Seat of arbitration cannot keep shifting with venue and must be fixed

Citation : Bbr (India) Private Limited vs S.P. Singla Constructions Private Limited, Civil Appeal Nos. 4130-4131 Of 2022

Date of Judgment/Order : May 18, 2022

Court/Tribunal : Supreme Court Of India

Corum : Sanjiv Khanna, J.

Background

The litigants had entered into a contract where arbitration clause was present but no seat or venue was mentioned. When disputes arose, the matter was referred to arbitration, the sole arbitrator held that the venue of the proceedings would be Panchkula, Haryana. Neither party had objected to the place of arbitration proceedings as fixed by the arbitral tribunal. Subsequently, this arbitrator recused and the entire matter was handed over to a new arbitrator who recorded his consent and also declared that the venue of the proceedings would be Delhi. Since then, the proceedings continue at Delhi and order was passed in favor of the Respondent. The respondent filed an application for interim orders under Section 9 of the Arbitration and Conciliation Act, 19964 before the Additional District Judge, Panchkula while the appellant filed a petition under Section 34 of the Act before the Delhi High Court. Thus, the appellant and respondent invoked the jurisdiction of two different courts. 

Now 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?

Judgment

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

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’.

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