Arbitration In IndiaJurisdiction of Court is Dependent on the Seat of Arbitration

The Delhi High Court in the case of Sunil Kumar Chandra v.. M/S Spire Techpark Pvt Ltd., O.M.P. (I) (COMM.) 328/2022 decided on 18.01.2023, held that that the jurisdiction of the Court would be decided based on the“seat”of the Arbitration, and this will prevail over other clauses in an Agreement.

FACTS

Mr. Sunil Kumar Chandra (herein referred to as “the Petitioner”) booked an office in World Trade Center, the project of M/S Spire Techpark Pvt Ltd (herein referred to as “the Respondent”) on 11.07.2013. The Petitioner deposited an amount of Rs.9,50,000/- (Rupees Nine Lakhs Fifty Thousand Only) and the Respondent issued a receipt for the same.

The Respondent further issued a demand letter of Rs.36,75,000/- (Rupees Thirty Six Lakhs Seventy Five Thousand Only) as a full and final consideration towards the booked project and also demanded an amount of Rs. 21,61,270/- (Rupees Twenty-One Lakhs Sixty One Thousand Two Hundred Seventy Only) as the remaining balance amount. The Petitioner paid the entire amount and the Respondent acknowledged and issued a receipt on 07.08.2013.

The parties entered into an Agreement on 26.08.2013, under which an office unit was allocated to the Petitioner. According to the Agreement, the Respondent was required to transfer ownership rights of the units to the Petitioner within 36 months, including 6 months grace, or by August 2017.

The Respondent vide letter dated 22.01.2016 offered the possession of the booked unit and demanded Rs.5,78,643/- (Rupees Five Lakhs Seventy-Eight Thousand Six Hundred Forty Three Only) to be paid towards different charges and on payment of the same, the Petitioner would have gotten the possession on 01.01.2017.

The Petitioner approached the Respondent for making the payment, but the Respondent made excuses and offered for allotting some other unit as the booked unit was already allotted to Vivo Company back in August 2016. Moreover, after this, the Respondent also did not make return payments to the Petitioner as stated in the Agreement.

The Petitioner served a legal notice to the Respondent on 19.04.2018, calling upon the Respondent to handover the possession of the booked unit and to make the payment of unpaid assurance returns. The Respondent replied to the legal notice on 07.09.2018, and stated that the Petitioner had not made the payment of  Rs.5,78,643/- (Rupees Five Lakhs Seventy Eight Thousand Six Hundred Forty Three Only) and also admitted that the booked unit was on lease with Vivo Company. The Respondent made a few return payments from the month of June 2018 to November 2018.

The Petitioner invoked the Arbitration Clause envisaged in clause 18.2 of the Agreement. The Petitioner has also filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”) vide Sunil Kumar Chandra v. M/s. Spire Techpark Pvt. Ltd. [OMP (I) (COMM) 328/2022]  (hereinafter referred to as the “Section 9 Application”). The Petitioner has filed the present petition under Section 11 of the A&C Act seeking constitution of Arbitral Tribunal.

ISSUE BEFORE THE HIGH COURT

Which Court would have the jurisdiction to entertain the dispute if two contradictory clauses exist in an Agreement?

CONTENTIONS OF THE PARTIES

The Petitioner relied on Perkins Eastman Architects DPC v. HSCC (India) Ltd. [(2020) 20 SCC 760] and contended that the Arbitration Clause stating that the Respondent has the power to choose an Arbitrator is invalid.  It was also submitted that the Courts of Gautam Buddha Nagar do not have jurisdiction to decide the interim reliefs pleaded by the Respondent as both the parties have mutually decided the jurisdiction under Clause 18.2 of the Agreement and it was decided as New Delhi.

It was further contended that the Section 9 Application should also be moved only before the Court competent to grant the relief. Hence, both the petitions shall be heard by this Court.

The Respondent accepted the arbitrability of the dispute but opposed the maintainability of the Petition based on the pecuniary jurisdiction.

DECISION AND FINDINGS

The High Court relied on BGS SGS SOMA JV v. NHPC [(2020) 4 SCC 234] and Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. [(2017) 7 SCC 678] observed that the jurisdiction of the Court would be decided based on the “seat” of Arbitration.

The High Court further relied on Ramkishorelal v. Kamal Narayan [1963 Supp (2)SCR 417] and Shree Bhowani Cotton Mills vs Union Textile Traders [1965 SCC OnLine Cal 83], and observed that Clause 18.2 and 18.3 of the Agreement were unclear and ambiguous, and hence, in case of inconsistency between two provisions of same instrument, the former clause shall prevail over the latter one. Hence, Clause 18.2 would prevail over Clause 18.3 with respect to the mode of dispute resolution.

The High Court held that the parties had already mutually decided New Delhi to be the “seat” of the Arbitration and hence, this Court has the jurisdiction to entertain the present petition. Moreover, it was also held that the issue of pecuniary jurisdiction was already rejected under the Section 9 Application on 23.11.2022, which is not further challenged by the Respondent.

The High Court further appointed Mrs. Madhurima Mridul as the sole Arbitrator to adjudicate the disputes arising between the parties out of the Agreement and directed the Arbitrator to ensure compliance under Section 12(1) of the A&C Act and disposed the petition. The High Court also disposed the Section 9 Application directing the Sole Arbitrator to decide the interim relief on merits.

AMLEGALS REMARKS

The Delhi High Court has upheld that when two clauses of an Agreement are contradictory to each other and cannot be harmoniously construed, the former clause would prevail over the latter clause. It was also held that in case of ambiguity of the jurisdiction of the Courts, the jurisdiction would be decided based on the Seat of Arbitration. The High Court has upheld the legislative intent of the A&C Act by upholding the party autonomy, as the seat of Arbitration is mutually decided to be New Delhi.

–Team AMLEGALS 

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