Case: BGS SGS SOMA JV Vs. NHPC LTD

3. At the outset, the facts in SLP (Civil) No.25618 of 2018 are set out as follows. On 16.01.2004, the Petitioner was awarded a contract for construction of Diversion Tunnels, Coffer Dams, Concrete Gravity Dams, Plunge Pools and Cutoff Walls of Subansri Lowertric Project on river Subansri, with an installed capacity of 2000 MW, stated to be the largest Hydropower project yet in India. The project site is located in the lower Subansri districts in the States of Assam and Arunachal Pradesh. Clause 67.3 of the agreement between the parties provides for dispute resolution through arbitration. Clause 67.3 reads as follows:Any dispute in respect of which the Employer and the Contractor have failed to reach at anicable settlement pursuant to Sub-Clause 67.1, shall be finally settled by arbitration as set forth below. The Arbitral Tribunal shall have full power to open up, review and revise any decision,ion, instruction, determination, certificate oration of the Engineer(i) A dispute with an Indian Contractor shall be finally settled in accordance with theand Conciliation Act, 1996, or any statutory amendment thereof. The arbitral tribunal shall consist of 3one each to be appointed by theployer and the Contractor. The thirdtor shall be chosen by the two Arbitrators so appointed by the Parties and shall act as Presiding arbitrator. In case of failure of the two arbitrators, appointed by theties to reach upon a consensus within a period of 30 days from the appointment of the arbitrator appointed subsequently, the Presiding arbitrator shall be appointed by the President of the Institution of Engineers (India). For the purposes of this Sub- Clause, the term Indian Contractor means a contractor who is registered inand is a juridic person created under Indian law as well as a joint venturesuch a contractor and a Foreign Contractor(ii) In the case of a dispute with a Foreign Contractor, the dispute shall be finallytled in accordance with the provisions of the Indian Arbitration and Conciliation Act, 1996 and read with UNCITRAL Arbitration Rules. The arbitral tribunal shall consist of three Arbitrators,one each to be appointed by theArbitrator shall be chosen by the two Arbitrators so appointed by the Parties and shall act as Presiding arbitrator. In case of failure of the two arbitrators appointed by the parties to reach a consensus within a period of 30 days from their appointment on the Presiding Arbitrator to be appointed subsequently, the Presiding arbitrator shall be appointed by the President of thetution of Engineers (India). For theposes of this Clause 67, the term Foreign Contractor means a contractor who is not registered in India and is not a juridicson created under Indian Law. In case of any contradiction between Indiantion and Conciliation Act, 1996 andTRAL Arbitration Rules, the provisions in the Indian Arbitration and Conciliation Act, 1996 shall prevail(iii) Arbitration may be commenced prior to or after completion of the Works, provided that the obligations of the Employers, the Engineer, and the Contractor shall not be altered by reason of the arbitration being conducted during the progress of the Works(v) If one of the parties fail to appoint itstrator in pursuance of sub-clause (i) and (ii) above, within 30 days after receipt of the notice of the appointment of its arbitrator by the other party, then the President of the Institution of Engineers (India), both in cases of foreign contractors as well asContractors, shall appoint thetor. A certified copy of the order of the President of Institution of Engineers (India), making such an appointment shall benished to each of the parties(vi) Arbitration Proceedings shall be held at New Delhi/Faridabad, India and theof the arbitration proceedings and that of all documents and communications between the parties shall be English(vii) The decision of the majority of arbitrators shall be final and binding upon bothties. The cost and expenses of Arbitration shall be borne in such a manner asmined by the arbitral tribunal. However, the expenses incurred by each party innection with the preparation, presentation etc. of its proceedings as also the fees and expenses paid to the arbitrator appointed by such party on its behalf shall be borne by each party itself4. On 16.05.2011, a Notice of Arbitration was issued by the Petitioner to the Respondent, in regard to payment of compensation for lossesfered due to abnormal delays and additional costs as a result ofdrances caused by the Respondent. Ar Arbitral Tribunal was constituted as per clause 67.3 of the agreement under thetration Act, 1996. Pursuant thereto, the Petitioner filed its Statement of Claim seeking recovery of an amount of INR 986.60 crores plus CHF 1060619. Between August 2011 and August 2016,gs of the Arbitral Tribunal took place at New Delhi. The Tribunal then delivered its unanimous award at New Delhi on 26.08.2016, by which the claims of the Petitioner aggregating to INR 424,81,54,096.29 were allowed, together with simple interest at 14% per annum till the date of actual payment. On 04.10.2016, in view of certain computational and typographical errors in the arbitral award, the figure of 424,81,54,096.29 was rectified to INR 424,70,52,126.66. On 03.01.2017, being aggrieved by the arbitral award and thecation thereto, the Respondent filed an application under Section 34 of the Arbitration Act, 1996 seeking to set aside these awards before the Court of the District and Sessions Judge, Faridabad, Haryana. On 28.04.2017, the Petitioner filed an application under Section 151 read with Order VII Rule 10 of the Code of Civil Procedure, 1908inafter referred to as the CPC) and Section 2(1)(e)(i) of thetion Act, 1996, seeking a return of the petition filed under Section 34 for presentation before the appropriate Court at New Delhi and/or the District Judge at Dhemaji, Assam. In November, 2017, after thestitution of a Special Commercial Court at Gurugram, the Section 34 petition filed at Faridabad was transferred to the said Gurugrammercial Court and numbered as Arbitration Case No.74 (CIS No. ARB/118/2017)5. On 21.12.2017, the Special Commercial Court, Gurugram allowed the application of the Petitioner, and returned the Section 34 petition for presentation to the proper court having jurisdiction in New Delhi. On 15.02.2018, the Respondent filed an appeal under Section 37 of the Arbitration Act, 1996 read with Section 13(1) of the Commercial Courts Act, 2015 before the High Court of Punjab and Haryana at Chandigarh. On 12.09.2018, the impugned judgment was delivered by the Punjab and Haryana High Court, in which it was held that the appeal filed under Section 37 of the Arbitration Act, 1996 wastainable, and that Delhi being only a convenient venue where arbitral proceedings were held and not the seat of the arbitrationFaridabad would have jurisdiction on the basis of the cause of action having arisen in part in Faridabad. As a result, the appeal was allowed and the judgment of the Special Commercial Court,

Reasoning:
16. This provision is conspicuous by its absence in Section 37 of thetration Act, 1996, which alone can be looked at for the purpose ofing appeals against orders setting aside, or refusing to set aside awards under Section 34. Also, what is missed by the impugnedis the words under Section 34. Thus, the refusal to set aside an arbitral award must be under Section 34, i.e., after the grounds set out in Section 34 have been applied to the arbitral award in question, and after the Court has turned down such grounds. Admittedly, on the facts of these cases, there was no adjudication under Section 34 of the Arbitration Act, 1996 - all that was done was that the Special Commercial Court at Gurugram allowed an application filed under Section 151 read with Order VII Rule 10 CPC, determining that the Special Commercial Court at Gurugram had no jurisdiction tofurther with the Section 34 application, and therefore, such19. The reasoning in this judgment commends itself to us, as a distinction is made between judgments which either set aside, or refuse to set aside, an arbitral award after the court applies its mind to Section 34 of the Arbitration Act, 1996, as against preliminary orders oftion of delay, which do not in any way impact the arbitral award that has been assailed21. It can be seen that the reasoning in this judgment would have noplication to the facts of the present case. The Division Bench held that directing Antrix to file an affidavit, enclosing therewith its auditedance Sheets and Profit and Loss Account for the last three years, isself an interim order passed under Section 9 of the Arbitration Act, 1996. The further reasoning of the Court that the direction to Antrix to furnish an affidavit is to aid a future interim order, which would be just consequential, does not commend itself to us. A step towards anwould not amount to granting, or refusing to grant, any measure under Section 9 of the Arbitration Act, 1996. The case is also distinguishable for the reason that, as regards the Bangalore Court, which cannot proceed further with the matter, the impugned order therein is really final and would, therefore, also be appealable under Section 37. For all these reasons, this judgment is whollyable and would not apply to the facts of the present case. We may also advert to the fact that our judgment in Kandla (supra) wasered on 07.02.2018, and was missed by the Division Bench in Antrix Corporation Ltd. (supra), as the Division Bench had reservedon 06.12.2017, even though it ultimately pronounced theon 30.05.2018. The judgment in South Delhi Municipal(supra) was decided after reference was made to Kandla (supra), resulting in a deposit order being held to be not appealable under Section 37 of the Arbitration Act, 199622. It is clear, therefore, that the appeals filed in the present case do not fall within Section 37 of the Arbitration Act,1996 and are not23. We now examine the second part of the challenge made by thetioners to the impugned judgment, which relates to the determination of the seat of the arbitral proceedings between the parties. Thepugned judgment of the Punjab and Haryana High Court referred to BALCO (supra) and Indus Mobile Distribution Pvt. Ltd. (supra), and other judgments of this Court, in order to arrive at the conclusion that the arbitration clause in the present case does not refer to the seat of arbitration, but only refers to the venue of arbitration.sequently, the impugned judgment holds that since a part of the cause of action had arisen in Faridabad, and the Faridabadcial Court was approached first, the Faridabad Court alone would have jurisdiction over the arbitral proceedings, and the courts at New Delhi would have no such jurisdiction59. The view of the Delhi High Court in Antrix Corporation Ltd. (supra), which followed judgments of the Bombay High Court, does notmend itself to us. First and foremost, it is incorrect to state that theample given by the Court in paragraph 96 of BALCO (supra)forces the concurrent jurisdiction aspect of the said paragraph. As has been pointed out by us, the conclusion that the Delhi as well as the Mumbai or Kolkata Courts would have jurisdiction in the example given in the said paragraph is wholly incorrect, given the sentence, This would be irrespective of the fact that the obligations to beformed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi . Thetence which follows this is out of sync with this sentence, and the other paragraphs of the judgment. Thus, BALCO (supra) does not unmistakably hold that two Courts have concurrent jurisdiction, i.e., the seat Court and the Court within whose jurisdiction the cause of action arises. What is missed by these High Court judgments is the subsequent paragraphs in BALCO (supra), which clearly andtakably state that the choosing of a seat amounts to the choosing of the exclusive jurisdiction of the Courts at which the seat is located. What is also missed are the judgments of this Court in Enercondia) Ltd. (supra) and Reliance Industries (supra)60. Equally, the ratio of the judgment in Indus Mobile Distributionvate Ltd. (supra), is contained in paragraphs 19 and 20. Tworate and distinct reasons are given in Indus Mobile Distributionvate Ltd. (supra) for arriving at the conclusion that the Courts at Mumbai alone would have jurisdiction. The first reason, which ispendent of the second, is that as the seat of the arbitration wasnated as Mumbai, it would carry with it the fact that Courts at Mumbai alone would have jurisdiction over the arbitration process. The second reason given was that in any case, following the Hakam Singh (supra) principle, where more than one Court can be said to haverisdiction, the agreement itself designated the Mumbai Courts asexclusive jurisdiction. It is thus wholly incorrect to state that Indus Mobile Distribution Private Ltd. (supra) has a limited ratio61. Equally incorrect is the finding in Antrix Corporation Ltd. (supra) that Section 42 of the Arbitration Act, 1996 would be renderedtive and useless. Section 42 is meant to avoid conflicts in jurisdiction of Courts by placing the supervisory jurisdiction over all arbitralin connection with the arbitration in one Court exclusively. This is why the section begins with a non-obstante clause, and then goes on to state …where with respect to an arbitration agreement any application under this Part has been made in a Court… It isous that the application made under this part to a Court must be a Court which has jurisdiction to decide such application. Thequent holdings of this Court, that where a seat is designated in an agreement, the Courts of the seat alone have jurisdiction, wouldthat all applications under Part I be made only in the Court where the seat is located, and that Court alone then has jurisdiction over the arbitral proceedings and all subsequent applications arising out of the arbitral agreement. So read, Section 42 is not renderedeffective or useless. Also, where it is found on the facts of a particular case that either no seat is designated by agreement, or the so-called seat is only a convenient venue, then there may be several Courts where a part of the cause of action arises that may havediction. Again, an application under Section 9 of the Arbitration Act, 1996 may be preferred before a court in which part of the cause oftion arises in a case where parties have not agreed on the seat of arbitration, and before such seat may have been determined, on the facts of a particular case, by the Arbitral Tribunal under Section 20(2) of the Arbitration Act, 1996. In both these situations, the earliesthaving been made to a Court in which a part of the cause of action arises would then be the exclusive Court under Section 42, which would have control over the arbitral proceedings. For all these reasons, the law stated by the Bombay and Delhi High Courts in this regard is incorrect and is overruledTests for determination of seat63. It will thus be seen that wherever there is an express designation of a venue, and no designation of any alternative place as the seat, combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral84. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in antration clause as being the venue of the arbitration proceedings, the expression arbitration proceedings would make it clear that the venue is really the seat of the arbitral proceedings, as thesaid expression does not include just one or more individual orular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as tribunals are to meet or have witnesses,perts or the parties where only hearings are to take place in the venue, which may lead to the conclusion, other things being equal, that the venue so stated is not the seat of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings shall be held at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitralceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a venue and not the seat of the arbitral proceedings, would then conclusively show that such a clause designates a seat of the arbitral proceedings. In antional context, if a supranational body of rules is to govern thetion, this would further be an indicia that the venue, so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the stated venue, which then becomes the seat for the purposes ofCorrectness of the judgment in Hardy Exploration and93. The Three Judge Bench in Hardy Exploration and Productiondia) Inc (supra) failed to apply the Shashoua principle to theclause in question. Had the Shashoua principle been applied, the answer would have been that Kuala Lumpur, which was stated to be the venue of arbitration proceedings, being governed by theTRAL Model Law, would be governed by a supranational set of rules, and there being no other contrary indicator, it would be clear that Kuala Lumpur would therefore be the juridical seat of the arbitration96. The decision in Hardy Exploration and Production (India) Inc. (supra) is therefore contrary to the Five Judge Bench in BALCO (supra), in that it failed to apply the Shashoua principle to theclause in question. The Hardy Exploration and Productiondia) Inc. (supra) decision would lead to the result that a foreign award would not only be subject to challenge in the country in which it was made, but also subject to challenge under Section 34 of Part I of the Arbitration Act, 1996, which would lead to the chaos spoken of in paragraph 143 of BALCO (supra), with the concomitant risk offlicting decisions, as held in Venture Global Engineering (supra) [overruled in BALCO (supra)], which would add to problems relating to enforcement, and undermine the policy underlying the New York Convention and the UNCITRAL Model Law. We, therefore, declare that the judgment in Hardy Exploration and Production (India) Inc. (supra), being contrary to the Five Judge Bench in BALCO (supra), cannot be considered to be good law97. Coming to the impugned judgment in the present appeals, it is clear that the reasoning followed stems from the subject-matter test that flows from the definition of court in Section 2(1)(e)(i) of the Act. According to the impugned judgment, since the agreement was executed at Faridabad, part of the cause of action would arise at Faridabad, clothing Faridabad courts with jurisdiction for the purposes of filing a Section 34 petition. The second part of the reasoning is that Faridabad is the place where the request for reference to arbitration was received, as a result of which part of the cause of action arose in Faridabad, which ousts the jurisdiction of Courts of New Delhi, in which no part of the cause of action arose98. We have extracted the arbitration agreement in the present case (as contained in Clause 67.3 of the agreement between the parties) in paragraph 3 of this judgment. As per the arbitration agreement, in case a dispute was to arise with a foreign contractor, clause 67.3(ii) would apply. Under this sub-clause, a dispute which would amount to an international commercial arbitration within the meaning of Section 2(1)(f) of the Arbitration Act, 1996, would have to be finally settled in accordance with the Arbitration Act, 1996 read with the UNCITRALbitration Rules, and in case of any conflict, the Arbitration Act, 1996 is to prevail (as an award made under Part I is considered a domestic award under Section 2(7) of the Arbitration Act, 1996 notwithstanding the fact that it is an award made in an international commercialtration). Applying the Shashoua principle delineated above, it is clear that if the dispute was with a foreign contractor under Clause 67.3 of the agreement, the fact that arbitration proceedings shall be held at New Delhi/Faridabad, India in sub-clause (vi) of Clause 67.3, would amount to the designation of either of these places as the seat ofbitration, as a supranational body of law is to be applied, namely, the UNCITRAL Arbitration Rules, in conjunction with the Arbitration Act, 1996. As such arbitration would be an international commercialtration which would be decided in India, the Arbitration Act, 1996 is to apply as well. There being no other contra indication in such ation, either New Delhi or Faridabad, India is the designated seat un- der the agreement, and it is thereafter for the parties to choose as to in which of the two places the arbitration is finally to be held99. Given the fact that if there were a dispute between NHPC Ltd. and a foreign contractor, clause 67.3(vi) would have to be read as a clause designating the seat of arbitration, the same must follow even when sub-clause (vi) is to be read with sub-clause (i) of Clause 67.3, where the dispute between NHPC Ltd. would be with an Indian Contractor. The arbitration clause in the present case states that Arbitrationceedings shall be held at New Delhi/Faridabad, India… , therebynifying that all the hearings, including the making of the award, are to take place at one of the stated places. Negatively speaking, the clause does not state that the venue is so that some, or all, of the hearings take place at the venue; neither does it use language such as the Tribunal may meet, or may hear witnesses, experts orties. The expression shall be held also indicates that the so-called venue is really the seat of the arbitral proceedings. The dispute is to be settled in accordance with the Arbitration Act, 1996 which,fore, applies a national body of rules to the arbitration that is to be held either at New Delhi or Faridabad, given the fact that the present arbitration would be Indian and not international. It is clear, therefore, that even in such a scenario, New Delhi/Faridabad, India has been designated as the seat of the arbitration proceedings100. However, the fact that in all the three appeals before us thewere finally held at New Delhi, and the awards were signed in New Delhi, and not at Faridabad, would lead to the conclusion that both parties have chosen New Delhi as the seat of arbitration under Section 20(1) of the Arbitration Act, 1996. This being the case, both parties have, therefore, chosen that the Courts at New Delhi alone would have exclusive jurisdiction over the arbitral proceedings.fore, the fact that a part of the cause of action may have arisen at Faridabad would not be relevant once the seat has been chosen, which would then amount to an exclusive jurisdiction clause so far as Courts of the seat are concerned33. It will thus be seen that the new provisions contained in Sections 20 and 31(4) of the Arbitration Act, 1996 are a replication of Articles 20 and 31(3) of the UNCITRAL Model Law, in which pride of place is given to the juridical seat of the arbitral proceedings. However, the definition of court in Section 2(1)(e) of the Arbitration Act, 1996tinues the definition contained in the Arbitration Act, 1940, butplaces any and every civil court by only the principal civil court ofinal jurisdiction in a district, and includes the High Court in exercise of its ordinary civil jurisdiction. Section 42 of the Arbitration Act, 1996 also substantially follows the drill of Section 31(4) of the Arbitration Act, 194045. In any case, a judgment must be read as a whole, so that conflicting parts may be harmonised to reveal the true ratio of the judgment. However, if this is not possible, and it is found that the internalflicts within the judgment cannot be resolved, then the first endeavour that must be made is to see whether a ratio decidendi can be culled out without the conflicting portion. If not, then, as held by Lordning in Harper and Ors. v. National Coal Board (1974) 2 All ER 441, the binding nature of the precedent on the point on which there is a conflict in a judgment, comes under a cloud.46. If paragraphs 75, 76, 96, 110, 116, 123 and 194 of BALCO (supra) are to be read together, what becomes clear is that Section 2(1)(e)has to be construed keeping in view Section 20 of the Arbitration Act, 1996, which gives recognition to party autonomy - the Arbitration Act, 1996 having accepted the territoriality principle in Section 2(2),ing the UNCITRAL Model Law. The narrow construction of Section 2(1)(e) was expressly rejected by the Five Judge bench in BALCO (supra).