In M/s. Kings Chariot ("Petitioner") v. Mr. Tarun Wadhwa ("Respondent"), [ARB.P. 421/2024] the Hon'ble High Court of Delhi ("Delhi HC") inter alia held that if an arbitration agreement does not specify a seat of arbitration, the court's jurisdiction will be determined in accordance with Sections 16 to 20 of the Code of Civil Procedure, 1908 ("CPC").
FACTS
Disputes arose between the parties under a contract executed between them, for constructing a multi-storied hotel in Guna, Madhya Pradesh ("Contract"). Consequently, the Respondent invoked the arbitration clause in the Contract to which the Petitioner responded by demanding outstanding payments. After the Respondent failed to pay or respond, the Petitioner filed the present petition under Section 11(5) of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") before the Delhi HC, to seek the appointment of an arbitrator ("Petition").
The Respondent filed a reply to the Petition, claiming that the Delhi HC had no jurisdiction to entertain the Petition since a) the cause of action arose entirely in Madhya Pradesh and b) no arbitration venue/ seat was specified in the Contract.
ISSUE
Whether the Delhi HC has jurisdiction to entertain the Petition based on a general jurisdiction clause in the Contract, particularly when no arbitration seat/venue is specified?
FINDINGS
At the outset, the Delhi HC observed that the Contract, as a matter of fact, did not specify any seat or venue for arbitration and in that regard, a clause stating "all disputes are subject to Delhi jurisdiction only" in the Contract, is a general jurisdictional clause and cannot amount to determination of the arbitration seat or venue in the Contract.
The Delhi HC further observed that, there is 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, then the jurisdiction of the courts shall be determined in accordance with Sections 16 to 20 of CPC. JURISDICTION OF COURT TO BE DETERMINED AS PER SECTION 16 TO 20 OF CPC, IF NO SEAT IS MENTIONED IN THE ARBITRATION AGREEMENT
Applying the aforesaid principle in the facts of the present case, the Delhi HC held that the Petitioner's contention, which was based on the procurement of stamp paper and signing of the Contract in Gurgaon, lacked the grounds to establish jurisdiction in Delhi. The Delhi HC further noted that since the Contract was executed in Madhya Pradesh for work within that state and considering that the Respondent conducted business in the said state, only the courts in Madhya Pradesh hold jurisdiction over the dispute. Consequently, the Petition was dismissed.
CONCLUSION
The present judgment holds a significant value because the Delhi HC herein, sought to recapitulate two major principles: a) a general jurisdiction clause in a contract cannot define the seat or venue for arbitration; and b) jurisdiction must be determined based on Sections 16 to 20 of the CPC, if there is no agreement on the seat of arbitration.
While this judgment reaffirms the limited scope of judicial intervention in arbitration matters, particularly specifying that not all courts can have jurisdiction over arbitration matters, it also seeks to signify the importance of specifying seat/venue of arbitration in agreements, so as to avoid conferring jurisdiction on courts that may be contrary to the interests or intention of the parties.
Originally published 22 July 2024
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