Parties' Conduct Overrides Clause: Calcutta High Court Rejects Literal Interpretation Of Arbitration Venue Clause

The Calcutta High Court on Tuesday dismissed Chittaranjan Locomotive Works' application for an unconditional stay of an arbitral award dated March 14th, 2024. Justice Shampa Sarkar on 2nd December, 2025 ruled that the conduct of the parties and arbitrator and the award publication proceedings in Kolkata constituted “contrary indicia”, sufficient to displace Chittaranjan as the contractual venue. The controversy stems from a tender issued by the Railway Administration, Chittaranjan Locomotive Works (CLW) for the supply of Driving Gear Systems. After delays, CLW determined the contract and levied liquidated damages of ₹2,40,85,873/- on Arihant Electricals, paving way for arbitration proceedings. As a result, the arbitral award dated March 14, 2024 was passed in favour of Arihant Electricals and rejected CLW's. Aggrieved by the arbitrator's decision, CLW approached the High Court for an unconditional stay of the award under Section 36 of the Arbitration and Conciliation Act of 1996, arguing that the award is “opposed to the public policy of India, is unreasonable, unconscionable and perverse” and that the arbitrator, whose appointment was “void ab initio”, based its decision on documents that were admitted as a part of the record. Mr. Amit Dubey, counsel for the respondent, Arihant Electricals, raised preliminary objections to the Court's jurisdiction, maintaining that the contract specifically mentioned Chittaranjan as the arbitration venue. He specifically pointed to clause 2900(g) of the contract, which states, “the venue of arbitration shall be the place from which the acceptance note is issued”. Citing the Supreme Court's ruling in BGS SGS SOMA JV v. NHPC Ltd., he argued that the venue must be interpreted as the only juridical seat, when there is no express mention of seat. With this, he argued that the Commercial Court in Asansol, Chittaranjan, has “exclusive jurisdiction” to try the matter. Justice Shampa Sarkar rejected the jurisdictional challenge, noting that the parties had consciously incorporated the term 'venue' rather than 'seat' in the contract. Referencing BGS SGS Soma principle , the court observed that where the arbitral record shows that the proceedings and the award are centred elsewhere, the juridical seat shifts. The Court held: "The conduct of the parties and of the arbitrator indicate that the proceedings were administered and controlled from Kolkata. Mere mention of Chittaranjan as venue, without any factual nexus linking the proceedings thereto, cannot oust the jurisdiction of this court.". The Court observed that two in-person hearings were held at Punwani Chambers in Kolkata, the award was signed and published at Kolkata, and no hearing was ever held at Chittaranjan. It highlighted that seat and venue is subject to change based on conduct, and that juridical seat will be inferred from “where the proceedings were administered and controlled”. The court states: “The conduct of the parties and of the arbitrator indicate that the proceedings were administered and controlled from Kolkata.” Justice Sarkar, distinguishing from the decision laid down in BGS SGS Soma v. NHPC, pointed forth "contrary indicia" that refuted the assumption that the contractual venue served as the juridical seat. The Court quoted INOX Renewables Limited v. Jayesh Electricals Limited, holding that a shift in the seat may take place the moment the parties mutually establish proceedings elsewhere, adding that in this case, “primacy of the parties, their intention and conduct overrules the clause with regard to the venue as Chittaranjan”. Regarding the petitioner's request for an unconditional stay of award, the Court held that the relief under the second proviso to Section 36(3), is a legislative exemption which is confined to cases involving fraud or corruption in the award-making process. Reiterating that unconditional stay "is a very narrow exception" especially after the introduction of the 2021 amendment, the Court held: “this Court does not find that the arbitral award was induced by fraud, the respondent has not secured any unfair and unlawful gain.” Dismissing the application for unconditional stay of the award, the Court nonetheless granted stay of arbitral award for eight weeks, which shall continue until the disposal of section 34 application only if the said security of 3,08,00,000/- is furnished within the stipulated time. Case Title: Chittaranjan Locomotive Works v. Arihant Electricals Case No.: COM (AP) 910/2024 Coram: Hon'ble Justice Shampa Sarkar Judgment Delivered: 02 December 2025 Appearances: For the Petitioner: Mr. Swatarup Banerjee; Ms. Amrita Pandey, For the Respondent-Mr. Amit Dubey, Mr. Subhradip Roy; Ms. Sananda Ganguli Click Here To Read/Download Order

Parties' Conduct Overrides Clause: Calcutta High Court Rejects Literal Interpretation Of Arbitration Venue Clause

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