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Any arbitration proceeding involves two major concepts: the "seat" and the "venue." The venue refers to where in physical space an arbitration is held, while the seat concerns what jurisdiction's laws apply.

The seat of arbitration is the place where an arbitration will take place. The law or procedural law governing that particular jurisdiction, as well as which court(s) will supervise and enforce it, applies to arbitrations seated there. For international arbitrations, the location of the arbitration—its "seat"—is an important factor in determining what law will be applied to a dispute and which courts will have supervisory jurisdiction over it.

While arbitration may take place at a specific location, the "venue" of that arbitration refers only to its location and does not affect any law or jurisdiction.

Under both the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996 ("Act"), no definitions have been provided for 'seat' or 'venue.' Section 20 of the latter Act defines "place of arbitration," which applies interchangeably to either term.

The Law Commission recommended that independent definitions be ascribed to the terms seat and venue in an amendment proposed in 2015, but such suggestions did not become part of the legislation.

Judges have settled the law through various judicial pronouncements on this subject, though their rulings sometimes conflict.

The jurisdiction of a court is determined by reference to the parameters set out in Sections 16–20 of the Code of Civil Procedure, 1908 ("CPC").

According to Section 20 of the Civil Procedure Code, a court can assume jurisdiction over a dispute if any of the following is true: (1) The defendant lives or has his business within that court's territorial limits; (2) at least part of the cause for action arose in those same territorial limits.

When courts have concurrent jurisdiction over a dispute, different courts may hear the same case. To avoid conflicts related to jurisdictions of courts, parties often select a particular court as the sole deciding body for disputes.

However, the parties that choose to litigate in a court cannot change or confer jurisdiction upon a court which does not have it. This legal position has been conclusively settled by the Supreme Court in A.B.C. Laminart Pvt. Ltd. & Anr. v A.P. Agencies, Salem.

Unlike a court proceeding, arbitration can take place in any venue. Arbitration proceedings may be held at neutral sites where there is no traditional jurisdiction to hear disputes. Any court that has jurisdiction to enforce an arbitration decision could also enforce the Act, which gives it authority.

BALCO –

The distinction between the concepts of "seat" and "venue" in arbitration was first done in the case of Bharat Aluminium Company (BALCO) v Kaiser Aluminium Technical Service Inc.. The Supreme Court examined the concepts of "seat" and "venue" in detail and concluded that they are distinct.

The Court clarified that, although arbitration proceedings may take place anywhere in the world, the "seat" of those proceedings is located at a specific arbitral institution—such as an international commercial court or another tribunal with similar authority—whereas the "venue" where these meetings are held refers to any geographical area within which parties can freely negotiate or litigate. The Court also made it clear that the words "Place of arbitration" have been used interchangeably.

Although the concepts of "seat" and "venue" are distinct and independent, poorly drafted arbitration agreements often fail to demonstrate where an actual hearing will be held.

Due to poorly framed arbitration clauses, courts have developed various principles in order to untangle the web and find where a case should be heard.

In its decision in the case of BALCO, the Supreme Court relied on a famous English legal principle propounded by Justice Cooke - The Shashoua principle which states that when an agreement expressly designates the venue without any express reference to seat, combined with a supranational body of laws the inexorable conclusion is that the venue is actually the seat.

BGS-SGS-Soma-JV 

The Supreme Court ruled that when a clause designates an arbitration venue and specifies that it will be held at such a place, the designation indicates where the arbitration actually takes place and the law that governs it, that is, the venue is also the seat. 

It is unnecessary to say more about this controversy, because it should be settled by a larger bench of the Supreme Court Justices.

The seat of arbitration is more important than the place where an arbitration takes place. If no agreement has been reached about this, a party could use this to delay or even end the arbitral process by trying to oust courts from having jurisdiction over that case.