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BGS SGS SOMA JV v. NHPC Ltd.

Civil Appeal · 2019 INSC 1349Decided 10 Dec 2019
Civil Appeal No. 9307 of 2019
Justice Rohinton Fali Nariman · Justice Aniruddha Bose · Justice V. Ramasubramanian

Background

The appellant was awarded a major construction contract for the Subansiri Lower Hydroelectric Project, one of India's largest hydropower projects, with the contract's arbitration clause stating that "Arbitration Proceedings shall be held at New Delhi/Faridabad, India." After disputes arose and arbitral awards were made (with hearings and signing of the awards actually taking place in New Delhi), a question arose as to whether a party could challenge the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the courts in Faridabad (where part of the cause of action arose) or only in New Delhi. Three connected appeals raised this same jurisdictional question.

Decision Breakdown

The Supreme Court held that where an arbitration clause designates a place using language like "shall be held" at a particular location, without qualifying words suggesting it is merely a convenient meeting "venue," that location is to be treated as the juridical "seat" of arbitration, not just a venue: a seat carries the legal consequence of exclusive jurisdiction under Section 20(1) of the Act. Since all three arbitrations in question were actually conducted and the awards signed at New Delhi, the Court held that New Delhi had been chosen by the parties as the seat, giving the courts there exclusive jurisdiction over challenges to the award, irrespective of where part of the cause of action arose. The Court accordingly set aside the impugned judgment and directed that the Section 34 petitions be filed in the courts at New Delhi, allowing all three appeals.

Lesson Learnt

In arbitration agreements, the place named for conducting proceedings is usually treated as the legal "seat" (which fixes which courts have exclusive jurisdiction over the arbitration) unless the clause's own language clearly shows it is only a flexible meeting venue, so parties drafting or relying on arbitration clauses should pay close attention to location-related wording, since it can determine which court alone can hear a challenge to the award.

Official source (sci.gov.in)View Judgment (PDF)

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