Accrual Of Cause Of Action At A Place Is Not A Consideration For Determining Jurisdiction For The Purpose Of Section 11 Of A&C Act: Delhi High Court

The bench of Justice Manoj Kumar Ohri reiterated that the place of arbitration would be the seat of arbitration when there is no contrary indicia present in the agreement to show that the place of arbitration was not intended to be the seat of arbitration. It held that designation of the seat of arbitration amounts to conferment of exclusive jurisdiction on the Courts at the seat of arbitration to decide all the application in connection with the arbitral agreement and the place where the cause of action arose would not be relevant when some other place has been designated as the seat of arbitration.

Facts

The respondent issued a letter of intent (LOI) (Agreement) dated 19.03.2021 in favour of the petitioner in relation to certain civil and structure works. The agreement contained an arbitration clause and Faridabad was designated as the ‘place of arbitration’.

A dispute arose between the parties in relation to the work executed by the petitioner under the agreement. The petitioner issued a legal notice dated 07.04.2023, demanding the payment against the final bill. In response to this letter, the respondent issued a reply informing the petitioner about the appointment of the sole arbitrator by it. However, in rejoinder notice, the petitioner objected to the appointment of the sole arbitrator by the respondent and ultimately filed an application under Section 11 of the A&C Act for the appointment of the arbitrator.

Objections

The respondent objected to the maintainability of the petition on the following grounds:

• In terms of Clause 31.16 of the agreement, Faridabad has been decided as the place of arbitration which is akin to designation of the seat of arbitration as there is no contrary indicia, in absent of which, the place is essentially the seat of arbitration.
• The High Court of Delhi lacks territorial jurisdiction as only the Punjab and Haryana High Court can appoint the arbitrator in view of Clause 31 of the agreement.
• The agreement was singed and executed in Faridabad, additionally, the project is also located in Faridabad.

The petitioner made the following submissions in favour of the territorial jurisdiction of the Court:

• That the agreement was signed and executed in New Delhi, therefore, a part of the cause of action has arisen in New Delhi. Moreover, the arbitrator appointed by the respondent is based in New Delhi and the preliminary hearing before him also took place in New Delhi only, therefore, the High Court at New Delhi has the jurisdiction to decide the dispute based on the principle of cause of action.
• Mere designation of place of arbitration does not mean that the place would be the seat of arbitration.

Analysis by the Court

The Court observed that Clause 31.16 of the agreement provides that Faridabad shall be the place of arbitration. It observed that there is no other contrary indicia in the agreement which would prevent the place from becoming the seat of arbitration.

The Court reiterated that the place of arbitration would be the seat of arbitration when there is no contrary indicia present in the agreement to show that the place of arbitration was not intended to be the seat of arbitration. It held that designation of the seat of arbitration amounts to conferment of exclusive jurisdiction on the Courts at the seat of arbitration to decide all the application in connection with the arbitral agreement and the place where the cause of action arose would not be relevant when some other place has been designated as the seat of arbitration.

The Court held that the accrual of cause of action at a place for pursuing a substantive legal action is not a consideration for determining jurisdiction for the purposes of Section 11 of the A&C Act.

Accordingly, the Court held that it does not have the territorial jurisdiction to entertain the petition for the appointment of the arbitrator. The Court granted liberty to the parties to approach the appropriate court.

Case Title: GR Builders v. Metro Speciality Hospitals Pvt Ltd

Citation: 2023 LiveLaw (Del) 911

Date: 26.09.2023

Counsel for the Petitioner: Ms. Amrit Kaur Oberoi, Ms. Pallavi Maurya and Mr. Aditya Kumar Hire, Advocates.

Counsel for the Respondent: Ms. Malviya Trivedi, Sr. Advocate with Mr. Deepak Gera, Mr. Sumit Kumar Dubey, Mr. Satender Adhana, Mr. Aditya Jai, Mr. Suchakshu Jain, Ms. Sujal Gupta and Mr. Nipun Katyal, Advocates.

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