[Seat vs. Venue] Designated “Seat” Of Arbitration Has Exclusive Jurisdiction: Calcutta High Court Reiterates

The Calcutta High Court bench of Justice Soumen Sen and Justice Biswaroop Chowdhury has held that once the “seat” of arbitration is designated in an agreement, it is to be treated as the exclusive jurisdiction for all arbitration proceedings. The Court referred to the 'Shashoua Principle', which propounds that when there is an express designation of a "venue" and no alternative seat is specified, the venue is considered the juridical seat of arbitration.

The arbitration clause in the loan agreement stated: “Arbitration to be held in Mumbai”. The Court held that Mumbai would be both the seat and the venue of arbitration, and that Bombay High Court or the principal civil court of original jurisdiction in Mumbai would have exclusive jurisdiction over the arbitral proceedings and any challenge to the arbitral award.

Brief Facts

Versatile Construction (Appellant) purchased a Dumper vehicle through a hire-purchase agreement, which was financed by Tata Motors Finance Ltd. (Respondent). The appellant received a loan of Rs. 42,16,095 and paid Rs. 28,23,796. The respondent invoked the arbitration clause. On 19.06.2022, a notice was sent to appellant. The appellant decided not to participate in the arbitration. An ex-parte award was passed on 9.09.2024.

On 20.09.2024, in a section 34 along with connected section 9 application, the single judge held that as per the loan agreement which stated “Arbitration to be held in Mumbai”, the Court had no territorial jurisdiction to take up the matter and it was even doubtful whether the Mumbai High Court had jurisdiction, since it could well be possible that one the District courts of Mumbai qualified as the jurisdictional “court” having original civil jurisdiction as contemplated in Section 2(1)(e) of the Act. The Appellant filed the appeal against the order dated 20.09.2024.

Observations

The court referred to Roger Shashoua v. Mukesh Sharma, in which the England and Wales High Court held that the seat of arbitration has to have an exclusive jurisdiction over all arbitration proceedings. This came to be popularly referred to as the 'Shashoua Principle'. It propounded that whenever 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 indica, the inexorable conclusion is that the seated venue is actually the juridical seat of the arbitration proceeding.

The court noted that the Supreme Court in Bharat Aluminium Company v Kaiser Aluminium Technical Services Inc. (BALCO) opined that the legislature had intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and courts where the arbitration takes place. This was necessary as the agreement may have provided for a seat of arbitration at a place which was neutral to both the parties.

In Mankatsu Impex Pvt. Ltd. v. Airsual Ltd., it was noted that the seat of arbitration is not just about where an institution is placed or where the hearings shall be held, but it is about which Court would have supervisory power over such proceedings.

In BGS SGS SOMA JV v. NHPC Limited, it was observed that where parties have selected the seat of arbitration in their agreement, such selection would then amount to an exclusive jurisdiction clause as the parties had then indicated that the courts at the 'seat' would alone have jurisdiction to entertain challenges against the arbitral award which has been made at the seat. The Court concluded that the concurrent jurisdiction theory of BALCO was not its true ratio since if the seat was designated or determined, only the seat court would have exclusive jurisdiction.

The Delhi High Court in Samsung India Electronics Pvt. Ltd. v. Enn Enn Corp Limited observed that the term 'Seat' is of utmost importance as it connotes the situs of arbitration. The term 'Venue' is a place chosen as a convenient location by the parties to carry out the arbitration proceedings, but it should not be confused with 'Seat'. It noted that 'Seat' carries more weight than 'Venue' or 'place'.

The court noted that Clause 21.1 of the loan agreeemnt stated that arbitration was to be held in Mumbai in accordance with the 1996 Act and Clause 22 vested power on competent courts and tribunals in Mumbai. Thus, Mumbai was the venue as well as seat of arbitration.

The court held that the "principal civil court of original jurisdiction in a district" in Mumbai or the Bombay High Court would be the Court having supervisory jurisdiction over the arbitral proceeding as well as the post arbitral jurisdiction under Section 34 and/or Section 37 of the Act.

The court dismissed the application.

Case Title: Versatile Construction vs. Tata Motors Finance Ltd.

Case Number: APOT/389/2024 with AP.COM/822/2024 IA No.: GA-COM/1/2024

For the Respondent: Mr. Tapas Dutta, Adv., Ms. Atrayee Chatterjee, Adv.

For the Respondent: Ms. Hasnuhana Chakraborty, Adv., Ms. Anna Malhotra, Adv., Mr. Rishav Maity, Adv.

Date of Order: 15.01.2025

Click Here To Read/Download Order