Exclusive Jurisdiction Clause Prevails Over Seat Of Arbitration Clause If It Expressly Covers Proceedings Relating To Arbitration: Delhi HC

The Delhi High Court bench of Justice C. Hari Shankar has observed that generally if an agreement contains both exclusive jurisdiction clause and seat of arbitration clause, then judicial proceedings relating to arbitration would lie only before the court having territorial jurisdiction over the arbitral seat/venue. However, as in the instant case, if the exclusive jurisdiction clause also covers proceedings relating to arbitration then it would prevail over the seat of arbitration clause.

Background Facts

Precitech Enclosure Systems Pvt. Ltd. (“Petitioner”) and Rudrapur Precision Industries (“Respondent”) entered into a Rent Agreement dated July 15, 2017 whereunder the Respondent held itself out to be the landlord of a piece of industrial land situated in Pant Nagar, Uttarakhand. Clause 20 of the Rent Agreement provided for resolution of disputes stating that the court at Rudrapur, Uttarakhand shall have exclusive jurisdiction to determine any dispute between the parties including any application made under the Arbitration and Conciliation Act, 1996.

Till March, 2021, the Petitioner was regularly paying rent to the Respondent in accordance with the Rent Agreement. However, the Covid-19 pandemic and later disputes among its directors resulted in freezing of the bank account of the Petitioner in March, 2021 and it was unable to pay the rent. On March 3, 2021, both the parties entered into a compromise deed whereby, the total rent for the premises was settled at 27,75,547. However, on 15 May, 2021, the Respondent withdrew his consent to the compromise deed and threatened to take forcible possession of the belongings of the Petitioner.

The Respondent also unilaterally appointed an arbitrator to which the Petitioner objected. However, the sole arbitrator issued notice to the parties. The Petitioner filed objections before the arbitrator objecting to his appointment as being unilateral and without the Petitioner's consent. When the arbitrator disregarded the Petitioner's objections, the Petitioner moved this Court by means of OMP(T)(Comm) 25/2023 for termination of the mandate of the arbitrator and appointment of another arbitrator.

The Petitioner alleged that meanwhile, the Respondent took forcible possession of the disputed premises as a result of which the Petitioner was unable to obtain access to its machinery and goods. Resultantly, the Petitioner preferred the present petition before this Court under Section 9, Arbitration and Conciliation Act, 1996 praying that the Respondent be restrained from alienating or creating third party interest in its possessions and be directed to hand over the possession of the machinery and equipment to the Petitioner.

Contentions

The Counsel for the Respondent submitted that in view of Clause 20 of the Rent Agreement, the courts at Rudrapur alone would have jurisdiction to entertain the present petition.

Responding to this submission, the Counsel for the Petitioner submitted that the Respondent itself by an email in follow up to an email dates 4 April, 2022 agreed to Delhi being the arbitral venue and therefore the arbitral seat and in its wake also acquiesced to the jurisdiction of this Court. Further, it was submitted that Section 42 of the Arbitration and Conciliation Act obligates the Petitioner to file the present Section 9 petition before this Court once this Court has already entertained OMP (T) (Comm) 25/2023 and passed orders thereon.

The Counsel for the Respondent submitted that the email dated April 4, 2022 merely referred to the geographical venue of the arbitration and did not consent to Delhi being regarded as the arbitral seat or in any manner override the exclusive jurisdiction clause contained in the Rent Agreement.

Observations

The Court began its analysis by discussing the well settled principles regarding the general law applicable to the court having territorial jurisdiction to deal with proceedings relating to or arising out of arbitration. Drawing from a plethora of precedents, the Court observed that

“if the agreement contains one clause designating the arbitral seat/arbitral venue, and another conferring exclusive jurisdiction on courts located elsewhere over the agreement and disputes that arise out of it, legal or judicial proceedings relating to arbitration would lie only before the Court having territorial jurisdiction over the arbitral seat/arbitral venue.”

However, the Court noted that the situation at hand was different from the general position of law discussed above. In the instant case, the exclusive jurisdiction clause also covered proceedings relating to arbitration. The Court placed reliance on its previous decisions in Cars24 Services (P) Ltd. v. Cyber Approach Workspace LLP 2020 SCC OnLine Del 1720 and Hunch Circle Private Limited v. Futuretimes Technology India Pvt. Ltd. 2022 SCC OnLine Del 361, wherein similar to the present case, the exclusive jurisdiction clause also covered proceedings relating to arbitration.

The Court observed that where the agreement between the parties had contractually conferred jurisdiction for appointment of the arbitrator on competent courts in a particular territorial jurisdiction by exclusive jurisdiction clause, such court and no other would have the jurisdiction to entertain a Section 11 application. Thus, where an exclusive jurisdiction clause covered and included applications relating to the arbitral proceedings it would predominate over the seat of arbitration clause.

Applying the law to the facts of the case, the Court observed that Clause 20 of the Rent Agreement was not a mere omnibus exclusive clause. It specifically vested jurisdiction with courts at Rudrapur in respect of “any application to be made under the Arbitration and Conciliation Act, 1996” which would include the present petition under Section 9 of the Arbitration and Conciliation Act, 1996. Thus, the exclusive jurisdiction clause would prevail even if there would have been any separate clause in the Rent Agreement fixing the seat of arbitration outside Rudrapur, Uttarakhand.

As far as the Petitioner's reliance on Section 42 is concerned, the Court noted that the said provision would not come to its aid. While it was true, that Section 42 required that every subsequent application must be preferred before the court which was first approached in connection with the arbitration, however this would be dependent on the premise that the first court had jurisdiction. As analysed above, this Court would be coram non judice.

Thus, the Court concluded that the objection of the Respondent sustains and OMP (I) (Comm) 305/2023, consequently, stood dismissed for want of territorial jurisdiction.

Case Title: Precitech Enclosures Systems Pvt. Ltd. v. Rudrapur Precision Industries

Case Number: O.M.P.(I) (COMM.) 305/2023

Appearance:

For Petitioner – Mr. L.B. Rai, Mr. Krishan Kumar Arora, Mr. Shivam Bedi, Advs.

For Respondent- Mr. Avdhesh Chaudhary and Ms. Geetanjali Setia, Advs. for R-1 and 2 Mr. Zaryab Jamal Rizvi, Ms. Firdouse Qutb Wani, Advocates for R-3 and 4

Date: 17.03.2025

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