Indian Arbitration scenario has faced the challenge of judicial intervention and conflicting judgements vis-a’-vis designation of “seat” and “venue”. While, venue is merely a geographical location where the arbitration is conducted, seat determines the legal jurisdiction governing the arbitration proceeding. Complications can arise when a contract designates a specific “seat” while at the same time, confer jurisdiction on Court located in a different place.
This aspect was settled by Supreme Court in celebrated judgement of BALCO vs. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552 and thereafter explained in judgement of BGS SGS Soma vs. NHPC (2020) 4 SCC 234. In these judgments concept of “contra indica” was developed as a test for determining “seat” of arbitration. However, recently various High Courts have given a different interpretation of contra indicia, again resurrecting confusion between seat and venue of arbitration.
This article focuses on the determination of seat and venue in an arbitration agreement with a special focus on contra indicia as interpreted by Indian Courts.
The Law on Contra Indicia
In BALCO (supra) and BGS SGS Soma (supra), Apex Court adopted the Shashoua Test according to which wherever there is an express designation of “venue” without designation of “seat” and no other contra indicia, the inexplorable conclusion is that venue is the juridical seat of the arbitration proceeding.
Despite Shashoua Test in place, many Courts continued using the expression “venue” and “seat” interchangeably. Therefore, Supreme Court again intervened in Mankastu Impex Pvt. Ltd. vs. Airvisual Ltd. (2020) 5 SCC 399 and held that “mere expression ‘place of arbitration’ cannot be the basis to determine place as the ‘seat’ of arbitration”. Supreme Court held that intention of the parties as to the “seat” should be determined from other clauses in the agreement and the conduct of the parties.
CONFLICTING VIEWS BY HIGH COURTS
FIRST VIEW: Place of arbitration is to be considered the juridical seat.
This view was taken by Bombay High Court, Madras High Court and Delhi High Court and the facts before the Courts were similar inasmuch as the parties had decided a place of arbitration of one place and opted for exclusive jurisdiction of another place’s court. In these cases, the Courts applied the Shashoua Test and held that in these cases, the parties intended that place of arbitration is to be considered the juridical seat of arbitration. In doing so, the Court ignored the exclusive jurisdiction clause of the respective agreements and held that such clauses are for other proceedings and not arbitration proceedings.
SECOND VIEW: Exclusive Jurisdiction Clause is the Contra Indicia
A contrary view has been taken by Gujarat High Court Rajasthan High Court, Calcutta High Court and Delhi High Court that where a place is designated as venue and exclusive jurisdiction has been given to court of another place, the latter is a clear contra indicia that prevents the venue from being the seat of arbitration.
The Court in these cases held that venue is merely a convenient location for holding arbitration sittings, and the intention of the parties in the agreement was to confer seat to place where the exclusive jurisdiction lies.
Despite Supreme Court’s intervention, the law on “seat” and “venue” is a conundrum that puzzles Court till this day. In light of the contrasting views expressed by the Courts, the seat vs. venue debate would result in endless pursuit for litigants to pursue.
In our view, if the seat is not specifically mentioned in the arbitration agreement, then the idea of contra indicia for deciding seat is of particular import and has to be understood after considering all clauses of an agreement.
The authors believe that the First View runs afoul of the law which mandates that the intention of parties is to be gauged from a holistic understanding of the intention of the parties. An exclusive jurisdiction clause in our view should prevent the term “venue” from being exalted to the position of seat as per Supreme Court’s dicta of BGS SGS Soma (supra).
While all the judgements who have given the First View discuss BGS SGS Soma (supra), they do not discuss how the exclusive jurisdiction clause cannot be seen as a contra indicia. The more recent judgements of Aseem Watts (supra) by Rajasthan High Court and Homevista Décor (supra) by Calcutta High Court on the other hand distinguish the judgements giving the First View and have held that designating an exclusive jurisdiction to a particular Court suggests that the venue is a convenient place of arbitration and not the seat. Even the Delhi High Court’s recent decisions of Kush Raj Bhatia (supra), Cravants Media Pvt. Ltd. (supra), and Mrs. Meenakshi Nehra Bhat (supra) distinguish and dilute the First View given by the coordinate benches.
Given that all decisions giving the First View and Second View are of coordinate benches, one will have to wait the final judgment of the Supreme Court on this issue.