BGS SGS SOMA JV v. NHPC Ltd.
CITATION – Civil Appeal No. 9307 OF 2019
JUDGE – R. F Nariman.
- The Petitioner was awarded a contract by the Respondent for constructing a large hydropower project in Assam and Arunachal Pradesh (“Agreement”).
- Clause 67.3 of the Agreement between the parties provided for dispute resolution, and the arbitration agreement stated that “Arbitration Proceedings shall be held at New Delhi/Faridabad, India and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English.” (emphasis supplied).
- Disputes arose between the parties and an Arbitral Tribunal was constituted. Between August 2011 and August 2016, 71 sittings of the Arbitral Tribunal took place at New Delhi. The Arbitral Tribunal delivered a unanimous arbitral award in favour of the Petitioner in Delhi on August 26, 2016 (“Award”). Aggrieved by the Award, the Respondent filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) seeking to set aside the award before the Court at Faridabad.
- The Petitioner filed an application seeking a return of the petition challenging the Award for presentation before the appropriate court at New Delhi and/or the District Judge at Dhemaji Assam. In 2017, the Special Commercial Court at Gurugram (“Commercial Court”) allowed the application of the Petitioner and returned the challenge petition before the courts in New Delhi.
- Thereafter, the Respondent filed an appeal under Section 37 of the Arbitration Act read with Section 13(1) of the Commercial Courts Act, 2015 before the Punjab & Haryana High Court (“High Court”).
- The High Court passed a judgment in favour of the Respondent, where it held that the appeal filed was maintainable and that Delhi was only a convenient venue where arbitral proceedings were held and not the seat of the arbitration proceedings.
- The High Court held that Faridabad courts would have jurisdiction based on the cause of action has arisen in part in Faridabad. Aggrieved by the order of the High Court, the Petitioner filed a special leave petition before the Supreme Court.
- Maintainability of Section 37 before High Court
- The Juridical Seat of Arbitration Proceedings.
- Test for determination of seat
Whether the Appeal under section 37 had been maintainable before the High Court?
- The Respondent contended that its Appeal had been maintainable under section 37 of the Arbitration Act read with section 13 of the Commercial Courts Act, 2015 (Commercial Courts Act).
- The Petitioner argued that the appeal could not have been maintainable, as it did not fall within the strict bounds of section 37.
- The SC agreed with the Petitioner and held that it is settled law that the right to appeal is not an inherent right but a creature of statute, i.e., an appeal can be preferred only where expressly permitted by law.
- The SC observed that section 13 of the Commercial Courts Act does not provide an independent right of appeal, but merely provides the forum for such an appeal. Therefore, appeals under section 37 of the Arbitration Act would necessarily be restricted to the category of orders enumerated therein.
- The SC explained that a refusal to entertain an application under section 34 based on lack of jurisdiction would not amount to “refusing to set aside an arbitral award under section 34”.
- In its view, the High Court had failed to appreciate that the refusal to set aside the award should have been under section 34, i.e., after the court heard the Section 34 Petition on merits and thereafter dismissed the application.
- Therefore, the SC concluded that the Appeal was not maintainable before the High Court, and could not have been decided on the basis on section 37(1)(c).
The Juridical Seat of Arbitration Proceedings
- The Supreme Court observed that Section 42 of the Arbitration Act9 has been inserted to avoid conflicts in the 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.
- When a seat has been designated, the courts at the seat alone would have jurisdiction and all further applications must be made to the same Court by operation of Section 42 of the Arbitration Act.
- The Supreme Court also held that when a seat has not been designated by the arbitration agreement, and only a convenient venue has been designated, there may be several courts where a part of the cause of action may have arisen.
- An application for interim relief before the commencement of arbitration under Section 9 of the Arbitration Act may then be preferred in any court where a part of the cause of action has arisen as the parties / arbitral tribunal has not determined the seat yet. In such a case, the earliest court before which an application has been made would be deemed the court having exclusive jurisdiction and all further applications must lie before this court by virtue of Section 42 of the Arbitration Act
Test for Determination of the seat-
- the Supreme Court set out that “…wherever there is an express designation of a “venue”, and no designation of any alternative place as the “seat”, combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding.”
- The Court further held that when there is a designation of a venue for “arbitration proceedings”, the expression “arbitration proceedings” make it clear that the venue should be considered the “seat” of arbitration proceedings.
- Further, the expression “shall be held” at a particular venue would further anchor the arbitral proceedings to a particular place and signify that such place is the seat of arbitral proceedings.
- On the contrary, language such as “tribunals are to meet or have witnesses, experts or the parties” may signify that such a place is only the “venue” of the arbitral proceedings.
- These factors, along with the fact that there are no other significant contrary indicia to state that the venue is merely a venue and not the seat, would show that a venue has indeed been designated the “seat” of arbitral proceedings.