Since Seat Is Fixed, Only Court Having Territorial Jurisdiction Over Seat Has Jurisdiction Over Arbitral Proceedings: Delhi High Court

Facts:

A dispute arose between the parties in a Dealership Agreement, and subsequently, they were referred to arbitration by an order of the Indore Bench of the High Court of Madhya Pradesh dated 13th May 2020. Clause 32 of the Agreement dealt with dispute resolution and granted exclusive jurisdiction in all matters arising from the agreement to the Courts of Indore. The said clause also designated the seat of the arbitration exclusively at Delhi. At the Section 11 stage, the petitioner raised the issue of the High Court of Madhya Pradesh not having jurisdiction over arbitral proceedings. The same was rejected by observing that the parties have conferred exclusive jurisdiction to the Courts in Indore and designated Delhi as the venue of the arbitration. The parties did not confer any power to the Courts in Delhi to adjudicate the arbitral proceedings.

In the Section 34 petition filed before the High Court of Delhi, the issue arose for consideration as to which court would exercise supervisory jurisdiction over the arbitral proceedings.

Submissions by the Parties:

The respondent made the following submission:

1. That by the order of the High Court of Madhya Pradesh has examined the aspect of territorial jurisdiction. Thereafter, the court rejected the petitioner's arguments that the arbitration seat being Delhi, the Court of Delhi would have jurisdiction over the arbitral proceedings. The petitioner challenged the impugned judgment before the Supreme Court, and the SLP was dismissed by an order dated 5th August 2020.
2. Once the High Court of Madhya Pradesh has exercised its jurisdiction at the stage of Section 11, and the Supreme Court upheld the same, the present Section 34 petition has to be filed before the same High Court.
3. That the ratio of BGS SGS Soma JV and BBR (India) Pvt Ltd v. S P Singla Constructions Pvt Ltd, which held that the court which exercises supervisory jurisdiction over the arbitral seat would be determined by the seat of the arbitration, were in existence at the time of pronouncement of the judgement of the High Court of Madhya Pradesh. Therefore, according to the current position of law, the High Court of Madhya Pradesh did possess the jurisdiction to decide the matter.
4. That even by applying the principle of res judicata, the petitioner cannot contest, in the present petition, that the High Court of Delhi has the jurisdiction to adjudicate the matter.

Analysis of the Court:

The Bench held that the decision of the High Court of Madhya Pradesh cannot be treated as laying down the correct position of law. The High Court proceeded on an erroneous premise that the arbitration agreement had fixed the venue or place of sitting at Delhi when, in reality, the agreement had fixed the seat of the arbitration at Delhi. The Supreme Court in BGS SGS Soma JV has laid down the law relating to which court would have the curial territorial jurisdiction over arbitral proceedings. The court distinguished between sub-sections (1) and (2) and sub-section (3) of Section 20 in the context of the seat and venue of the arbitration. The court also considered the decision rendered in BCC Developers & Promoters Pvt Ltd v. UOI, where the court cited BBR (India). The position of law emerging from BBR (India), which relies upon BGS SGS Soma JV, is clear. Sub-sections (1) and (2) of Section 20 refer to the "seat" of the arbitration, and sub-section (3) refers to the venue of the arbitration.

Clause 32 of the agreement fixed Delhi as the seat of the arbitration. When the seat of arbitration is fixed by the contract, the courts at Indore would not have the curial jurisdiction over the arbitral proceedings. The courts that have territorial jurisdiction over the seat of arbitration are the courts that can exercise supervisory jurisdiction over the arbitral proceedings, including jurisdiction under Section 34 of the Arbitration Act.

The Bench further held that a mere dismissal in limine of the SLP filed against the decision of the High Court of Madhya Pradesh does not amount to an approval of the decision. The Supreme Court did not lend its approval to the correctness of the decision of the High Court under challenge, nor does the decision merge with the order passed by the Supreme Court. Therefore, the said dismissal of the SLP cannot restrict the petitioner from approaching the High Court of Delhi on the principle of res judicata.

On the touchstone of Section 42, the law laid down in BGS SGS Soma JV regarding this is clear. If the court first approached does not have jurisdiction to deal with the arbitral proceedings, Section 42 cannot apply to confer that court the jurisdiction to deal with matters arising out of the said proceedings. Applicability of Section 42 is restricted to the courts initially approached having the jurisdiction.

The aspect of BGS SGS Soma JV and BBR (India) altering the position of law, the court held that these judgments do not offer any clarificatory caveat regarding the overruling of earlier view as that in BALCO. By virtue of Article 141 of the Constitution, the decisions rendered by the Supreme Court become the law. Therefore, it cannot be said that BGS SGS Soma JV and BBR (India) altered the position of law regarding.

In light of the BGS SGS Soma JV and BBR (India) rulings, the order passed by the High Court of Madhya Pradesh cannot be passed within the lawful exercise of jurisdiction. Therefore, the petitioner cannot be denied the jurisdiction of the High Court of Delhi based on the impugned order passed by the High Court of Madhya Pradesh. The seat of the arbitration, being fixed at Delhi, clocks curial and supervisory jurisdiction over the arbitration proceedings only on the court at Delhi.

Case Title: Grand Motors Sale And Services Pvt Ltd v. VE Commercial Vehicles Ltd

Citation: 2024 LiveLaw (Del) 1037

Case Number: O.M.P. (COMM) 248/2023, I.A. 12798/2023 & I.A.12801/2023

Counsel for the Petitioner: Mr. Kuriakose Varghese, Mr. V. Shyamohan, Mr. Abir Phukan and Mr. Akshat Gogna, Advocates.

Counsel for the Respondent: Ms. Gunjan Sinha Jain, Ms. Mann Bajaj and Ms. Aparna Gupta, Advocates.

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