How to decide the “seat” of arbitration when only “venue” specified in the Agreement? Larger Bench to decide

Supreme Court: The Bench of RK Agrawal and AM Sapre, JJ has referred the question as to determination of the “seat” and “venue” for holding arbitration proceedings to a larger bench after the counsel brought to the Court’s notice that there are several decisions on the issue by the Benches of variable strength.

The Court, hence, said that though, the question regarding the “seat” and “venue” for holding arbitration proceedings by the arbitrators arising under the Arbitration Agreement/International Commercial Arbitration Agreement is primarily required to be decided keeping in view the terms of the arbitration agreement itself, but keeping in view the decisions by the Benches of variable strength and issues involved, which frequently arise in International Commercial Arbitration matters, the matter should be referred to a larger bench.

The Court was hearing the appeal arising from a Delhi High Court order wherein it was held that Indian Courts have no jurisdiction to entertain the application filed by the Union of India (appellant) under Section 34 of the Arbitration and Conciliation Act, 1996 to question the legality and correctness of the award in question and accordingly dismissed the appellant’s application as being not maintainable in Indian Courts.

The Counsel had brought to the Court’s notice that some decisions which have bearing over the questions arising in this appeal have been rendered by the Constitution Bench, some by Three- Judge Bench and remaining by the Two-Judge Bench and hence, the matter should be decided by an appropriate bench in order to clear the confusion.

The question placed before the larger bench is:

“when the arbitration agreement specifies the “venue” for holding the arbitration sittings by the arbitrators but does not specify the “seat”, then on what basis and by which principle, the parties have to decide the place of “seat” which has a material bearing for determining the applicability of laws of a particular country for deciding the post award arbitration proceedings.”

[Union of India v. Hardy Exploration and Production (India) INC, 2018 SCC OnLine SC 474, decided on 01.05.2018]

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