The Seat of arbitration is a very important facet in arbitral proceedings. It
determines which court will have the supervisory power over the matter and
clarifies the jurisdictional issue. The enforcement of awards also depends upon
the seat/venue of arbitration. This article explains the evolution of concept of
seat in Indian arbitration and with the help of plethora of cases and judicial
justifications settles the dispute between seat and venue of arbitration.
India had a Village Panchayat system which was a combination of arbitration and
mediation. It was only when the courts in the British India started controlling
the Panchayat Decisions, the problem started arising. In an earlier Privy
Council judgment of Seethamma v. Veeranna
[i], an interesting comment was made on
the village Panchayat system which said that not only it is quick, inexpensive,
goes according to customary law but also goes according to morality and courts
in British India should be loathed to set aside these awards only because they
do not agree with the village morality.
In existing statutes of Indian law, there is Code of Civil procedure, 1859, in
which only existing disputes could be referred and not future ones by and large
by courts in suits instituted with them, after which came the 1899 Act which
applied to the Presidency Towns only. At no stage in these earlier acts,
including the Arbitration Act 1940 Act (hereinafter referred to as 1940 Act) was
there any concept of the place or seat of arbitration.
The concept of seat of
arbitration was first brought in by the Geneva Protocol of 1923, post World War
I, which had grounds to refuse to recognize and enforce Foreign Award on the
ground that the award was annulled in the place where it was made. The Indian
law accepted and imbibed the Protocol in its domestic law as it was signatory to
the protocol by the Protocol Convention Act of 1937.
Then came the New York Convention in 1958 which again had a limited concept of
seat, same as the Geneva Convention. Amongst all these shadowy concepts,
concurrent jurisdiction evolved in the early two judgments, National Thermal Power v. Singer Company And Ors
, under the 1940 Act, the brief
facts of which are that arbitration was to take place in London, hence English
Law was to apply.
So, the question which arose was how is the 1940 Act empowered
to have the jurisdiction to give power to the Indian Courts to set aside the
award of the London Court. The argument failed only on one ground that section
9(b) of the Foreign Award Act says that an arbitration agreement governed by the
law of India will not be covered by this act. It was stated that an arbitration
agreement is part of the main agreement which is governed by the Indian law
which is the substantive law. M/s Sumitomo Heavy Industries Ltd. v. ONGC
Ltd. also followed the judgment of Singer.
In the above confusion, the first legislative correction made in the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as Act of 1996) was that,
section 9(b) of the Foreign Awards Act was dropped and the Act of 1996 repealed
all the three older acts which are the Convention Act, Foreign Award Act and the
Then came the Model UNCITRAL Law of 1985, the Act of 1996 took certain portions
of the Model and retained certain portions of the older Act.
The famous case of Bhatia International v. Bulk Trading SA
, discusses the
applicability of Part I of the UNCITRAL Model Law, where in the end instead of
applying only section 9, the whole Part I was applied. The same went on to be
followed by in the case of Venture Global Engineering v. Satyam Computer
All the above confusion arose because somewhere the Model Law was not followed
by the 1996 Act when section 9 was concerned.
Then came the landmark case of Bharat Aluminium Co v. Kaiser Aluminium Technical
('BALCO'), where the above mentioned two cases were overruled.
Overruling Bhatia and Venture Global decisions
Although the Indian Arbitration and Conciliation Act, 1996 ('the 1996 Act') is
based on the UNCITRAL Model Law, on a clearly erroneous statutory construction
of the 1996 Act, the Supreme Court in these decisions assumed that, unless the
parties expressly or implied agreed to the contrary, the Indian courts had
jurisdiction with respect to foreign-seated arbitration similar to their curial
jurisdiction with respect to arbitrations seated within India under Part I of
the 1996 Act.
The Hon'ble Supreme Court in BALCO has now unequivocally
overruled Bhatia and Venture Global on the basis that Part I of the 1996 Act
does not apply to foreign-seated arbitrations. It opined that the application of
the UNCITRAL Model Law was intended to be limited to the territorial
jurisdiction of the seat of arbitration i.e. the territoriality principle and as
the seat of the arbitration is the 'centre of gravity' of the arbitration,
therefore a choice of a foreign-seated arbitration by the parties ordinarily
meant that the parties also agreed to the application of the curial law of that
After the BALCO regime being followed, Hon'ble Supreme Court had to clarify in
its subsequent decisions that BALCO was to apply only when the seat of
arbitration is not foreign. This was laid down in the case of Reliance
Industries Ltd. And Ors. V. Union of India
, wherein it held that Part I of the
Act will be excluded by necessary implication 'if juridical seat is outside
India or where law other than Indian law governs the arbitration agreement'. Due
to the presence of a foreign seat and as well as a foreign law to govern the
arbitration agreement, the SCI held Part I to be excluded.
Before the BALCO judgment in 2012, The Seat Doctrine was already in development
from 2011 through the following judgments:
- Videocon Industries Limited v. Union of India and Anr.
- Yograj Infrastructure Ltd. v. Ssang Yong Engineering and Construction Co.
In both the above cases it was held that, Part I of the Act will be excluded if
a combination of a foreign seat with foreign curial law or a foreign seat with
foreign law to govern the arbitration agreement is present in the arbitration
The Indian courts, previously, have carved out a clear distinction between venue
and seat in the landmark case of Enercon (India) Ltd. and Ors. v. Enercon GMBH
. , where the 'seat' was understood to be the venue, a convenient place,
which was London in the present case and not seat as in the arbitral sense, even
though the laws of India were to be applied.
This case looked at certain
important judgments which were:
- Braes of Doune Wind Farm (Scotland) Limited Vs. Alfred McAlpine Business
Services Limited EWHC 426 [ii], where the seat of arbitration was Glasgow.
It held that the law governing the arbitration is English law, then the
challenge procedure cannot be a Scottish law. Therefore, seat was read as
'venue' and Glasgow became the venue only.
- Roger Shashoua & Ors v Mukesh Sharma, which held that courts of the seat
of arbitration have exclusive jurisdiction over all proceedings arising out of
the arbitration. The existence of multiple venues is only a matter of
In 2017, three interesting judgments came up regarding seat and venue, which
- IMAX Corporation v E-City Entertainment Pvt Ltd , where there were no seat
designation rules, the ICC rules were to be followed. The ICC designated London
as the seat of arbitration, which gave the exclusive jurisdiction to London.
- Indus Mobile Distribution Private Limited v. Datawind Innovations Private
Limited , where Mumbai was designated as the seat of arbitration, giving
exclusivity to the Mumbai Courts.
In the latest case of BGS SGS Soma JV v NHPC Ltd
, the Hon'ble Supreme Court of
India held that the venue of arbitration is synonymous with the seat of
arbitration when the seat is not expressly provided for in an arbitration
agreement. In the case of Union of India v. Hardy Exploration and Production
., the interpretation of 'venue' in the Hardy Exploration Case as
just a location that the parties has agreed upon for the arbitral proceedings to
physically take, unless concomitant
factors exist to show that the venue is
the intended juridical seat, is incorrect.
They explain that the reasoning in
the Hardy Exploration Case fails to take into account the principles expounded
in the Shashoua Case
and therefore is not legally sound. The Hardy Exploration
judgment was pronounced by a three judge bench as same as the Bgs Soma Case,
hence, not yet overruled. But as the dictum of Hardy goes against the Shashoua
Case which was pronounced by a five judge bench, Hardy is an incorrect law.
To conclude, now even in a purely domestic situation, if a seat is designated,
it amounts to an exclusive jurisdiction clause, and all other courts are
- Seethamma v. Veranna, AIR 1934 PC 105
- Braes of Doune Wind Farm (Scotland) Limited Vs. Alfred McAlpine Business
Services Limited EWHC 426
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