Designation Of Venue Would Override A Generic ‘Exclusive Jurisdiction’ Clause: Delhi High Court

The bench of Justice Sachin Datta held that for an exclusive jurisdiction to override a venue clause, it must specifically provide that the Courts at a particular place have exclusive jurisdiction over the arbitral proceedings and a generic exclusive jurisdiction clause which does not refer to arbitration proceedings as such does not override the venue clause.

The Court reiterated that designation of seat of arbitration is a hallmark of party autonomy enshrined under the A&C Act, thus, it could also be a neutral place and need to be a place where the cause of action arose.

Facts

The respondent invited bids for Rural Electrification works in Pilibhit and Hardoi Districts, Uttar Pradesh under Government of India Scheme known as Rajiv Gandhi Gramin Vidyutikaran Yojana, vide tender issued on 02.04.2005. The petitioner submitted its proposals/bids for the said works on 10.05.2005 and 11.05.2005.

Clause 8 of the General Conditions of Contract (GCC) conferred exclusive jurisdiction on the Courts at New Delhi. Further, Clause 48 of GCC provided that New Delhi shall be the Venue of arbitration. However, the Letter of Award (LOA) dated 01.08.2005 issued in favour of the petitioner provided that the Courts at Lucknow shall have the exclusive jurisdiction in all matters arising out of the contract. Pertinently, the same Clause made LOA subject to GCC.

A dispute arose between the parties which led the petitioner to invoke the arbitration clause. Accordingly, a three-member tribunal was formed, however, its mandate stood terminated by mutual consent of the parties. Thereafter, the parties mutually appointed a sole arbitrator on 13.08.2018.

The 18 months period provided under Section 29A of the A&C Act expired before the arbitrator could deliver the award, consequently, the petitioner filed an application under Section 29A seeking extension of time to allow the arbitrator to complete the arbitral proceedings and deliver the award.

However, the respondent raised preliminary objection to the maintainability of the petition on the ground of lack of territorial jurisdiction.

Contention of the parties

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

• The Court lacks jurisdiction due to the seat of arbitration being in Lucknow, Uttar Pradesh. Cause of action and contract performance occurred exclusively within Uttar Pradesh.
• Consent cannot confer jurisdiction where none inherently exists."New Delhi" in the arbitration clause signifies a neutral venue, not the seat of arbitration.
• Clause 21.2 of the LOA designates "local court of Lucknow" with exclusive jurisdiction.
• LOA supersedes GCC's "Courts of Delhi" clause, establishing "local Courts at Lucknow."
• Sole Arbitrator's award time frame expired on 03.02.2019 (18 months from commencement), the present application filed on 06.03.2020 is significantly delayed.
• Amendments to Section 29A of Act are prospective, not retroactive, therefore, the benefit of the amended Section would not be made available to the Petitioner.

The petitioner made the following counter-arguments:

• The Court possesses territorial jurisdiction due to the arbitration's seat being in Delhi.
• Clause 21.3 of the LOA is "subjected to" the GCC; Clause 8 of GCC, conferring "Courts of Delhi" with exclusive jurisdiction, prevails over Clause 21.2.
• Harmonious reading of contract warrants construing "Supreme Court of Delhi" in Clause 21.2 as "High Court of Delhi" in alignment with GCC's Clause 8. Contra Proferentem principle resolves any ambiguity. Absence of seat of arbitration in LOA; Clause 48.1.2 of the GCC designates "New Delhi" as the seat/venue of arbitration.
• Arbitrator entered reference on 13.08.2018, initiating arbitral proceedings under Section 29A of the Act.
• Arbitral Tribunal's mandate, as per Section 29A (amended by Act No. 33 of 2019), expired on 13.02.2020. Respondent's argument on earlier Arbitral Tribunal's expiry on 03.02.2019 is unfounded, as a new Tribunal was constituted on 13.08.2018, with no objections till 27.01.2020.
• The learned Arbitrator, through an order dated 20.02.2020, validated the mandate's expiry on 20.02.2020, binding the respondent.

Analysis by the Court

The Court observed that Clause 8 of the General Conditions of Contract (GCC) conferred exclusive jurisdiction on the Courts at New Delhi. Further, Clause 48 of GCC provided that New Delhi shall be the Venue of arbitration. It held that the exclusive jurisdiction clause provided under Clause 21 of LOA is generic in nature as it does not specifically refer to arbitral proceedings.

The Court distinguished several other precedents wherein the exclusive jurisdiction clause was given primacy over the venue clause by holding that in those cases, the exclusive jurisdiction clause specifically referred to the arbitration proceedings as well.

It held that for an exclusive jurisdiction to override a venue clause, it must specifically provide that the Courts at a particular place have exclusive jurisdiction over the arbitral proceedings and a generic exclusive jurisdiction clause which does not refer to arbitration proceedings as such does not override the venue clause.

The Court reiterated that designation of seat of arbitration is a hallmark of party autonomy enshrined under the A&C Act, thus, it could also be a neutral place and need to be a place where the cause of action arose.

The Court also rejected the argument regarding the delay in approaching the court for extension of mandate. Accordingly, the Court extended the mandate by a period of one year.

Case Title: Reliance Infrastructure Limited v. Madhyanchal Vidhyut Vitran Nigam Limited, OMP (MISC) (COMM) 161 of 2020

Citation: 2023 LiveLaw (Del) 690

Counsel for the Petitioner: Mr. Nikhil Chawla, Mr. Hasan Murtaza and Mr. Aditya Panda

Counsel for the Respondent: Mr. Anurag Kishore and Ms. Ritika Srivastava

Click Here To Read/Download Order

Full View