Arbitration - Order Returning Sec 34 Application For Presentation In Proper Court Not Appealable Under Sec 37 : SC [Read Judgment]

The order of a Court returning an application under Section 34 of the Arbitration and Conciliation Act 1996 for presentation before the proper forum is not appealable under Section 37 of the Act.

This was held by the Supreme Court in a judgment delivered on December 10,2019 in the case BGS SGS Soma JV vs NHPC Ltd.

A three judge bench comprising Justices R F Nariman, Aniruddha Bose and V Ramasubramanian held that such an order was not falling within the scope of any of the sub-sections of Section 37.

Factual Background

The case arose out of a contract signed between NHPC Limited and its contractor, BGS SGS SOMA JV.

The contract had an arbitration clause which stated that the "arbitration proceedings shall be held at New Delhi / Faridabad".

When disputes arose between NHPC and JV, arbitration proceedings were commenced in New Delhi. Award was passed in Delhi in JV's favour. Challenging this, NHPC filed an application under Section 34 of the Arbitration Act before the Faridabad District Court.

Pointing out that Faridabad was not the appropriate jurisdiction, JV filed an application under Section 151 read with Order VII, Rule 10 CPC and Section 2(1)(e)(i) of the Arbitration Act, seeking the return of the Section 34 application to the appropriate court in New Delhi.

This application was allowed ordering return of the same from Faridabad to the appropriate court in New Delhi.

Aggrieved by this transfer order, NHPC filed an appeal under Section 37 of the Arbitration Act before the Punjab and Haryana High Court.

The HC held that appeal against the transfer order was maintainable under Section 37. It was further held that New Delhi had no exclusive jurisdiction as it was not the "seat of the arbitration" and was a mere "venue of convenience". Since a part of cause of action had arise at Faridabad, the HC held that Section 34 proceedings can be maintained there, ruled the HC.

JV approached the SC against this order of the HC.

HC's reasoning held wrong

To hold the appeal maintainable, the HC held that the order of return fell within the scope of Section 37(c), which deals with orders "refusing to set aside an arbitral award under Section 34".

The SC stressed on the fact that Section 37(c) deals specifically with refusal to set aside an arbitral award under Section 34, and not just refusal to entertain an application under Section 34.

The apex court said :

"what is missed by the impugned judgment is the words "under Section 34". Thus, the refusal to set aside an arbitral award must be under Section 34, i.e., after the grounds set out in Section 34 have been applied to the arbitral award in question, and after the Court has turned down such grounds. Admittedly, on the facts of these cases, there was no  adjudication under Section 34 of the Arbitration Act, 1996 - all that was done was that the Special Commercial Court at Gurugram allowed an application filed under Section 151 read with Order VII Rule 10 CPC, determining that the Special Commercial Court at Gurugram had no jurisdiction to proceed further with the Section 34 application, and therefore, such application would have to be returned to the competent court situate at New Delhi".

Parameters of Arbitration Act governs appeals in Commercial Courts arising out of arbitral awards

The Court also referred to the 2018 decision in Kandla Export Corporation v OCI Corporation and another, which held that there is no independent right to appeal given under the Commercial Courts Act and that it gives a mere forum. 

"Given the fact that there is no independent right of appeal under Section 13(1) of the Commercial Courts Act, 2015, which merely provides the forum of filing appeals, it is the parameters of Section 37 of the Arbitration Act,1996 alone which have to be looked at in order to determine whether the present appeals were maintainable", observed the judgment authored by Justice Nariman.

Section 37(1) makes it clear that appeals shall only lie from the orders set out in sub-clauses (a), (b) and (c) and from no others, observed the Court.

The judgment also held that venue of arbitration will be the seat of arbitration in the absence of contrary intention expressed by the parties. The Court held a 2018 judgment in the case Union of India vs. Hardy Exploration and Production (India) INC which had held otherwise to be incorrect. A detailed report on that aspect may be read here.

Case Details

Title : BGS SGS Soma JV vs NHPC Ltd

Case No : Civil Appeals 9307, 9308 & 9309 of 2019

Judgment date : December 10, 2019

Coram : Justices R F Nariman, Aniruddha Bose, V Ramasubramanian

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