BGS SGS Soma JV v. NHPC Ltd.

At a glance

Parties

BGS SGS Soma JV (contractor) v. NHPC Ltd. (employer), with two connected appeals

Case no.

Civil Appeals No. 9307, 9308 and 9309 of 2019 (arising out of SLP (Civil) Nos. 25618, 25848 and 28062 of 2018)

Court

Supreme Court of India: R.F. Nariman (author), Aniruddha Bose and V. Ramasubramanian

Underlying award(s)

Unanimous domestic award made at New Delhi on 26 August 2016, rectified on 4 October 2016 (SLP 25618 of 2018)

Treaty

Clause 67.3 of the construction contract; Arbitration and Conciliation Act, 1996

Sector

Hydroelectric construction

Outcome

Appeals allowed. The Section 37 appeal to the High Court was not maintainable, and New Delhi was the seat, so the Section 34 petition must be presented to the courts at New Delhi.

Amount

Claimed in arbitration: INR 986.60 crores plus CHF 1060619. Award: INR 424,81,54,096.29, rectified to INR 424,70,52,126.66, with simple interest at 14% per annum.

The dispute

On 16 January 2004 BGS SGS Soma JV was awarded a contract to build diversion tunnels, coffer dams, concrete gravity dams and related works for the 2000 MW Subansiri Lower Hydroelectric Project in Assam and Arunachal Pradesh. It started arbitration to recover compensation for delays and extra costs caused by hindrances it attributed to NHPC. The arbitration clause (Clause 67.3(vi)) said that "Arbitration Proceedings shall be held at New Delhi/Faridabad, India". All the sittings were held in New Delhi, and the award was made there. NHPC filed its petition to set aside the award (Section 34) in Faridabad. The Special Commercial Court at Gurugram returned the petition for presentation to the courts at New Delhi. On NHPC's appeal, the Punjab and Haryana High Court held that New Delhi was only a venue and that Faridabad had jurisdiction because part of the cause of action arose there. Before the Supreme Court, the contractors challenged both whether the High Court appeal was maintainable and the High Court's ruling that New Delhi was not the seat.

Key holdings

1. Section 13 of the Commercial Courts Act, 2015 only provides the forum for an appeal. It creates no independent right of appeal, so Section 37 of the Arbitration Act, 1996 alone decides which orders can be appealed. An order returning a Section 34 petition under Order VII Rule 10 of the Code of Civil Procedure is not an order 'refusing to set aside an arbitral award under Section 34'. NHPC's appeal to the High Court was therefore not maintainable. ¶¶ 14–22
2. Read as a whole, the BALCO judgment holds that choosing a seat works like an exclusive jurisdiction clause in favour of the courts of the seat. The statement in paragraph 96 of BALCO on concurrent jurisdiction of cause-of-action courts conflicts with the rest of that judgment. High Court decisions that applied concurrent jurisdiction, including Antrix v. Devas (Delhi High Court) and Bombay High Court rulings, are overruled. ¶¶ 40–61
3. The Court restated the test for the seat. A clause naming the 'venue' of the 'arbitration proceedings', especially one saying they 'shall be held' there, designates the seat unless there are significant contrary indicia. A supranational body of rules (international cases) or the Arbitration Act, 1996 (domestic cases) supports that reading. ¶¶ 62–84
4. Union of India v. Hardy Exploration and Production (India) Inc. is not good law. It failed to apply the Shashoua principle and is contrary to the five-judge bench in BALCO. Its result exposes a foreign award to challenge both at the seat and under Section 34, against the policy of the New York Convention. ¶¶ 93–96
5. Clause 67.3(vi) designated New Delhi/Faridabad as the seat. Because the proceedings were held and the awards signed in New Delhi in all three appeals, the parties chose New Delhi as the seat under Section 20(1). The courts at New Delhi alone have jurisdiction, and it does not matter that part of the cause of action arose in Faridabad. The High Court judgment was set aside, and the Section 34 petition is to be presented in New Delhi. ¶¶ 98–102

Procedural history

1. 16 January 2004Contract for the Subansiri Lower Hydroelectric Project works awarded to the contractor.
2. 16 May 2011Notice of Arbitration issued. Seventy-one sittings followed in New Delhi between August 2011 and August 2016.
3. 26 August 2016Unanimous award made at New Delhi; rectified on 4 October 2016.
4. 3 January 2017NHPC filed its Section 34 petition in Faridabad; it was transferred to the Special Commercial Court, Gurugram, in November 2017.
5. 21 December 2017The Special Commercial Court, Gurugram returned the petition for presentation to the proper court in New Delhi.
6. 12 September 2018The Punjab and Haryana High Court allowed NHPC's appeal and held that Faridabad had jurisdiction.
7. 10 December 2019The Supreme Court allowed the appeals: New Delhi is the seat and its courts have exclusive jurisdiction.

Tribunal, counsel and experts

Decided by

• R.F. Nariman Judge, Supreme Court of India
• Aniruddha Bose Judge, Supreme Court of India
• V. Ramasubramanian Judge, Supreme Court of India

For the claimant

Abhishek Manu Singhvi · Arunabh Chowdhury · Ankit Chaturvedi

For the respondent

Maninder Acharya

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Keywords

• seat of arbitration
• venue
• exclusive jurisdiction
• Section 34 set-aside
• Section 37 appeal
• Commercial Courts Act 2015
• Shashoua principle
• BALCO
• Hardy Exploration
• Indus Mobile
• Section 42
• Section 20 Arbitration and Conciliation Act
• New York Convention Article V(1)(e)
• hydroelectric project
• Subansiri
• NHPC
• return of plaint Order VII Rule 10

Summary generated with AI from the published documents — refer to the award for the authoritative text.