Mere Conduct Of Arbitral Proceedings Does Not Determine Seat Of Arbitration: Supreme Court

The Supreme Court has said there is a distinction between the seat and venue of arbitration, holding that while the seat determines the supervisory jurisdiction of courts, the venue only denotes the physical location where hearings are held.

A Bench of Justices Sanjay Kumar and Sanjeev Sachdeva said that in the absence of an express designation of a seat, the mere conduct of arbitration proceedings at a particular location for administrative convenience does not confer exclusive jurisdiction on the courts of that place.

Court made the observations while dealing with an appeal filed by Mahanadi Coalfields Ltd against an Odisha High Court order which had held that Cuttack was the seat of arbitration. The Supreme Court clarified that Cuttack was merely the venue for convenience and not the juridical seat of arbitration, and set aside the high court's order.

Why did the Supreme Court hold that Cuttack was not the seat of arbitration?

The dispute arose out of contract works between Mahanadi Coalfields Ltd and M/s GSCO (Gurmeet Singh And Company) Infrastructure Private Limited and claims arising from those works.

After a previous round of litigation, arbitration proceedings were commenced and were held at Cuttack. The sole arbitrator passed a common arbitral award in favour of the respondent on October 25, 2021.

The appellants subsequently filed three separate petitions under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Court, Sundargarh, seeking setting aside of the arbitral award.

The respondent challenged the maintainability of these petitions before the Odisha High Court.

By its June 20, 2025 judgment, the high court held that the seat of arbitration was Cuttack and that the Section 34 petitions filed before the District Judge, Sundargarh, were not maintainable for want of jurisdiction. It also held that the petitions were time barred.

The high court's reasoning was based, among other things, on the fact that the arbitrator had been appointed by the high court under Section 11(6) of the Act. Since the high court is seated at Cuttack, it held that Cuttack must be treated as the juridical seat of arbitration and that courts at Cuttack alone would have exclusive jurisdiction over applications under Part I of the Act, including Section 34 petitions.

The Supreme Court disagreed with this reasoning.

Does holding arbitration proceedings at a particular place make it the seat?

No. The Supreme Court said the mere conduct of arbitral proceedings at a particular location cannot, by itself, determine the juridical seat of arbitration.

"There is a distinction between 'seat' and 'venue' of arbitration. While 'Seat' determines the Courts exercising supervisory jurisdiction over the arbitration proceedings, 'Venue' merely denoted the physical location where the sitting are held," the Bench said.

Court held that the high court had erred in treating Cuttack as the seat merely because the disputes were referred to the arbitrator by the high court, which has its seat at Cuttack.

"Merely because the seat of the high court is at Cuttack would not confer jurisdiction on the District or Commercial courts at Cuttack. The high court has clearly erred in restricting the jurisdiction of the high court to the District within the territory of which the high court is physically situated, i.e. Cuttack," the Bench said.

The Supreme Court clarified that a high court of a State exercises jurisdiction over the entire State. Therefore, all Commercial Courts or District Courts, where no Commercial Court has been established, within the territorial jurisdiction of that high court would have jurisdiction to entertain a petition under Section 34 of the Act.

This would be subject to an agreement between the parties to the contrary, or a specific determination of the seat in the order appointing the arbitrator or any other stipulation or direction by the court.

What did the Supreme Court say about the limitation period for Section 34 petitions?

Court also emphasised that an application under Section 34 of the Arbitration and Conciliation Act for setting aside an arbitral award must be filed within the period prescribed under Section 34(3).

"The limitation period for challenging the award is three months, with a potential extension of thirty days if the court is satisfied that the applicant was prevented by sufficient cause from making the application within that time," the Bench said.

The respondent, in the present case, conceded that the high court's finding on limitation was erroneous.

The high court had held that even if the Section 34 petitions filed before the Sundargarh court were initially treated as having been filed before the wrong court and the time spent there was excluded, the appellants had persisted with the proceedings before the wrong court. By the time the issue was decided, the delay would have exceeded the period that could be condoned.

The high court had therefore held that the petitions were clearly barred by limitation.

The Supreme Court's ruling on jurisdiction, however, meant that the petitions before the District Judge, Sundargarh, could proceed.

What is the role of Section 42 in determining jurisdiction?

The Supreme Court also referred to Section 42 of the Arbitration and Conciliation Act, which provides that all subsequent applications arising out of an arbitration agreement must be made before the court where the first application under Part I of the Act was filed.

"This non-obstante provision aims to centralize jurisdiction once a court has been approached, but it presupposes that the first court had proper territorial jurisdiction," the Bench said.

Court ultimately allowed the appeal and restored the Section 34 petitions filed by Mahanadi Coalfields before the District Judge, Sundargarh.

It directed the District Judge to decide the petitions in accordance with law and expeditiously.

Case Title: Mahanadi Coalfields Ltd & Ors Vs M/s GSCO (Gurmeet Singh And Company) Infrastructure Private Limited

Bench: Justices Sanjay Kumar and Sanjeev Sachdeva

Date of Judgment: September 23, 2024