Where No Seat Is Specified In Arbitration Agreement, Jurisdiction Of Court Shall Be Determined In Accordance With Section 16 To 20 Of CPC: Delhi High Court

The bench held that:

“….no confusion and law is explicit that for the purpose of Arbitration, even if no part of cause of action has arisen in a place, then too, the parties can agree on a seat of jurisdiction, which would then become the place for all litigation under the Arbitration Act. However, if the parties do not specify any seat/place of Arbitration, them the jurisdiction of the Court shall be determined in a accordance with Section 16 to Section 20 of C.P.C.”

Brief Facts:

The Petitioner, engaged in the business of internal development works for various establishments, was approached by the Respondent, who was constructing a multi-storied hotel in Guna, Madhya Pradesh, to carry out internal development works for the said hotel. A meeting between the parties in Delhi led to the signing of an MEP Contract. On 03.07.2021, a conflict arose when the Respondent allegedly manhandled the Petitioner's workforce at the project site and expelled them. Subsequently, the Respondent invoked the Arbitration Clause contained in the Contract, to which the Petitioner responded and demanded payment of the outstanding amount. However, the Respondent neither paid the amount nor responded to the Petitioner's reply. Thereafter, the Petitioner approached the Delhi High Court (“High Court”) for an appointment of arbitrator.

In response, the Respondent raised two objections. Firstly, it argued that the petition failed to disclose any cause of action. Secondly, it contended that the High Court lacked territorial jurisdiction to entertain the petition since no part of the cause of action arose in Delhi. The Respondent argued that the entire cause of action arose in Madhya Pradesh and that no venue or seat of Arbitration was agreed upon in the Contract.

In the rejoinder, the Petitioner argued that the stamp paper for the MEP Contract was purchased in Gurgaon, Haryana, and the contract was signed there as well. Additionally, the Petitioner mentioned that a Transfer Petition was filed and allowed by the Supreme Court which transferred the investigation of an FIR registered against her in Madhya Pradesh to the SIT, Delhi Police. The Petitioner maintained that despite the earlier Petition filed before the Gwalior Bench of the Madhya Pradesh High Court, the jurisdiction lay exclusively in Delhi.

Observations by the High Court:

The High Court noted that Clause 3 of the MEP Contract mandated arbitration for any disputes arising between the parties, with the arbitrator to be mutually agreed upon by the parties. Notably, this clause did not specify any seat or venue for conducting the arbitration. The Plaintiff referred to a clause of the MEP Contract, stating that "all disputes are subject to Delhi jurisdiction only." However, the High Court found this to be a general jurisdictional clause, which does not specify a seat or venue for arbitration. The High Court held that the general jurisdictional clause cannot be interpreted to define the seat or venue for arbitration.

The High Court referred to the Supreme Court decision in M/s Ravi Ranjan Developers Pvt. Ltd. vs. Aditya Kumar Chatterjee where SC clarified that while the definition of the "Court" under Section 2(1)(e) of the Arbitration Act may not strictly apply to the appointment of arbitrators under Section 11(6) of the Arbitration Act, the application under Section 11(6) cannot be filed in any High Court regardless of its territorial jurisdiction. Therefore, Section 11(6) must be read harmoniously with Section 2(1)(e), implying that the High Court with superintendence or supervisory jurisdiction over the relevant lower court would have the authority to entertain the application.

The High Court further elaborated that the territorial jurisdiction for civil suits is determined by Sections 16 to 20 of the Code of Civil Procedure (CPC). This means that the court within whose territorial limits the defendant resides, carries on business, or where the cause of action arose, would have the jurisdiction to entertain the suit. When it comes to an application under Section 11 of the Act, if there is no agreement on the seat of arbitration, the High Court held that the jurisdiction must be determined based on Sections 16 to 20 CPC.

The High Court referred to Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited and Ors. where the Supreme Court held that if parties designate a seat of arbitration, it serves as an exclusive jurisdiction clause, meaning only courts in that location have jurisdiction over arbitration proceedings. Additionally, in Union of India vs. Hardy Exploration and Production (India) Inc., the Supreme Court distinguished between "sittings" at various places, which relate to the venue, and the "seat of arbitration," which is critical in determining the court's supervisory jurisdiction over the arbitration process.

Furthermore, the Supreme Court in Mankastu Impex Private Limited vs. Airvisual Limited emphasized that the seat of arbitration is vital as it determines the applicable law and procedural rules and not merely the location of hearings.

The High Court held that the Petitioner's claim that part of the cause of action arose in Gurgaon due to the purchase of a stamp paper and the signing of the agreement was insufficient to establish jurisdiction in Delhi. It noted that the contract was executed in Madhya Pradesh for work to be carried out in that state, and the Respondent conducted business in Madhya Pradesh. Therefore, it held that only the courts in Madhya Pradesh have jurisdiction over the dispute.

Consequently, the High Court dismissed the petition.

Case Title: M/S Kings Chariot Vs Mr. Tarun Wadhwa

Citation: 2024 LiveLaw (Del) 678

Case Number: ARB.P. 421/2024

Advocate for the Petitioner: Ms. Avsi Malik, Mr. Abhinav Sharma, Mr. Naveen Gaur & Mr. Deepak Jain.

Advocate for the Respondent: Mr. Sanyyam Maheshwari & Mr. Bharat Khurana.

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