# BGS SGS SOMA JV v. NHPC LTD

- **Citation:** [2019] 17 S.C.R. 742
- **Court:** Supreme Court of India
- **Decided:** 2019-12-10
- **Case number:** Civil Appeal No. 9307 of 2019
- **Bench:** R. F. Nariman, Aniruddha Bose, V. Ramasubramanian
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/bgs-sgs-soma-jv-v-nhpc-ltd-33674
- **Pages:** 86

## Headnote

Arbitration and Conciliation Act, 1996:
s. 37 - Appeals under - Against the orders passed in
applications u/s. 151 r/w O. VII r. 10 CPC and u/s. 2(1)(e)(i) of
the Arbitration and Conciliation Act, 1996, seeking return of
petition filed u/s. 34 of 1996 Act - Maintainability of - Held:
Section 37(1) makes it clear that appeals shall only lie from the
orders set out in sub-clause (a), (b) and (c) thereof and no others
- The refusal to set aside an arbitral award must be under s. 34
i.e. after the grounds set out in s. 34 have been applied to the
arbitral award in question and after the courts have turned down
such grounds - In the present case there was no adjudication u/s.
34 - Therefore, the appeals filed in the present case do not fall
within s. 37 and hence not maintainable.
ss. 20, 31(4), 42 and 2(1)(e) - Juridical seat of arbitral
proceedings - What constitutes 'judicial seat' of arbitral proceeding
- In the facts of the present case whether the 'seat' of the
arbitration proceedings would be in 'New Delhi' or 'Faridabad' -
Held: The moment a seat is designated by agreement between the
parties, it is akin to an exclusive jurisdiction clause, which would
then vest the Courts at the 'seat' with exclusive jurisdiction for the
purpose of regulating arbitral proceedings - In order to determine
whether the 'seat' of the arbitral proceedings has, infact, been
indicated in the agreement between the parties, it is to be seen that
wherever there is express designation of a 'venue' and there is no
designation of any alternative place as the 'seat', combined with
supranational body of rules governing the arbitration, and no
other significant contrary indicia, the stated 'venue' would be
actually the 'seat' of the arbitral proceedings - The arbitration
clause in the present case states that "Arbitration Proceedings shall
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be at New Delhi/Faridabad" indicates that the proceedings shall
be held at either of the two places - Both the places have been
designated as the 'seat' of the arbitration proceedings - In all the
cases, since the proceedings were finally held at New Delhi and
the awards were signed in New Delhi, would lead to the conclusion
that both the parties have chosen New Delhi as 'seat' of arbitration
u/s. 20(1) - Therefore, both parties have chosen that the Court at
New Delhi alone would have exclusive jurisdiction over the arbitral
proceedings.
Judgments/Orders:
Interpretation of judgments - Principles - Held: Judgments
of courts are not to be construed as statutes - They are not to be
read as Euclid's theorems - Observations made therein must be read
in the context in which they appear.
Judgment having conflicting portions - Held: A judgment
must be read as a whole, so that conflicting parts may be
harmonised to reveal the true ratio of the judgment - If harmonising
is not possible, first it should be seen if ratio decidendi can be
called out without the conflicting portion - If not the binding nature
of the precedent on the point on which there is a conflict in
judgment, comes under a cloud.
Allowing the appeals, the Court
HELD: 1.1 Given the fact that there is no independent
right of appeal under Section 13(1) of the Commercial Courts
Act, 2015, which merely provides the forum of filing appeals, it
is the parameters of Section 37 of the Arbitration Act,1996 alone
which have to be looked at in order to determine whether the
present appeals were maintainable. [Para 14] [764-C]
1.2 Section 37(1) Arbitration Act makes it clear that
appeals shall only lie from the orders set out in sub-clauses (a),
(b) and (c) and from no others. The pigeonhole that the High
Court in the impugned judgement has chosen to say that the
appeals in the present cases were maintainable is sub-clause (c).
According to the High Court, even where a Section 34
application is ordered to be returned to the appropriate Court,
such order would amount to an order "refusing to set aside an
arbitral award under S

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BGS SGS SOMA JV
v.
NHPC LTD.
(Civil Appeal No. 9307 of 2019)
DECEMBER 10, 2019
[R. F. NARIMAN, ANIRUDDHA BOSE AND
V. RAMASUBRAMANIAN, JJ.]
Arbitration and Conciliation Act, 1996:
s. 37 - Appeals under - Against the orders passed in
applications u/s. 151 r/w O. VII r. 10 CPC and u/s. 2(1)(e)(i) of
the Arbitration and Conciliation Act, 1996, seeking return of
petition filed u/s. 34 of 1996 Act - Maintainability of - Held:
Section 37(1) makes it clear that appeals shall only lie from the
orders set out in sub-clause (a), (b) and (c) thereof and no others
- The refusal to set aside an arbitral award must be under s. 34
i.e. after the grounds set out in s. 34 have been applied to the
arbitral award in question and after the courts have turned down
such grounds - In the present case there was no adjudication u/s.
34 - Therefore, the appeals filed in the present case do not fall
within s. 37 and hence not maintainable.
ss. 20, 31(4), 42 and 2(1)(e) - Juridical seat of arbitral
proceedings - What constitutes 'judicial seat' of arbitral proceeding
- In the facts of the present case whether the 'seat' of the
arbitration proceedings would be in 'New Delhi' or 'Faridabad' -
Held: The moment a seat is designated by agreement between the
parties, it is akin to an exclusive jurisdiction clause, which would
then vest the Courts at the 'seat' with exclusive jurisdiction for the
purpose of regulating arbitral proceedings - In order to determine
whether the 'seat' of the arbitral proceedings has, infact, been
indicated in the agreement between the parties, it is to be seen that
wherever there is express designation of a 'venue' and there is no
designation of any alternative place as the 'seat', combined with
supranational body of rules governing the arbitration, and no
other significant contrary indicia, the stated 'venue' would be
actually the 'seat' of the arbitral proceedings - The arbitration
clause in the present case states that "Arbitration Proceedings shall
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be at New Delhi/Faridabad" indicates that the proceedings shall
be held at either of the two places - Both the places have been
designated as the 'seat' of the arbitration proceedings - In all the
cases, since the proceedings were finally held at New Delhi and
the awards were signed in New Delhi, would lead to the conclusion
that both the parties have chosen New Delhi as 'seat' of arbitration
u/s. 20(1) - Therefore, both parties have chosen that the Court at
New Delhi alone would have exclusive jurisdiction over the arbitral
proceedings.
Judgments/Orders:
Interpretation of judgments - Principles - Held: Judgments
of courts are not to be construed as statutes - They are not to be
read as Euclid's theorems - Observations made therein must be read
in the context in which they appear.
Judgment having conflicting portions - Held: A judgment
must be read as a whole, so that conflicting parts may be
harmonised to reveal the true ratio of the judgment - If harmonising
is not possible, first it should be seen if ratio decidendi can be
called out without the conflicting portion - If not the binding nature
of the precedent on the point on which there is a conflict in
judgment, comes under a cloud.
Allowing the appeals, the Court
HELD: 1.1 Given the fact that there is no independent
right of appeal under Section 13(1) of the Commercial Courts
Act, 2015, which merely provides the forum of filing appeals, it
is the parameters of Section 37 of the Arbitration Act,1996 alone
which have to be looked at in order to determine whether the
present appeals were maintainable. [Para 14] [764-C]
1.2 Section 37(1) Arbitration Act makes it clear that
appeals shall only lie from the orders set out in sub-clauses (a),
(b) and (c) and from no others. The pigeonhole that the High
Court in the impugned judgement has chosen to say that the
appeals in the present cases were maintainable is sub-clause (c).
According to the High Court, even where a Section 34
application is ordered to be returned to the appropriate Court,
such order would amount to an order "refusing to set aside an
arbitral award under Section 34". [Para 14] [764-C-D]
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1.3 Under the proviso to Section 13(1A) of the Commercial
Courts Act, 2015, Order XLIII of the CPC is also mentioned.
This provision is conspicuous by its absence in Section 37 of
the Arbitration Act, 1996, which alone can be looked at for the
purpose of filing appeals against orders setting aside, or refusing
to set aside awards under Section 34. Also, what is missed by
the impugned judgment is the words "under Section 34". Thus,
the refusal to set aside an arbitral award must be under Section
34, i.e., after the grounds set out in Section 34 have been applied
to the arbitral award in question, and after the Court has turned
down such grounds. Admittedly, on the facts of the present cases,
there was no adjudication under Section 34 of the Arbitration
Act, 1996 - all that was done was that the Special Commercial
Court at Gurugram allowed an application filed under Section 151
read with Order VII Rule 10 CPC, determining that the Special
Commercial Court at Gurugram had no jurisdiction to proceed
further with the Section 34 application, and therefore, such
application would have to be returned to the competent court
situate at New Delhi. Thus, the appeals filed in the present case
do not fall within Section 37 of the Arbitration Act,1996 and are
not maintainable. [Paras 15-16 and 22] [764-E-G-H; 765-A-B;
770-B]
Kandla Export Corporation & Anr. v. M/s OCI
Corporation & Anr. (2018) 14 SCC 715 : [2018] 1
SCR 915 - relied on.
Hamanprit Singh Sidhu v. Arcadia Shares & Stock
Brokers Pvt. Ltd 2016 234 DLT 30 (DB) ; South Delhi
MunicipalCorporation v. Tech Mahindra EFA (OS)
(Comm.) 3 of 2019 - approved.
Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd.
2018 SCC Online Del 9338 - held per-incuriam.
Municipal Corporation of Delhi & Ors. v.
International Security & Intelligence Agency Ltd.
(2004) 3 SCC 250 : [2003] 1 SCR 951 ; Arcot Textile
Mills Ltd. v. Regional Provident Fund Commissioner
and Ors. (2013) 16 SCC 1 : [2013] 11 SCR 371 ;
South Delhi Municipal Corporation v. Tech Mahindra
EFA (OS) (Comm.) 3 of 2019 - referred to.
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2.1 In the statutory setting under Arbitration Act of 1940,
the "place" in which the award is made, is not referred to at all.
Given this fact, the "Court" was defined as any Civil Court
having jurisdiction to decide questions forming the subject
matter of the reference to arbitration if the same had been the
subject matter of a suit. The UNCITRAL Model Law on
International Commercial Arbitration (as adopted by the United
Nations Commission on International Trade Law on 21 June
1985) was then adopted by this country. The UNCITRAL Model
Law introduced the concept of "place" or "seat" of the arbitral
proceedings. [Paras 28 and 29] [772-F-G]
2.2 The Arbitration Act, 1996 repealed the Arbitration Act,
1940. As is stated in its preamble, the Arbitration Act, 1996
adopted provisions of the UNCITRAL Model Law, as they had
made a significant contribution to the establishment of a unified
legal frame work for the fair and efficient settlement of disputes
arising in international commercial relations. The Arbitration
Act, 1996 refers to "the place" of arbitration and defines 'Court',
and indicates which Courts have jurisdiction in relation to arbitral
proceedings in several sections in Part I. [Paras 30 and 31] [774A-B]
2.3 The new provisions contained in Sections 20 and 31(4)
of the Arbitration Act, 1996 are a replication of Articles 20 and
31(3) of the UNCITRAL Model Law, in which pride of place is
given to the juridical seat of the arbitral proceedings. However,
the definition of "court" in Section 2(1)(e) of the Arbitration Act,
1996 continues the definition contained in the Arbitration Act,
1940, but replaces any and every civil court by only the principal
civil court of original jurisdiction in a district, and includes the
High Court in exercise of its ordinary civil jurisdiction. Section
42 of the Arbitration Act, 1996 also substantially follows the drill
of Section 31(4) of the Arbitration Act, 1940. [Para 33] [775-H;
776-A-B]
2.4 Thus, given the new concept of "juridical seat" of the
arbitral proceedings, and the importance given by the
Arbitration Act, 1996 to this "seat", the arbitral award is now
not only to state its date, but also the place of arbitration as
determined in accordance with Section 20. However, the
definition of "Court" contained in Section 2(1)(c) of the
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Arbitration Act, 1940, continued as such in the Arbitration Act,
1996, though narrowed to mean only principal civil court and the
High Court in exercise of their original ordinary civil jurisdiction.
Thus, the concept of juridical seat of the arbitral proceedings
and its relationship to the jurisdiction of courts which are then
to look into matters relating to the arbitral proceedings
including challenges to arbitral awards was unclear, and had to
be developed in accordance with international practice on a case
by case basis by this Court. [Para 34] [776-C-D]
2.5 The judgment in *BALCO case would show that where
parties have selected the seat of arbitration in their agreement,
such selection would then amount to an exclusive jurisdiction
clause, as the parties have now indicated that the Courts at the
"seat" would alone have jurisdiction to entertain challenges
against the arbitral award which have been made at the seat.
The *BALCO judgment when read as a whole, applies the concept
of "seat" which is in Section 20 of the Arbitration Act, 1996, by
harmoniously construing Section 20 with Section 2(1)(e), so as
to broaden the definition of "court", and bring within its ken
courts of the "seat" of the arbitration. However, this proposition
is contradicted when paragraph 96 of the judgment speaks of
the concurrent jurisdiction of Courts within whose jurisdiction
the cause of action arises wholly or in part, and Courts within
the jurisdiction of which the dispute resolution i.e. arbitration,
is located. [Paras 40 and 41] [783-H; 784-A-D]
2.6 Judgments of Courts are not to be construed as
statutes, neither are they to be read as Euclid's theorems. All
observations made must be read in the context in which they
appear. In any case, a judgment must be read as a whole, so that
conflicting parts may be harmonised to reveal the true ratio of
the judgment. However, if this is not possible, and it is found
that the internal conflicts within the judgment cannot be
resolved, then the first endeavour that must be made is to see
whether a ratio decidendi can be culled out without the conflicting
portion. If not, then, the binding nature of the precedent on the
point on which there is a conflict in a judgment, comes under a
cloud. [Paras 43 and 45] [785-C; 787-A-B]
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2.7 If paragraphs 75, 76, 96, 110, 116, 123 and 194 of the
judgment in *BALCO case are read together, what becomes clear
is that Section 2(1)(e) has to be construed keeping in view
Section 20 of the ArbitrationAct, 1996, which gives recognition
to party autonomy - the Arbitration Act, 1996 having accepted
the territoriality principle in Section 2(2), following the
UNCITRAL Model Law. The narrow construction of Section
2(1)(e) was expressly rejected in *BALCO case. This being so,
what has then to be seen is what is the effect Section 20 on
Section 2(1)(e) of the Arbitration Act, 1996. [Para 46] [788-AB]
2.8 In **Indus Mobile Distribution Private Limited case the
provisions of Section 20 were properly analysed in the light of
the 246thReport of the Law Commission of India titled,
'Amendments to the Arbitration and Conciliation Act, 1996' (i.e.
the "Law Commission Report, 2014"), under which Section
20(1) and (2) would refer to the "seat" of the arbitration, and
Section 20(3) would refer only to the "venue" of the arbitration.
Given the fact that when parties, either by agreement or, in
default of there being an agreement, where the arbitral tribunal
determines a particular place as the seat of the arbitration under
Section 31(4) of the Arbitration Act, 1996, it becomes clear that
the par- ties having chosen the seat, or the arbitral tribunal
having determined the seat, have also chosen the Courts at the
seat for the purpose of interim orders and challenges to the
award. [Para 47] [788-C-E]
2.9 The Law Commission Report, 2014 also recommended
an amendment in the definition of "Court" under Section 2(1)(e)
of the Arbitration Act, 1996, so that in the case of international
commercial arbitrations held in India, the High Court alone
should be the "Court" for the purposes of the Arbitration Act,
1996, even where such a High Court does not exercise ordinary
original jurisdiction. There commendation made by the Law
Commission, 1996. [Para 49] [790-F-G]
2.10 The said amendment carried out in the definition of
"Court" is also a step showing the right direction, namely, that
in international commercial arbitrations held in India, the High
Court alone is to exercise jurisdiction over such proceedings,
even where no part of the cause of action may have arisen within
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the jurisdiction of such High Court, such High Court not having
ordinary original jurisdiction. In such cases, the "place" where
the award is delivered alone is looked at, and the High Court
given jurisdiction to supervise the arbitration proceedings, on
the footing of its jurisdiction to hear appeals from decrees of
courts subordinate to it, which is only on the basis of territorial
jurisdiction which in turn relates to the "place" where the award
is made. In the light of this im- portant change in the law, Section
2(1)(e)(i) of the Arbitration Act, 1996 must also be construed in
the manner indicated by this judgment. [Para 50] [791-H; 792A-B]
2.11 If, the conflicting portion of the judgment of *BALCO
case in paragraph 96 is kept aside for a moment, the very fact
that parties have chosen a place to be the seat would necessarily
carry with it the decision of both parties that the Courts at the
seat would exclusively have jurisdiction over the entire arbitral
process. In fact, subsequent Division Benches of this Court have
understood the law to be that once the seat of arbitration is
chosen, it amounts to an exclusive jurisdiction clause, insofar
as the Courts at that seat are concerned. [Paras 51 and 52] [792F-H]
2.12 The moment a seat is designated by agreement
between the parties, it is akin toan exclusive jurisdiction clause,
which would then vest the Courts at the "seat" with exclusive
jurisdiction for purposes of regulating arbitral proceedings
arising out of the agreement between the parties. [Para 55] [796D]
2.13 It will thus be seen that wherever there is an express
designation of a "venue", and no designation of any alternative
place as the "seat", combined with a supranational body of rules
governing the arbitration, and no other significant contrary
indicia, the in-exorable conclusion is that the stated venue is
actually the juridical seat of the arbitral proceeding. [Para 63]
[802-B]
2.14 Whenever there is the designation of a place of
arbitration in an arbitration clause as being the "venue" of the
arbitration proceedings,the expression"arbitration proceedings
would make it clear that the "venue" is really the "seat" of the
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arbitral proceedings, as the aforesaid expression does not include
just one or more individual or particular hearing, but the
arbitration proceedings as a whole, including the making of an
award at that place. This language has to be contrasted with
language such as "tribunals are to meet or have witnesses,
experts or the parties" where only hearings are to take place
in the "venue", which may lead to the conclusion, other things
being equal, that the venue so stated is not the "seat" of arbitral
proceedings, but only a convenient place of meeting. Further,
the fact that the arbitral proceedings "shall be held" at a
particular venue would also indicate that the parties intended
to anchor arbitral proceedings to a particular place, signifying
there by, that that place is these at of the arbitral proceedings.
This, coupled with there being no other significant contrary
indicia that the stated venue is merely a "venue" and not the
"seat" of the arbitral proceedings, would then conclusively show
that such a clause designates a "seat" of the arbitral proceedings.
In an International context, if a supranational body of rules
is to govern the arbitration, this would further be an indicia
that "the venue", so stated, would be the seat of the arbitral
proceedings. In a national context, this would be replaced by the
Arbitration Act, 1996 as applying to the "stated venue", which
then becomes the "seat" for the purposes of arbitration. [Para
84] [816-G-H; 817-A-D]
2.15 In the present case, as per the arbitration agreement,
in case a dispute was to arise with a foreign contractor, clause
67.3(ii) would apply. Under this sub-clause, a dispute which
would amount to an 'international commercial arbitration' within
the meaning of Section 2(1)(f) of the Arbitration Act, 1996, would
have to be finally settled in accordance with the Arbitration Act,
1996 read with the UNCITRAL Arbitration Rules, and in case
of any conflict, the Arbitration Act, 1996 is to prevail (as an award
made under Part I is considered a domestic award under Section
2(7) of the Arbitration Act, 1996 not withstanding the fact that
it is an award made in an international commercial arbitration).
Applying the Shashoua principle, it is clear that if the dispute
was with a foreign contractor under Clause 67.3 of the
agreement, the fact that arbitration proceedings shall be held
at New Delhi/Faridabad, India in sub-clause (vi) of Clause 67.3,
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would amount to the designation of either of these places as the
"seat" of arbitration, as a supranational body of law is to be
applied, namely, the UNCITRAL Arbitration Rules, in
conjunction with the Arbitration Act, 1996. As such arbitration
would be an international commercial arbitration which would be
decided in India, the Arbitration Act, 1996 is to apply as well.
There being no other contra indication in such a situation, either
New Delhi or Faridabad, India is the designated "seat" under
the agreement, and it is there- after for the parties to choose
as to in which of the two places the arbitration is finally to be
held. [Para 98] [825-E-H; 826-A-B]
2.16 Given the fact that if there were a dispute between
NHPC Ltd. and a foreign con- tractor, clause 67.3(vi) would have
to be read as a clause designating the "seat" of arbitration, the
same must follow even when sub-clause (vi) is to be read with
sub-clause (i) of Clause 67.3, where the dispute between NHPC
Ltd. would be with an Indian Contractor. The arbitration clause
in the present case states that "Arbitration Proceedings shall
be held at New Delhi/Faridabad, India...", thereby signifying that
all the hearings, in- cluding the making of the award, are to take
place at one of the stated places. Negatively speaking, the clause
does not state that the venue is so that some, or all, of the
hearings take place at the venue; neither does it use language
such as "the Tribunal may meet", or "may hear witnesses,
experts or parties". The expression "shall be held" also
indicates that the so called "venue" is really the "seat" of the
arbitral proceedings. The dispute is to be settled in accordance
with the Arbitration Act, 1996 which, therefore, applies a
national body of rules to the arbitration that is to be held either
at New Delhi orFaridabad, given the fact that the present
arbitration would be Indian and not international. It is clear,
therefore, that even in such a scenario, New Delhi/Faridabad,
India has been designated as the "seat" of the arbitration
proceedings. [Para 99] [826-B-E]
2.17 However, the fact that in all the three appeals before
this Court, the proceedings were finally held at New Delhi, and
the awards were signed in New Delhi, and not at Faridabad,
would lead to the conclusion that both parties have chosen New
Delhi as the "seat" of arbitration under Section 20(1) of the
Arbitration Act, 1996. This being the case, both parties have,
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therefore, chosen that the Courts at New Delhi alone would have
exclusive jurisdiction over the arbitral proceedings. Therefore,
the fact that a part of the cause of action may have arisen at
Faridabad would not be relevant once the "seat" has been
chosen, which would then amount to an exclusive jurisdiction
clause so far as Courts of the "seat" are concerned. [Para 100]
[826-F-H]
2.18 Consequently, the impugned judgment is set aside,
and the Section 34 petition is ordered to be presented in the
Courts in New Delhi, as was held by the Single Judge of the
Special Commercial Court at Gurugram. [Para 101] [827-A]
*Bharat Aluminium Co. (BALCO) v. Kaiser Aluminium
Technical Service, Inc.,(2012) 9 SCC 552 : [2012] 12
SCR 327 Amar Nath Om Prakash v. State of Punjab
(1985) 1 SCC 345 ; Union of India v. Amrit Lal
Manchanda (2004) 3 SCC 75 : [2004] 2 SCR 422 ;
Brahmani River Pellets Ltd. v. Kamachi Industries Ltd.
2019 SCC Online SC 929 ; Enercon (India) Ltd. and
Ors. v. Enercon GmbH and Anr. (2014) 5 SCC 1 ;
**Indus Mobile Distribution Private Limited v.
Datawind Innovations Private Limited & Ors., (2017)
7 SCC 678 : [2017] 4 SCR 744 - relied on.
Union of India v. Hardy Exploration and Production
(India) Inc. 2018 SCC Online SC 1640 - held not
good law.
Antrix Corporation Ltd. v. Devas Multimedia Pvt. Ltd.
(2018) SCC Online Del 9338 - not approved.
Venture Global Engineering v. Satyam Computer
Services Ltd. & Anr. (2008) 4 SCC 190 - stood
overruled.
Dozco India (P) Ltd. v. Doosan Infracore Co. Ltd.
(2011) 16 SCC 179 ; Videocon Indusries Ltd. v. Union
of India (2011) 6 SCC 161 ; Harmony Innovation
Shipping Ltd. v. Gupta Coal India Ltd. and Anr. (2015)
9 SCC 172 ; Roger Shashoua & Ors. v. Mukesh
Sharma & Ors., (2017) 14 SCC 722 ; Sumitomo Heavy
Industries Ltd. v. ONGC Ltd. & Ors. (1998) 1 SCC
305 ; Hakam Singh v. M/s. Gammon (India) Ltd.,
(1971) 1 SCC 286 : [1971] 3 SCR 314 ; Reliance
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Industries Ltd. v. Union of India (2014) 7 SCC 603 :
[2014] 6 SCR 456 - referred to.
Roger Shashoua & Ors. v. Mukesh Sharma [2009]
EWHC 957 (Comm) ; Harper and Ors. v. National
Coal Board (1974) 2 All ER 441 ; Enercon GmbH v.
Enercon (India) Ltd. [2012] EWHC 689 ; Shagang
South-Asia (Hong Kong) Trading Co. Ltd. v. Daewoo
Logistics [2015] EWHC 194 ; Process and Indusrial
Developments Ltd. v. Nigeria [2019] EWHC 2241 ;
Naviera Amazonica Peruana S.A. v. Compania
Internacional De Seguros Del Peru (1988) 1 Lloyd's
Rep 116 (CA) ; Braes of Doune Wind Farm (Scotland)
v. Alfred McAlpine Business Services Ltd. [2008]
EWHC 436 (TCC) ; C v. D [2007] EWCA Civ. 182 -
referred to.
Case Law Reference
[2018] 1 SCR 915
relied on
Para 6
[1971] 3 SCR 314
referred to
Para 6
[2012] 12 SCR 327
relied on
Para 6
[2017] 4 SCR 744
relied on
Para 6
[2014] 6 SCR 456
referred to
Para7
[2003] 1 SCR 951
referred to
Para 17
[2013] 11 SCR 371
referred to
Para 17
2016 234 DLT 30 (DB)
approved
Para 18
(1985) 1 SCC 345
relied on
Para 43
(2004) 2 SCC 422
relied on
Para 44
(2014) 5 SCC 1
relied on
Para 51
(2011) 16 SCC 179
referred to
Para 72
(2011) 6 SCC 161
referred to
Para 74
(2015) 9 SCC 172
referred to
Para 81
(1998) 1 SCC 305
referred to
Para 90
(2008) 4 SCC 190
stood overruled
Para 94
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CIVIL APPELLATE JURISDICTION : Civil Appeal No. 9307
of 2019.
From the Judgment and Order dated 12.09.2018 of the High
Court of Punjab and Haryana at Chandigarh in FAO-COM No. 2 of
2018.
With
Civil Appeal Nos. 9308, 9309 of 2019.
Ms. Maninder Acharya, ASG, Dr. Abhishek M. Singhvi, Sr. Adv.,
Arunabh Chowdhury, Mrs. Pragya Baghel, Vaibhav Tomar, Barnali
Chowdhury, Ms. Shruti Choudhry, Amit Bhandari, Abhishek Roy,
Ms. Samten Doma, Karma Dorjee, Dechen W. Lachungpa, A.C.
Mishra, Ankit Chaturvedi (for M/s ACM Legal), Puneet Taneja,
Tarkeshwar Nath, Ms. Laxmi Kumari, Viplav Acharya, Mahavir Rawat,
Rameshwar Prasad Goyal, Advs. for the appearing parties.
The Judgment of the Court was delivered by
R. F. NARIMAN, J.
1. Leave granted.
2. Three appeals before us raise questions as to maintainability
of appeals under Section 37 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as "the Arbitration Act, 1996"), and, given the
arbitration clause in these proceedings, whether the "seat" of the
arbitration proceedings is New Delhi or Faridabad, consequent upon
which a petition under Section 34 of the Arbitration Act, 1996 may be
filed dependent on where the seat of arbitration is located.
3. At the outset, the facts in SLP (Civil) No.25618 of 2018 are
set out as follows. On 16.01.2004, the Petitioner was awarded a contract
for construction of Diversion Tunnels, Coffer Dams, Concrete Gravity
Dams, Plunge Pools and Cutoff Walls of Subansri Lower Hydroelectric
Project on river Subansri, with an installed capacity of 2000 MW, stated
to be the largest Hydropower project yet in India. The project site is
located in the lower Subansri districts in the States of Assam and
Arunachal Pradesh. Clause 67.3 of the agreement between the parties
provides for dispute resolution through arbitration. Clause 67.3 reads
as follows:
BGS SGS SOMA JV v. NHPC LTD.
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"Any dispute in respect of which the Employer and the
Contractor have failed to reach at an amicable settlement
pursuant to Sub-Clause 67.1, shall be finally settled by arbitration
as set forth below. The Arbitral Tribunal shall have full power to
open up, review and revise any decision, opinion, instruction,
determination, certificate or valuation of the Engineer.
(i) A dispute with an Indian Contractor shall be finally
settled in accordance with the Indian Arbitration and
Conciliation Act, 1996, or any statutory amendment
thereof. The arbitral tribunal shall consist of 3 arbitrators,
one each to be appointed by the Employer and the
Contractor. The third Arbitrator shall be chosen by the
two Arbitrators so appointed by the Parties and shall act
as Presiding arbitrator. In case of failure of the two
arbitrators, appointed by the parties to reach upon a
consensus within a period of 30 days from the
appointment of the arbitrator appointed subsequently, the
Presiding arbitrator shall be appointed by the President
of the Institution of Engineers (India). For the purposes
of this Sub-Clause, the term "Indian Contractor" means
a contractor who is registered in India and is a juridic
person created under Indian law as well as a joint
venture between such a contractor and a Foreign
Contractor.
(ii) In the case of a dispute with a Foreign Contractor, the
dispute shall be finally settled in accordance with the
provisions of the Indian Arbitration and Conciliation Act,
1996 and read with UNCITRAL Arbitration Rules. The
arbitral tribunal shall consist of three Arbitrators, one
each to be appointed by the Employer and the
Contractor. The third Arbitrator shall be chosen by the
two Arbitrators so appointed by the Parties and shall act
as Presiding arbitrator. In case of failure of the two
arbitrators appointed by the parties to reach a consensus
within a period of 30 days from their appointment on
the Presiding Arbitrator to be appointed subsequently,
the Presiding arbitrator shall be appointed by the
President of the Institution of Engineers (India). For the
purposes of this Clause 67, the term "Foreign
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Contractor" means a contractor who is not registered
in India and is not a juridic person created under Indian
Law. In case of any contradiction between Indian
Arbitration and Conciliation Act, 1996 and UNCITRAL
Arbitration Rules, the provisions in the Indian Arbitration
and Conciliation Act, 1996 shall prevail.
(iii) Arbitration may be commenced prior to or after
completion of the Works, provided that the obligations
of the Employers, the Engineer, and the Contractor shall
not be altered by reason of the arbitration being
conducted during the progress of the Works.
xxx
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xxx
(v) If one of the parties fail to appoint its arbitrator in
pursuance of sub-clause (i) and (ii) above, within 30 days
after receipt of the notice of the appointment of its
arbitrator by the other party, then the President of the
Institution of Engineers (India), both in cases of foreign
contractors as well as Indian Contractors, shall appoint
the arbitrator. A certified copy of the order of the
President of Institution of Engineers (India), making
such an appointment shall be furnished to each of the
parties.
(vi) Arbitration Proceedings shall be held at New Delhi/
Faridabad, India and the language of the arbitration
proceedings and that of all documents and
communications between the parties shall be English.
(vii) The decision of the majority of arbitrators shall be final
and binding upon both parties. The cost and expenses
of Arbitration shall be borne in such a manner as
determined by the arbitral tribunal. However, the
expenses incurred by each party in connection with the
preparation, presentation etc. of its proceedings as also
the fees and expenses paid to the arbitrator appointed
by such party on its behalf shall be borne by each party
itself."
4. On 16.05.2011, a Notice of Arbitration was issued by the
Petitioner to the Respondent, in regard to payment of compensation for
BGS SGS SOMA JV v. NHPC LTD.
[R. F. NARIMAN, J.]
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losses suffered due to abnormal delays and additional costs as a result
of hindrances caused by the Respondent. A three-member Arbitral
Tribunal was constituted as per clause 67.3 of the agreement under
the Arbitration Act, 1996. Pursuant thereto, the Petitioner filed its
Statement of Claim seeking recovery of an amount of INR 986.60
crores plus CHF 1060619. Between August 2011 and August 2016,
seventy-one sittings of the Arbitral Tribunal took place at New Delhi.
The Tribunal then delivered its unanimous award at New Delhi on
26.08.2016, by which the claims of the Petitioner aggregating to INR
424,81,54,096.29 were allowed, together with simple interest at 14%
per annum till the date of actual payment. On 04.10.2016, in view of
certain computational and typographical errors in the arbitral award, the
figure of 424,81,54,096.29 was rectified to INR 424,70,52,126.66. On
03.01.2017, being aggrieved by the arbitral award and the rectification
thereto, the Respondent filed an application under Section 34 of the
Arbitration Act, 1996 seeking to set aside these awards before the Court
of the District and Sessions Judge, Faridabad, Haryana. On 28.04.2017,
the Petitioner filed an application under Section 151 read with Order
VII Rule 10 of the Code of Civil Procedure, 1908 (hereinafter referred
to as the "CPC") and Section 2(1)(e)(i) of the Arbitration Act, 1996,
seeking a return of the petition filed under Section 34 for presentation
before the appropriate Court at New Delhi and/or the District Judge
at Dhemaji, Assam. In November, 2017, after the constitution of a
Special Commercial Court at Gurugram, the Section 34 petition filed at
Faridabad was transferred to the said Gurugram Commercial Court and
numbered as Arbitration Case No.74 (CIS No. ARB/118/2017).
5. On 21.12.2017, the Special Commercial Court, Gurugram
allowed the application of the Petitioner, and returned the Section 34
petition for presentation to the proper court having jurisdiction in New
Delhi. On 15.02.2018, the Respondent filed an appeal under Section
37 of the Arbitration Act, 1996 read with Section 13(1) of the
Commercial Courts Act, 2015 before the High Court of Punjab and
Haryana at Chandigarh. On 12.09.2018, the impugned judgment was
delivered by the Punjab and Haryana High Court, in which it was held
that the appeal filed under Section 37 of the Arbitration Act, 1996 was
maintainable, and that Delhi being only a convenient venue where
arbitral proceedings were held and not the seat of the arbitration
proceedings, Faridabad would have jurisdiction on the basis of the cause
of action having arisen in part in Faridabad. As a result, the appeal was
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allowed and the judgment of the Special Commercial Court, Gurugram
was set aside.
6. Dr. Abhishek Manu Singhvi, learned Senior Advocate
appearing on behalf of the Petitioner in SLP (C) No.25618 of 2018,
has assailed the impugned High Court judgment on both counts.
According to him, on a combined reading of Section 13 of the
Commercial Courts Act, 2015 and Section 37 of the Arbitration Act,
1996, it becomes clear that Section 13 of the Commercial Courts Act,
2015 only provides the forum for challenge, whereas Section 37 of the
Arbitration Act, 1996 - which is expressly referred to in the proviso to
Section 13(1) of the Commercial Courts Act, 2015 - circumscribes the
right of appeal. He contended that this when read with Section 5 of
the Arbitration Act, 1996, makes it clear that only certain judgments
and orders are appealable, and no appeal lies under any provision outside
Section 37 of the Arbitration Act, 1996. He contended that the High
Court was manifestly wrong when it said that the present appeal was
appealable under Section 37(1)(c) of the Arbitration Act, 1996 as being
an appeal against an order refusing to set aside an arbitral award under
Section 34 of the Arbitration Act, 1996. According to Dr. Singhvi, an
order which allows an application under Section 151 read with Order
VII Rule 10 of the CPC can by no stretch of the imagination amount
to an order refusing to set aside an arbitral award under Section 34 of
the Arbitration Act, 1996. For this proposition, he strongly relied upon
on our judgment in Kandla Export Corporation & Anr. v. M/s OCI
Corporation & Anr. (2018) 14 SCC 715. On the second point, he read
out the impugned judgment in detail, and stated that the ultimate
conclusion that New Delhi was only a "venue" and not the "seat" of
the arbitration was incorrect, as the parties have chosen to have sittings
at New Delhi, as a result of which it is clear that the Arbitral Tribunal
considered that the award made at New Delhi would be made at "the
seat" of the arbitral proceedings between the parties. He further added
that it was clear that even if both New Delhi and Faridabad had
jurisdiction, New Delhi being the choice of the parties, the principle
contained in Hakam Singh v. M/s. Gammon (India) Ltd., (1971) 1
SCC 286, would govern. He referred in copious detail to many
judgments of this Court, including the Five Judge Bench in Bharat
Aluminium Co. (BALCO) v. Kaiser Aluminium Technical
Service, Inc., (2012) 9 SCC 552, Indus Mobile Distribution Private
Limited v. Datawind Innovations Private Limited & Ors., (2017)
BGS SGS SOMA JV v. NHPC LTD.
[R. F. NARIMAN, J.]
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7 SCC 678, and various other judgments to buttress his submissions.
According to him, the recent judgment delivered in Union of India v.
Hardy Exploration and Production (India) Inc. 2018 SCC Online
SC 1640 queers the pitch, in that it is directly contrary to the Five Judge
bench decision in BALCO (supra). It is only as a result of the confusion
caused by judgments such as Hardy Exploration and Production
(India) Inc. (supra) that the impugned judgment has arrived at the
wrong conclusion that New Delhi is not the "seat", but only the "venue"
of the present arbitral proceedings. He, therefore, in the course of his
submissions argued that this confusion should be removed, and exhorted
us to declare that Hardy Exploration and Production (India) Inc.
(supra) was not correctly decided, being contrary to the larger bench
in BALCO (supra).
7. Dr. Singhvi in the course of his submissions also referred
pointedly to paragraph 96 of BALCO (supra), and argued that not only
was the example given in the said paragraph contrary to the theory of
concurrent jurisdiction propounded therein, but was also contrary to
subsequent paragraphs in the said judgment, in which it was clearly held
that a clause in an agreement stating the "seat" of arbitration is akin to
an exclusive jurisdiction clause, which would put paid to any theory of
concurrent jurisdiction. As a matter of fact, two subsequent decisions
have understood the ratio of BALCO (supra) to be that once the "seat"
is indicated in an arbitration agreement, it is akin to an exclusive
jurisdiction clause, which would oust the jurisdiction of courts other than
courts at the seat. For this purpose he expressly referred to and relied
upon Reliance Industries Ltd. v. Union of India (2014) 7 SCC 603
and Indus Mobile Distribution Pvt. Ltd. (supra).
8. Shri Arunabh Chowdhury, appearing in SLP (Civil) No. 25848
of 2018, argued that unlike the first SLP argued by Dr. Singhvi, in his
case, the Notice for Arbitration was sent to the Assam site-office of
the Respondent, and not routed through the Assam office to be sent to
the Head Office at Faridabad, thereby making the observations based
on Section 21 of the Arbitration Act,1996 in the impugned judgment
inapplicable on the facts of his case. He supported Dr. Singhvi's
argument that the appeal filed under Section 37 of the Arbitration Act,
1996 would not be maintainable, and cited several judgments, which
will be dealt with a little later.
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9. Shri Ankit Chaturvedi, appearing in SLP (Civil) No. 28062 of
2018, stressed one important difference in the facts of his case, which
is, that the arbitral award made in his case expressly referred to Section
31(4) of the Arbitration Act, 1996, and stated that the place of arbitration,
as determined in accordance with Section 20 of the Arbitration Act,
1996, was New Delhi. Therefore, this being the "seat" as determined
by the Arbitral Tribunal in this case, a challenge under Section 34 of
the Arbitration Act, 1996 could only be made in the courts at New Delhi.
10. Smt. Maninder Acharya, learned Additional Solicitor General,
supported the judgment under appeal. She first argued that the reasoning
of the impugned judgment, that an order passed under Section 151 read
with Order VII Rule 10 of the CPC would amount to a refusal to set
aside an arbitral award, is correct, and relied heavily upon a Division
Bench judgment of the Delhi High Court in Antrix Corporation Ltd.
v. Devas Multimedia Pvt. Ltd. 2018 SCC Online Del 9338 for this
purpose. On the second point, she argued that the arbitration clause
did not expressly state that either New Delhi or Faridabad was to be
the seat of the Arbitral Tribunal. Therefore, the arbitration clause only
referred to a convenient venue, and the fact that the sittings were held
at New Delhi, therefore, would not make New Delhi the seat of the
arbitration under Section 20(1) of the Arbitration Act, 1996. According
to her, since the agreements in the present case were signed in
Faridabad, and since notices were sent by the Petitioners to the
Respondent's Faridabad office, part of the cause of action clearly arose
in Faridabad, as a result of which the courts in Faridabad would be
clothed with jurisdiction to decide a Section 34 application.