2022 Supreme(All) 1003

IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
SANGEETA CHANDRA, J.
M/S Zapdor-Ubc-Abnjv Delhi - Petitioner
Versus
U.O.I., Thru. General Manager Northern Railway New Delhi and Ors. - Respondents
Matters Under Article 227 No. 24693 of 2020
Decided On : 01-09-2022

The seat of arbitration is the place where the arbitration proceedings are held and not the place where the cause of action arose. The courts at the seat of arbitration have exclusive jurisdiction to entertain challenges to the arbitral award.

Headnote:

The Supreme Court held that the seat of arbitration is the place where the arbitration proceedings are held and not the place where the cause of action arose. The Court further held that the courts at the seat of arbitration have exclusive jurisdiction to entertain challenges to the arbitral award.

Fact of the Case:

The petitioner, a joint venture company, entered into a contract with the respondent, a railway company, for the electrification of a railway line. The contract contained an arbitration clause providing that any disputes arising out of the contract would be settled by arbitration in accordance with the Arbitration and Conciliation Act, 1996 (the Act). The arbitration proceedings were held in New Delhi and the arbitral tribunal rendered an award in favor of the petitioner. The respondent challenged the award before the Commercial Court at Lucknow, which had territorial jurisdiction over the place where the cause of action arose. The petitioner filed a petition under Article 227 of the Constitution of India, challenging the jurisdiction of the Commercial Court at Lucknow.

Finding of the Court:

The Supreme Court held that the Commercial Court at Lucknow did not have jurisdiction to entertain the respondent's challenge to the arbitral award. The Court held that the seat of arbitration was New Delhi, where the arbitration proceedings were held, and not the place where the cause of action arose. The Court further held that the courts at the seat of arbitration have exclusive jurisdiction to entertain challenges to the arbitral award.

Issues: 1. Whether the Commercial Court at Lucknow had jurisdiction to entertain the respondent's challenge to the arbitral award. 2. Whether the seat of arbitration was New Delhi, where the arbitration proceedings were held, or the place where the cause of action arose.

Ratio Decidendi: The Supreme Court held that the seat of arbitration is the place where the arbitration proceedings are held and not the place where the cause of action arose. The Court further held that the courts at the seat of arbitration have exclusive jurisdiction to entertain challenges to the arbitral award. The Court relied on the following provisions of the Act: * Section 2(1)(e): "'Court' means the principal civil court of original jurisdiction in a district"; * Section 20(1): "The parties are free to agree on the place of arbitration"; * Section 20(2): "Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the Arbitral Tribunal having regard to the circumstances of the case, including the convenience of the parties"; * Section 34(1): "Any party to an arbitration agreement or an arbitration proceeding may apply to the Court for an order- (a) to appoint an arbitrator or arbitrators where the parties or any of them fail to do so in accordance with the agreement or where the arbitration agreement provides that the appointment is to be made by the Court; (b) to remove an arbitrator or arbitrators where the arbitrator or arbitrators or any of them are or become incapable of acting or for any other reason it is not possible for the arbitrator or arbitrators to carry out the arbitration in accordance with the arbitration agreement or where an arbitrator or arbitrators have been guilty of misconduct or have misconducted the proceedings; (c) to set aside an arbitral award where- (i) the award has been made without proper legal authority or in contravention of the provisions of this Act; (ii) the award is in conflict with the public policy of India; (iii) the award is induced or affected by fraud or corruption; (iv) the award is in violation of the rules of natural justice; (v) the making of the award was improper."

Final Decision: The Supreme Court allowed the petition and set aside the order of the Commercial Court at Lucknow. The Court held that the Commercial Court at Lucknow did not have jurisdiction to entertain the respondent's challenge to the arbitral award and that the courts at New Delhi, where the arbitration proceedings were held, had exclusive jurisdiction to entertain such challenges.