Supreme Court Of India Differentiates Between ‘Place’ And ‘Seat’ Of Arbitration

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A three-judge bench of Supreme Court of India answered a reference explaining in detail difference between ‘venue’ ‘place’ and ‘seat’ of arbitration. Supreme Court cleared the air when it held that place of arbitration does not on its own gets the status of its seat.

Facts of the Case

An application was filed under section 34 of Arbitration and Conciliation Act 1996 before the learned single judge of Delhi High Court challenging the award passed by an arbitrator. The main objection to the abovesaid application was about the maintainability of the application under section 34. It was contended that in view of the terms and condition of the agreement, Courts in India do not have the jurisdiction to entertain the application under section 34. Learned single judge accepted this argument dismissed the application without answering other issues raised. This decision was challenged before Division Bench of High Court which followed the decision of Learned Single Judge. Disappointed by rulings of the High Court. Special Leave Petition was preferred in the Supreme Court of India. Division Bench of Supreme Court of India after examining the question in controversy and arguments raised and precedent relied on, saw this a fit case to be referred to a larger bench.

Supreme Court of India examined the various decision of both foreign and domestic jurisdiction, but the case of Sumito Heavy Industries v. ONGC Ltd. And Ors., Reliance Industries Limited and another v. Union of India and Bhatia International v. Bulk Trading S.A and Anr were relied upon heavily. In the course of arguments, it was inferred was held that in the instant case and Bhatia International case was the most relevant.

Decision Of The Case

Supreme Court examined the relevant clauses, article of UNCITRAL Model Laws and ICC Rules and came to the conclusion that parties were free to agree on the place of arbitration and if this is not specified, arbitral tribunal will decide this question. The Bench coming back to the case at hand said that just because arbitrator held the meeting at Kaula Lumpur and signed the award does not amount to determination and further elaborated by saying that the

“..sittings at various places are relatable to venue. It cannot be equated with the seat of arbitration or place of arbitration which has a different meaning.”

Moreover, Court observed that terms ‘place’ and seat are used interchangeably and discussed this point as follows:

When only the term ‘place’ is stated or mentioned and no other condition is postulated, it is equivalent to ‘seat’ and that finalises 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.

Using the reasoning above it was deciphered that in the present case according to the relevant clauses there were two distinct riders and either of them had to be satisfied to become a place and as already mentioned there was never any determination. Thus the word ‘place’ cannot be used as a ‘seat’

Supreme Court differentiating the words ‘ place’, ‘venue’ and seat in following words

“..a venue can become a seat if something else is added to it as a concomitant. But a place unlike seat, at least as is seen in the contract, can become a seat if one of the conditions precedent is satisfied. It does not ipso facto assume the status of seat.” Supreme Court concluded that Kuala Lumpur is not the seat or place of arbitration. The Courts in India have jurisdiction and accordingly set aside the order passed by Delhi High Court. The matter was sent back to Delhi High Court to be decided.

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