Difference Between 'Seat' & 'Venue' Of Arbitration: Allahabad High Court Explains

Background

The dispute between the Petitioner and the Respondent pertained to payments in respect of an apartment. When the matter reached the stage of Arbitration, the Petitioner claimed that as per the agreement, in case of any dispute arising between the parties, the place of the arbitration will be at "New Delhi".

Subsequently, the High Court appointed a sole arbitrator, having its seat at New Delhi, which partly allowed the claim of the petitioner.

Assailing the arbitral award, the respondent preferred an Arbitration Application under Section 34 of Arbitration and Conciliation Act, before District Judge, Gautam Budh Nagar (Uttar Pradesh), which proceeded with the case and issued notice to the petitioner.

The petitioner then moved an application before the Commercial Court, questioning the legality and validity of arbitration proceedings under Section 34 of the Act in Gautam Budh Nagar. The same came to be dismissed, following which, the petitioner approached the High Court through the present petition.

The issue to be decided by the High Court was whether the Commercial Court at Gautam Budh Nagar has jurisdiction to hear the case u/s 34 of the Arbitration and Conciliation Act, 1996 regarding the arbitral award passed by sole arbitrator, having its venue at New Delhi, which has been specified in the arbitration agreement (not as the seat of arbitration).

Petitioner

The counsel for the petitioner argued that "Venue of Arbitration" proceedings has been chosen to be at "New Delhi" by both the parties and the arbitration clause does not specifies the "Seat of Arbitration". Thus, in the absence of the specified "Seat of Arbitration" in arbitral agreement, the venue of arbitration will be the juridical seat of arbitration proceedings and as such, the impugned proceedings under Section 34 of the Arbitration and Conciliation Act, challenging the arbitral award is not maintainable in District- Gautam Budh Nagar, rather it is maintainable in the court at Delhi.

He further submitted that Section 36 of the Arbitration Act provides that the arbitral award shall be enforced under the relevant provisions of CPC in the same manner as if it were a decree of the court. In the present case, the application for execution can be filed before any court where the said decree/award can be executed. Thus, filing of execution proceedings in the Court at District- Gautam Budh Nagar is not tenable in law.

 Respondent

The counsel for the respondent stated that Clause 10.6 of the agreement confers exclusive jurisdiction to the courts of Gautam Budh Nagar, and venue of arbitration which in the present case is New Delhi, was merely a convenient location to carry out the arbitration proceedings.

Further, it was contended that the petitioner had himself submitted to the jurisdiction of the Courts in Uttar Pradesh, at the very first instance, since he had preferred an application under Section 11 before the Allahabad Court, pursuant to which the arbitrator was appointed.

Precedents

The High Court pointed out that initially, the juridical seat of arbitration, as a concept, did not find a place in the Arbitration Act of 1940. "While Section 20 of the 1996 Act granted parties the autonomy to choose 13 the 'place' of arbitration. It did so in an ambiguous manner without distinguishing between 'seat' and 'venue'," it noted.

Addressing this ambiguity, the 246th Law Commission Report suggested replacing the words 'place' for 'seat' or 'venue.' However, the Court recollected that these amendments were not enacted. As a result, the conflict between the juridical seat and jurisdiction of the court persisted along with the confusion pertaining to the distinction between 'seat' and 'venue'.

Finally, in 2009, the English judgment of Shashoua (2009) EWHC 957 held that the seat of arbitration is to have an exclusive jurisdiction over all proceedings that arise out of the arbitration. It laid the significant contrary indicia test as per which a place of arbitration is a stipulation that such place shall be the seat of the arbitration and consequently determine the lex fori in the absence of any significant contrary indicia.

This position was confirmed by a Division Bench of the Supreme Court of India in Roger Shashoua & Ors v. Mukesh Sharma & Ors., (2017) 14 SCC 722.

Subsequently, in Bharat Aluminium Co v. Kaiser Aluminium Technical Services Inc. (BALCO judgment), the Supreme Court acknowledged that the terms 'seat' and 'place' can be used interchangeably. It held while laying the principle of 'concurrent jurisdiction' that two courts can have jurisdiction over arbitration applications viz.

(i) courts possessing the subject-matter/cause of action jurisdiction and

(ii) courts where the place/seat of arbitration was designated.

However, the principle of concurrent jurisdiction was not intended to replace the principle of 'significant contrary indicia.' The existence of multiple venues was only perceived to be a matter of convenience.

Even though the Supreme Court expressed a different view in two subsequent judgments, the High Court noted that in the recent decisions in BGS SGS Soma JV vs NHPC Ltd and M/s Inox Renewables Ltd. v. Jayesh Electricals Ltd., a Division Bench of the Supreme Court reiterated the "Shashoua Principle", and clarified that venue of arbitration will be the juridical seat of arbitration in the absence of contrary intention of the parties. Further, a shift in venue by mutual agreement between the parties would tantamount to shifting of the place/ seat of arbitration.

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Citation: 2022 LiveLaw (AB) 80

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