Emerging open markets in India have led to the discussion on solving the disputes through mechanisms that can adjudicate and dispose of such disputes quickly.  Arbitration in India was introduced in 1996. Since then, the controversy related to seat and venue has been initiated. The issue related to seat and venue is important to discuss here because the supervisory jurisdiction is decided by the seat and venue. The seat and venue sound a Lil bit mystifying for deciding the jurisdiction. But every arbitration has a “Locus Arbitri” or the place of arbitration which basically governs the arbitral proceedings.

Place of Arbitration:

The arbitration act nowhere defines the seat or venue of arbitration. It only defines the place of arbitration in Section 20 of the Act which says: The parties at their own discretion can decide upon the place of arbitration, but where the parties have failed in deciding the place of arbitration, in such case the arbitral tribunal having considered the circumstances of the case and upon the convenience decides upon the place of arbitration for the parties. In cases where it is not decided upon the place of arbitration by either party or by the arbitration tribunal, in such circumstances the arbitral tribunal can meet at any place for consultation among the members to decide upon hearing witness, evidence, inspection of documents, goods or other property.

Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc, (2012) 9 SCC 552, BALCO: A Landmark Judgment

Section 20 of the Arbitration Act uses the word ‘place of arbitration’. Also, in sub-section (3) of Section 20, the word used is ‘place’ for the meeting of the members arbitral tribunal. Hence, the ambiguity was first addressed and clarified by the five-judge bench at the Supreme Court in this judgment. The distinction between seat and venue was first judicially recognized in this judgment. The Seat of Arbitration in this case was defined as the “Centre of gravity “of arbitration, which is actually the judicial seat of arbitration from whose laws the arbitration is governed. Whereas the Venue of Arbitration is a place where the proceedings such as hearing of witnesses, experts or parties and also the inspection of goods and properties are concluded.

Section 42: Jurisdictional Clause

The jurisdiction over the arbitral proceedings is determined by application under section 42 of the Act. In the domestic arbitration, the choice of juridical seat determines the court and any arbitral proceedings will be governed by it and also the setting aside of the award is to be decided by application under section 42.

Latest Pronouncements of Supreme Court

1. Union of India (UOI) v. Hardy Exploration & Production (India) Inc, (2019) 13 SCC 472

In this case, the arbitrator did not decide upon the place of arbitration; rather it only held the meeting/sitting at Kuala Lampur and signed the award. This in the sense of the court does not mean the place of arbitration. Therefore the court opined that the sitting at various places meant venue only and is not by any means considered to be the seat of the arbitration. The relevant observations of the Supreme Court in Hardy Exploration

"33. The word 'determination' has to be contextually determined. When a 'place' is agreed upon, it gets the status of seat which means the juridical seat. We have already noted that the terms 'place' and 'seat' are used interchangeably. When only the term 'place' is stated or mentioned and no other condition is postulated, it is equivalent to 'seat' and that finalizes the facet of jurisdiction. But if a condition precedent is attached to the term 'place', the said condition has to be satisfied so that the place can become equivalent to seat. In the instant case, as there are two distinct and disjunct riders, either of them has to be satisfied to become a place. As is evident, there is no agreement. As far as determination is concerned, there has been no determination.

2. Bgs Sgs Soma Jv vs Nhpc Ltd. SLP (CIVIL) NO.25618 OF 2018

In this case, a three-judge bench observed that the proceedings which continued over three meetings were all held in Delhi and awards were signed in Delhi and not Faridabad. Therefore, in contrast the parties have chosen Delhi as the Place of Arbitration. Further in this judgment, the Bench held that the judgment in Hardy Exploration (supra) is contrary to the decision of the Constitution Bench in (BALCO) and therefore, cannot be considered good law, for it could lead to a chaotic situation. The relevant paragraph of the judgment is as follows:

"84. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration Clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place.

3. Mankastu Impex Private Limited vs Airvisual Limited ARBITRATION PETITION NO. 32 OF 2018

The court in this case determined the importance of the seat of arbitration which was given as a clause in MoU. The clause gives the supervisory power over the arbitration proceedings and also determines the choice of a country's arbitration crucial law. The Court thereafter, opined thus:

"20. It is well-settled that "seat of arbitration" and "venue of arbitration" cannot be used interchangeably. It has also been established that mere expression "place of arbitration" cannot be the basis to determine the intention of the parties that they have intended that place as the "seat" of arbitration. The intention of the parties as to the "seat" should be determined from other clauses in the agreement and the conduct of the parties.

4. M/S. Inox Renewables Ltd. vs Jayesh Electricals Ltd (Arising out of SLP (C) No.29161 of 2019)

There are basically two most important points in the case: Firstly, the court has said that the venue of arbitration is equal to the juridical seat. And secondly, if there is a change in venue ipso facto that would be tantamount to a change in the juridical seat.