Venue of arbitration, in its entirety, becomes the seat of the arbitration: Bombay High Court settles the Venue-Seat quandary

The continuing saga of ‘venue’ v. ‘seat’ conundrum in the arbitration domain had yet again surfaced before the Hon’ble Bombay High Court (‘BHC’) in the case of Priya Malay Sheth v. VLCC Health Care Ltd [2022 SCC OnLine Bom 1137]. The Hon’ble BHC, relying on a series of judgments passed by the Hon'ble Supreme Court, wherein emphasis and importance has been given to the juridical seat, held that where the parties mutually agreed to be the place of the arbitration, the court of such place would exercise supervisory jurisdiction.

The brief facts of the case involves various contractual problems which arose between the parties, pursuant to which, the arbitration clause was invoked by the Applicant. The Applicant filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 (referred as “A&C Act” hereinafter) seeking appointment of an arbitrator. Relying upon Clause 13.2 of the Infrastructure and Facility Management Agreement (‘Arbitration Agreement’), the Respondent argued that the arbitral procedures are to be held in Delhi in accordance with the Arbitration Agreement, because of which the BHC lacked jurisdiction to hear the application. The Respondent further stated that the application under Section 11 of the A&C Act filed by the Applicant was not maintainable on the ground that the Arbitration Agreement required the Respondent to appoint the sole arbitrator and the proceedings were to be held in Delhi, hence, the Applicant's request for arbitration to be held at Mumbai, and to appoint an arbitrator named by the Applicant, was beyond the ambit of the Arbitration Agreement. However, the Applicant, relying upon Clause 13 of the Arbitration Agreement stated that the Respondent’s non-compliance of forming the arbitral tribunal, in the manner as prescribed under Clause 13.1 (which, inter-alia, provided for unilateral appointment of the sole arbitrator by the Respondent) of the Disputes Resolution clause, renders the procedure contemplated under Clause 13.2 ineffective. Thus, the provisions pertaining to the applicable rules and the venue of arbitration, being Delhi, would not apply. The same was premised on the fact that a letter of invocation of arbitration was sent by the Applicant to the Respondent, which was not addressed by the Respondent.

The BHC, relied upon the finding of the Hon’ble Supreme Court in the case of Perkins Eastman Architects DPC. Vs. HSCC (India) Ltd. 2019 SCC OnLine SC 1517, which held that a party interested in the outcome of the arbitral proceedings does not have any unilateral power to appoint an arbitrator. The Supreme Court had further added that this would, however, not invalidate the agreement. In view of the findings of the Hon’ble Supreme Court in Perkins case, the BHC found the submission on behalf of the Applicant, insofar as the appointment of the arbitrator is concerned, to be correct in law as a unilateral appointment of a sole arbitrator by one single party is against the basic tenets of A&C Act. However, the interlinking of the two sub-clauses of Clause 13 of the Arbitration Agreement was rejected by the BHC.

The BHC, while adjudicating upon the contentions vis-a-vis the ‘seat’ of the arbitration to be Delhi or Bombay, observed whenever a place is designated as the "venue" of the arbitration proceedings in its entirety in an arbitration clause, the said place would necessarily be the "seat" of the arbitral proceedings.

Following the principles of harmonious construction, the BHC interpreted Clause 13.2 of the Arbitration Agreement, and observed that the parties had agreed to the manner in which the arbitral proceeding would be conducted, i.e., as provided by ICC Rules, 2021. The BHC held that, in view of the various precedents of the Hon’ble Apex Court, it can be fathomed that the parties in the present case have agreed that the venue of the arbitration in its entirety shall also be the seat of arbitration.

The dismissal of the application by the BHC is good in law since the Arbitration Agreement, ought to have been interpreted in its entirety and an isolated interlinking of clauses would result in flawed application of A&C Act, thereby giving rise to inconsistent findings by the courts.

By - Rishika Jain and Pranav Sethi