The Supreme Court Wednesday held that the “jurisdictional seat” for arbitration to decide a dispute does not change with the appointment of a new arbitrator and without “express mutual consent of the parties”.
“It is highly desirable in commercial matters, in fact in all cases, that there should be certainty as to the court that should exercise jurisdiction. We do not think the law of arbitration visualises repeated or constant shifting of the ‘seat of arbitration',” the apex court said in an important verdict.
A bench of justices Ajay Rastogi and Sanjiv Khanna was faced with an “interesting” question of whether the ‘jurisdictional seat of arbitration' gets changed with the appointment of a new arbitrator if the terms of the agreement do not specifically provide for the place which would be the seat of the arbitration.
“We would hold that the place or the venue fixed for arbitration proceedings... Will be the jurisdictional ‘seat' and the courts having jurisdiction over the jurisdictional ‘seat' would have exclusive jurisdiction. This principle would have an exception that would apply when by mutual consent the parties agree that the jurisdictional ‘seat' should be changed, and such consent must be express and clearly understood and agreed by the parties,” Justice Khanna, writing the judgement, said.
Once the jurisdictional ‘seat' of arbitration is fixed as per the statute, then, without the express mutual consent of the parties to the arbitration, ‘the seat' cannot be changed, it elaborated.
The verdict came on a plea of a company, BBR (India) Private Ltd and it was submitted that the first arbitrator had decided that the jurisdictional seat of the arbitration for the dispute with firm S P Singla Constructions Private Ltd would be at Panchkula in Haryana as there was specific place decided in the terms of the agreement between the parties earlier.
However, the first arbitrator left due to personal reasons and was substituted by a new one who decided Delhi as the jurisdictional seat of the arbitration.
After the passing of the award, litigations were filed and pursued in Delhi and Haryana respectively by the parties.
“The short and interesting issue which arises in the present appeals is - whether conducting the arbitration proceedings at Delhi, owing to the appointment of a new arbitrator, would shift the ‘jurisdictional seat of arbitration' from Panchkula in Haryana, the place fixed by the first arbitrator for the arbitration proceedings,” the bench noted.
Referring judgements on the issue, the bench, in its 28 pages judgement, said the appointment of a new arbitrator, who holds the proceedings at a different location, would not change the jurisdictional ‘seat' already fixed by the earlier or first arbitrator.
“The place of arbitration in such an event should be treated as a venue where arbitration proceedings are held,” it said.
