BGS SGS Soma JV v. NHPC Ltd. — (2020) 4 SCC 234 

Citation : (2020) 4 SCC 234 

Petitioner: BGS SGS Soma JV  

Respondent: NHPC Ltd.  

Date of Judgement: 06/09/2012 

Bench: Jagdish Singh Khehar, Ranjana Prakash Desai, D.K.Jain, S.H.Kapadia

FACTS AND BACKGROUND OF THE CASE 

A contract pertaining to the building of hydroelectric projects in the states of Assam and  Arunachal Pradesh was signed by the petitioners and respondents. The aforementioned contracts had an arbitration clause that specified that, in the event of a disagreement, procedures would be held in Delhi or Faridabad. An arbitral tribunal with three arbitrators was established between 2011 and 2016, and it rendered a decision in favour of the petitioners in Delhi. The  Respondents, who felt wronged by the verdict, filed a challenge with the District Court of  Faridabad, Haryana, under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act").  The case was moved to the Gurgaon, Haryana, commercial court due to the Special  Commercial Court's establishment. The petitioners contested this in the interim in order to  transfer the jurisdiction to a suitable court, such as Assam or New Delhi. In support of this, the  Gurgaon Commercial Court ruled in the petitioners' favour. 

The Punjab and Haryana High Court received an appeal from the Respondents under Section  37 of the Act read with Section 13(1) of the Commercial Courts, Commercial Division and  Commercial Appellate Division of High Courts Act, 2015. Because Delhi was just a convenient  forum, the Court determined that the Court of Faridabad had the proper jurisdiction and that  the respondents' appeal was maintainable under Section 37. The petitioners, feeling wronged,  went to the Supreme Court. 

ISSUES INVOLVED 

1. Whether the High Court of Punjab and Haryana erred in Law to grant an appeal under  Section 37? 

2. What is the effect of designating “Seat” in an arbitration? 

3. Whether Delhi was the seat of the Arbitration? 

JUDGEMENT 

The Supreme Court noted that while Section 13(1) of the Commercial Courts Act offered an alternate forum for appeal, it did not create an independent right to an appeal. Section 37 makes it clear that appeals must only fall under subclauses (a), (b), and (c). Since Section 37 contains specific appeals, they are appealable under Section 13(1). The apex court noted that the  contested judgment had omitted the phrase "under [S]section 34," which meant that the appeal  could only be covered by Section 37(c) if the grounds outlined in Section 34 had been applied  to the arbitral award in question. 

The Supreme Court also cited the well-known BALCO International case, which established  precedent and declared that when a party chooses a specific arbitration location, it grants all  courts there exclusive jurisdiction over interim orders and award challenges. This would imply  that selecting a seat grants the courts sole authority over the arbitration procedure as a whole.  Second, it was decided that the BALCO ratio does not support concurrent jurisdiction between  two courts, and it is obvious that selecting a seat entails selecting the exclusive jurisdiction of  the courts where the seat is situated. 

Furthermore, the Supreme Court noted that Section 42 of the Act was included to prevent court  jurisdictional problems by giving one court sole supervisory power over all arbitral  proceedings. A court with the authority to decide such an application must receive the  application. Applications must be submitted under Section 42 in order for the courts at the seat  to have jurisdiction if a seat is not assigned. 

Finally, a convenient location may be chosen, allowing multiple courts to participate in the  cause of action; a seat is not only determined by the arbitration agreement. If the arbitration's  seat hasn't been decided by then, Section 9 permits interim relief prior to its start, which can  then be preferred in any court where a portion of the cause of action has arisen. In such a  circumstance, Section 42 grants exclusive jurisdiction to the earliest court to be contacted. 

The Court further concluded that the term "arbitration proceeding" would suggest automatic  jurisdiction to the arbitration seat in cases when the venue is not explicitly designated.  Furthermore, the phrase "shall be held" at a certain location would bind the arbitral proceedings  to that location and indicate that it is the proceeding's seat. 

The Court ultimately observed that Faridabad had been chosen as the arbitration's location after  applying the case's facts. Nevertheless, there is no indication to the contrary that the arbitration  agreement designates either Delhi or Faridabad as the designated seat. Therefore, the decision  of which of the two locations would have jurisdiction rests with the party. 

CONCLUSION  

In this case, the Court overturned the High Court's ruling and declared that, without indications  to the contrary, selecting a "venue" for the arbitration proceedings is equivalent to designating  a seat, and identifying a seat amounts to exclusive jurisdiction of the courts at the seat.

Author(s): Riya Rao, intern at the Legal Lock, 3rd year LLB student at G.D. Goenka University.