Rules Of Arbitral Institution Do Not Determine The Place Of Arbitration: Delhi High Court

Facts

The parties entered into a Concession Agreement for the "Implementation of Regional Integrated Solid Waste Management Project for 16 Urban Local Bodies".

Disputes arose between the parties in relation to the said agreement and the respondent terminated the agreement and also enchased the bank guarantee issued by the petitioner. Consequently, the petitioner issued the notice invoking arbitration to the respondent and asked the respondent to appoint its nominee arbitrator.

The petitioner filed a Section 11 application for the appointment of a nominee arbitrator on behalf of the respondent on the ground that it has failed to make an appointment within the specified period of 30 days.

Contention Of The Parties

The respondent disputed the maintainability of the petition on the ground that as per the agreement between the parties, the place of arbitration is Gwalior and only the Courts at Gwalior have the jurisdiction to entertain any dispute arising out of the arbitration agreement.

The petitioner sought to counter the contention of the respondent on the ground that the parties have agreed that the arbitration shall be conducted under the Rules of International Centre for Alternative Dispute Resolution (ICADR) New Delhi, therefore, the Courts in New Delhi have been conferred with the jurisdiction to entertain applications arising out of the arbitration agreement.

Observation Of The Court

The Court observed that when the parties have expressly agreed on a place of arbitration, it shall be construed that only the Court at that place will have the jurisdiction to deal with matters arising out of the arbitration agreement and the rules of the arbitral institution are subservient to the arbitration agreement.

The Court referred to Article 11.2 of the Concession Agreement to hold that the parties have expressly agreed to have Gwalior as the place of arbitration. It also referred to Article 16.4 of the Concession Agreement to hold that the parties have conferred jurisdiction on the Courts at Gwalior, therefore, the High Court of Delhi does not have the territorial jurisdiction to appoint the arbitrator.

The Court noted that Rule 17 of ICADR provides that the place of arbitration shall be New Delhi or any other Regional Office of ICADR as the parties may agree, therefore, the same is subject to the arbitration agreement. The Court observed as under:

"Rule 17 of the ICADR Rules indicates that the place of arbitration would be New Delhi or such other place where the regional office of ICADR is situated as the parties may agree. However, the proviso further makes it clear that failing any such agreement, the place of arbitration shall be determined by the Arbitral Tribunal. Clearly, there is no agreement that the place of arbitration shall be New Delhi or any other place where the regional office of ICADR is located. Therefore, it would be for the Arbitral Tribunal to determine the place of arbitration. As noticed above, Article 11.2(b) of the Concession Agreement clearly indicates that the place of arbitration is required to be in Gwalior."

The Court also referred to its judgment in S.P. Singla Construction Pvt. Ltd. v. Construction & Design Services, 2021 SCC OnLine Del 4454 in that case a similar issue was considered and a similar finding was rendered. The Court further held that rules of arbitral institutions are only procedural and comes into play after the commencement of the arbitration.

Consequently, the Court dismissed the petition with the liberty to approach the appropriate Court.

Case Title: Ecogreen Energy Gwalior Pvt. Ltd. v. Commissioner of Municipal Corporation, Gwalior., Arb.P. 1120/2021.

Citation: 2022 LiveLaw (Del) 297

Date: 16/03/2022

Counsel for the petitioner: Mr Kapil Sankhla, Mrs Meghna Sankhla, Mr Wishwa Pratap and Mr Devesh Matta, Advocates.

Counsel for the Respondent: Mr Harish Dixit and Mr Sarthak Chiller, Advocates.

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