Choice Of Venue Is Also A Choice Of Seat Of Arbitration: Delhi High Court

CASE TITLE:
SP Singla Constructions Private Limited Vs. Construction And Design Services, Uttar Pradesh Jal Nigam

DATE OF ORDER:
23 September, 2021

JUDGE(S):
Justice Suresh Kant Kait

SUBJECT

The Single Judge Bench of Delhi High Court comprising Justice Suresh Kant Kait held that choice of venue is also a choice of seat of arbitration. The Court based its observation on the ratio of the Apex Court in BGS SGS SOMA JV v. NHPC [(2020) 4 SCC 234] wherein it was held by the Court that ‘ in cases where there is an express designation of a venue and no any designation ad to the seat of the arbitration, combined with a supranational body of rules governing the arbitration and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding.’

IMPORTANT LEGAL PROVISIONS

THE ARBITRATION AND CONCILIATION ACT, 1996

Section 11(6)-provides that on failure of any party to act according to the appointment procedure agreed to between the parties, the other party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

BRIEF FACTS OF THE CASE

• Respondent invited proposals to undertake design, engineering, procurement and construction of a corridor for old and differently-abled persons during Kumbh and Magh Mela at Sangam, Allahabad, UP, India.
• The petitioner secured the bid in their favour.. A letter of Award was thus issued by the respondent on the petitioner on 08.02.2017.
• The project was valued at Rs. 984,53,75,000/- and was to be completed in 30 months. An additional period of 48 months for defect liability was to be also provided. The petitioner was also required to submit Bank Guarantees amounting to 5% of the value of the project, the bank guarantees were duly deposited by the petitioner.
• The petitioner claims that the work on the said project was started immediately but the respondent failed to fulfill their part of the obligation, particularly to provide for a Right to Way to the petitioner within 15 days of the aforesaid contract.
• When the petitioner communicated with the respondent following its failure to fulfill its obligation, the respondent vide a letter dated 16.04.2020 that the project and the contract both ought to be considered terminated.
• In view of the said letter, the petitioner claimed the ‘Termination Payment’ that it was entitled to as per the contract between the parties and to also discharge the bank guarantees.
• The respondent subsequently discharged the bank guarantees but failed to honour the clause dealing with ‘Termination Payment’.
• As a result, the petitioner invoked dispute resolution clause of the contract entered into by the parties. On the failure to dissolve the dispute amicably, the petitioner invoked the arbitration clause and proposed name of Hon’ble Justice Mr. S.J. Mukhopadhyay as its nominee arbitrator.
• On the failure of the respondent to appoint its nominee Arbitrator within 30 days of issuance of Notice invoking arbitration, petitioner approached this Court and sought the appointment of Arbitrator.

ARGUMENTS RAISED BY THE PETITIONER

• It was contended by the learned counsel for the petitioner that as per the clause of the contract between the parties any dispute, if not resolved amicably was to be referred to arbitration and it was to be held in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi (ICDAR)and shall be subject to Arbitration Act.
• The learned counsel contended that by incorporating the Rules of ICDA, New Delhi into the contract, the parties have expressly chosen the seat/place of arbitration at New Delhi.

ARGUMENTS RAISED BY THE RESPONDENT

• The learned counsel for the respondent opposed the petition in question on the ground of its maintainability as the present Court lacked the required jurisdiction.
• The learned counsel further submitted that the agreement between the partied was entered into at Lucknow and only petitioner has its registered office at Delhi. Thus, no cause of action has arisen within the jurisdiction of the present Court.
• That reliance placed by the petitioner on ICADR Rules is erroneous and ICADR Rules will come into play only after arbitral tribunal is constituted.
• The parties by their agreement provided that ‘The venue of such arbitration shall be Lucknow and the language of arbitration proceedings shall be English.’ In view of the said clause, learned counsel submitted that since only the word ‘venue’ has mean mentioned , it is to be taken to mean ‘seat’ of arbitration as well and the distinction between the two is not to be made applicable in the present case.

LEGAL ISSUE

• Whether the seat of arbitration shall be New Delhi in the light that the arbitration has to be conducted in accordance with the Rules of Arbitration of the ICADR, New Delhi or Lucknow, in the light of agreement that the venue of such arbitration shall be Lucknow?

ANALYSIS BY THE COURT

• After careful perusal of the submissions made, the Court observed that a bare reading of the clauses of the agreement between the parties shows that the arbitration proceedings were agreed to be conducted as per Rules of ICDAR, New Delhi and the venue of arbitration was to be Lucknow.
• The Constitutional Bench of the Apex Court in Bharat Aluminium Company Ltd. v. Kaiser Aluminium Technical Services Inc [(2012) 9 SCC 552] highlighted the distinction between ‘venue’ and ‘seat’. The Bench observed ‘seat’ of arbitration is the centre of gravity of the arbitration and the ‘venue’ is the geographical location where such arbitration meetings are conducted.
• Further the Court observed that the Apex Court in Mankastu Impex Private Ltd. v. Airvisual Limited[(2020) 5 SCC 399] concluded that the intention of the parties as to where the seat of arbitration is to be, has to be determined from other clauses of the agreement and the conduct of the parties. Mere expression of place of arbitration will not be enough to draw the conclusion as to the seat of arbitration.
• However, the ratio laid down in Bharat Aluminium Company ltd. was further discussed in great detail in BGS SGS SOMA JV v. NHPC [(2020) 4 SCC 234]and it was held that ‘choice of venue is also a choice of the seat of the arbitration.’

CONCLUSION

In view of the observation of the Hon’ble Supreme Court in BGS SGS SOMA JV case, the court concluded that since the parties have agreed that the venue of arbitration shall be Lucknow and therefore, the jurisdiction to decide disputes arising out of the said agreement between the parties shall exclusively vest with the Courts in Lucknow. The Court thus dismissed the petition with liberty to petitioner to approach the Court at Lucknow in order to seek appointment of Arbitrator under the provisions of section 11(6) of Arbitration and Conciliation Act, 1996.

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