Supreme Court Clarifies Jurisdictional Seat of Arbitration: BBR (India) vs. S.P. Singla Constructions (2022)

Date of the Judgment: 18 May 2022

Citation: Civil Appeal Nos. 4130-4131 of 2022 (Arising out of Special Leave Petition (Civil) Nos. 30019-30020 of 2019)

Judges: Justice Ajay Rastogi and Justice Sanjiv Khanna

Can the location of arbitration proceedings be changed simply by appointing a new arbitrator? The Supreme Court of India recently addressed this critical question in a dispute between BBR (India) Private Limited and S.P. Singla Constructions Private Limited. The core issue was whether the change in the venue of arbitration proceedings from Panchkula to Delhi, due to the appointment of a new arbitrator, would shift the jurisdictional seat of arbitration. This judgment clarifies the distinction between the ‘seat’ and ‘venue’ of arbitration and its impact on court jurisdiction.

The judgment was delivered by a two-judge bench comprising Justice Ajay Rastogi and Justice Sanjiv Khanna, with the opinion authored by Justice Sanjiv Khanna.

Case Background

BBR (India) Private Limited (appellant) and S.P. Singla Constructions Private Limited (respondent) entered into a contract on 30th June 2011. The appellant was to supply, install, and stress cable stays for a bridge being constructed by the respondent in Jammu and Kashmir. The contract included an arbitration clause for dispute resolution by a sole arbitrator appointed by the respondent’s managing director. The contract and letter of intent were executed in Panchkula, Haryana, where the respondent’s corporate office is also located. The appellant’s registered office is in Bengaluru, Karnataka.

Disputes arose between the parties, leading to arbitration. Initially, Justice (Retd.) N.C. Jain was appointed as the sole arbitrator. In the first sitting on 5th August 2014, the arbitral tribunal fixed the venue of proceedings as Panchkula, Haryana. The respondent was absent but had requested an adjournment, which was granted. Neither party objected to Panchkula as the venue. Subsequent proceedings were held in Chandigarh on 16th December 2014, where parties were directed to complete pleadings. On 29th May 2015, Justice (Retd.) N.C. Jain recused himself for personal reasons, and pleadings were completed by then.

Justice (Retd.) T.S. Doabia was appointed as the new arbitrator. In his first order on 30th June 2015, he stated that the venue of the proceedings would be Delhi. The appellant was not present at this hearing. The respondent was directed to inform the appellant. Subsequent hearings, cross-examinations, and arguments took place in Delhi. The final award was pronounced in Delhi on 29th January 2016, awarding the respondent Rs. 3,35,86,577 with 15% interest.

Timeline:

Course of Proceedings

The respondent filed an application under Section 9 of the Arbitration and Conciliation Act, 1996, before the Additional District Judge, Panchkula, on 7th May 2016, seeking interim orders. The appellant filed a petition under Section 34 of the Act before the Delhi High Court on 28th April 2016. The Additional District Judge, Panchkula, dismissed the respondent’s application on 14th December 2016, citing a lack of territorial jurisdiction and noting that a prior petition under Section 34 was pending before the Delhi High Court. The court held that the Delhi High Court had jurisdiction and that the Section 9 petition was barred under Section 42 of the Act. However, the High Court of Punjab and Haryana set aside this order on 14th October 2019, ruling that the Delhi courts lacked jurisdiction and that the courts at Panchkula had jurisdiction. The High Court of Punjab and Haryana held that the second arbitrator did not determine Delhi to be the ‘seat of arbitration’. The review application was also dismissed on 8th November 2019.

Legal Framework

The Supreme Court examined the following provisions of the Arbitration and Conciliation Act, 1996:

• Section 2(1)(e): Defines “court” as the principal civil court of original jurisdiction in a district, including the High Court, having jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit.
  
  “2. Definitions.—(1) In this Part, unless the context otherwise requires,—
  xx xx xx
  (e) “Court” means— (i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;”
• Section 20: Deals with the place of arbitration, allowing parties to agree on the place, and if they don’t, the arbitral tribunal determines it. It also allows the tribunal to meet at any place for convenience.
  
  “20. (1) The parties are free to agree on the place of arbitration.
  (2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
  (3) Notwithstanding sub-section (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.”
• Section 42: States that when an application under Part I of the Act has been made in a court, that court alone has jurisdiction over the arbitral proceedings and all subsequent applications.
  
  “42. Jurisdiction.— Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court.”

Arguments

Appellant’s Submissions:

• The appellant contended that the appointment of the new arbitrator, Justice (Retd.) T.S. Doabia, and the subsequent fixing of Delhi as the venue, shifted the jurisdictional seat of arbitration from Panchkula to Delhi.
• They relied on the decision in Inox Renewables Ltd v. Jayesh Electricals Ltd. [(2019) SCC OnLine SC 2036], where the court upheld the jurisdiction of Ahmedabad courts as the arbitration proceedings were conducted there, despite the initial seat being Jaipur.
• The appellant argued that since substantive proceedings were held in Delhi, the courts in Delhi should have supervisory powers over the arbitration.
• They also contended that since they had filed the first application under Section 34 of the Act in Delhi, the Delhi High Court had exclusive jurisdiction under Section 42 of the Act.

Respondent’s Submissions:

• The respondent argued that the initial determination of Panchkula as the venue by the first arbitrator was the jurisdictional seat of arbitration.
• They contended that the change of venue to Delhi by the new arbitrator was for convenience and did not change the jurisdictional seat.
• They relied on the principle 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.
• The respondent argued that the courts at Panchkula had jurisdiction as the jurisdictional seat was fixed there.

Innovativeness of the argument: The appellant’s argument was innovative in trying to apply the principle of change of seat based on where the proceedings were conducted. However, the court rejected it by distinguishing the facts of the case from Inox Renewables Ltd v. Jayesh Electricals Ltd. [(2019) SCC OnLine SC 2036].

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. 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?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

The Supreme Court also considered the following legal provisions:

• Section 2(1)(e) of the Arbitration and Conciliation Act, 1996: Definition of “court”.
• Section 20 of the Arbitration and Conciliation Act, 1996: Place of arbitration.
• Section 42 of the Arbitration and Conciliation Act, 1996: Jurisdiction of the court where an application under Part I has been made.

Judgment

How each authority was viewed by the Court?

• Bhartiya Aluminium Company v. Kaiser Aluminium Technical Services Inc [(2012) 9 SCC 552]: The court relied on this case to explain the distinction between ‘jurisdictional seat’ and ‘venue’ and held that the ‘seat of arbitration’ is the center of gravity in arbitration.
• BGS SGS Soma JV v. NHPC Limited [(2020) 4 SCC 224]: The court relied on this case to clarify that the term ‘subject matter of the suit’ in Section 2(1)(e) is confined to Part-I of the Act and that the clause refers to the court of the ‘seat’ of arbitration. It also held that the ‘seat of arbitration’ determines the court with supervisory control over the arbitral process.
• Shashoua v. Sharma [(2009) EWHC 957 (Comm.)]: The court relied on this case to observe that an agreement as to the ‘seat of arbitration’ draws in the law of that country as the curial law and is analogous to an exclusive jurisdiction clause.
• Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and Others [(2017) 7 SCC 678]: The court relied on this case to hold that the moment the parties by agreement designate ‘the seat’, it becomes akin to an exclusive jurisdiction clause.
• Brahmani River Pellets Limited v. Kamachi Industries Limited [(2020) 5 SCC 462]: The court relied on this case to follow the decision in Indus Mobile and held that once the ‘seat of arbitration’ has been fixed, then the courts at the said location alone will have exclusive jurisdiction to exercise the supervisory powers over the arbitration.
• Union of India v. Hardy Exploration and Production (India) Inc. [(2019) 13 SCC 472]: The court held this case to be per incuriam as it contradicted the ratio and law laid down in Bhartiya Aluminium Company v. Kaiser Aluminium Technical Services Inc [(2012) 9 SCC 552].
• Inox Renewables Ltd v. Jayesh Electricals Ltd. [(2019) SCC OnLine SC 2036]: The court distinguished this case on facts as it was a case governed under Section 20(1) of the Act and not Section 20(2) of the Act and held that the jurisdictional ‘seat of arbitration’ can be changed by mutual consent of parties.
• Antrix Corpn. Ltd. v. Devas Multimedia (P) Ltd. [(2018) SCC OnLine Del 9338]: The court overruled this decision as it was contrary to the reasoning in BGS SGS Soma JV v. NHPC Limited [(2020) 4 SCC 224] and held that Section 42 is meant to avoid conflicts of jurisdiction of courts by placing the supervisory jurisdiction over all arbitration proceedings in connection with the arbitration proceedings with one court exclusively.

What weighed in the mind of the Court?

The Supreme Court emphasized the importance of certainty and stability in determining the jurisdictional seat of arbitration. The court reasoned that once the seat is fixed by the arbitral tribunal under Section 20(2) of the Arbitration and Conciliation Act, 1996, it should remain static unless the parties mutually agree to change it. The court rejected the argument that the change of venue for convenience or the appointment of a new arbitrator could shift the jurisdictional seat. The court was also concerned about the potential for confusion and litigation if the jurisdictional seat could be changed easily. The court held that the seat determines the jurisdiction of the courts, not the place where substantive proceedings are held. The court also clarified that Section 42 of the Act does not apply in this case as the jurisdictional seat was already fixed by the arbitrator before any party moved the court.

Fact:Law Ratio

The court’s decision was primarily driven by legal considerations (70%) such as the interpretation of Section 20 and Section 42 of the Arbitration and Conciliation Act, 1996, and the precedents set by previous judgments. While factual aspects (30%), such as the change of venue and appointment of new arbitrator, were considered, they were secondary to the legal principles.

The court’s reasoning was based on the following steps:

• The court first determined that the initial determination of Panchkula as the venue by the first arbitrator was the jurisdictional seat of arbitration.
• The court then considered whether the change of venue to Delhi by the new arbitrator shifted the jurisdictional seat.
• The court relied on the principle 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.
• The court distinguished the facts of the case from Inox Renewables Ltd v. Jayesh Electricals Ltd. [(2019) SCC OnLine SC 2036] and held that the jurisdictional ‘seat of arbitration’ can be changed by mutual consent of parties under Section 20(1) of the Act and not under Section 20(2) of the Act.
• The court held that the seat determines the jurisdiction of the courts, not the place where substantive proceedings are held.
• The court also held that Section 42 of the Act does not apply in this case as the jurisdictional seat was already fixed by the arbitrator before any party moved the court.

The court rejected the argument that the change of venue for convenience or the appointment of a new arbitrator could shift the jurisdictional seat and held that the place of jurisdiction or ‘the seat’ must be certain and static and not vague or changeable.

The court quoted the following from the judgment:

• “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.”
• “Change of venue does not result in change or relocation of the ‘seat of arbitration’.”
• “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.”

Key Takeaways

• The jurisdictional seat of arbitration, once fixed by the arbitral tribunal under Section 20(2) of the Arbitration and Conciliation Act, 1996, remains static unless the parties mutually agree to change it.
• The venue of arbitration can change for convenience without altering the jurisdictional seat.
• The appointment of a new arbitrator and the subsequent change of venue does not shift the jurisdictional seat.
• The courts having jurisdiction over the jurisdictional seat have exclusive jurisdiction over the arbitral proceedings.
• This judgment provides clarity on the distinction between the ‘seat’ and ‘venue’ of arbitration and its impact on court jurisdiction.

Directions

The Supreme Court did not issue any specific directions in this case.

Development of Law

The ratio decidendi of this case is that the jurisdictional seat of arbitration, once fixed by the arbitral tribunal under Section 20(2) of the Arbitration and Conciliation Act, 1996, remains static unless the parties mutually agree to change it. The change of venue for convenience or the appointment of a new arbitrator does not shift the jurisdictional seat. This decision clarifies the distinction between the ‘seat’ and ‘venue’ of arbitration, reinforcing the principle of party autonomy and the importance of certainty in arbitration proceedings. This decision reaffirms the position of law as laid down in BGS SGS Soma JV v. NHPC Limited [(2020) 4 SCC 224] and overrules the reasoning given in Union of India v. Hardy Exploration and Production (India) Inc. [(2019) 13 SCC 472].

Conclusion

The Supreme Court dismissed the appeals, holding that the jurisdictional seat of arbitration remained Panchkula and did not shift to Delhi. The court clarified that the change of venue by the new arbitrator was for convenience and did not alter the jurisdictional seat. This judgment reinforces the importance of the ‘seat’ of arbitration in determining the jurisdiction of courts and provides clarity on the distinction between the ‘seat’ and ‘venue’ in arbitration proceedings.