Calcutta High Court in Domestic Arbitration: Forum Selection clause has precedence over seat of arbitration

Calcutta High Court in Domestic Arbitration: Forum Selection clause has precedence over seat of arbitration

When a specified court/jurisdiction is chosen, notwithstanding the seat of arbitration, the Court selected by the parties would have jurisdiction in the case a domestic arbitration

The Calcutta High Court on 21 January 2021 by a single judge, Justice Debangsu Basak, while deciding a plea under Section 9 of the Arbitration and Conciliation Act, 1996 for interim protection, ruled that a forum selection clause supersedes jurisdiction of the seat of arbitration in domestic arbitration when even otherwise the selected forum has jurisdiction akin to Section 20 of the Code of Civil Procedure, 1908 (CPC).

The respondent - Devyani International Limited raised objections over the lack of jurisdiction and argued that under the arbitration agreement, the parties had agreed that the seat of arbitration shall be at New Delhi. Therefore, respondent contended that the courts at New Delhi have exclusive jurisdiction to try, entertain and determine any proceeding under the Arbitration Act, overriding the 'choice of jurisdiction' to adjudicate disputes arising out of the agreement.

Per contra, the petitioner - Bowlopedia Restaurants India Limited stated that the forum selection clause would have precedence over the clause on the seat of arbitration.

The primary issue in the case was that when there is a forum selection clause conferring exclusive jurisdiction to a Court which is different to the Court having jurisdiction over the seat of arbitration, in a domestic arbitration, which Court will have jurisdiction over the arbitration proceedings?

To arrive at its conclusion, the Court considered a series of judgments passed by the Supreme Court and the Delhi High Court.

The High Court observed, "In the facts of the present case, the forum selection clause is prior to the clause prescribing the seat of arbitration, in my view, in a domestic arbitration, the issue as to whether the forum selection clause is prior to the clause prescribing the seat of arbitration or vice versa, is of no consequence. The seat of arbitration, in the case of a domestic arbitration, assume significance, in the absence of a valid forum selection clause.

"In other words, if the parties have by agreement, chosen a specified court, and which such Court otherwise have jurisdiction over the subject matter of the arbitration, then, notwithstanding a seat of arbitration being prescribed which is different to the forum selection clause, the Court selected by the parties will have jurisdiction, in the case of a domestic arbitration," Court further added.

The Court highlighted that the Arbitration Act recognized party autonomy and the power of the parties to choose the law that would govern the contract and the arbitration. It has recognized the power of the party to select the applicable procedure for arbitration between themselves, to select the arbitrators to adjudicate the disputes and the seat of arbitration.

The Court pointed out that it is essential in international commercial arbitration that the laws applicable to the arbitration proceedings are recognized by identifying the seat of the arbitration. The seat of arbitration then determines the law governing the arbitration proceedings and such a situation does not arise in the case of a domestic arbitration.

However, the Court stated that, when a specified court/jurisdiction is chosen, notwithstanding the seat of arbitration, the Court selected by the parties would have jurisdiction in the case a domestic arbitration.

The Court laid down that in case of domestic arbitration:

1. Where the agreement has not prescribed the seat of arbitration and the parties have not selected any Court to try the disputes, then, the Court having jurisdiction over the subject matter of the arbitration will exercise jurisdiction.

2. Where the parties to the arbitration agreement have prescribed a seat of arbitration and such agreement does not have a forum selection clause, then, the Court having jurisdiction over the seat of arbitration, will have jurisdiction to try the arbitration petition.

3. Where the parties have prescribed the seat of arbitration as well as selected a forum, and there is no conflict between the two, then the Court having jurisdiction on the seat of arbitration, will exercise jurisdiction as there is no conflict.

4. Where the parties have selected a seat of arbitration which is in conflict with the jurisdiction of the Court selected under the forum 31 selection clause, then, the Court selected under the forum selection clause will have jurisdiction provided such Court otherwise has jurisdiction akin to Section 20 of the CPC, 1908.

The Court concluded, "party autonomy in an arbitration being imperative, it is just and proper that in a domestic arbitration when the parties agree to a selected forum, which otherwise has jurisdiction, then, such selected forum should have precedence over the seat of arbitration. It is so in order to give primacy to party autonomy."

The Court was of the opinion that the issue framed was answered correctly and this Court had the jurisdiction to try and determine the present petition.