Arbitration In IndiaVenue to be Construed as Seat, when the parties intend to provide Exclusive Jurisdiction to the Venue

The Delhi High Court, in M/S AXALTA COATING SYSTEM INDIA PVT LTD V. M/S MADHUBAN MOTORS PVT. LTD. (Arb P 980/2023 decided on 18.01.2024) held that in the absence of “seat” in the  Arbitration Clause, the “venue” would be construed as seat, as the intention of the parties was to provide exclusive jurisdiction under guise of “venue”.

FACTS

M/s. Axalta Coating Systems India Pvt. Ltd. (hereinafter referred to as the “Petitioner”) entered into a Supply Agreement dated 10.08.2016 (hereinafter referred to as the “Agreement”) with M/s. Madhuban  Motors Pvt. Ltd. (hereinafter referred to as the “Respondent”).

Due to disputes between the parties, the Petitioner sent a demand notice dated 02.06.2022, which was rejected by the Respondent vide letter dated 20.06.2022.

The Petitioner had sent a notice invoking arbitration on 27.07.2022, against which reply was filed by the Respondent on 22.08.2022.

Hence, the Petitioner has filed the present petition under Section 11 (5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”) for the appointment of an Arbitrator.

ISSUES BEFORE THE DELHI HIGH COURT

1. Whether the present petition of appointment of Arbitrator under Section 11 of the A&C Act is maintainable?
2. Whether “venue” can be construed to be “seat” of Arbitration in the absence of “seat” in the Arbitration Clause in the Agreement?

CONTENTION OF THE PARTIES

The Petitioner contended that the  clause 12 of the Agreement, categorically provided that New Delhi would be the  venue for arbitration proceedings. Furthermore, a separate territorial jurisdiction clause was provided in the Agreement, which gave jurisdiction to New Delhi.

It was submitted that in absence of “seat”, the parties had an intention to give exclusive jurisdiction to the Courts of Delhi and hence, “venue” would be construed to be seat of Arbitration.

The Respondent contended that the present High Court did not have the territorial jurisdiction to entertain the present petition. It was contended that the Agreement merely provides the “venue” of the Arbitration, but was silent on the “seat” of Arbitration.

It was argued that the in absence of “seat” of Arbitration, the territorial jurisdiction would be where the cause of action has arisen. Hence, courts of Mumbai would have the jurisdiction to entertain the present petition.

DECISION AND FINDINGS

The High Court observed that the Arbitration Clause mentions “venue” of the Arbitration to be New Delhi, and hence, exclusive jurisdiction to be at New Delhi.

The court considered the presence of an exclusive jurisdiction clause in the agreement as a significant factor in determining the intention of the parties regarding the seat of arbitration .

The High Court relied on BGS SGS Soma vs. NHPC Ltd.[ (2020) 4 SCC 234] and held that in the absence of contrary indicia, the “venue” mentioned in an arbitration clause can be considered the “seat” of arbitral proceedings .

The High Court held that pendency of another application before the same High Court clearly indicates the intention of parties to provide exclusive jurisdiction to New Delhi.

The High Court appointed sole Arbitrator for the arbitration of disputes between the parties.

AMLEGALS REMARKS

The Delhi High Court has upheld the legislative intent of the A&C Act that is party autonomy. When an Arbitration Agreement aims at providing exclusive territorial jurisdiction, then the “venue” would be considered to be “seat” of Arbitration, even when the “seat” is not categorically mentioned in the Arbitration Clause.

-Team AMLEGALS, assisted by Mr. Shaurya Pandey (Intern)

For any query or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or himanshi.patwa@amlegals.com