This week, we take a look at a very significant decision of the Supreme (SC) in BGS SGS Soma JV v. NHPC Ltd.This case was centered around an arbitration clause which, inter alia, provided that the "Arbitration Proceedings shall be held at New Delhi/Faridabad, India...". The language of the clause gave rise to jurisdictional challenges as to which courts would be competent to supervise the arbitration proceedings.
Consequently, in deciding this case, the SC has laid down the rules for determining the 'seat' of the arbitration, inter alia opining that designating a 'venue' of the arbitration proceedings amounts to designating a seat, in the absence of indicators to the contrary. The SC has further clarified that designating a seat of arbitration amounts to granting exclusive jurisdiction of the courts situated at such a seat.
In addition, the SC also dealt with the scope of appeal available under section 37(1)(c) of the Arbitration and Conciliation Act, 1996, and stated that the same is available only when a court has heard and dismissed a section 34 application on merits.
This judgment not only clarifies previously grey areas in arbitration law, but also underlines the importance of parties taking care to designate a 'seat' of arbitration at the very outset, given that they are also effectively selecting the courts which would have supervisory jurisdiction thereafter.
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