Supreme Court of India: when the arbitration agreement specify the “venue” but does not specify the “seat”, then on what basis and by which principle, the parties have to decide the place of “seat”

Supreme-Court-of-India-1_85138_730x419

In Union of India v Hardy Exploration and Production (India) INC (Civil Apperal no. 4628 of 2018 [Arising Out of SLP (C) No.31356 Of 2016] dated May 01, 2018), the Supreme Court of India addressed a question of when the arbitration agreement specify the “venue” for holding the arbitration sittings by the arbitrators but does not specify the “seat”, then on what basis and by which principle, the parties have to decide the place of “seat” which has a material bearing for determining the applicability of laws of a particular country for deciding the post award arbitration proceedings. The case analysis is given below:

Factual Matrix

The case involved challenge to the legality, validity and correctness of the award made by the arbitrators in Hardy Exploration’s (foreign company) favour in one international commercial arbitration proceeding between the Union of India and Hardy Exploration.

Union of India filed a petition under Section 34 of the Indian Arbitration and Conciliation Act, 1996 (Act) challenging an award. This was objected by Hardy Exploration on two principal objections firstly, a petition under Section 34 of the Act would not lie in view of the fact that it is a foreign award. Second, even if, the petition under Section 34 of the Act, is maintainable, the said petition will not lie in Delhi High court as it does not have the necessary territorial jurisdiction. The Delhi High Court held that keeping in view the terms of the agreement in question coupled with the law laid down by Delhi High Court in several decisions governing the issues arising in the case, Indian Courts have no jurisdiction to entertain the application filed by the Union of India under Section 34 of the Act to question the legality and correctness of the award in question. The Union of India appealed under Section 37(2) of the Act before division bench of Delhi High Court which was dismissed.

Contentions of the Parties

Rival contentions were made with regard to the ‘place of arbitration’. According to the Union of India, the place of arbitration was New Delhi and, according to the Hardy Exploration, the place of arbitration was Kuala Lumpur, Malaysia. Further, Hardy Exploration contended that the Indian Courts have no jurisdiction to entertain the Union of India’s application filed under Section 34 of the Act to challenge the legality and correctness of an award in question.

Arbitration Clause

The relevant clauses pertaining to arbitration is reproduced below:

 “33.12 The venue of conciliation or arbitration proceedings pursuant to this Article unless the parties otherwise agree, shall be Kuala Lumpur and shall be conducted in English language. Insofar as practicable the parties shall continue to implement the terms of this contract notwithstanding the initiation of arbitration proceedings and any pending claim or dispute.”

Foreign Cases Cited by the Parties

S.No. Case Title Citation
1. Naviera Amazonica Peruana S.A. vs. Compania Internacional De Seguros Del Peru (1988) (1) Lloyd’s Law Reports 116
2. Hiscox   vs. Outhwaite (1992) 1 AC 562
3. Union of India vs. McDonnell   Douglas   Corpn.

 

(1993)   2   Lloyd’s   Law

Rep. 48

4. C vs. D (2007) EWCA Civ 1282 (CA)
5. C vs. D (2008) 1 Lloyd’s Law Rep 239
6. Braes of Doune Wind Farm   (Scotland)   Limited   vs.   Alfred   McAlpine Business Services Limited (2008) EWHC 426 (TCC)

 

7. Shashoua and Ors. vs. Sharma   (2009) EWHC 957

(Comm.)

8. Sulamerica Cia Nacional De Seguros S.A.

& Ors. vs. Enesa Engenharia SA & Ors.

(2012)

EWCA Civ 638

9. (1)   Enercon   GMBH   (2)   Wobben

Properties GMBH vs. Enercon (India) Ltd.

(2012)

EWHC 3711 (Comm)

10. Govt. of India vs. Petrocon

India Ltd.

(2016) SCC Online MYFC 35

Conclusion

The Supreme Court held that he question regarding the “seat” and “venue” for holding arbitration proceedings by the arbitrators arising under the Arbitration Agreement/International Commercial Arbitration Agreement is primarily required to be decided keeping in view the terms of the arbitration agreement itself, but having regard to the law laid down by the Supreme Court of India in several decisions by the Benches of variable strength, and further taking into consideration the aforementioned submissions of the Parties  and also keeping in view the issues involved in the appeal, which frequently arise in International Commercial Arbitration matters, the Supreme Court was of the considered view that this is a fit case to exercise its power under Order VI Rule 2 of the Supreme Court Rules, 2013 and refer this case (appeal ) to be dealt with by the larger Bench of the Supreme Court for its hearing.

One Comment Add yours

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s