedings would be Delhi was passed.

Thereafter, hearings were held, witnesses were cross-examined, and the arguments were addressed by the parties at Delhi.

An award was pronounced at Delhi on 29th January 2016, whereunder Singla was awarded a sum of Rs.3,35,86,577/- with interest at the rate of 15% per annum.

After the passing of the award, two proceedings were initiated. Singla filed an application for interim orders under Section 9 of the Arbitration and Conciliation Act, 1996 before the Additional District Judge, Panchkula, on 7th May 2016. BBR filed a petition under Section 34 of the Act before the Delhi High Court on 28th April 2016. Thus, the parties invoked the jurisdiction of two different courts.

The Section 9 petition was dismissed on the ground of lack of territorial jurisdiction stating that such jurisdiction vests solely with the Delhi High Court, where a prior petition under Section 34 had been filed, and was pending.

Punjab and Haryana High Court set aside such order with the finding that the courts of Delhi did not have the jurisdiction to entertain the objections under Section 34 of the Act. It further recorded that the agreement between the parties was silent as to ‘the seat’ of the arbitration proceedings, and second arbitrator Justice (Retd.) T.S. Doabia, had not determined Delhi to be the ‘seat of arbitration’.

This order of the high court was challenged before the top court by BBR.

Court's Analysis:

Top Court relied on Section 2 (1) (e) of the 1996 Act, which defines the term ‘court’; Section 20 on the ‘place of arbitration’; as well as Section 42 which deals with jurisdiction.

A bench of Justices Ajay Rastogi and Sanjiv Khanna noted that if the arbitration proceedings were held throughout in Panchkula, there would have been no difficulty in holding that Delhi is not the jurisdictional ‘seat’.

The bench further noted that once the arbitrator fixed ‘the seat’ in terms of sub-section (2) of Section 20 of the 1996 Act, the arbitrator could not change ‘the seat’ of the arbitration, except when and if the parties mutually agree and state that the ‘seat of arbitration’ should be changed to another location, which was not so in the present case.

Court further observed 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’.

" '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’ ", said the bench.

Court was further of the opinion that such a shift would creates a recipe for litigation and (what is worse) confusion which was not intended by the 1996 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."

Also, the bench was of the view 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.

Thus, while dismissing the appeals filed by BBR, Court said, "...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."

Case Title: BBR (INDIA) PRIVATE LIMITED vs. S.P. SINGLA CONSTRUCTIONS PRIVATE LIMITED