The concept of seat is extremely important for arbitration as it is deeply attached to the lexarbitri i.e.the law of the juridical seat of the arbitration is the law that is to be applied to the arbitral proceedings.1The Arbitration and Conciliation Act, 1996 ( hereinafter 'The Act') has not clearly defined the concept of seat and venue which has therefore shifted the onus on the courts to clear the ambiguities by the way of judicial pronouncements. The provisions relevant for understanding conspectus of seat and venue under the 1996 Act are Sections 2(2) and 20.
On 10th December 2019, the Supreme Court of India in the case of BGS SGS Soma JV v. NHPC Ltd.2gave a landmark judgement which has temporarily settled the position with respect to the seat and venue of an arbitration.
The court heavily relied on the judgementofBharat Aluminium Company v. Kaiser Aluminium Technical Services Inc.3in this case which to an extent settle the confusion between seat and venue of an arbitration proceeding.
Understanding the Judicial perspective
The Supreme Court, in the BALCO case cleared the lacuna in the legislation with respect to this concept. The Apex Court provided an interpretation of the word 'place' and said that it would mean "seat" or "venue" on the basis of which section of the statute the word was being used. In this landmark decision of the Supreme Court, it solved the ambiguities of section 2(2) and 20 of the statute by providing a lucid understanding of 'seat' and 'venue'.
Therefore the apex court in BALCO removed the lacunae in the interpretations and stated, that the interpretation of the section has to mean that part-1 of the Act will be applicable only when the seat/place of the arbitral proceedings is in India, restoring the distinction between seat and venue as given in the Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd..4which further strengthened the doctrine of seat and venue under the 1996 Act, the court clarified that the word "place" used in Sections 20(1) and (2) would mean "seat" and "place" used in Section 20(3) would mean"venue".
Furthermore the Supreme Court in Enercon (India) v. Enercon GMBH 5 categorically held that where the parties did not specify any seat for arbitration proceeding, it would have to be determined by analysing which seat had "closest and most intimate connection" with the dispute.
In BGS Soma case, Supreme Court invalidated Union of India v. Hardy Exploration and Production 6 and Antrix Corporation Ltd v Devas Multimedia Pvt Ltd 7 stating that they have wrongly interpreted the BALCO case.
In Union of India v. Hardy Exploration and Production the Supreme Court held that "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." and in Antrix Corporation Ltd v Devas Multimedia Pvt Ltd the Delhi High Court held that the there exists concurrent jurisdiction between the courts having jurisdiction over the place where the cause of action arises and the courts in the place of arbitration. BGS Soma invalidated both of these judgements and stated that 'venue' in an arbitration agreement will be treated as the 'seat' if there is no significant indication that 'venue' is not meant to be the 'seat' in arbitration agreement or in the actions of the parties. The court heavily relied on significant contrary indica test which was given inRoger Shashoua v Mukesh Sharma 8 in establishing this principle. In Roger Shashoua9, the English court was of the opinion that for an arbitral proceeding, the juridical seat would be the 'venue' in the situation where the 'venue' has been expressly designated and there is no express or implied designation of an alternative place as the 'seat' along with a supranational body of rules regulating the arbitration, and no other significant contrary indicia.
In Brahamani River Pellet v. Kamachi Industries 10 the supreme courtreiterated that if the courts of a particular place has specified with the jurisdiction, it shows the parties' intention to exclude all other courts and to give jurisdiction to deal with the matter only to the court so specified.
In MankatsuImpexPvt. Ltd. v. Airvisual Ltd.11 the Supreme Court has taken a contrary view than that of BGS Soma and took a similar stand with Hardy Exploration which stated that the word "seat" and "venue" cannot be used interchangeably and that the parties intention to choose a seat of arbitration should not be determined by the mere expression "place of arbitration" but should be determined from other clauses in the agreement and the conduct of the parties.
Impact of the present judgement
This recent development has reinforced the debate regarding the seat and venue dichotomy in the Act. The legislature has not provided any clarity regarding the seat/venue/place issue which shifts the encumbrance on the judiciary to decide this issue of seat/ venue/place of arbitration as it plays an key role in determining the jurisdiction of courts having supervisory jurisdiction over the proceedings. The Supreme court inarguably in BGS Soma held that unless there is contrary intention of the parties a place or venue is effectively the juridical seat of the arbitration proceeding. Contradicting this view another three judge bench of the Supreme Court in MankatsuImpex case held that parties act and other clause in the agreement should be taken into consideration before determining the seat of arbitration.
Impact of the present judgement
This recent judgement has caused a obscurity in determination of seat of arbitration as the party autonomy is being paramount in arbitration proceedings, the court at the parties' chosen seat should have exclusive jurisdiction to avoid jurisdictional challenges and dilatory/slack litigations. However, it may be prudent to bring in this change through an amendment of the Act, rather than conflicting judicial precedents that endanger the consistency of law and process.
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