India – “Venue” Is The “seat” Of Arbitration Proceedings, Unless Agreement States Otherwise And A Preliminary Order Returning The Petition Under Section 34 Of The Arbitration And Conciliation Act, 1996 (“Act”) Is Not Appealable Under The Act.

The Hon’ble Supreme Court in its recent judgment dated December 10, 2019 in the matter title as “BGS SGS SOMA JV v. NHPC LTD, CIVIL APPEAL
NO. 9307 OF 2019 (ARISING OUT OF SLP (CIVIL) NO.25618 OF 2018), was dealing with the following questions

 

(a) Maintainability of the appeal under Section 37 of the Act, and (b) Determinationofthe“Seat”ofthearbitrationproceedings?

 

Brief Facts :

 

BGS SGS SOMA JV (“Petitioner”) was awarded with a contract for construction of diversion Tunnels at Assam and Arunachal Pradesh by NHPC Ltd. (Respondent). There was an Arbitration Clause in the agreement which stated that “Arbitration Proceedings shall be held at New Delhi/ Faridabad”. A dispute arose between the parties and Notice of Arbitration was issued by the Petitioner to the Respondent. Subsequently, the Arbitral Tribunal was constituted and an award was passed in favor of the Petitioner. Aggrieved by the award, the Respondent filed an application under Section 34 (“Petition”) of the Act before the District Court, Faridabad. This petition was later transferred to the Commercial Court, Gurugram. The Petitioner had filed an application under Section 151 read with Order VII Rule 10 of the Civil Procedure Code, 1908 (“CPC”) and Section 2(1)(e)(i) of the Act, seeking the return of the petition for presentation before the Courts at New Delhi and/ or Assam. The Commercial Court, Gurugram, allowed the application of the Petitioner and returned the petition of the Respondent for presentation before the Courts at Delhi. Against this order, the Respondent filed an appeal under Section 37 (“Appeal”) of the Act read with Section 13(1) of the Commercial Courts Act, 2015 before the Hon’ble High Court of Punjab and Haryana. The High Court while allowing the appeal, held that, Delhi being only a convenient “Venue” for the arbitration proceedings, could not be the “Seat” of arbitration proceedings.

 

The Petitioner challenged the order of the High Court before the Hon’ble Supreme Court. The Supreme Court while dealing with the question as to maintainability of the appeal, considered the interplay between Section 37 of the Act and Section 13 of the Commercial Courts Act, as laid down in the judgment in “Kandla Export Corporation & Anr. v. M/s OCI Corporation & Anr”.

 

The Supreme Court observed that Section 13 (1) of the Commercial Courts Act only provides forum for filing appeals, and to consider the maintainability of the present appeal what needs to be looked at is the parameters under Section 37 (1) (c), which states that, an appeal can be filed against the order of “setting aside or refusing to set aside an arbitral award under Section 34.”. The Supreme Court observed that where the “Venue” of the arbitration proceedings has been expressly agreed by the parties, the conclusion would be that the stated “Venue” is also the “Seat” of the arbitration proceedings, unless there is an agreement contrary to

the same or there exist other contrary indicia.

 

Accordingly, the Supreme Court observed that since the arbitration clause stated that the “Arbitration Proceedings shall be held at New Delhi/ Faridabad”, it thereby signified that hearings and passing of the award, was to be at one of the stated places and the expression “shall be held” indicates that the “Venue” is the “Seat” of the arbitration proceedings.

 

The Supreme Court concluded that both the parties have chosen New Delhi as the “Seat” of arbitration and the Courts at New Delhi alone would have exclusive jurisdiction over the arbitration proceedings, especially since the proceedings along with the award were finally held and signed at New Delhi and not at Faridabad (where the cause of action had arisen). Consequently, the Supreme Court set aside the impugnedorder and directed the Respondent to present the petition before the Courts in New Delhi. Further, relying on various judgments, the Supreme Court also held that the preliminary orders, such as the one in the present case returning the petition to be filed before the competent Court at New Delhi (as opposed to an order setting aside or refusing to set aside an award) which do not impact the arbitral award are not appealable under Section 37 of the Act.