Seat Of Arbitration Inferred By Contractual Clauses & Conduct Of Parties, Venue Is Considered Seat In Absence Of Other Indications: Delhi High Court

Brief Facts:

Axalta Coating Systems India Pvt. Ltd (“Petitioner”) filed an application under Section 11(5) of the Arbitration & Conciliation Act 1996 (“Arbitration Act”) in the Delhi High Court (“High Court”) for the appointment of a sole arbitrator to resolve disputes arising from a Supply Agreement with Madhuban Motors Pvt. Ltd. (“Respondent”).

The Petitioner relied on clause 12 of the Supply Agreement, which contained the arbitration agreement, specifying New Delhi as the venue for arbitration. Emphasizing the separate territorial jurisdiction provision in the same clause, the Petitioner contended that the disputes are subject to the jurisdiction of New Delhi courts.

On the other hand, Respondent argued that the High Court lacked territorial jurisdiction. It asserted that clause 12.3 designated a venue but remained silent on the seat of arbitration. According to the respondent, the absence of a designated seat meant the court where the cause of action arose should entertain the petition. Since the Supply Agreement was not signed or executed in Delhi, the Respondent argued that Mumbai, where these actions occurred, should have jurisdiction.

Clause 12 of the Supply Agreement is extracted below:

“12. Governing law, Jurisdiction and Dispute Resolution

12.1 This Agreement, its performance and any dispute or claim arising out of or in connection with it shall be governed by and construed in all respects in accordance with the laws of India.

12.2 All Disputes or claims arising out of or relating to this Agreement shall be subject to the exclusive jurisdiction of the courts at New Delhi, India to which the Parties irrevocably submit.

12.3 All disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of this Agreement or the breach thereof shall be settled amicably. If, however, the Parties are not able to resolve them amicably within a period of thirty days or any longer period as agreed upon by the Parties from the date of commencement of such negotiation the same would be resolved by arbitration. The dispute may be referred to the arbitration by either Party after issuance of thirty days' notice in writing to other, clearly mentioning the nature of the dispute/differences. Such arbitration shall be conducted by a Sole Arbitrator to be appointed by Parties hereto by mutual consent. The Arbitration and Conciliation Act, 1996 or any statutory modification thereof shall apply to the arbitration proceedings and the venue for the arbitration proceedings shall be New Delhi, India. All the arbitration proceedings shall be carried out in English language.”

Observations by the High Court:

The High Court referred to the decision of the Supreme Court in Ravi Ranjan Developers Pvt. Ltd. vs Aditya Kumar Chatterjee and noted that mere mention of a place in an arbitration clause does not inherently result in that place becoming the seat of arbitration. Secondly, parties, while having the discretion to refer disputes to a specific court to the exclusion of others, must do so in accordance with sections 11(6) and 20(1) of the Arbitration Act.

Further, the High Court held that in the absence of any other contrary indicia, the venue mentioned in an arbitration clause would be considered the seat of arbitral proceedings. It underscored the distinction between the place of arbitration and the seat of arbitration. Mere expression of "place of arbitration" does not automatically indicate the seat and the determination of the seat should be inferred from other clauses in the agreement and the conduct of the parties.

The High Court noted that the Ravi Ranjan Developers case did not contain clauses demonstrating the parties' intention, nor did it include an exclusive jurisdiction clause. This distinction was crucial as the present case involved clauses specifying both the venue and exclusive jurisdiction in New Delhi. It held that conjoint reading of clauses 12.2 and 12.3 revealed that parties intended to subject all disputes to the exclusive jurisdiction of the courts at New Delhi, designating New Delhi as not only the venue for some hearings but as the place for conducting the entire arbitration proceedings. Therefore, the High Court held that New Delhi was intended to be the seat of arbitral proceedings, supported by the language of the agreement and the absence of significant contrary indicia.

Consequently, the petition was allowed, and Mr Namit Suri was appointed as the sole arbitrator to adjudicate upon the disputes between the parties.

Case Title: M/S Axalta Coating Systems India Pvt. Ltd. Vs M/S Madhuban Motors Pvt. Ltd.

Citation: 2024 LiveLaw (Del) 173

Case Number: ARB. P. 980/2023.

Advocate for the Petitioner: Mr Piyush Sharma, Mr Armaan Verma and Mr Ayushman Singh.

Advocate for the Respondent: Mr. Adarsh Ramanujan.

Click Here To Read/Download Order