PSU Objects To International Arbitration Being Moved From Delhi To London; Supreme Court Questions Change Of Venue For Convenience

The Supreme Court on Wednesday heard a dispute between NMDC Steel Ltd, a Public Sector Undertaking of the Government of India and Italian company Danieli & C. Officine, regarding the shifting of the place of hearing of the international arbitration between them from Delhi to London.The bench comprising Chief Justice of India Surya Kant, Justice Ujjal Bhuyan and Justice NK Singh was hearing a Special Leave Petition filed by NDMC Steel Ltd against the order of the Telangana High Court which refused to interfere in the procedural order passed by the Arbitral Tribunal, which shifted the Closing Hearing in the Arbitration from Delhi to London, UK.The Tribunal, while passing the said order, noted that the costs of the three proposed five-star hotels in Delhi, including the Taj Mansingh, are way higher than the quotation given by IDRC, London, UK. As per the contract between the parties, Hyderabad is the designated venue of the Arbitration. Solicitor General of India Tushar Mehta, appearing for NDMC, argued that shifting the hearing to London at this stage will cause great prejudice.Senior Advocate Shyam Divan, for the respondents, submitted that under International Arbitration Law, there is a distinction between the seat of the arbitration and the place of hearing. The 'seat' carries a lot of weight since it determines the law which would be applicable. However, the place/venue of hearing can be changed as the per the convenience of the parties. The 'seat' of the present arbitration notionally continues to be in Hyderabad and only the place of hearing is shifted to London from Delhi.The CJI opined that there seems to be a vacuum in law regarding the question whether the place of arbitration can be changed merely for the ease of the lawyers/ arbitrators. "In this aspect, probably there is some grey area. We would like to examine it- can the place or venue of arbitration be changed only for the convenience of the lawyers or the arbitrators?" "This is the law that has to be developed in the arbitration field, then we have to think about it," the CJI added.Another Counsel for the respondents, supporting the order of the High Court, submitted that the alternative remedy available is under S.34 of the Arbitration & Conciliation Act 1996. The CJI interjected to observe that accepting the High Court's view could discourage the Indian PSUs and companies from opting for arbitration. He explained : "Ultimately, the verdict may be in your favour, but that is also going to be against the arbitration culture. The Indian Corporate entities, particularly the Indian Public Sector entities, will be extremely reluctant to enter into International Arbitration because if they know that I agree to an Indian seat, for Hyderabad, but proceedings are now in Siberia, what impact will it leave on them?" In the alternative, the CJI also highlighted that if the Court purely rules in favour of PSUs, then the global arbitration community will think Indian Courts are 'conservative'. "If we decide in their favour, the International Arbitration Community may think that the Indian courts are very conservative. We don't want that kind of message to be given." The bench however, expressed the inclination to interfere with the High Court's order and grant relief to the PSU. The respondent was given an opportunity to find an amicable solution instead of "inviting an order from the Court" and the matter was posted to tomorrow. BackgroundThe petitioner had initially approached the Telangana High Court in a writ petition seeking to quash the procedural order passed by the Arbitral Tribunal, which shifted the Closing Hearing in the Arbitration from Delhi to London, UK. The petitioner had sought restoration of the venue to a location in Hyderabad. It also sought a stay on the proceedings pending before the Arbitral Tribunal in ICC.Notably, the Tribunal, while passing the said order, noted that the costs of the three proposed five-star hotels in Delhi, including the Taj Mansingh, are way higher than the quotation given by IDRC, London, UK. The High Court refused to interfere with the procedural order, stating that the petitioner already has the efficacious remedy available under S.34 of the Arbitration & Conciliation Act 1996 . The Court also hold that the Tribunal's order to shift the hearing to London is well reasoned and not perverse. The relevant part states : "The impugned Procedural Order is not opaque with regard to the decision to shift the venue from New Delhi to IDRC, London. The Arbitral Tribunal gives sufficient reasons for the shift of venue, the primary reason being that of IDRC being cost-effective compared to Taj Mansingh in Delhi. Perversity, even on a broader understanding of the word, signifies a decision which is unhinged, in the sense of being removed from reasons and evidence. A perverse order is one where the decision-making authority comes to a conclusion without being tethered to the submissions made on behalf of the parties or...

PSU Objects To International Arbitration Being Moved From Delhi To London; Supreme Court Questions Change Of Venue For Convenience

Anmol Kaur Bawa

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