[Cites 33, Cited by 0]
Calcutta High Court
Chittaranjan Locomotive Works vs M/S Arihant Electricals on 2 December, 2025
Author: Shampa Sarkar
Bench: Shampa Sarkar
2025:CHC-OS:235
IN THE HIGH COURT AT CALCUTTA
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL Division
BEFORE :-
THE HON'BLE JUSTICE SHAMPA SARKAR
AP-COM -960 of 2024
Chittaranjan Locomotive Works
Vs.
M/s Arihant Electricals
For the Petitioner : Mr. Swatarup Banerjee, Adv.
Mr. Partha Ghosh, Adv.
Mr. Madhu Jana, Adv.
Mr. Rahul Agarwala, Adv.
Mr. Golam Zaky, Adv.
Ms. Ritika Chowdhury, Adv.
For the Respondent : Mr. Amit Dubey, Adv.
Mr. Subhradip Roy, Adv.
Ms. Sananda Ganguli, Adv.
Judgment Reserved on : 11.11.2025
Judgment Delivered on : 02.12.2025
Shampa Sarkar, J.
1. This is an application for Unconditional Stay of the award, in the
alternative stay of the award dated April 18, 2024, passed by the learned
sole Arbitrator in an arbitration proceeding being AP No. 114 of 2022,
without securing the awarded sum.
2. By an order dated April 21, 2022, the Learned Arbitrator was
appointed by the High Court at Calcutta. According to the petitioner, the
award was liable to be set aside and or quashed as the same was opposed to
the public policy of India, being unreasonable, unconscionable and perverse.
3. Mr. Partha Ghosh, learned advocate for the petitioner submitted that,
sometime in 2009, the Railway Administration had floated a tender for
2025:CHC-OS:235
procurement of design, testing, supply and commissioning of Transmission
Systems for WAP-5 AC Electric Locomotives suitable for 200kmph services
and 225 kmph test speed as per CLW specification no.
CLW/MS/3/SPEC/001(REV-O) of July, 2009.
4. The respondent participated in the tender and submitted a bid
sometime in September 2009. The respondent was the highest bidder.
5. According to the petitioner, time was the essence of the contract. As
per the Indian Railway Standard, (in short IRS), the conditions of contract
provided for remedy in liquidated damages and not by way of penalty, in the
event of any breach of the terms and conditions. The contract provided that,
if the contractor failed to deliver the stores or any instalment thereof within
the period fixed for such delivery or within the period, extended, or if the
supplier repudiated the contract before the expiry of such period, the
purchaser, without prejudice to its other rights, could recover from the
contractor agreed liquidated damages. Purchase order number
91/10/095/NS00135 dated June 9, 2010 was placed on the respondent for
procurement of design, testing, supply and commissioning of Transmission
Systems for WAP-5 AC Electric Locomotives suitable for 200kmph services
and 225 kmph test speed as per CLW specification no.
CLW/MS/3/SPEC/001(REV-O) of July, 2009.
6. The requirement of the petitioner wanted materials of aluminium
alloy, but the respondent intended to supply materials of Spheroidal
Graphite Cast Iron (SGCI) and as such the petitioner sought for approval
from the RDSO. The respondent was advised to proceed with the
manufacture and supply of the ordered item with Spheroidal Graphite Cast
Iron (SCGI) material composition vide letter dated April 15, 2013. The
2025:CHC-OS:235
respondent sought for extension of the delivery period up to March 2014
and the same was extended by the petitioners, without imposing any
liquidated damages.
7. According to the petitioner, the scope of supply for the items
pertaining to the contract was defined in the tender documents, the
purchase order and IRS conditions.
8. According to the petitioner, on August 1, 2014, the respondent once
again requested for extension of delivery time and the same was approved by
the petitioners. Time till September 30, 2014 was allowed without charging
any liquidated damages.
9. According to the petitioner, the respondent failed to supply within the
delivery period and on the request of the respondent, three modification
advices were issued, with imposition of liquidated damages. The petitioner
contended that under the provisions of the IRS, COC, liquidated damages on
the stores which the contractor had failed to deliver within the fixed period,
could be recovered by the purchaser. Thus, liquidated damages were
imposed as per the terms and conditions of the purchase order due to non-
supply of the materials within the stipulated delivery period. Such
composition was not a penalty. The respondent caused severe delay. The
petitioners determined the contract, and made a final payment on June 18,
2018, by imposing liquidated damages to the tune of Rs. 1,17,01,200/-
(Rupees one crore seventeen lakh one thousand two hundred only). Thus,
disputes arose and the respondent invoked arbitration.
10. According to the petitioner, the respondent issued a letter dated June
29, 2020 seeking for waiver of deducted liquidated damages amounting to
Rs. 3,55,38,255/-, refund of the liquidated damages, and further requested
2025:CHC-OS:235
for arbitration. The petitioner refused such request on the ground of
limitation. Thereafter the arbitrator was appointed by the High Court.
11. The learned arbitrator passed the award, thereby, allowing all the
claims of the respondent and rejecting the claims of the petitioner.
According to Mr. Partha Ghosh, learned advocate for the petitioner, the
learned arbitrator failed to assign reasons and mechanically relied upon
documents which were neither part of the statement of claim nor disclosed
before him. Thus, the award was a nullity. Moreover, the appointment of the
learned arbitrator was alleged to be without any authority of law and all
consequential orders passed by him were non-est and void ab initio. Thus,
prayer for stay of enforcement of the award was made.
12. It was urged that the award was in conflict with the public policy of
India as envisaged in Section 34(2)(b) and specifically Explanation 1 (ii) and
(iii) and Section 34 (2-A) of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as the said Act). The relevant provisions of which are
quoted below:-
"Section 34(2)(b):- The Court finds that-
(i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
[Explanation 1.- For the avoidance of any doubt, it is clarified that
an award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or
corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law;
or
(iii) it is in conflict with the most basic notions of morality or
justice.
[(2-A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the
court, if the court finds that the award is vitiated by patent
illegality appearing on the face of the award:
2025:CHC-OS:235
Provided that an award shall not be set aside merely on the ground
of an erroneous application of the law or by reappreciation of
evidence.]"
13. Mr. Ghosh further submitted that the award did not deal with the
dispute which was referred. The learned Arbitrator travelled beyond the
subject matter of the arbitration. The said award had been challenged by
filing AP-COM 706 of 2024. It was urged that, the application for
unconditional stay be allowed or in the alternative, the petitioner may be
directed to secure the awarded sum. The petitioner was a government entity
and the award holder would never be deprived, in the event the award was
finally upheld. It was further urged that, if the petitioner was directed to
deposit the amount awarded, money would be blocked and the upkeep of
infrastructural facilities would suffer. Moreover the Government of India
would face financial hardship. Thus, the prayer for stay should be allowed to
prevent irreparable loss and injury which the petitioner would sustain on
account of such perverse award.
14. A preliminary issue with regard to maintainability of this application
was raised by Mr. Amit Dubey learned Advocate for the claimant
/respondent. It was urged that this court lacked jurisdiction to entertain
this application. As the application under Section 34 of the said Act was not
maintainable before the High Court at Calcutta, consequentially, the
application under Section 36(2) of the said Act was also not maintainable.
The court could not pass any order directing stay of enforcement of the
award and/or stay of the execution proceeding, as it lacked territorial
jurisdiction to entertain the application. By virtue of clause 2900 (g) of IRS,
the seat of arbitration was Chittaranjan. The seat was agreed by the parties
2025:CHC-OS:235
in terms of Section 20 of the said Act. The clause provided that the seat of
arbitration would be the place from which the letter of acceptance was
issued and in the present case, the letter of acceptance of the respondents
bid was issued from Chittaranjan. The seat of arbitration would be the
determinative of factor as to which court would have supervisory jurisdiction
over the arbitral proceeding and to entertain the application seeking setting
aside of the award. Mr. Dubey urged that the principal Civil Court at the
seat of arbitration alone, would be competent to decide this application.
Reliance was placed on the decision of the Hon'ble Apex court in BGS SGS
SOMA JV vs NHPC Ltd. decided in Civil Appeal No. 9307 of 2019,
(reported in MANU/SC/1715/2019).
15. Learned advocate contended that the competent court at
Chittaranjan, i.e., commercial court at Asansol would have jurisdiction to
entertain a challenge to the arbitral award. When the parties chase the seat,
such act amounted to choosing the exclusive jurisdiction of the court. It was
further submitted that in the present case, there was an express designation
of a venue and no designation of an alternative place as a seat. Thus, in the
absence of any significant contrary indicia, the logical conclusion would be
that the venue (Chittaranjan) should actually be the juridical seat of the
arbitral proceeding. Referring to BGS SGS SOMA (supra), it was submitted
that, if a place was designated as a venue of arbitration, such place also
would be the seat. The parties had intended to anchor the arbitral
proceeding at Chittaranjan.
16. Mr. Dubey contended that, the Hon'ble Apex Court had declared the
law on the seat centric jurisdiction, insofar as, supervisory jurisdiction of
courts over the arbitral proceeding was concerned. The law declared by the
2025:CHC-OS:235
Hon'ble Apex Court in BGS SGS SOMA (supra), was also followed by a three
Judges bench of the Hon'ble Apex Court in Hindustan Construction
Company Ltd. vs NHPC Ltd. and Ors. decided in Civil Appeal No. 1987
of 2020. It was urged that decision in Bharat Aluminium Co. (BALCO) vs.
Kaiser Aluminium Technical Service Inc. reported in (2012) 9 SCC 552
was clarified and interpreted in BGS SGS SOMA (supra). Thus, the Apex
Court held that the ratio of BALCO (supra) should be understood to mean
that, in the event a party had agreed to a seat of arbitration in their
contract, such selection would tantamount to an exclusive jurisdiction
clause and the court within the seat of would have jurisdiction to entertain
challenges against the arbitral award. The Apex Court, in the said decision
did not accept the finding that two courts would have concurrent
jurisdiction either on the basis of the seat or by accrual of cause of action.
17. Relying on the decision of this court in Versatile Construction vs
Tata Motors Finance Ltd. decided in APOT 389 of 2024 wit AP Com No.
822 of 2024, Mr. Dubey contended that the Division Bench approved the
finding of a learned single judge to the effect that, once a seat of arbitration
was decided by the parties, the provisions of Sections 16 to 20 of the Code of
Civil Procedure would not be the determinant factor as to the jurisdiction of
the supervisory court. The clarification given in BGS SGS SOMA (supra), as
regards the ratio in BALCO (supra) was followed by the Hon'ble Division
Bench.
18. The Hon'ble Apex Court in BBR (India) Private Ltd. vs S.P. Singla
Construction Private Limited decided in Civil Appeal No. 4130-4131 of
2022, again followed the decision laid down in BGS SGS SOMA (supra), in
respect of exclusive juridical authority of the court within whose jurisdiction
2025:CHC-OS:235
the seat of arbitration was determined. The two-court theory in BALCO
(supra) was not accepted. Such decision was also further by this court in
Damodar Valley Corporation v. BLA Projects Private Ltd. decided in AP
473 of 2021, and a co-ordinate bench held that, the designated seat would
confer exclusive jurisdiction on the court at the seat and, venue would be
the seat if the seat was not specified. A similar proposition was laid down in
the decision of Adhunik Corporation Ltd. v. Gauri Sanker Choubey
decided in AP COM No. 693 of 2024. Mr. Dubey submitted that, admittedly
the parties to the contract had entered into the agreement, thereby
determining the place of issuance of the letter of acceptance, that is,
Chittaranjan, as the place of arbitration vide clause 2900(g) of the IRS. Such
agreement was neither varied nor modified by the parties. The learned
arbitrator also did not pass any order determining the seat of arbitration as
Kolkata. Arbitration was conducted through video conference. The claimant
attended the hearing from New Delhi and the respondent from Chittaranjan.
The learned arbitrator was in Kolkata. Only two physical hearings were
conducted at Kolkata. Therefore, it could be concluded with certainty that
the hearings were held at Kolkata, for convenience, but Kolkata was not the
seat of arbitration. Kolkata was merely a geographical location. The seat and
venue of arbitration was Chittaranjan. The execution proceedings had been
filed at Asansol.
19. According to Mr. Dubey, the question before the Apex Court in Ravi
Rajan (supra) was with regard to appointment of an arbitrator and not with
regard to determination of the jurisdictional court. Moreover, the agreement
before the Hon'ble Apex Court provided that sitting of the tribunal would be
at Kolkata, therefore, positively indicating that, Kolkata would be the venue.
2025:CHC-OS:235
The decision of Ravi Rajan (supra), according to Mr. Dubey, was per
incuriam. The Hon'ble High Court of Allahabad disagreed with the finding of
the Apex Court in Ravi Rajan (supra) by relying upon BGS SGS SOMA
(supra), and the other judgments on the said issue. Thus, it was submitted
that, this court lacked jurisdiction in view of Section 2(1)(e) read with
Section 20 of the said Act, and Section 10 of the Commercial Courts Act,
2015.
20. Mr. Partha Ghosh, Learned Advocate for the petitioner, submitted that
the cause of action arose within the jurisdiction of this Court. All the
correspondence was received by the respondent within the jurisdiction of
this court. The venue chosen by the learned arbitrator to conduct the
physical hearing was 7B Kiran Shankar Roy Road. Paragraph 96 of the
decision in BALCO (supra) clarified the position of law that, not only the
court at the seat, but also the court within whose jurisdiction part of cause
of action had arisen, could entertain an application for setting aside the
award and consequently also entertain the application for stay of the award.
21. Mr. Ghosh submitted that, all the communication, correspondence,
offer etc. took place from the office of the respondent, situated at Diamond
Chambers, 4, Chowringee Lane, Kolkata - 700016, which was within the
jurisdiction of this court. Moreover, the arbitration proceeding was held in
physical form at Punwani Chambers, 7B Kiran Shankar Roy Road, Kolkata -
700001, also within the jurisdiction of this court. Thus, this court would
always have jurisdiction to receive, try, entertain and adjudicate the
application for stay of the award and the application for setting aside the
award. The dispute between the parties raised in the application for setting
aside the award.
2025:CHC-OS:235
22. According to Mr. Ghosh, the arbitration clause provided that the
venue of arbitration shall be the place from which the acceptance note was
issued or any other place as the arbitrator at his discretion may determine.
As the physical sittings were held at 7B Kiran Sankar Roy Road, Kolkata,
which was within the jurisdiction of this court, and in view of the fact that
the award was signed and published in Kolkata, this court would alone have
jurisdiction to entertain the applications. Relying on paragraph 96 of BALCO
(supra) it was submitted that, the full Bench had categorically recorded that,
in any arbitration proceeding, two courts would have jurisdiction to
adjudicate the dispute between the parties under Part I of the said Act, that
is, the court within whose jurisdiction part of cause of action had arisen and
the court within whose jurisdiction the seat of arbitration was situated.
23. Therefore, in view of the law laid down in the BALCO (supra),
objection with regard to the jurisdiction of this court to entertain the
application for setting aside the award and for stay of the award, could not
be raised. Mr. Ghosh distinguished the decisions relied upon by Mr. Dubey
and submitted that this was a fit case for stay of the operation of the award.
24. Mr. Ghosh submitted that, the decision of Ravi Rajan Developers
Pvt. Ltd. vs Aditya Kumar Chatterjee decided in Civil Appeal Nos. 2394-
2395 of 2022 was not good law and was contrary to the decision laid down
in BGS SGS SOMA (supra), which was followed by the Hon'ble Apex Court
in various judgments.
25. Considered the contentions of the parties.
26. The arbitration clause is quoted below. It provides that, the venue of
arbitration shall be the place from which the acceptance note was issued or
such other place as the arbitrator, at his discretion, may determine.
2025:CHC-OS:235
"2900. Arbitration:
(a) In the event of any question, dispute or difference arising under
these conditions or any special conditions of contract, or in
connection with this contract (except as to any matters the decision
of which is specially provided for by these or the special conditions)
the same shall be referred to the sole arbitration of a Gazetted
Railway Officer appointed to be the arbitrator, by the General
Manager in the case of contracts entered into by the Zonal Railways
and Production Units; by any Member of the Railway Board. In the
case of contracts entered into by the Railway Board and by the Head
of the Organisation in respect of contracts entered into by the other
Organisations under the Ministry of Railways. The Gazetted Railway
Officer to be appointed as arbitrator however will not be one of those
who had an opportunity to deal with the matters to which the
contract relates or who in the course of their duties as railway
servant have expressed views on all or any of the matters under
dispute or difference. The award of the arbitrator shall be final and
binding on the parties to this contract.
(b) In the event of the arbitrator dying, neglecting or refusing to act or
resigning or being unable to act for any reason, or his award being
set aside by the court for any reason, it shall be lawful for the
authority appointing the arbitrator to appoint another arbitrator in
place of the outgoing arbitrator in the manner aforesaid.
(c) It is further a term of this contract that no person other than the
person appointed by the authority as aforesaid should act as
arbitrator and that if for any reason that is not possible, the matter is
not to be referred to 'arbitration at all.
(d) The arbitrator may from time-to-time with the consent of all the
parties to the contract enlarge the time for making the award.
(e) Upon every and any such reference, the assessment of the cost
incidental to the reference and award respectively shall be in the
discretion of the arbitrator.
(f) Subject as aforesaid, the Arbitration Act, 1940 and the rules
thereunder and any statutory modifications thereof for the time being
in force shall be deemed to apply to the arbitration proceedings
under this clause.
(g) The venue of arbitration shall be the place from which the
acceptance note is issued or such other place as the arbitrator at his
discretion may determine.
(h) In this clause the authority, to appoint the arbitrator includes, if
there be no such authority, the officer who is for the time being
discharging the functions of that authority, whether in addition to
other functions or otherwise."
27. Section 2(1)(e) and Section 20 of the said Act is quoted below :-
"2(1)(e)- "Court" means-
(i) 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
2025:CHC-OS:235
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;
(ii) in the case of international commercial arbitration, 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, and in other cases, a
High Court having jurisdiction to hear appeals from decrees of courts
subordinate to that High Court;]
"20. Place of arbitration.- (1) The parties are free to agree on the
place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of
arbitration shall be determined by the arbitral tribunal having regard
to the circumstances of the case, including the convenience of the
parties.
(3) Notwithstanding sub-section (1) or sub-section (2), the arbitral
tribunal may, unless otherwise agreed by the parties, meet at any
place it considers appropriate for consultation among its members, for
hearing witnesses, experts or the parties, or for inspection of
documents, good or other property."
28. Section 10 of the Commercial Courts Act, 2015
"10. Jurisdiction in respect of arbitration matters.--Where the
subject-matter of an arbitration is a commercial dispute of a Specified
Value and--
(1) If such arbitration is an international commercial arbitration, all
applications or appeals arising out of such arbitration under the
provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996)
that have been filed in a High Court, shall be heard and disposed of by
the Commercial Division where such Commercial Division has been
constituted in such High Court.
(2) If such arbitration is other than an international commercial
arbitration, all applications or appeals arising out of such arbitration
under the provisions of the Arbitration and Conciliation Act, 1996 (26
of 1996) that have been filed on the original side of the High Court,
shall be heard and disposed of by the Commercial Division where
such Commercial Division has been constituted in such High Court.
(3) If such arbitration is other than an international commercial
arbitration, all applications or appeals arising out of such arbitration
under the provisions of the Arbitration and Conciliation Act, 1996 (26
of 1996) that would ordinarily lie before any principal civil court of
original jurisdiction in a district (not being a High Court) shall be filed
in, and heard and disposed of by the Commercial Court exercising
territorial jurisdiction over such arbitration where such Commercial
Court has been constituted."
2025:CHC-OS:235
29. The proceedings were substantially conducted through virtual
hearing, and the arbitrator participated from his residence at Kolkata. The
petitioner's counsel appeared from Kolkata and it is alleged that the
respondent's counsel appeared from New Delhi. The records show that no
physical meeting ever took place at Chittaranjan. Two physical hearings
were conducted at Punwani Chambers, 7B, Kiran Shankar Roy Road,
Kolkata- 700001, which is within the jurisdiction of this court. The award
was signed and published at Kolkata and such has been recorded in the
award itself. It is clear that, even if there was no particular order
determining the venue by the arbitrator, the physical hearings were held
within the jurisdiction of this court, i.e., at 7B Kiran Shankar Roy Road and
both the parties accepted such venue for the arbitral proceeding. The
arbitrator, at his discretion, also accepted such venue. In this case, venue
cannot automatically be read as seat. The intention of the parties and the
conduct of the proceedings are relevant. The learned arbitrator held two
physical meetings within the jurisdiction of this court and signed and
delivered the award within the jurisdiction of this court at Kolkata. Hence,
the venue was accepted to be Kolkata by the parties and also by the learned
arbitrator. Seat of arbitration is the juridical seat which determines the
court which has supervisory jurisdiction under Sections 34 and 37 of the
Act. Venue can merely be the location where the hearings are conducted
unless the parties intends that the venue to be also the seat. In this case,
the parties consciously used the term venue in the arbitration clause and
not seat. The parties consciously choose the venue and the arbitrator
accepted the same. The physical hearings were conducted within the
jurisdiction of this court. Both the parties participated and no one raised
2025:CHC-OS:235
any objection with regard to the selection of the venue at 7B Kiran Shankar
Roy Road, Kolkata - 700001. The conduct of the parties and of the arbitrator
indicate that the proceedings were administered and controlled from
Kolkata. In BGS SGS SOMA (supra), the Apex Court held that, in the event
the arbitration agreement mentioned a venue, such venue would become the
seat only when no contrary indicator would appear. Conversely, if the
arbitral proceedings and the award clearly indicated another place as the
centre of arbitration, the juridical seat would shift automatically. The
arbitrator's office was in Kolkata. The physical hearings and the signing of
the award took place within the jurisdiction of this court. The mere mention
of Chittaranjan as venue, without any factual nexus linking the proceedings
thereto, cannot oust the jurisdiction of this court. Upon a combined reading
of clause 2900(g) of the COC, Section 20(2) of the said Act and Section 10 of
the Commercial Courts Act, 2015, this Court has the jurisdiction to
entertain this application. The fact that not a single proceeding was held
from Chittaranjan will clearly indicate that the arbitrator and the parties
chose 7B Kiran Shankar Roy Road as the place of the arbitral proceedings
and had anchored the proceedings to the said venue, which was permissible
as per the terms of the contract. Parties deviated and derogated from the
agreed venue.
30. In BGS SGS SOMA (supra), the arbitration agreement provided that,
the arbitration proceedings shall be held at New Delhi, although, the work
was to be executed in Faridabad. After the award was passed, the award
debtor filed an application under Section 34 of the said Act in the Faridabad
court. Award holder objected, arguing that, only the Delhi court would have
jurisdiction. It was held that Delhi was the juridical seat. As per the clause,
2025:CHC-OS:235
the seat was fixed and no concurrent jurisdiction existed elsewhere. Venue
would be treated as seat only if no seat was mentioned and there was no
contrary indicia. In the present case, the contrary indicia was that, the
arbitrator and the parties, by their conduct and action accepted that
physical hearings would be held from 7B Kiran Shankar Roy Road and the
parties participated without raising any objection to the venue. Here, the
learned arbitrator also had a discretion to choose the venue/place of
arbitration and it can be gathered from the conduct of the parties and the
conduct of the arbitrator that, the 7B Kiran Shankar Roy Road as the place
for physical hearings. It was also the venue for passing of the award,
irrespective of the fact that no specific order was passed determining the
venue. The occasion for determination of the venue by the learned arbitrator
did not arise in this case, inasmuch as, not only did the agreement permit
the arbitrator to exercise discretion while selecting a venue, but also
because the parties did not ask for determination of venue by the
arbitration, as they agreed to participate in the proceedings held at 7B Kiran
Shankar Roy Road. Thus, the decision in BGS SGS SOMA (supra), is
distinguishable on facts.
31. In Hindustan Construction (supra), it was confirmed that the court
at the seat alone would have supervisory jurisdiction. In this case, no seat
was prescribed and this court has already analyzed why the venue will not
be read as a seat in the peculiar circumstances of this case. The decision
does not apply.
32. In Bharat Broadband Network Limited, the agreement named New
Delhi as the place of arbitration. The arbitrator was appointed by the Delhi
High Court. Later, when the question arose whether Delhi or Bengaluru
2025:CHC-OS:235
would have jurisdiction to entertain an application under Section 34, it was
held that once the court appoints an arbitrator under Section 11 of the said
Act, that court had jurisdiction as the seat court, unless the agreement
clearly indicated otherwise. The place of arbitration was New Delhi, so the
seat was Delhi. It was held that seat and jurisdiction were interconnected.
The designation of a place of arbitration conferred exclusive jurisdiction on
the court at that place, even if the cause of action arose elsewhere. This
judgment is also distinguishable on facts.
33. In INOX Renewables Limited v. Jayesh Electricals Ltd. reported in
(2023) 3 SCC 733, it was held that, when parties by mutual consent shifted
the venue of arbitration proceedings from the place initially mentioned in
the contract to another place and all hearings were held at such place, the
juridical seat of arbitration must be treated as having shifted to the new
venue. Relevant paragraphs are quoted below:-
"12. This case would show that the moment the seat is chosen as
Ahmedabad, it is akin to an exclusive jurisdiction clause, thereby
vesting the courts at Ahmedabad with exclusive jurisdiction to deal
with the arbitration. However, the learned counsel for the respondent
referred to and relied upon paras 49 and 71 of the aforesaid judgment.
Para 49 only dealt with the aspect of concurrent jurisdiction as dealt
with in BALCO v. Kaiser Aluminium Technical Services
Inc. [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC
552 : (2012) 4 SCC (Civ) 810] ["BALCO"] which does not arise on the
facts of the present case. Para 71 is equally irrelevant, in that, it is
clear that the parties have, by mutual agreement, entered into an
agreement to substitute the venue at Jaipur with Ahmedabad as the
place/seat of arbitration under Section 20(1) of the Arbitration and
Conciliation Act, 1996.
***
***
15. The aforesaid judgment would have no application to the facts of
the present case as there is nothing akin to Clause 35.2, which is the
amendment clause which was applied to the facts in Videocon
case [Videocon Industries Ltd. v. Union of India, (2011) 6 SCC 161 :
(2011) 3 SCC (Civ) 257] . This being the case, the parties may
mutually arrive at a seat of arbitration and may change the seat of
2025:CHC-OS:235
arbitration by mutual agreement which is recorded by the arbitrator in
his award to which no challenge is made by either party."
34. Such principle is applicable in the present case. Ordinarily, the seat
mentioned in the contract governs jurisdiction. However, the parties enjoy
autonomy to hold proceedings elsewhere by showing their intention to
change the seat or the venue. This is in consonance with Section 20 (3) of
the said Act. Here, the arbitration was anchored physically within the
jurisdiction of this court at 7B, Kiran Shankar Roy Road. The office of the
arbitrator was situated in Kolkata, and virtual hearings were held initially.
Upon the physical hearings being held at the venue shifted. 7B, Kiran
Shankar Roy Road, the venue cannot be read as the seat in view of the
contrary indicia, that is the parties by their conduct participated in the
virtual hearings held at 7B, Kiran Shankar Roy Road, which is within the
jurisdiction of this court. When the parties consciously permitted the
physical sittings to be held within 7B, Kiran Shankar Roy Road, the said
place became the venue and as such this court has jurisdiction to entertain
the application under Section 34 and 36 of the said Act. The arbitration
proceedings were administered and controlled from such venue and the
award was signed there. Primacy of the parties, their intention and conduct
overrules the clause with regard to the venue as Chittaranjan, that is, the
place from where the letter of acceptance was issued.
35. Relevant portions of the decision in BGS SGS SOMA (supra) are
quoted below:-
"82. On a conspectus of the aforesaid judgments, it may be concluded
that whenever there is the designation of a place of arbitration in an
arbitration clause as being the "venue" of the arbitration proceedings,
the expression "arbitration proceedings" would make it clear that the
"venue" is really the "seat" of the arbitral proceedings, as the aforesaid
2025:CHC-OS:235
expression does not include just one or more individual or particular
hearing, but the arbitration proceedings as a whole, including the
making of an award at that place. This language has to be contrasted
with language such as 'tribunals are to meet or have witnesses,
experts or the parties' where only hearings are to take place in the
"venue", which may lead to the conclusion, other things being equal,
that the venue so stated is not the "seat" of arbitral proceedings, but
only a convenient place of meeting. Further, the fact that the arbitral
proceedings "shall be held" at a particular venue would also indicate
that the parties intended to anchor arbitral proceedings to a particular
place, signifying thereby, that that place is the seat of the arbitral
proceedings. This, coupled with there being no other significant
contrary indicia that the stated venue is merely a "venue" and not the
"seat" of the arbitral proceedings, would then conclusively show that
such a clause designates a "seat" of the arbitral proceedings. In an
International context, if a supranational body of rules is to govern the
arbitration, this would further be an indicia that "the venue", so
stated, would be the seat of the arbitral proceedings. In a national
context, this would be replaced by the Arbitration Act, 1996 as
applying to the "stated venue", which then becomes the "seat" for the
purposes of arbitration.
***
98. However, the fact that in all the three appeals before us the
proceedings were finally held at New Delhi, and the awards were
signed in New Delhi, and not at Faridabad, would lead to the
conclusion that both parties have chosen New Delhi as the "seat" of
arbitration under Section 20(1) of the Arbitration Act, 1996. This being
the case, both parties have, therefore, chosen that the courts at New
Delhi alone would have exclusive jurisdiction over the arbitral
proceedings. Therefore, the fact that a part of the cause of action may
have arisen at Faridabad would not be relevant once the "seat" has
been chosen, which would then amount to an exclusive jurisdiction
clause so far as Courts of the "seat" are concerned."
36. In the decision of Versatile Construction (supra), the ratio was that,
once a seat of arbitration had been decided by the parties, the provisions of
Section 16 to 20 of the Code of Civil Procedure, 1908 would not be the
determinant factor as to the jurisdiction of the court to entertain an
arbitration under Section 34 of the Act. In that case, the clause provided
that arbitration would be held in Mumbai and there was no contrary
indication that any other place could be designated as the seat of
2025:CHC-OS:235
arbitration. Mumbai had to be construed as not only the venue, but also the
seat of arbitration.
37. In BBR (India) Private Ltd. (supra), the Hon'ble Apex Court held that
where the arbitral tribunal holds the arbitration proceedings, that place,
would by default be the venue and consequently the seat. Paragraphs 22 to
29 are quoted below:-
"22. BGS SGS Soma (supra) also refers to decision of this Court in
Union of India v. Hardy Exploration and Production (India) Inc., 19
which had held that the choice of the venue of arbitration did not
imply that it had become the 'seat of arbitration' and that the venue
could not by itself assume the status of 'the seat'; instead a venue
could become 'the seat' only if "something else is added to it as a
concomitant". According to BGS SGS Soma (supra), the reasoning
given in Hardy Exploration (supra) is per incuriam as it contradicts
the ratio and law laid down in BALCO (supra). Hence, BGS SGS
Soma (supra) holds that it would be correct to hold that while
exercising jurisdiction under sub-section (2) of Section 20 of the
Act, an arbitrator is not to pass a detailed or a considered decision.
The place where the arbitral tribunal holds the arbitration
proceedings would, by default, be the venue of arbitration and
consequently the 'seat of arbitration'.
23. When we turn to the facts of the present case, if the arbitration
proceedings were held throughout in Panchkula, there would have
been no difficulty in holding that Delhi is not the jurisdictional
'seat'. But that was not to be, as on recusal of Mr. Justice (Retd.)
N.C. Jain and post the appointment of Mr. Justice (Retd.)
T.S.Doabia arbitration proceedings were held at Delhi. In the
context of the present case and noticing the first order passed by
the arbitral tribunal on 5th August 2014 stipulating that the place
of the proceedings would be Panchkula in Haryana and in the
absence of other significant indica on application of Section 20(2) of
the Act, the city of Panchkula in Haryana would be the
jurisdictional 'seat' of arbitration. As 'the seat' was fixed vide the
order dated 5th August, 2014, the courts in Delhi would not have
jurisdiction.
38. In the decision of Damodar Valley Corporation (supra) the venue of
arbitration was agreed to be Kolkata and the courts at Kolkata were
conferred to have exclusive jurisdiction. The jurisdiction clause provided
conferment of exclusive jurisdiction in the courts within the city of Kolkata.
2025:CHC-OS:235
39. In Adhunik Corporation Ltd. (supra) also, it was provided that
arbitration would be held within Kolkata, West Bengal although the
expression seat had not been specifically mentioned. The court held that
throughout the agreement, there was nothing to connote that any other
alternative venue had been either proposed or accepted by the parties. As
the arbitration clause provided that the arbitration would be within the
jurisdiction of Kolkata, it was held that courts at Kolkata would have
supervisory jurisdiction.
40. The preliminary objection with regard to the jurisdiction of this court
to entertain the application under Section 34 and 36 of the said Act is
rejected.
41. Now comes the issue of unconditional stay. When the Court considers
a prayer for unconditional stay of the award, a cursory look at the award
should indicate that either the making of the award was perpetuated by
fraud or corruption, or that the award was passed in violation of a prevailing
law, or the award was based on forged documents which were used in
evidence, or the award was vitiated due to violation of the principles of
natural justice. Here, the learned Arbitrator recorded the submissions, the
claims and counterclaims of the parties and considered the documents
submitted. Reasons have been assigned. Thus, at this stage it cannot be
prima facie held that the award is either perverse or a nullity. Unconditional
stay of an arbitral award is a very narrow exception to the general rule that,
when an award is for a money decree, stay can only be granted when the
'sum' awarded (principal + interest) is secured. Before the amendment of
2015, mere filing of a petition under Section 34, would automatically stay its
enforcement. After the amendment of 2015, which came into effect from
2025:CHC-OS:235
October 23, 2015, filing of an application under Section 34 of the said Act,
will not by itself operate as a stay of the award. The award debtor has to
apply separately for a stay and the Court has the discretion to impose
conditions for grant of stay. In case of an award for payment of money, the
law mandates that the principles of the Civil Procedure Code, shall be taken
into consideration. Thus, the principles of Order 41 Rule 5 of the Code of
Civil Procedure have been made applicable by law. Order 41 Rule 5 of the
Code is quoted below :-
"5. Stay by Appellate Court.--(I) An appeal shall not operate as
a stay of proceedings under a decree or order appealed from
except so far as the Appellate Court may order, nor shall execution
of a decree be stayed by reason only of an appeal having been
preferred from the decree; but the Appellate Court may for
sufficient cause order stay of execution of such decree.
(2) Stay by Court which passed the decree.--Where an
application is made for stay of execution of an appealable decree
before the expiration of the time allowed for appealing therefrom,
the Court which passed the decree may on sufficient cause being
shown order the execution to be stayed.
(3) No order for stay of execution shall be made under sub-rule (1)
or sub-rule (2) unless the Court making it is satisfied--
(a) that substantial loss may result to the party applying for
stay of execution unless the order is made;
(b) that the application has been made without unreasonable
delay; and
(c) that security has been given by the applicant for the due
performance of such decree or order as may ultimately be
binding upon him.
(4) 1 [Subject to the provision of sub-rule (3),] the Court may make
an ex parte order for stay of execution pending the hearing of the
application.
[(5) Notwithstanding anything contained in the foregoing sub-
rules, where the appellant fails to make the deposit or furnish the
security specified in sub-rule (3) of rule 1, the Court shall not make
an order staying the execution of the decree.]"
2025:CHC-OS:235
42. For unconditional stay, a special case has to be made out. Such
provision was brought in by the amendment of 2021, which is the second
proviso to Section 36(3). The petitioner has failed to prove that the making of
the award was induced by fraud and corruption.
43. Fraud means a deliberate deception in the arbitral process, which
affects the award as a whole. It must be, prima facie, shown that the
Arbitrator's decision is tainted on account of either suppression or deliberate
concealment of material facts or misrepresentation. The Arbitrator must be
misled into making an award, being influenced by false statements or
misrepresentation. It must be shown that the decision is an outcome of
collusion between the arbitrator and one of the parties, or that there is
witness tampering. None of these instances has been, prima facie,
established.
44. Meaning of the expression 'corruption in the making of the award' is
that, the decision of the Arbitrator is influenced by illegal gratification or by
abuse of power. There are no such allegations of corruption against the
Arbitrator.
45. In Venture Global Engineering vs. Stayam Computer Services
Limited and Anr. reported in (2010) 8 SCC 660, fraud was defined in
terms of concealment of material fact and misrepresentation. In Avitel Post
Studioz Limited and Ors. vs. HSBC PI Holdings (Mauritius) Limited.
reported in (2021) 4 SCC 713, the Hon'ble Apex Court defined fraud as
trickery and concealment of material facts.
46. This Court does not find that the arbitral award was induced by
fraud. The award is not vitiated on account of deliberate act of deception by
2025:CHC-OS:235
the respondent. The respondent has not secured any unfair and unlawful
gain.
47. In the decision of Karur Vysya Bank vs Srei Equipment Finance
Limited decided in AP-COM 947 of 2024, this Court held as follows:-
"25. The parties made elaborate submissions both for and against
the award. The second proviso to Section 36(3) required a primary
satisfaction on the part of the court that the making of the award
as alleged by the petitioner was induced or affected by fraud or
corruption. The award-debtor could seek stay of operation of the
award upon discharging the burden of at least, prima facie,
showing that the award was induced by fraud or corruption. Fraud
and corruption have not been defined in the said Act.
48. In the decision of Union of India and Ors. vs Rahul Kumar Thakur
decided in AP-COM 657 of 2024, this Court held as follows:-
"20. Ventura Global Engineering (supra) also propounded that,
that concealment of material circumstances on the part of one of
the parties to an arbitration agreement, thereby, leading the
arbitrator to pass an award, was fraud. Therefore, if the party
which ought to have disclosed material, wilfully withheld the same
in order to deceive the arbitrator, such award should be set aside
on the ground of fraud. These aspects are not available from the
documents relied upon by the petitioners. The circumstances which
led to the making of the award, prima facie, do not appear to be
fraudulent. The definition of law as per the Indian law, does not
apply to this case.
21. Section 17 of the Indian Contract Act, defines fraud as
follows:-
17. 'Fraud' defined.--
"Fraud' means and includes any of the following acts committed
by a party to a contract, or with his connivance, or by his agent',
with intent to deceive another party thereto or his agent, or to
induce him to enter into the contract:--
(1) the suggestion, as a fact, of that which is not true, by one who
does not believe it to be true;
(2)the active concealment of a fact by one having knowledge or
belief of the fact;
(3)a promise made without any intention of performing it;
(4)any other act fitted to deceive;
2025:CHC-OS:235
(5)any such act or omission as the law specially declares to be
fraudulent. Explanation.--Mere silence as to facts likely to affect
the willingness of a person to enter into a contract is not fraud,
unless the circumstances of the case are such that, regard being
had to them, it is the duty of the person keeping silence to
speaks, or unless his silence, is, in itself, equivalent to speech.
Illustrations (a) A sells, by auction, to B, a horse which A knows
to be unsound. A says nothing to B about the horse's
unsoundness. This is not fraud in A.(b) B is A's daughter and has
just come of age. Here the relation between the parties would
make it A's duty to tell B if the horse is unsound.(c) B says to A--
"If you do not deny it, I shall assume that the horse is sound". A
says nothing. Here, A's silence is equivalent to speech.(d) A and
B, being traders, enter upon a contract. A has private information
of a change in prices which would affect B's willingness to
proceed with the contract. A is not bound to inform B."
22. The expression "making of the award" would mean that,
the award must have been obtained by a party to the arbitration
upon suppressing material evidence or by making false
statements before the learned arbitrator in order to take an unfair
advantage over the other party. The petitioners have not been
able to, prima facie, establish that any of these situations had
arisen in the making of the award. There is nothing on record to
show that vital documents had been either concealed or false
statements had been made before the learned Arbitrator, which
had a causative link with the facts constituting and culminating
in the award.
***
24. Corruption of the learned Arbitrator should be such, that it
would be, prima facie, evident from the award itself that the
learned Arbitrator had tried to curb or prevent the course of
justice. The burden of proof is rather high. The petitioners were
required to discharge the burden by at least bringing to the notice
of this court from the records and from the award that, either the
respondent had concealed relevant materials or had made false
statements, which led the arbitrator to pass the award in their
favour. The petitioners would have to show, prima facie, that the
learned Arbitrator deliberately passed the award in abuse of the
process of law and had illegally obstructed the course of justice. "
49. The challenge to the award is primarily on the merits. It was
submitted that the award travelled beyond the disputes referred and the
learned arbitrator relied on materials which were not part of the evidence in
2025:CHC-OS:235
the arbitral proceeding. Further challenge is on the ground of limitation and
waiver of the right to invoke arbitration.
50. Upon perusal of the award, this court finds that the learned arbitrator
recorded the submissions of the parties, the claims and counterclaims of the
parties and considered the documents submitted. The issue of waiver of the
claimant's right to seek reference, was rejected on merits. The issue of
limitation was decided as a preliminary issue and it was found that some of
the claims could not be held to be time-barred, but without proper trial. The
relevant clauses were discussed. The nature of the contract was discussed.
Whether time was the essence was also dealt with. The award cannot be
stayed unconditionally. The pleadings have been considered, the documents
and the conditions of the IRS were discussed. As such, this is not the stage
to decide whether the award suffers from perversity or is opposed to the
public policy of India. These issues will have to be decided upon a detailed
hearing of the application under Section 34.
51. The prayer for unconditional stay is thus rejected.
52. At the conclusion of the hearing, the respondent was permitted to file
a calculation with regard to the sum awarded, the same has been filed.
There shall be unconditional stay of the award for a period of 8 weeks.
Within such time, the petitioner will furnish security to the tune of Rs
1,32,49,605/-, which shall be deposited by way of a demand draft before the
learned Registrar Original Side. The demand draft shall be encashed and
deposited in an interest bearing auto renewable fixed deposit with any
nationalized bank, until further orders.
53. In the event the deposit is made as directed hereinabove, the
unconditional stay will continue till disposal of the application under
2025:CHC-OS:235
Section 34 of the Arbitration and Conciliation Act, 1996. In case of default,
the execution case will proceed and the stay will stand automatically
vacated, without further reference to this Court.
54. Urgent Photostat certified copies of this judgment, if applied for, be
supplied to the respective parties upon fulfilment of requisite formalities.
(Shampa Sarkar, J.)
