The Supreme Court in the case of BBR (India) Private Limited v. S. P. Singla Constructions Private Limited, [Civil Appeal Nos. 4130-4131 of 2022], has held that, after an arbitrator fixed ‘the seat’ under sub-section (2) of section 20 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the arbitrator cannot change ‘the seat’, even in cases of appointment of a new arbitrator, except when and if the parties mutually agree for the same. .
Whether conducting proceedings at a different location, due to the appointment of a new arbitrator, would shift the ‘jurisdictional seat of arbitration’ from the location originally fixed by the first arbitrator?
1. The Appellant (i.e. BBR (India) Private Limited) and Respondent (i.e. S. P. Singla Constructions Private Limited) entered into a contract dated June 30, 2011 under which the Appellant was required to supply, install and undertake stressing of cable strays for a long cable stay bridge being constructed by the Respondent in Jammu and Kashmir. Under the subject contract, a letter of intent dated June 30, 2011 was issued that contained an arbitration clause, but did not provide for a ‘seat’ or ‘venue’ of arbitration.
2. In the first sitting held on August 5, 2014, the sole arbitrator (i.e. Mr. Justice (Retd.) N. C. Jain) directed that the venue of the proceedings would be at Panchkula, Haryana, and neither party objected to the same. Pertinently, the arbitral tribunal fixed the jurisdictional ‘seat’ before any party moved the court for any interim reliefs under the Arbitration Act.
3. During the proceedings held on May 29, 2015, the sole arbitrator recused himself for personal reasons. On June 30, 2015, a procedural order was passed recording the consent of Mr. Justice (Retd.) T. S. Doabia to take over as the sole arbitrator. This order stated that the venue of the proceedings would be at Delhi.
4. After the completion of the arbitration proceedings, an award was signed and pronounced on January 29, 2016 by the sole arbitrator at Delhi. In the award, the Respondent was awarded a sum of Rs. 3,35,86,577/- along with interest. Consequently, the Appellant filed a Petition under section 34 of the Arbitration Act before the Delhi High Court for setting aside the award and the Respondent filed a petition under section 9 of the Arbitration Act before the Additional District Judge, Panchkula for interim reliefs.
5. By an order dated December 14, 2016, the Additional District Judge, Panchkula dismissed the Respondent’s petition under section 9, but the High Court of Punjab and Haryana set aside the same by an order dated October 14, 2019. In this order, the High Court observed that, inter-alia, the courts of Delhi do not have jurisdiction to entertain the objections under section 34 of the Arbitration Act and the courts at Panchkula had jurisdiction to deal with the case. A review application assailing the High Court’s order filed by the Appellant was dismissed on November 8, 2019.
6. Both orders passed by the High Court of Punjab and Haryana were challenged before the Supreme Court.
Findings/ observations of the Supreme Court:
1. If the parties have not agreed on the place of arbitration as ‘the seat’, sub-section (2) of section 20 of the Arbitration Act shall be applicable. The arbitral tribunal shall determine the place of arbitration, while doing so, it can take into regard the circumstances of the case including the convenience of the parties.
2. After the arbitrator fixed ‘the seat’ in terms of sub-section 2 of section 20 of the Arbitration Act, the arbitrator cannot 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. In the facts of the present case this did not take place, therefore, the court held that the courts in Delhi would not have jurisdiction. The court opined that in all cases, particularly commercial matters, that there should be certainty as to the court that should exercise jurisdiction. 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.
3. In addition to the above, the court observed that ‘venue’ is not constant and can change in terms of sub-section (3) of section 20 of the Arbitration Act but change of ‘venue’ does not result in change or relocation of the ‘seat of arbitration’.
4. In response to the contention of the Appellant that courts where arbitration proceedings are being conducted should be given supervisory powers, the Court clarified that 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’.
5. Also, the Appellant’s contention was that the petition under section 34 was filed before the Delhi High Court prior in time to the Respondent’s application under section 9 being filed before the Additional District Judge, Panchkula. As such, the Appellant contended that by virtue of section 42 of the Arbitration Act, courts in Delhi would get exclusive jurisdiction. This contention was rejected, and the court held that the ‘fastest finger first principle’ cannot be applied because the jurisdictional ‘seat’ was determined and fixed under sub-section (2) of section 20 of the Arbitration Act, and courts in Delhi would not get jurisdiction over courts in Panchkula.
Although the arbitral tribunal has the ability to fix the jurisdictional ‘seat’ under sub-section (2) of section 20 of the Arbitration Act, but it does not have any power to modify/ alter the same. This restriction shall continue to apply if the arbitral tribunal has been substituted. This reflects the primacy of party autonomy in arbitration proceedings, including in relation to the change of ‘seat’ under sub-section (2) of section 20 although the ‘seat’ was not originally fixed by the parties.
Please find a copy of the judgment, here.
This update has been contributed by Yurvraj Choksy (Principal Assoicate).
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