[Seat vs Venue] Bombay High Court Upholds Arbitrator's Discretion To Change Venue Of Arbitral Proceedings

The Bombay High Court bench of Justice Arun R. Pedneker has held that an arbitrator has the authority to change the venue to a conveniently located place even if the venue is specified in the agreement. The court held that the arbitrator may shift the venue if conducting proceedings at the agreed venue would be detrimental to the arbitration process. It observed that Section 20(3) does not completely bar the change of venue without the consent of the parties, even when the venue is agreed upon in the contract. Background Facts: The petitioner filed the writ petition against the impugned order passed by the Arbitrator on 16.06.2024, which fixed the venue of arbitration at Aurangabad. The agreed venue between the parties in terms of the agreement dated 02.09.2013 was at 'Regional headquarter Commissioner D.M.C., Dhule'. Contentions of the Parties: The counsel for Petitioner contended that: The venue cannot be fixed anywhere other than as provided in the agreement. The parties had agreed that the place of arbitration would serve as both the seat and venue for all purposes of the arbitration proceedings.The arbitrator had no jurisdiction to change the venue once the agreement provided for the same unless the parties later agreed to a different venue. Section 20(2) of the Arbitration and Conciliation Act gives power to the arbitral tribunal to determine the place of arbitration in the absence of any agreement as contemplated under Section 20(1). As per Section 20 (3), the Tribunal can meet at any place it considers appropriate for hearing witnesses, experts, parties etc. The impugned order is in violation of section 20.The seat and venue are the same and the arbitration proceedings are required to be conducted at a place of arbitration i.e. Dhule. The High Court in exercise of its power under Articles 226 and 227 of the Constitution of India can intervene in the arbitration proceedings in exceptional circumstances. Per contra, the counsel for Respondent contended that: The place of arbitration, as provided in the agreement, refers to the seat of arbitration under section 20(1).The arbitrator has the discretion to choose a different venue. As there was no agreement regarding the venue, the Arbitrator decided on Aurangabad as the venue of arbitration, considering the submissions and convenience of the parties.The Court should refrain from exercising its powers under Articles 226 and 227 of the Constitution, which should be used sparingly in cases of grave illegality.The change of venue does not alter the seat of arbitration. Observations: The court noted that the Arbitrator had taken into account the following facts while fixing the venue of Arbitration and decided to hold the proceedings in Aurangabad: There was no agreement on the venue; although there was an agreement on the seat, the venue could be shifted to a more convenient location without changing the seat of arbitration. The earlier arbitrators faced difficulties while conducting proceedings at the designated seat.On nine occasions, the proceedings were held in Nashik, which is far from the stated venue. The court referred to BBR (India) Private Limited vs. S. P. Singla Constructions Private Limited [AIR 2022 SC 2673], which held that section 20(3) empowers the arbitral tribunal to conduct hearings at any place of convenience unless the parties have agreed otherwise. This can be for consultation among its members, recording witness statements, examination of experts or parties, and inspection of documents, goods, or property. The court further observed that the 'seat of arbitration' may be different from the place where contractual obligations are/were to be performed. The court also referred to BGS SGS Soma JV vs. NHPC Limited, where the Supreme Court had held that the 'seat of arbitration' can be determined by the following test: “... 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 arbitral proceeding.” In BGS SGS Soma JV, it was observed that section 20 leaves no room for doubt that where the place of arbitration is in India, the parties are free to agree to any "place" or "seat" within India. In the absence of the parties' agreement thereto, Section 20(2) authorizes the tribunal to determine the place/seat of such arbitration. The Supreme Court had also observed that the fixation of the most convenient "venue" is taken care of by Section 20(3). in certain cases, the “venue” mentioned in the arbitration agreement may be the “seat” of arbitration. The court noted the case of Jagson Airlines Ltd. and Anr. vs. Bannari Amman Exports (P) Ltd....

[Seat vs Venue] Bombay High Court Upholds Arbitrator's Discretion To Change Venue Of Arbitral Proceedings

Tazeen Ahmed

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