SC: Issue on “Seat” and “Venue” in International Commercial Arbitration Referred to Larger Bench

May 02, 2018

Case name: Union of India v. Hardy Exploration and Production (India) INC

Date of Judgment: May 01, 2018

In this case, taken up by the Two-Judge Bench of the Supreme Court, the seminal issue was that 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”?

In the case, the appellant had challenged order passed by Division Bench of the Delhi High Court whereby the Court held that the Indian Courts have no jurisdiction to entertain the appellant’s application under Section 34 of Arbitration and Conciliation Act, 1996 to question the legality of award rendered in international commercial arbitration proceedings.

In the instant case, the appellant had challenged the legality, validity and correctness of the award made by the arbitrators in respondent’s favour in an international commercial arbitration proceeding between the appellant (Union of India) and the respondent (foreign company).

The Respondent’s challenged the appellant’s application by contending that the Indian Courts have no jurisdiction to entertain the appellant’s application filed under Section 34 to challenge the legality and correctness of an award in question.

Bench’s Verdict

Pursuant to hearing the Senior Counsel of the parties at length, the Supreme Court has opined that though the 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 this Court in several decisions by the Benches of variable strength and also keeping in view the issues involved in the appeal, which frequently arise in International Commercial Arbitration matters, we are of the considered view that this is a case to exercise our 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 this Court for its hearing.

In view of the aforesaid, the Supreme Court refrained from recording any findings in the case and has requested the Chief Justice of India for constituting the appropriate Bench for hearing and disposal of this appeal.