Designation Of Venue Of Arbitration Tantamount To Seat Of Arbitration In Absence Of A Significant Contrary Indicia: Delhi High Court Reiterates
The High Court of Delhi has held that the venue of arbitration would actually be the seat of arbitration when the agreement does not contain any contrary indicia. It held that clause proving for venue of arbitration would have a superseding effect over a clause providing for exclusive jurisdiction on any other Court if the parties have expressly made the latter subject to the...
The High Court of Delhi has held that the venue of arbitration would actually be the seat of arbitration when the agreement does not contain any contrary indicia. It held that clause proving for venue of arbitration would have a superseding effect over a clause providing for exclusive jurisdiction on any other Court if the parties have expressly made the latter subject to the former.
The bench of Justice Yogesh Khanna held that if the agreement contains a venue clause as well as an exclusive jurisdiction clause, however, the clause providing for exclusive jurisdiction is made subject to the venue clause, then reference to courts of exclusive jurisdiction is reduced to the adjudication of disputes other than those covered by the arbitration/venue clause.
The Court also held that accrual of cause of action howsoever trivial or significant, would not be relevant for determining the jurisdiction of the Court when the agreement provides a specific seat of arbitration.
Facts
Parties entered into a shareholders agreement dated 15.10.2020. Clause 17.1 of the agreement designated ‘Mumbai’ as the venue of arbitration. Further, clause 23.1 provided that the Courts at Mumbai or New Delhi shall have the jurisdiction over the subject matter of the agreement, however, this clause was made subject to Clause 17 of the agreement.
A dispute arose between the parties. Accordingly, the petitioner filed a section 9 application before the High Court of Delhi seeking certain interim reliefs. The respondent objected to the maintainability of the petition on the ground of lack of territorial jurisdiction of the Courts.
Contention of the Parties
The respondent objected to the territorial jurisdiction of the Court on the following grounds:
- Clause 17.1 designates Mumbai as the venue of arbitration which is akin to designation of the seat of arbitration, therefore, only the Courts in Mumbai would have the territorial jurisdiction.
- Clause 23 is not to be considered as a contrary indicia as the parties have expressly made it subject to Clause 17, therefore, the designation of venue under Clause 17 would have an overriding effect over the jurisdiction conferred on the Courts in New Delhi by Clause 23.
- The Supreme Court in BGS SOMA has held that the venue is to be considered as the seat of arbitration when the agreement does not contain anything which indicates to the contrary.
The petitioner made the following counter-arguments:
- The board meetings were held at New Delhi, therefore, the Court would have the jurisdiction as per Section 20(c) of CPC.
- Clause 23 expressly provides that the Courts at New Delhi or Mumbai shall have the jurisdiction over the subject matter of the agreement which clearly indicates that the parties only intended to make Mumbai as only the venue/place and not the seat of arbitration.
- Mere designation of venue of arbitration would not be considered as the seat of arbitration as both the terms have different implications.
Analysis by the Court
The Court observed that Clause 17.1 of the agreement designated ‘Mumbai’ as the venue of arbitration. Further, clause 23.1 provided that the Courts at Mumbai or New Delhi shall have the jurisdiction over the subject matter of the agreement, however, this clause was made subject to Clause 17 of the agreement.
The Court held that when Clause 23 has expressly been made subject to Clause 17, anything contained therein cannot be understood as overriding anything provided under Clause 17, therefore, it cannot be considered to be a contrary indicia.
The Court held that the venue of arbitration would actually be the seat of arbitration when the agreement does not contain any contrary indicia. It held that clause proving for venue of arbitration would have a superseding effect over a clause providing for exclusive jurisdiction on any other Court if the parties have expressly made the latter subject to the former.
The Court held that if the agreement contains a venue clause as well as an exclusive jurisdiction clause, however, the clause providing for exclusive jurisdiction is made subject to the venue clause, then reference to courts of exclusive jurisdiction is reduced to the adjudication of disputes other than those covered by the arbitration/venue clause.
The Court also held that accrual of cause of action howsoever trivial or significant, would not be relevant for determining the jurisdiction of the Court when the agreement provides a specific seat of arbitration.
Accordingly, the Court held that only the Courts at Mumbai would have the jurisdiction to hear the petition. It dismissed the petition for want to territorial jurisdiction.
Case Title: Vasudev Garg v. Embassay Commercial Project
Citation: 2023 LiveLaw (Del) 1049
Date: 31.10.2023
Counsel for the Petitioner: Dr.Abhishek Manu Singhvi, Mr.Rajshekhar Rao, Mr.Sunil Dalal, Senior Advocates with Mr.Manohar Malik, Mr.Deepak Biswas, Mr.Neeraj Matta, Mr.Devashish Bhadauria, Ms.Manisha Saroha, Mr.Navish Bhati, Ms.Astha Gumber, Mr.Nikhil Beniwal, Mr.Harshit Gupta, Advocates.
Counsel for the Respondent: Mr.Sanjay Jain, Senior Advocate with Mr.Gyanendra Kumar, Ms.Shreya Som, Ms.Shree Sinha, Mr.Shivam Tiwari and Ms.Harshita Sukhija, Advocates for R-1. Mr.Rajiv Nayar, Senior Advocate with Mr.Mahesh Aggarwal,Mr.Rishi Aggarwala, Mr.Ankit Banati Mr.Prabhav Bahuguna, Mr.Vikram Choudhary, Ms.Tarini Khurana, Advocates for R2 to R5. Mr.Tejas Karia and Ms.Devika Bansal, Ms.Shruti Sabharwal, Advocates for R-6. Mr.Jyoti Chaudhary and Mr.Sumit Malhotra, Advocates for R-7.