High Court At Designated 'Venue' Has Jurisdiction, J&K High Court Dismisses S. 11 Application

Brief Facts:

Tata Project Ltd. (“Respondent No. 1”) was tasked with constructing a transmission line by Power Grid Corporation of India (“Respondents no. 2 to 4”). Subsequently, Respondent no. 1 subcontracted the revetment work to Babu Ram (“Petitioner”) through work order, for a sum of Rs. 24,72,750/-. The Petitioner claimed to have satisfactorily completed the contracted work to the satisfaction of the Respondents, with the transmission tower subsequently erected over the revetment, and the transmission line commissioned and operational.

According to the Petitioner, upon completion of the work, bills amounting to Rs. 24,72,750/- were submitted to Respondent No. 1. However, despite repeated requests and legal notice, the payment wasn't made to the Petitioner. Clause 17 of the work order mandated the parties to attempt an informal negotiation for dispute resolution and, if unsuccessful, to resort to arbitration in accordance with the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). Despite following this procedure by sending a legal notice invoking Clause 17, the Respondents didn't respond to the notice. Feeling aggrieved, the Petitioner filed an application in Jammu & Kashmir and Ladakh High Court (“High Court”) under Section 11(6) of the Arbitration Act for the appointment of an arbitrator to settle the dispute.

While acknowledging the existence of the arbitration clause and the dispute over non-payment of bills, Respondent No. 1 argued that the High Court lacked jurisdiction due to the specified venue of arbitration in Hyderabad, Andhra Pradesh.

Observations by the High Court:

Referring to the decision in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. [AIR 2019 SC 3658], the High Court emphasized that when a contract designates a specific jurisdiction for arbitration, only courts within that jurisdiction have the authority to entertain related applications. The clause stating Hyderabad as the venue of arbitration was interpreted as excluding other courts. Therefore, lacking jurisdiction over Hyderabad, the High Court held that it couldn't entertain matters related to the arbitration agreement.

The High Court referred to the decision of the Supreme Court in BGS SGS Soma JV v. NHPC, (2020) 4 SCC 234, and reinforced the interpretation of arbitration clauses with designated venues as indicating the "seat" of arbitration. The High Court noted that the term "venue" in arbitration clauses refers to the "seat" of arbitration, signifying not only the location for hearings but the overall conduct of the arbitration proceedings. This interpretation aligns with Section 20 of the Arbitration Act, wherein parties have the autonomy to select the place of arbitration.

Consequently, the High Court held that once parties designate a specific place as the venue of arbitration, that venue becomes the seat of arbitration, and only courts with jurisdiction over that venue can entertain applications related to the arbitration agreement. As per the present case, with Hyderabad designated as the venue of arbitration, the High Court held that only courts having jurisdiction over Hyderabad can adjudicate matters concerning the arbitration agreement. The application was dismissed.

Case Title: Babu Ram vs Tata Project Ltd. Residential Manager and Ors.

Case Number: Arb Petition No. 47/2019

Advocate for the Applicant: Mr. Bari Abdullah

Advocate for the Respondent: Mr. Raman Sharma, AAG for R-1. Ms. Garima Gupta, Advocate for R-2, 3, & 4.

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