Seat of Arbitration & Territorial Jurisdiction of Courts

Domestic arbitration is regulated by Part I of the Arbitration and Conciliation Act, 1996 ["Act of 1996"] and Section 2(2) thereof states that Part I applies where the 'place' of arbitration is in India. Therefore, arbitration proceedings which takes place in India and where disputes are decided in accordance with the substantive laws of India is referred to as 'domestic arbitration'. The Act of 1996 inter alia gives the parties, autonomy to decide the place of arbitration under Section 20 and prescribes the extent judicial intervention under Section 5[1]. Purpose of Section 5 of the Act of 1996: Section 5 is specific and has a definite purpose as it creates a bar on interference by judicial authorities[2]. There are specific provisions under the Act of 1996 which provides for judicial intervention. Perusal of the Act of 1996 would show that the Courts can interfere at initial stage under Sections 8 and 11 to ensure that a party does not sabotage the arbitration. Further, during the arbitration proceedings, the Court only has a supportive role to play and it is only once the arbitral award is delivered, that the Courts interfere either to modify/set aside the award or enforce it. However, the basic common thread which runs through all these stages of arbitration is that the Court where the 'seat/place' of arbitrator is situated, alone will have the territorial jurisdiction to entertain such applications or appeal. Applicability of Code of Civil Procedure, 1908 for conferring jurisdiction on Court under the Act of 1996: The purpose of deciding on a 'seat/place' of arbitration is that the parties agree to confer jurisdiction on a Court, within whose territory the arbitration proceedings is to be held, so that any subsequent challenge to the arbitral award or enforcement of arbitral award can be made before that particular Court. This is because the Courts have supervisory jurisdiction or control over all tribunals and authorities subordinate to it within its territorial limits[3]. However, it is to be considered as to whether parties, by an arbitration agreement, can confer jurisdiction on a Court where no part of cause of action has arisen that is, whether provisions of Section 9, 16 to 20 of Code of Civil Procedure, 1908 ["CPC"] can be given a complete go-bye and jurisdiction can be conferred on a Court where no cause of action has arisen. It is no longer res integra that for deciding which Court will have the jurisdiction to entertain a petition or application or suit, the principles as laid in the CPC have to be followed and parties by consent, cannot confer jurisdiction on a Court where no part of cause of action has arisen or which inherently lacks jurisdiction[4]. However, when it comes to domestic arbitration, Section 19(1) of the Act of 1996 specifically excludes the applicability of CPC in as much as it states that the arbitral tribunal shall not be bound by its provisions. Further, Section 20 (1) and (2) gives autonomy to the parties or the arbitral tribunal to decide on the 'place' of arbitration and Section 30(4) states that the arbitral award shall mention its date and place of arbitration. Therefore, when parties are given complete autonomy to decide on the place of arbitration and the provisions of the CPC are not applicable, then how is jurisdiction to be conferred upon a Court under the Act of 1996? Section 2(1)(e)(i) of the Act of 1996 defines 'Court' as under: In the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;" BALCO & concept of 'neutral place': In Bharat Aluminium Col. (BALCO) v. Kaiser Aluminium Technical Service, Inc.[5] ["BALCO"], the Supreme Court interpreted Section 2(1)(e)(i) of the Act of 1996 and observed that the term "subject-matter of the arbitration" cannot be confused with "subject-matter of the suit" and that "subject-matter" referred therein is confined to Part I, whose purpose is to identify the courts having supervisory control over the arbitration proceedings. It refers to a Court which would essentially be a Court of the seat of the arbitration process. Further, it held that under the Act of 1996, the jurisdiction has been conferred to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place, which may be a neutral place to both parties and where no cause of action has arisen. But, it also held that Section...

Seat of Arbitration & Territorial Jurisdiction of Courts

Vaibhav Niti

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