Choice of venue is also a choice of the seat of arbitration

In S.P. SINGLA CONSTRUCTIONS PRIVATE LIMITED vs CONSTRUCTION AND DESIGN SERVICES, UTTAR PRADESH JAL NIGAM, the dispute before the Delhi High Court was with the venue and seat of arbitration as defined in the contract made between the two parties.

The petitioners argued that Clause 26.3 of the Contract is specific that the arbitration shall be held “in accordance with the Rules of the International Centre for Alternative Dispute Resolution, New Delhi” and that by incorporating the Rules of ICADR, New Delhi into the Contract in question, the parties have expressly chosen the seat /place of arbitration at New Delhi.

To submit that where parties expressly choose to incorporate the rules of an arbitral institute into their arbitration clause, while failing to specifically agree on a “seat” of arbitration, they are deemed to knowingly have chosen and relied on the seat selection clause of the institutional rules, reliance is placed upon Hon‟ble Supreme Court‟s decision in Imax Corporation Vs. M/s E-City Entertainment (I) Pvt. Ltd. (2017) 5 SCC 331. It is further submitted on behalf of petitioner that in view of Article 17 of the Rules of ICADR, New Delhi in the absence of any seat being agreed upon between the parties, the seat has to be nominated through ICADR, New Delhi, as the institute and incorporation of the Rules of ICADR, New Delhi is “New Delhi”. According to learned counsel for the petitioner, “venue” of arbitration does not include the “seat” of the arbitration

Respondents opposed the present petition on the issue of maintainability of this petition lacking jurisdiction before this Court. They submitted that the agreement between the parties was executed at Lucknow for the work to be performed at Allahabad and that respondent is having its registered office at Lucknow and only petitioner has its registered office at Delhi and so, no cause of action has arisen within the jurisdiction of this Court and, therefore, the present petition is not maintainable. They argued that both the parties relied upon ICADR Rules only for the purpose of determining the procedure of arbitral proceedings and not the seat of arbitration proceedings. Also submitted that as per Rule 17 of ICADR Rules, even if seat of arbitration is to be decided as per ICADR Rules, mutual consent of both the sides is required and in the present case, respondent has never consented to the seat of arbitration as New Delhi.

The High Court observed that a bare reading of aforesaid Clause 26.3.1 shows that upon invocation of arbitration by either party, the proceedings shall be conducted in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi and the venue of such Arbitration shall be Lucknow.

The Hon‟ble Supreme Court in a catena of judgments has elaborately discussed the terms “venue” and “seat”. A five judge Constitution Bench of the Supreme Court in Bharat Aluminium Company Ltd. (Supra) recognized that “Seat” and “Venue” are different and observed that the “Seat” of arbitration is the center of gravity of the arbitration and the “Venue” is the geographical location where such arbitration meetings are conducted. The Court held that under sub- Section (2), (2) and (3) of Section 20 of the Arbitration and Conciliation Act, 1996, “Place of Arbitration” is used interchangeably. That though the agreement between the parties therein was executed at Faridabad and part of cause of action also arose at Faridabad and also that Faridabad was the place where request for arbitration was received, however, the arbitration clause in the said agreement did not specifically mention that “the hearings shall take place at the venue” or the tribunal “may meet” or “may hear the witnesses, experts or parties” at the venue. In the facts of the said case, since the proceedings were held in Delhi and Award was also signed in Delhi, the Court directed hearing of Section 34 petition in the Courts at New Delhi. The Court observed that if the arbitration agreement provides that arbitration proceedings “shall be held” at a particular venue, then that indicates arbitration proceedings would be anchored at such venue, and therefore, the choice of venue is also a choice of the seat of arbitration. The Hon‟ble Court reiterated that once the parties designate the seat of arbitration, only the courts governing the seat have exclusive jurisdiction to govern such arbitration proceeding and jurisdiction of all other courts stand ousted.

In view of afore-noted holding of the Hon‟ble Supreme Court in BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234 that “choice of venue is also a choice of the seat of arbitration”, the High Court finds that in Clause-26.3.1 of Article-26 of the Agreement dated 08.02.2017, the parties have agreed that the venue of arbitration shall be „Lucknow‟ and therefore, the courts at Lucknow shall have the exclusive jurisdiction to entertain the disputes arising out of Agreement in question. The role of ICADR Rules shall come into play with regard to procedure to be followed, only after the arbitration commences before the appropriate jurisdiction of law, which in this case is “Lucknow”.