Appointment of new arbitrator and Jurisdiction seat of arbitration

The Supreme Court of India in the case of BBR (India) Private Limited vs. S.P. Singla Constructions Private Limited recently dealt with the question “whether conducting the arbitration proceedings at Delhi, owing to the appointment of a new arbitrator, would shift the ‘jurisdictional seat of arbitration’ from Panchkula in Haryana, the place fixed by the first arbitrator for the arbitration proceedings?”

In the said case, the arbitration clause was silent and did not stipulate the seat or venue of arbitration. The contract and letter of intent were executed at Panchkula in Haryana. The corporate office of the respondent was also located at Panchkula. However, the registered office of the appellant was located in Bengaluru, Karnataka.

When a dispute arose between the parties, the matter was referred to arbitration. In the first sitting, the arbitral tribunal held that the venue of the proceedings would be in Panchkula, Haryana. Neither party had objected to the place of arbitration proceedings as fixed by the arbitral tribunal. Arbitration proceedings were thereafter held at Chandigarh, where the parties were directed to complete the pleadings, and the matter was adjourned for the framing of issues. In the proceedings held on 29th May 2015, the Ld Arbitrator Mr. Justice (Retd.) N.C. Jain recused the recording that he did not want to continue as the arbitrator for personal reasons. The records received thus far would be handed over to the new arbitrator.

Thereafter, Mr. Justice (Retd.) T.S. Doabia took over as the sole arbitrator and recorded his consent in this regard in the first procedural order dated 30th June 2015. The order stated that the venue of the proceedings would be Delhi. Thereafter, hearings were held, witnesses were cross-examined, and the arguments were addressed by the parties at Delhi. Award was signed and pronounced at Delhi on 29^th January 2016, whereunder the respondent was awarded a sum of Rs.3,35,86,577/- with interest at the rate of 15% per annum.

Pursuant to the above, two proceedings were initiated. The respondent filed an application for interim orders under Section 9 of the Arbitration and Conciliation Act, 1996 before the Additional District Judge, Panchkula, on 7^th May 2016. The appellant filed a petition under Section 34 of the Act before the Delhi High Court on 28th April 2016. Meaning thereby, the appellant and respondent invoked the jurisdiction of two different courts. Resultantly, the question of the ‘jurisdictional seat of arbitration’ assumes importance, which was answered by the Apex Court.

The Additional District Judge, Panchkula, dismissed the respondent’s petition filed under Section 9 of the Act through an order dated 14th December 2016, stating that it lacked territorial jurisdiction. The court held that the Delhi High Court, where a prior petition under Section 34 was filed and pending, had the exclusive jurisdiction to entertain the application. Since the Section 9 petition was subsequent, it was barred by Section 42 of the Act. However, the High Court of Punjab and Haryana overturned this order through an order dated 14th October 2019. The High Court concluded that the courts in Delhi did not possess the jurisdiction to entertain objections under Section 34 of the Act.

The High Court of Punjab and Haryana recorded that the agreement between the parties was silent as to ‘the seat’ of the arbitration proceedings, and the second arbitrator Mr. Justice (Retd.) T.S. Doabia, vide his first order dated 30th June 2015, had not determined Delhi to be the ‘seat of arbitration’. The High Court relied in the decision of State of West Bengal and Others v. Associated Contractors (2015) 1 SCC 32, held that the courts at Panchkula had jurisdiction to deal with the case. It is this order that has been assailed before the Apex Court in the present case.

The Apex Court after interpreting Section 2 (1) (e) of the Act, which defines the term ‘court’; Section 20 on the ‘place of arbitration’; as well as Section 42 with respect to ‘jurisdiction’ and after discussing various judgments held that the city of Panchkula in Haryana would be the jurisdictional ‘seat’ of arbitration.

The present case was not one wherein the parties, by consent, agree mutually that the ‘seat of arbitration’ would be located at a particular place. The said exercise would be in terms of sub-section (1) of Section 20 of the Act, which endorses and emphasizes on party autonomy and choice that determines the ‘seat of arbitration’.

The court noted that the arbitrator, once fixing ‘the seat’ according to subsection (2) of Section 20 of the Act, cannot alter ‘the seat’ of the arbitration unless the parties mutually agree and explicitly state that the ‘seat of arbitration’ should be changed to a different location, which was not the case in the present scenario.

The court further observed that ‘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’.

In view of this, the Apex court dismissed the appeals.

The judgment can be accessed from the below link: https://main.sci.gov.in/supremecourt/2019/43890/43890_2019_14_1501_35100_Judgement_18-May-2022.pdf

By

Aditya Dhar, Advocate
Principal Associate, Vaish Associates Advocates
Email: aditya.dhar@vaishlaw.com
Mobile: +91 9971873110