Delhi High Court: Exclusive Jurisdiction Can Be Inferred From Parties Intention, Even If The Term Seat Is Not Mentioned In Arbitration Clause
Delhi High Court: Exclusive Jurisdiction Can Be Inferred From Parties Intention, Even If The Term Seat Is Not Mentioned In Arbitration Clause
Justice Sanjeev Narula of the Delhi High Court has held that the parties’ intention to confer exclusive jurisdiction can be inferred from the wording of the arbitration clause, even if the term seat is not explicitly used. The court ruled that when an agreement implicitly or explicitly designates the seat of arbitration, the authority to appoint an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996, rests exclusively with the court of the designated seat.
The petitioner, Sanjay Kumar Verma, was engaged as a team leader by the respondent – Planning and Infrastructural Development Consultants Pvt. Ltd., by a Letter of Appointment ("LoA") for a project in Uttar Pradesh, with a fixed monthly salary. Upon completing his tenure, the Petitioner was not compensated for the final three months and left the project site after fulfilling all obligations. Subsequently, a series of communications occurred between the parties' legal representatives, culminating in the Petitioner initiating a civil suit in the Principal District and Sessions Judge Court to recover his outstanding dues. In response, the Respondent filed an application under Section 8 of the Arbitration and Conciliation Act in the District Court, seeking arbitration based on Clause 13 of the LoA. Clause 13 stipulated that disputes would be resolved through arbitration before an arbitrator chosen by the company, with jurisdiction in Patna. The District Court granted the Respondent's application and directed the parties to arbitration. Following this, the Petitioner filed an application in the Delhi High Court ("High Court") under Section 11 of the Arbitration Act for the appointment of an arbitrator, while the Respondent objected to it, arguing that the High Court lacked jurisdiction due to the clause specifying "Patna jurisdiction."
The petitioner contended that the indication of Patna jurisdiction in the Letter of Acceptance (LoA) doesn't conclusively establish the 'seat of arbitration' through mutual consent. It was argued that, in the absence of an explicit agreement on the seat by the parties, the High Court should exercise jurisdiction in accordance with Section 2(1)(e) of the Arbitration Act. Drawing on the principles of the Code of Civil Procedure (“CPC”), the petitioner emphasized that the cause of action transpired in Delhi, where the respondent conducted business. Additionally, invoking Section 42 of the Arbitration Act, the petitioner asserted that, as a prior Section 8 application was submitted in Delhi courts, the High Court should address the Section 11(6) petition.
The High Court emphasized that the parties have the autonomy to mutually decide the place of arbitration and underscored that the designation of the seat grants exclusive jurisdiction to the courts in that particular location. It was noted that the clause in the LoA clearly specified that disputes would fall under the jurisdiction of Patna, Bihar.
After scrutinizing the language of the arbitration clause, the High Court determined that it represented a mutual understanding designating Patna as the venue for arbitration. Despite the absence of an explicit term seat in the clause, the parties’ intention to establish Patna as the arbitration venue was evident. This interpretation aligned with the principle of party autonomy outlined in Section 20 of the Arbitration Act, which underscores the importance of respecting the parties’ consensus on such matters. Consequently, the High Court ruled that there was a clear agreement specifying Patna as the seat of arbitration, thereby granting jurisdiction to the Patna court to appoint an arbitrator under Section 11(6) of the Arbitration Act. The High Court distinguished this case from situations where the seat remained undefined or was subjected to the general supervisory roles of specific courts.
Additionally, the High Court rejected the petitioner's reliance on Section 42 of the Arbitration Act, asserting that subsequent applications under Section 42 could not be filed in the civil court handling the arbitration agreement. Ultimately, with the explicit designation of Patna as the seat of arbitration in the LoA, the High Court concluded that it did not have jurisdiction to appoint an arbitrator under Section 11(6) of the Arbitration Act.
Case Title: Sanjay Kumar Verma v. Planning and Infrastructural Development Consultants Pvt. Ltd.
