Court's Jurisdiction U/S 11(6) Of A&C Act Is Decided Under CPC When No Seat Or Venue Is Specified In Arbitration Agreement: Delhi High Court

Brief Facts:

The parties entered into an Agreement dated 06.07.2022 (hereinafter, 'subject agreement') for construction work for Bishop's Residence Ground Floor Building for N.W.G.E.L Church,District Sundergarh (hereinafter, 'subject property') located in Odisha. Clause 9 of the subject agreement stipulates resolution of disputes through Arbitration.

Petitioner alleges breach of subject agreement by the respondent inasmuch as not only the respondent failed to complete the work within the stipulated time period, but also defaulted in making payments. The petitioner invoked arbitration by issuing notice dated 08.07.2024 under Section 21 of the Arbitration Act.

Contentions:

The Respondent submitted that the arbitration clause being silent as to the seat/venue of arbitration, the seat/place for arbitration ought to be in Rajgangpur and not Delhi.

It was further argued that when the arbitration clause does not stipulate any seat or venue of arbitration, the jurisdiction shall be decided in accordance with Section 2(1)(e) of the Arbitration Act read with Sections 16 to 20 of the CPC, that is to say that the Court within whose jurisdiction the respondent actually or voluntarily resides or carries on business, or where any part of cause of action has arisen, would essentially have the territorial jurisdiction to entertain the matter.

Per contra, the Petitioner submitted that part of cause of action has arisen in Delhi. Not only the petitioner's place of business is in Delhi, but also part payment was admittedly received by it in its bank account which is maintained with Delhi branch. Further, the bills and invoices towards the Works were raised from the petitioner's office in Delhi.

Observations:

The court observed that it is a settled position in law that when the arbitration agreement is silent on the aspect of 'seat', 'venue' or 'place' of arbitration, the determining factor will be where the cause of action arises as well as where the defendant/respondent actually or voluntarily resides or carries on their business.

It further added that in other words, Section 2(1)(e) of the Arbitration Act has to be read in light with Sections 16 to 20 of CPC to determine the territorial jurisdiction of the Court at the stage of considering referral to arbitration in a Section 11 Arbitration Act petition.

The Supreme Court in Ravi Ranjan Developers (P) Ltd. v. Aditya Kumar Chatterjee (2022) held that “at the same time, an application under Section 11(6) of the Arbitration Act for appointment of an Arbitrator/Arbitral Tribunal cannot be moved in any High Court in India, irrespective of its territorial jurisdiction. Section 11(6) of the A&C Act has to be harmoniously read with Section 2(1)(e) of the A&C Act and construed to mean, a High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the A&C Act.”

The court held that when the arbitration clause lacks clarity on the seat/venue, jurisdiction under section 11 of the Arbitration Act must be determined on the basis of sections 16 to 20 of the CPC. In such a case, two factors are important- where the respondent resides or conducts business and where the cause of action wholly or in part arises.

The court further observed that the cause of action consists of material and integral facts that establish rights, obligations and the right to sue. Insignificant facts do not form part of the cause of action and only those facts which have a direct nexus with lis between the parties are considered relevant.

Based on the above discussion, the court said that in the present case, the subject agreement was indisputably executed and notarized in Odisha. The construction work under the said agreement also took place in Odisha.

It further said that even the respondent's principal place of business is in Odisha. Considering the aforesaid, this Court is of the considered opinion that the material part of cause of action has arisen outside the territorial jurisdiction of this Court.

The court concluded that merely having a bank account in Delhi for the purposes of payment does not justify the accrual of cause of action. The substantial and integral cause of action lies in Odisha therefore making reliance on this singular fact highly misconceived.

Accordingly, the present petition was dismissed.

Case Title: FAITH CONSTRUCTIONS versus N.W.G.E.L CHURCH

Case Number:ARB.P. 1318/2024

Judgment Date: 20/03/2025

For Petitioner: Mr. Rajeev M. Roy, and Mr. P. Srinivasan, Advocates.

For Respondent: Ms. Susmita Mahala, Advocate.