Arbitration : Delhi High Court Emphasises Venue's Significance, Overrides Generic 'Exclusive Jurisdiction' Clause

Arbitration : Delhi High Court Emphasises Venue's Significance, Overrides Generic 'Exclusive Jurisdiction' Clause

The Delhi High Court has determined that the location where the arbitral proceedings are established essentially represents the 'seat of arbitration,' taking precedence over a general exclusive jurisdiction clause.

The Court concluded that a generic exclusive jurisdiction clause does not serve as conflicting evidence that would prevent the designated venue from assuming the role of the arbitration's seat.

Justice Sachin Datta's Bench determined that in order for an exclusive jurisdiction clause to supersede a venue clause, it must explicitly stipulate that the courts in a specific location possess exclusive authority over the arbitration proceedings. A broad exclusive jurisdiction clause that lacks direct reference to arbitration proceedings does not take precedence over the venue clause.

The Court reaffirmed that the selection of the arbitration's seat is a fundamental expression of party autonomy as established by the Arbitration and Conciliation (A&A) Act. Moreover, this choice can be a neutral location and need not be confined to where the cause of action originated.

In the present case, the respondent initiated a bidding process for Rural Electrification projects in the Pilibhit and Hardoi Districts of Uttar Pradesh, under the Government of India's Rajiv Gandhi Gramin Vidyutikaran Yojana. This was done through a tender issued on April 2, 2005. The petitioner subsequently submitted its project proposals and bids for the aforementioned works on May 10, 2005, and May 11, 2005.

Clause 8 of the General Conditions of Contract (GCC) established the exclusive jurisdiction of the courts in New Delhi. Additionally, Clause 48 of the GCC stipulated New Delhi as the designated arbitration venue. However, the Letter of Award (LOA) dated August 1, 2005, granted to the petitioner contained a provision stating that all matters pertaining to the contract would fall under the exclusive jurisdiction of the courts in Lucknow. Importantly, this very Clause also subjected the LOA to the provisions of the GCC.

A disagreement emerged between the involved parties, prompting the petitioner to initiate the arbitration clause. Subsequently, a three-member tribunal was constituted, but its authority was terminated through mutual agreement. Following this, the parties collectively selected a sole arbitrator on August 13, 2018.

The timeframe of 18 months, as outlined in Section 29A of the A&C Act, lapsed before the arbitrator could issue the award. As a result, the petitioner submitted an application under Section 29A to request an extension of time, allowing the arbitrator to finalize the arbitration proceedings and deliver the award.

The respondent, however, raised an initial objection regarding the validity of the petition, citing the absence of territorial jurisdiction.

The two parties adopted opposing stances, with the respondent objecting to the petition's maintainability based on the following reasons: The Court's jurisdiction is deficient due to the arbitration's seat being in Lucknow, Uttar Pradesh. Both the cause of action and the execution of the contract were confined to Uttar Pradesh. The inclusion of "New Delhi" in the arbitration clause indicates a neutral venue, not the seat of arbitration, and consent cannot establish jurisdiction where none inherently exists. Clause 21.2 of the LOA exclusively designates the "local court of Lucknow" for jurisdiction, which supersedes the GCC's "Courts of Delhi" clause, thereby establishing the "local Courts at Lucknow" as the relevant jurisdiction.

Furthermore, the sole arbitrator's award timeframe concluded on February 3, 2019, marking 18 months from the initiation, making the present application, filed on March 6, 2020, considerably delayed. Additionally, the amendments made to Section 29A of the Act are prospective, not retroactive, meaning the Petitioner wouldn't be eligible for the benefits of the amended Section.

Contrarily, the petitioner presented the ensuing counter-arguments: The Court's jurisdiction remains intact owing to the arbitration's seat situated in Delhi. While Clause 21.3 of the LOA is "subjected to" the GCC, the prevalence of Clause 8 of GCC, which confers "Courts of Delhi" with exclusive jurisdiction, supersedes Clause 21.2. A harmonious interpretation of the contract dictates that the "Supreme Court of Delhi" in Clause 21.2 should be understood as the "High Court of Delhi," aligning it with GCC's Clause 8. Any ambiguity is resolved through the Contra Proferentem principle. Notably, the LOA lacks a specified seat of arbitration; however, Clause 48.1.2 of the GCC explicitly designates "New Delhi" as the seat and venue of arbitration.

The arbitrator initiated the reference on August 13, 2018, thereby instigating arbitral proceedings under Section 29A of the Act. The Arbitral Tribunal's authority, as per Section 29A (amended by Act No. 33 of 2019), ceased to exist on February 13, 2020.

The respondent's contention regarding the prior Arbitral Tribunal's expiration on February 3, 2019, is unsubstantiated, as a new Tribunal was established on August 13, 2018, without any objections raised until January 27, 2020. Through an order issued on February 20, 2020, the learned Arbitrator validated the mandate's conclusion on February 20, 2020, binding the respondent.

Upon meticulous scrutiny of the presented facts and arguments, the Court noted that Clause 8 of the GCC vested exclusive jurisdiction in the Courts situated in New Delhi. Additionally, Clause 48 of the GCC stipulated New Delhi as the designated arbitration venue. The Court concluded that the exclusive jurisdiction clause stipulated in Clause 21 of the Letter of Award (LOA) is of a general and generic nature, given that it lacks specific reference to arbitral proceedings.

The Court drew a distinction from various prior legal precedents in which the exclusive jurisdiction clause was accorded prominence over the venue clause. This distinction was based on the Court's determination that in those instances, the exclusive jurisdiction clause specifically encompassed reference to the arbitration proceedings.

The Court established that for an exclusive jurisdiction clause to take precedence over a venue clause, it is imperative that the clause explicitly states that the courts at a specific location possess exclusive jurisdiction concerning the arbitral proceedings. It emphasised that a general exclusive jurisdiction clause, lacking specific reference to arbitration proceedings, cannot supersede the venue clause.

The Court reiterated that the choice of the arbitration seat is a core expression of party autonomy protected by the Arbitration and Conciliation Act. It emphasised that the seat can also be a neutral location and does not necessarily need to correspond to the place of the cause of action. Additionally, the Court dismissed the contention regarding the delay in seeking an extension of the arbitrator's mandate. Subsequently, the Court extended the arbitrator's mandate for an additional year.