Arbitration In IndiaTerritorial Jurisdiction sine Qua non for the Court for Appointment of Arbitrator

The Delhi High Court in G.R. Builders v. M/s. Metro Speciality Hospitals Pvt. Ltd., [ARB.P.628/2023 & I.A. 11633/2023, decided on 26.09.2023] held that the Court where the seat of Arbitration has been fixed, would have the exclusive jurisdiction to entertain an application for appointment of Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.

FACTS

Metro Specialty Hospitals Pvt. Ltd. (hereinafter referred to as the “Respondent”) issued a Letter of Intent (hereinafter referred to as “LOI”) on 19.03.2021 to GR Builders (hereinafter referred to as the “Petitioner”) for the construction of a hospital building in Faridabad, Haryana. The time of completion of the project was 12 months from the date of issuance of the LOI.

The Petitioner completed the work on time; however, its payment was not processed, and hence, a total amount of Rs. 12,99,04,110/- and despite of several reminders the payment was not made.

In view of the above, the Petitioner issued a legal notice dated 07.04.2023, demanding the outstanding amount. The Respondent replied on 05.06.2023, informing the appointment of Mr. Justice S.N. Agarwal (Retd.) as the sole arbitrator for adjudication of disputes between the parties.

The Petitioner objected to the appointment vide Rejoinder Notice dated 12.06.2023 and hence, has filed the present Petition under Section 11(6) and (8) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”).

ISSUE BEFORE THE HIGH COURT

1. Whether the present application filed under Section 11 of the A&C Act is maintainable?

CONTENTIONS OF THE PARTIES

The Petitioner contended that the act of the Respondent of appointing a Sole Arbitrator was not in accordance with the Arbitration Clause. It was submitted that the Ld. Arbitrator was to be appointed as per the procedure stipulated in Clause 31.14 of the LOI, which specifically provided that the Sole Arbitrator has to be appointed by the Management Review Committee in consultation with the Petitioner/contractor.

It was argued that the LOI was signed between the parties in Delhi, therefore, Delhi High Court had the jurisdiction to entertain the present application.

The Respondent contended that as per Clause 31.16 of the LOI, Faridabad was decided as the place of Arbitration and therefore, the present High Court did not have territorial jurisdiction to entertain the present Petition. Instead, P&H High Court has the jurisdiction to entertain the application under Section 11 of the A&C Act.

Whereas, it was submitted that the LOI was executed in Faridabad and the project was also situated in Faridabad.

DECISION AND FINDINGS

The Delhi High Court referred the Clause 31.14 and 31.16 of the LOI. The High Court relied on Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc., [(2012) 9 SCC 552] wherein it was held that the Court where the seat of Arbitration has been fixed, would have exclusive jurisdiction to entertain an application under Section 11 of the A&C Act. It was observed that as per the Clause 31.16 of the LOI, Faridabad, Haryana was the chosen seat of Arbitration. Moreover, it cannot be presumed that the intention of the place of Arbitration was Delhi.  

The High Court further relied upon BBR (India) Pvt. Ltd. v. SP Singla Construction Pvt. Ltd, [(2023) 1 SCC 693], and held that once the seat of Arbitration is pre-determined, merely because proceedings were carried out in Delhi, the Delhi High Court would not have jurisdiction to entertain the matter.

Therefore, the High Court dismissed the petitions as the Court did not have jurisdiction to entertain the matter.

AMLEGALS REMARKS

The Delhi High Court has upheld the legislative intent of party autonomy envisaged in the A&C Act. It has held that once the place of Arbitration has been envisaged in the Arbitration Agreement, then only those Court would have exclusive territorial jurisdiction to entertain an application for appointment of Arbitrator.

Team AMLEGALS assisted by – Mr. Atulit Raj (Intern)

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