Arbitrator Can't Assume Arbitral Seat Without Clear Agreement From Parties: Delhi High Court

The Delhi High Court bench of Justice C. Hari Shankar has held that that parties in arbitration can agree to an arbitral seat at a neutral location, different from where the contract was executed, the work was carried out, or the arbitration proceedings were conducted. However, such a decision must first reflect mutual agreement and, secondly, must be documented, either explicitly in writing or recorded by the Arbitrator or the Court in an order. The High Court held that, without such an agreement, the Arbitrator cannot assume there was a mutual understanding between the parties regarding a particular location as the arbitral seat, unless there are written or oral submissions explicitly indicating an agreement to the location as the arbitral seat. Brief Facts: The Petitioner, Union of India, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to challenge an arbitral award. The petition is currently at a stage where notice has yet to be issued by the High Court. The central issue before the High Court arose from a preliminary objection raised by Mr. Sahil Garg, counsel for Arsh Constructions (Respondent) regarding the maintainability of the petition before the High Court. The objection advanced by Mr. Garg was based on a critical aspect of the arbitral award itself. In paragraph 4 of the impugned award, the Arbitrator expressly observed that Gurgaon was the undisputed seat of arbitration which conferred supervisory jurisdiction over the arbitral proceedings to the High Court of Punjab and Haryana. Mr. Garg contended that in light of this determination, the petition should have been filed before the High Court having jurisdiction over Gurgaon, rather than before the Delhi High Court. Mr. Garg further argued that the Petitioner has not specifically challenged or traversed the Arbitrator's finding that Gurgaon was the agreed seat of arbitration. According to him, this omission signifies that the finding has been accepted by the petitioner and as such, the jurisdiction of the High Court is ousted. Observations by the High Court: The High Court noted that if Gurgaon was indeed the arbitral seat, the court would have no territorial jurisdiction over the matter. This stems from clear rulings of the Supreme Court in cases such as BGS SGS Soma JV v NHPC Ltd and BBR (India) Pvt Ltd v S P Singla Constructions Pvt Ltd where it was held that petition under Section 34 of the Arbitration Act must be filed in the court that has territorial jurisdiction over the arbitral seat. The High Court acknowledged that the Arbitrator, in the impugned award, recorded that it went "undisputed" between the parties that Gurgaon was the arbitral seat. This finding, however, was contested by the Petitioner's counsel, Ms. Dwivedi, who vehemently argued that this finding was incorrect. The Petitioner maintained that there had never been an undisputed agreement between the parties regarding Gurgaon as the arbitral seat. The High Court then addressed the ancillary issue of whether it is bound by the Arbitrator's finding that Gurgaon was the undisputed arbitral seat as recorded in the arbitral award. On this, the High Court turned to the arguments made by Ms. Dwivedi, who presented orders from the arbitral proceedings, contending that nowhere did the Petitioner agree to Gurgaon as the arbitral seat. The High Court found merit in this submission, as there was no documented evidence of such an agreement in the pleadings, proceedings, or any order recorded by the Arbitrator. Further, the High Court examined paragraph 4 of the impugned arbitral award, where the Arbitrator noted that Gurgaon had gone "undisputed" as the arbitral seat. The High Court observed that for a matter to be undisputed, it must have been raised at some point during the proceedings, and then allowed to pass without objection. However, there was no record in the proceedings that such an issue had been discussed or agreed upon by the parties. The High Court noted that the agreement between the parties did not specify Gurgaon as the arbitral seat, and in fact, the High Court of Punjab and Haryana previously designated Delhi as the venue of arbitration. Given the lack of any written or oral submissions indicating an agreement to Gurgaon as the arbitral seat, the High Court held that the Arbitrator's finding in paragraph 4 was based on an erroneous assumption. The Arbitrator mistakenly believed that the issue of the arbitral seat had been settled when, in fact, it had not even arisen during the proceedings. The High Court then held that any decision regarding the arbitral seat must be based on consensus between the parties and should be documented either in the contract, the arbitration record, or an order by the Arbitrator. In the absence of such documentation, the Arbitrator's conclusion that Gurgaon was the arbitral seat was held to be...

Arbitrator Can't Assume Arbitral Seat Without Clear Agreement From Parties: Delhi High Court

Rajesh Kumar

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