Delhi High Court Reiterates Designation Of Venue Equivalent To Seat Of Arbitration In Absence Of Contrary Indicia

Delhi High Court Reiterates Designation Of Venue Equivalent To Seat Of Arbitration In Absence Of Contrary Indicia

The respondent had objected to the maintainability of the petition based on the court’s la    ck of territorial jurisdiction

The Delhi High Court has held the venue of arbitration as the seat of arbitration if the agreement does not contain any contrary indicia.

The bench of Justice Yogesh Khanna said that the clause proving the venue of arbitration would have a superseding effect over a clause providing exclusive jurisdiction on any other court if the parties had made it clear.

However, if the agreement contained a venue clause and an exclusive jurisdiction clause, the clause providing for exclusive jurisdiction would be subject to the venue clause. The reference to courts of exclusive jurisdiction would then be reduced to the adjudication of disputes other than those covered by the arbitration/venue clause.

The bench clarified that accrual of the cause of action, however trivial or significant, would not be relevant to determine the jurisdiction if the agreement provided a specific seat of arbitration.

On 15 October 2020, the parties had entered into a shareholder’s agreement. The agreement’s Clause 17.1 designated Mumbai as the venue of arbitration. Further, Clause 23.1 provided that the courts in Mumbai or New Delhi shall have jurisdiction over the subject matter of the agreement. However, this clause was made subject to Clause 17 of the agreement.

As a dispute arose between the entities, the petitioner filed a Section 9 application before the high court seeking interim relief. However, the respondent objected to the maintainability of the petition on the ground that the court lacked territorial jurisdiction.

The contention of the respondent was:

• Clause 17.1 designates Mumbai as the venue of arbitration which is akin to the designation of the seat of arbitration. Thus, only the courts in Mumbai have territorial jurisdiction.

• Clause 23 cannot be considered contrary indicia, as the parties made it the subject to Clause 17. Therefore, the designation of venue under Clause 17 would have an overriding effect over the jurisdiction conferred on the courts in New Delhi by Clause 23.

• The Supreme Court in the BGS Soma case held that the venue is to be considered the seat of arbitration when the agreement does not contain anything which indicates the contrary.

The petitioner made the counter-arguments:

• The board meetings were held in New Delhi; therefore, the court would have the jurisdiction as per Section 20(c) of CPC.

• Clause 23 provides that the courts at New Delhi or Mumbai shall have the jurisdiction over the subject matter of the agreement, which clearly indicates that the parties only intended to make Mumbai the venue/place and not the seat of arbitration.

• Mere designation of the venue of arbitration would not be considered the seat of arbitration, as both the terms have different implications.

The judge observed that when Clause 23 was made subject to Clause 17, anything contained therein could not be understood as overriding anything under Clause 17. Thus, it could not be considered contrary indicia.

The bench held that the venue of arbitration would be the seat of arbitration if the agreement did not contain any contrary indicia. The clause proving for venue of arbitration would have a superseding effect over a clause providing for exclusive jurisdiction on any other court if the parties made the latter subject to the former.

Thus, while dismissing the petition for want of territorial jurisdiction, Justice Khanna stated that only the courts in Mumbai had the jurisdiction to hear the petition.