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23. In the case of Union of India Vs. Hardy Exploration and Production (India) Inc.9, the parties entered into a production sharing contract containing an arbitration clause, which provided that the "venue of conciliation or arbitration proceedings....unless the parties otherwise agree, shall be Kuala Lumpur..." and that "arbitration proceedings shall be conducted in accordance with the UNCITRAL Model Law on International Commercial Arbitration of 1985...."

Union of India challenged the arbitral award rendered in the arbitration proceedings under Section 34 of the Act before the Delhi High Court on the ground that the arbitration clause did not satisfy the seat of arbitration, but only specifed the venue of arbitration as 'Kuala Lumpur' and, hence, New Delhi was the 'seat' of arbitration.

The above claim was contested by Hardy Exploration and in the background facts, the Apex Court held that the choice of Kuala Lumpur as a 'venue' did not mean that Kuala 9 (2019) 13 SCC 472 M.M.Salgaonkar 18/42 CARAP-82-22 J.odt Lumpur was the 'seat' of arbitration. It was held that the mere choice of venue could not by itself be construed as choice of the seat of arbitration; instead, venue could become the seat, if someting else is added to it as a concomitant, though the Apex Court did not deem it appropriate to identify as to what would be the additional factors, which would be considered by it to determine, whether the choice of venue is to be treated as choice of seat.

19. When the parties have agreed to have the "venue" of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction under Section 11(6) of the Act. Since only Orissa High Court will have the jurisdiction to entertain the petition fled under Section 11(6) of the Act, the impugned order is liable to be set aside."

26. In this case, the Hon'ble Supreme Court deviated from the decision in Hardy Exploration (supra) holding that the parties' choice of the "venue of arbitration" is really that of the "seat of arbitration", though the Apex Court did not consider it M.M.Salgaonkar 21/42 CARAP-82-22 J.odt necessary to examine whether there existed any circumstances, justifying designation of venue as designation of seat.

27. Thereafter, the Apex Court was once again confronted with a similar issue in BGS SGS Soma JV (supra) , wherein the arbitration agreement specifed that, "the arbitration proceedings shall be held at New Delhi/Faridabad". It is this decision, in which the Apex Court declared it's earlier decision in Hardy Exploration (supra) to be per incuriam, since it did not follow the decision of the Five-Judge Bench in BALCO (supra), which approved the "shashoua principle".