Judgement Name: BGS SGS SOMA JV v. NHPC LTD
Citation: (2020) 4 SCC 234
Coram: Justice Rohinton Fali Nariman
Date: 10th December 2019
Overview and Ratio: The Supreme Court used the infamous case of BALCO to rule that the when parties have chosen a seat of arbitration or a tribunal has determined a seat, means that there is jurisdiction on the courts at such seat of arbitration for the purposes of interim orders and challenges to an award. Unless contrary, the designation of ‘venue’ can indicate ‘seat’.
- The petitioner and respondents entered into a contract concerning building of hydropower projects in the stated of Assam and Arunachal Pradesh. The said contracts contained an Arbitration clause for settlement of disputes that said that proceedings will take place in Delhi/Faridabad in case of disputes.
- From 2011 to 2016, Arbitral Tribunal consisting of three arbitrators were set up who passed an award in favour of the petitioners in Delhi. Aggrieved the Respondents challenged the award under Section 34 of the Act before the District Court of Faridabad, Haryana. Due to the constitution of Special Commercial Court in Haryana, the matter was transferred to the commercial court of Gurgaon, Haryana. In the interim, the petitioners challenged the same so as to change the jurisdiction to an appropriate court which the petitioners said was that of New Delhi or Assam. In furtherance of the same, the Gurgaon Commercial Court held in the favour of the petitioner.
- The respondent then filed an appeal under section 37 of the Act read with Section 13(1) of Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015, at the Punjab and Haryana High Court. The court held that courts in Faridabad had jurisdiction and that the Respondents appeal was maintainable under Section 37 as Delhi was only a convenient forum. Aggrieved, the Petitioner approached the Supreme Court.
- Whether the High Court of Punjab and Haryana erred in Law to grant appeal under Section 37?
- What is the effect of designating “Seat” in an arbitration?
- Whether Delhi was the seat of the Arbitration?
- Section 37 of Arbitration and Conciliation Act, 1996
- Section 34 of Arbitration and Conciliation Act, 1996
- Section 42 of Arbitration and Conciliation Act, 1996
- Section 9 of Arbitration and Conciliation Act, 1996
- Section 13(1) of the Commercial Courts Act
- The Supreme Court observed that Section 13(1) of the Commercial Courts Act did not give a rise to an independent right to an appeal but provides an alternative forum for appeal. As Section 37 contains certain appeal, they are appealable under Section 13(1) . . Section 37 clearly sets that appeals should lie within sub-clauses (a), (b) and (c0 and from no others. The apex court observed that the impugned judgement had missed the words “under section 34” which meant that refusal to set aside arbitral award must be after the grounds are set out in section 34 have been adhered to the award in question, only them can the appeal fall under the ambit of Section 37 (c ).
- The Supreme Court further referred to the infamous case of BALCO international, which set the precedence to be that when a party selects a particular seat of arbitration, it confers an exclusive jurisdiction clause to all courts at the seat of arbitration for the purposes of interim orders ad challenges to award. This would mean that choosing a seat gives the courts exclusive jurisdiction over the entire arbitration process. Secondly that the ratio of Balco does not hold that two courts have concurrent jurisdiction as it is quite clear from the Balco judgement that choosing a seat amounts to choosing the exclusive jurisdiction of the courts at which the seat is located. Further, The Supreme Court observed that Section 42 of the Act has been inserted so as to avoid conflicts in jurisdiction of courts by placing the supervisory jurisdiction over all arbitral proceedings in one court exclusively. An application must be made to a court which has the jurisdiction to decide such an application. If a seat is not designated, the courts at the seat alone would have jurisdiction and in furtherance of the same, applications are to be made to Section 42. Lastly, seat is not designated by arbitration agreement alone, even a convenient venue is designated, giving several other courts to have a part of cause of action. Section 9 allows interim relief before the commencement of arbitration which can then be preferred in any court where a part of the cause of action has arisen if the seat has not been determined by then. Such a case, allows the earliest court which has been approached to have exclusive jurisdiction as per virtue of section 42.
- Whenever there is no explicit designation given to venue, the expression “arbitration proceeding” would imply automatic jurisdiction to the seat of the arbitration. Further, the expression “shall be held” at a particular venue would further anchor the arbitral proceedings to a particular place and signify that such a place is the seat of the proceeding.
- Applying the facts of the case, the supreme court noted that the venue of the arbitration had been designated Faridabad. However there is no contrary indication, that either Delhi or Faridabad is the designated seat under the arbitration agreement. It is therefore up to the party to select where which of the two would have jurisdiction.
- Designating a seat amounts to exclusive jurisdiction of the courts at the seat
- Designating a ‘venue’ of the arbitration proceedings amounts to designating a seat, in absence of indicators to the contrary
- Sets aside Award of the High Court.