Seat v Venue

1. BALCO [2012]

The Supreme Court analysed the concept of "Seat" and "Venue" at length and held that both
the concepts are different. The Court clarified that the "Seat" of arbitration is the center of
gravity of the arbitration i.e. the place where the arbitration is anchored whereas the
"Venue" is merely the geographical location where such arbitration meetings are conducted.

The Court further clarified that the term "Place of arbitration" is used interchangeably under
Section 20 of the Act viz. (i) as seat under Section 20 (1); and (ii) as venue under Section
20 (3).

However, the Supreme Court, while emphasizing on party autonomy, granted concurrent
jurisdiction to two different courts to exercise powers under the Act i.e. the court with
supervisory jurisdiction over the seat of arbitration and the court in whose jurisdiction the
cause of action arose. This observation of the Supreme Court (ref para 96) created
confusion and led to conflicting decisions of different High Courts.

In the matter of BALCO (supra) wherein the Supreme Court adopted the famous English
principle propounded by Justice Cooke in Roger Shashoua v Mukesh Sharma. The
Shashoua principle states that when an agreement expressly designates the venue without
any express reference to seat, combined with a supranational body of laws and no
significant contrary indicia, the inexorable conclusion is that the venue is actually the seat
of arbitration.

2. Enercon (India) Limited v Enercon GmBH

The Supreme Court observed that "Once the seat of arbitration has been fixed in India, it
would be in the nature of exclusive jurisdiction to exercise the supervisory powers over the
arbitration". Similarly, in the matter of Reliance Industries Ltd. v Union of India, the
Supreme Court reiterated the principles of exclusive jurisdiction.

3. Antrix Corporation v. Devas Multimedia (Delhi HC)

In Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd. the Delhi High Court after
relying on judgments passed by the Bombay High Court and the Calcutta High Court held
that even courts where cause of action arose would have concurrent jurisdiction under the
Act, notwithstanding designation of seat of arbitration. The High Court followed the
observations made in para 96 of BALCO (supra) to arrive at such conclusion. The High
Court also observed that Section 42 of the Act presupposes that more than one forum is
competent to hear applications under the Act and thus to ensure efficacy of dispute
resolution, the provision empowers the Courts, who is first seized of the matter, to have
exclusive jurisdiction. Thus, ousting the jurisdiction of the court where the cause of action
arose would render Section 42 otiose and nugatory.

4. Hardy Exploration – Deviation from Shashoua principle

In Union of India v. Hardy Exploration and Production (India) Inc. a reference was made
before a 3 judge bench to determine whether the judgement declared in Sumitomo Heavy
Industries Ltd. v. ONGC Ltd. & Ors. will have an impact on the juridical seat doctrine. The
Court answered the reference in negative.

After answering such question, the Court further went to analyse and determine the seat of
arbitration. The arbitration clause provided in the Agreement defined the venue of
arbitration as Kuala Lumpur and the curial law as UNCITRAL Model Law on International
Commercial Arbitration

The Supreme Court held that Kuala Lumpur is not the seat of arbitration. The Court
declared that the word place cannot be used as seat. A venue does not automatically become
a seat. It requires a positive act and something concomitant attached to it. Similarly, a place
becomes a seat when one of the condition precedent is satisfied. It does not ipso facto
assume the status of a seat

5. BGS-SGS-Soma-JV
As pointed above, even though the Supreme Court deviated from the concurrent jurisdiction
principle propounded in BALCO (supra), it did not overrule the observations made in para
96 of the judgement. This led to confusion and contradictions as evident from the Antrix
Corporation (supra) judgement and similar judgements passed by Calcutta and Bombay
High Courts. This contradiction has been finally put to rest by the Supreme Court in the
case of BGS SGS SOMA JV v. NHPC Ltd. wherein it has been expressly observed that the
findings recorded in para 96 of BALCO (supra) is in conflict with other observations of the
same judgement and cannot be considered as ratio decidendi. It also overruled the law
followed in the Antrix Corporation (supra) judgement. The Supreme Court reiterated that
once the parties designate the seat of arbitration, only the courts governing the seat have
exclusive jurisdiction to govern such arbitration proceeding and jurisdiction of all other
courts stand ousted.

The Supreme Court concluded that when the clause designates a venue of arbitration and
declares that the arbitration will be held at such place, it indicates that the venue is actually
the seat. This coupled with the fact that there are no significant contrary indicia that the
"Venue" is merely a venue and not a seat further demonstrates that such place is actually
the seat. The Court thus reaffirmed the Shashoua principle.

The Supreme Court also declared the judgement of Hardy Exploration (supra) as contrary
to the principle laid down under BALCO (supra) and consequently as "not being good law".

6. Mankatsu Impex – Another deviation

17.1 This MoU is governed by the laws of India, without regard to its conflicts of laws
provisions and courts at New Delhi shall have the jurisdiction.

17.2 Any dispute, controversy, difference or claim arising out of or relating to this MoU,
including the existence, validity, interpretation, performance, breach or termination thereof
or any dispute regarding non-contractual obligations arising out of or relating to it shall be
referred to and finally resolved by arbitration administered in Hong Kong.

17.3 The place of arbitration shall be Hong Kong

The Court observed that the words ‘place of arbitration shall be Hong Kong’ were
insufficient to designate Hong Kong as the seat of arbitration. The Court then looked at
Clause 17.2 which provided that “….any dispute, controversy, difference arising out of or
relating to the MoU shall be referred to and finally resolved by arbitration administered in
Hong Kong…..”. The Court concluded that the words in Clause 17.2 that “arbitration
administered in Hong Kong” constituted indicia that the seat of arbitration was Hong Kong.