Seat of arbitration must be certain; parties should not be in doubt about jurisdiction of courts for remedies: Supreme Court

The Supreme Court on Wednesday held that the place fixed for arbitral proceedings would be the jurisdictional ‘seat’ where the courts would have exclusive jurisdiction, to avoid uncertainty [BBR (India) Pvt Ltd v SP Singla Constructions Pvt Ltd]..A Bench of Justices Ajay Rastogi and Sanjiv Khanna clarified that the only exception to this principle would arise when the parties, by mutual consent, agree that the jurisdictional ‘seat’ would be changed. It was stated that such consent must be express, clearly understood and agreed by the parties.“The place of jurisdiction or ‘the seat’ must be certain and static and not vague or changeable, as the parties should not be in doubt as to the jurisdiction of the courts for availing of judicial remedies,” the top court reasoned..The issue before the Court was whether the jurisdictional seat of arbitration would shift from the place fixed by the first arbitrator to another, on appointment of a new arbitrator..The letter of intent issued under the contract entered into by the parties had an arbitration clause for the resolution of disputes, but did not stipulate a venue for the arbitration.When disputes arose, the arbitral tribunal held that the proceedings would be conducted at Panchkula, where the contract was executed, and the respondent’s office was located.After the framing of issues, the case was handed over to a new arbitrator who, in his first procedural order, stated that the proceedings would take place in Delhi..After the award was pronounced in Delhi, the two parties moved court: one in Panchkula and the other in Delhi. The trial court in Panchkula dismissed the petition for lack of jurisdiction. However, the Punjab and Haryana High Court found that courts in Delhi were without jurisdiction. This led to the appeal before the Supreme Court. The top court after a detailed examination found that arbitrator could not change the seat of the arbitration, except when the parties mutually agreed that the seat of arbitration should be changed to another location..The Court explained that this was to avoid uncertainty and confusion resulting in avoidable 'esoteric and hermetic litigation' as to the jurisdictional seat of arbitration.“‘The seat’ once fixed by the arbitral tribunal under Section 20(2), should remain static and fixed, whereas the ‘venue’ of arbitration can change and move from ‘the seat’ to a new location,” the Court said. .It was the Bench’s opinion that there needed to be certainty as to the court that would exercise jurisdiction.“We do not think the law of arbitration visualises repeated or constant shifting of the ‘seat of arbitration’,” said the court.Therefore, it was held that the courts having jurisdiction over Panchkula would have exclusive jurisdiction over the dispute, and not courts in Delhi as the jurisdictional seat of arbitration was Panchkula and not Delhi..With this, the appeals were dismissed..[Read Judgment]