The Supreme Court has clarified that the place where an arbitral proceeding happens does not automatically become its juridical seat. A specific seat must flow from the parties’ agreement, an express designation, or a clear determination by the court.
A Bench of Justice Sanjay Kumar and Justice Sanjeev Sachdeva set aside an Orissa High Court decision that had treated Cuttack as the seat of arbitration simply because the arbitrator had been appointed there by the High Court and the proceedings were conducted at Cuttack.
The dispute arose out of a works contract concerning Sundargarh district in Odisha. The parties’ agreement did not identify Cuttack as the arbitration seat. Nor did the order through which the High Court appointed the arbitrator under Section 11(6) of the Arbitration and Conciliation Act specify Cuttack as the juridical seat.
The question arose after the award debtor approached the District Judge at Sundargarh under Section 34 of the Arbitration Act to challenge the arbitral award.
The Orissa High Court subsequently held that the Section 34 petition could not be maintained before the Sundargarh court. Its reasoning was that the arbitrator had been appointed by the High Court at Cuttack and, since the High Court was situated at Cuttack, the courts there would have exclusive jurisdiction over proceedings arising from the arbitration.
The Supreme Court rejected that approach.
The Bench held that the physical location of a High Court cannot, by itself, transform the place where an arbitration happens into the juridical seat of that arbitration. The fact that the High Court exercised its Section 11 jurisdiction from Cuttack did not confer exclusive jurisdiction on courts in Cuttack for subsequent proceedings under Part I of the Arbitration Act.
The Court also emphasised that a High Court exercises jurisdiction throughout the State. Consequently, Commercial Courts and District Courts falling within its territorial jurisdiction may entertain a Section 34 petition unless the parties have agreed otherwise or a particular seat has been expressly determined.
In the Court’s view, the High Court had therefore erred in treating Cuttack as the arbitration seat merely because the arbitrator was appointed by the High Court located there.
The Supreme Court also rejected the argument that Section 42 of the Arbitration Act prevented the Sundargarh court from entertaining the Section 34 challenge. The earlier Section 11 proceedings had been before the High Court and not before a District or Commercial Court at Cuttack.
The Bench accordingly restored the Section 34 petition before the District Judge, Sundargarh, directing that it be considered in accordance with law and dealt with expeditiously.
The ruling draws an important distinction between the venue where arbitration proceedings are physically conducted and the seat that determines the juridical jurisdiction of the arbitration. The mere fact that proceedings take place at a particular location, or that an arbitrator is appointed by a court situated there, is not enough to establish that location as the arbitration seat.
