Clearing cloud over jurisdiction of court in entertaining petitions under Sections 9, 11 and 34 of Arbitration and Conciliation Act, 1996

Determination of jurisdiction of a court in entertaining petitions under Sections 9, 11 and 34 of Arbitration and Conciliation Act, 1996 (Act), in respect of domestic arbitration to say the least, is confusing. It gets further complicated by court’s concepts of ‘seat’ and ‘venue’. This article attempts to simplify the principles for determining jurisdiction of civil courts in entertaining legal proceedings under Sections 9, 11, 34 and other similar proceedings.

The principles for determination of jurisdiction of court is different for institution of civil suits and for maintainability of arbitration proceedings. In civil suits, the parties cannot by consent confer jurisdiction to a court which does not, otherwise have jurisdiction however regarding arbitration proceedings, it is perfectly acceptable to grant jurisdiction to a place which otherwise does not have jurisdiction to entertain a civil suit. The Constitution Bench in the celebrated case of Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc[1] felt that on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. The logical conclusion, therefore, is that the courts where the arbitration takes place would have jurisdiction to entertain the legal proceedings because such court would be required to exercise supervisory control over the arbitral process. Therefore, for the purpose of determining the jurisdiction of court in proceedings connected with arbitration, legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action arose and the courts where the arbitration took place.

 

Seat and Venue in domestic Arbitration

In International Commercial Arbitration, ‘seat’ denotes a place whose law is made applicable to the arbitration dispute but in domestic arbitration the applicable law is usually Indian law, the ‘seat’ refers to the court which would have jurisdiction or control over the arbitration proceedings like entertaining petitions under Sections 9,11 or 34.

 

Venue, in International Commercial Arbitration is the place where the parties agree to hold arbitration proceedings whereas in domestic arbitration, venue may be the place where parties agree to hold arbitration proceedings and may also be considered the seat of arbitration. In a way, venue and seat may overlap in domestic arbitration.

 

Jurisdiction of court in proceedings connected with arbitration has two faceted approach: firstly, where the terms of contract speak about jurisdiction/seat/venue of arbitration and secondly, where the terms of contract are silent about jurisdiction of court and seat/venue of arbitration.

 

Determination of jurisdiction when clauses of jurisdiction/seat of arbitration is recorded

A jurisdiction clause would mean a clause wherein it is stated which court will have jurisdiction to entertain suits, place of arbitration clause means the name of the city where the parties have agreed to hold arbitration hearings.

Following situations may arise where the agreement between the parties contains either a jurisdiction clause or a clause indicating place of conducting arbitration or both:

1. Agreement contains only a jurisdiction clause and is silent about place/venue of holding arbitration.
2. Agreement contains only a clause about place/venue of holding arbitration and is silent about jurisdiction of court.
3. Agreement contains clauses both about jurisdiction of court and place/venue of arbitration

 

Agreement contains only a jurisdiction clause and is silent about place/venue of holding arbitration

Whenever an agreement grants jurisdiction to a place, it shall be the seat of arbitration. The courts having jurisdiction over such place can entertain proceedings arising out of arbitration clause. This is irrespective of the fact that whether the jurisdiction being granted is exclusive or not. Emkay Global Financial Services Ltd. v. Girdhar Sondhi[2] is a classic example where the courts at Mumbai were granted exclusive jurisdiction, however the entire arbitration proceedings were conducted at New Delhi and the award was passed at New Delhi. The challenge arose out of proceedings under Section 34 of the Act, following Indus Mobile Distribution Private Limited v. Datawind Innovation Private Limited[3], Supreme Court held that the courts at Mumbai had exclusive jurisdiction to entertain objection under Section 34 and New Delhi was only a convenient place for holding arbitration.

 

In Indus Mobile Distribution Private Limited v. Datawind Innovation Private Limited[4], agreement between the parties granted exclusive jurisdiction to courts at Mumbai. Two petitions under Sections 9 and 11 of the Act were instituted before the Delhi High Court. The Supreme Court held that the moment the seat is designated, it is akin to an exclusive jurisdiction clause. In arbitration law, however, the moment “seat” is determined, the fact that the seat is at Mumbai would vest Mumbai courts with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.

Delhi High Court however, in the matter of Siddhast Intellectual Property Innovations Private Limited v. The Controller General of Patent Designs Trademark[5] held that courts in Delhi would have jurisdiction to entertain petition under Section 11 of the Act because the meetings of the committee constituted to amicably resolve the disputes, in terms of arbitration clause, had taken place in Delhi. This finding was arrived at, notwithstanding that terms of the contract granted exclusive jurisdiction to courts at Mumbai. This judgment, respectfully is not good law as it does not consider authoritative precedent of Emkay Global Financial Services Ltd. vs Girdhar Sondhi[6].

 

Agreement contains only a clause about place/venue of holding arbitration and is silent about jurisdiction of court

Unlike the previous sub-heading, this heading pertains to agreements which do not contain jurisdiction clause but specifically mentions the venue where the arbitration proceedings would be held. In the absence of jurisdiction clause, the mandate of law is that venue of arbitration will be the seat of arbitration, consequently the courts exercising territorial jurisdiction over the venue shall be entitled to entertain legal proceedings connected with arbitration. Brahamani River Pallets Limited v. Kamachi Industries Limited[7] is an illustration of such clause. In this matter, a petition for appointment of arbitrator was filed before the Madras High Court, which was objected to on the ground that the arbitration clause contained in the agreement stated, “Arbitration shall be under Indian Arbitration and Conciliation Law 1996 and the Venue of Arbitration shall be Bhubaneswar”. The Supreme Court held that in terms of Section 20 of the Act; parties are free to agree on the place of arbitration. Party autonomy must be construed in the context of parties choosing a court which has jurisdiction out of two or more competent courts.

 

Where the contract specifies the jurisdiction of the court at a particular place, only such court will have the jurisdiction to deal with the matter and parties intended to exclude all other courts. Thus, when the parties have agreed to have the “venue” of arbitration at Bhubaneswar, the Madras High Court erred in assuming the jurisdiction.

 

The position of law was clearly elucidated by the Supreme Court in the matter of BGS SGS SOMA JV v. NHPC[8], which was a petition under Section 34 of the Act. In this matter the arbitration clause mentioned that “Arbitration Proceedings shall be held at New Delhi/Faridabad, India”. Unlike most of the cases, in this matter, two cities being Delhi and Faridabad were granted concurrent jurisdiction to hold arbitration proceedings. Peculiarly, the entire arbitration proceedings and the award was passed at New Delhi. Objection under Section 34 of the Act were however filed before the court at Faridabad. The Supreme Court concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the “venue” of the arbitration proceedings, the expression “arbitration proceedings” would make it clear that the “venue” is really the “seat” of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. The ratio of this judgement is in domestic arbitration, the venue shall become the seat of the arbitration, where there is no contrary indica that venue and seat must be two different places, which in turn will enable courts situated in that jurisdiction to entertain proceedings. The court further held both Delhi and Faridabad would be the seat of arbitration however for the purpose of petition under Section 34, courts at Delhi were preferred over Faridabad because entire arbitration proceedings were held and Award was passed at New Delhi.

What would constitute the ‘contrary indica’ mentioned in BGS SGS SOMA JV v. NHPC[9] is evident in the matter of Emkay Global Financial Services Ltd. vs Girdhar Sondhi[10], wherein notwithstanding holding of arbitration proceedings in New Delhi, court at Mumbai was held to be the court of competent jurisdiction because of jurisdiction clause categorically giving exclusive jurisdiction to Mumbai courts.

Agreement contains clauses both about jurisdiction of court and place/venue of arbitration

The other situation which is contemplated is that an agreement contains both the clauses-jurisdiction clause-which states the court which will have the jurisdiction to entertain proceedings and arbitration clause-which indicates the place where the arbitration proceedings would be conducted. Where both the clauses indicate the same city, the court exercising jurisdiction over that city will have jurisdiction to entertain petitions.

 

The difficulty arises in cases where both the clauses name different cities having jurisdiction. The Supreme Court in Inox Renewable Ltd v. Jayesh Electrical Limited[11] was considering issue of jurisdiction in an objection filed under Section 34 of the Act. The terms of the agreement initially agreed that the arbitration shall be held in Jaipur, about jurisdiction it was stated that courts in Rajasthan will have the jurisdiction. However, by way of a mutual agreement between the parties the place of arbitration was shifted to Ahmedabad. The petition under Section 34 was instituted before the Gujarat High Court which was challenged on the ground that jurisdiction clause mentions courts at Rajasthan shall have jurisdiction. The Supreme Court gave eminence to the place of holding of arbitration and held once the seat of arbitration is replaced by mutual agreement to be at Ahmedabad, the Courts at Rajasthan are no longer vested with jurisdiction as exclusive jurisdiction is now vested in the Courts at Ahmedabad, given the change in the seat of arbitration. The Delhi High Court however in the matter of Goyal Mg Gases Private Limited v. Steel Authority of India[12] rejected the argument of replaced place of arbitration for the reason it was recorded in the order sheet of arbitral tribunal, which it was not held, is not a permitted way to amend arbitration agreement. It was further held if the parties wanted, they could have carried out the amendment by way of a written agreement to this effect duly signed by the representatives of parties.

 

In Mankatsu Impex Private Limited v. Air visual Limited[13] the Supreme Court dealt with a case in which the jurisdiction was given to the courts at New Delhi, however, the place of arbitration was stated to be Hongkong. It was held that courts at Hongkong would have jurisdiction to entertain the matter, however, it further held that “seat of arbitration” and “venue of arbitration” cannot be used inter-changeably. Mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “seat” of arbitration. The intention of the parties as to the “seat” should be determined from other clauses in the agreement and the conduct of the parties. This judgment seems to be contrary to precedent in Inox Renewable Ltd v. Jayesh Electrical Limited[14]. In my view, Mankatsu Impex Private Limited[15] is a case of International Commercial Arbitration and thus, be not applied to domestic arbitrations.

 

A single Judge of Delhi High Court in in the matter of Balancehero India Private Limited v. Arthimpact Finserve Private Limited[16] held the Court, where the seat of the arbitration is located, would exercise jurisdiction in respect of the arbitral proceedings. Another bench of the same High Court in My Preferred Transformation and Hospitality Pvt. Ltd. v. Sumithra Inn[17] while facing with similar factual situation wherein jurisdiction was given to courts in Bengaluru and place of arbitration was stated to be New Delhi. Though the High Court relied upon Mankatsu Impex Private Limited, however, it gave clear directions regarding domestic arbitration. It was held the Court having jurisdiction over the seat of arbitration, would be exclusively competent to entertain petitions under the 1996 Act, in exercise of its supervisory jurisdiction over the arbitral process, unless there is a separate clause conferring exclusive jurisdiction on a court in another territorial location, qua the particular provision which is in issue. The courts in Delhi were held to be competent to entertain the petition under Section 11 of the Act since agreement did not contain any exclusive jurisdiction clause in respect of Section 11 of the Act.

Separate clause conferring exclusive jurisdiction as mentioned in My Preferred Transformation and Hospitality Pvt. Ltd was demonstrated in Cars24 Services Pvt. Ltd. Vs. Cyber Approach Workspace LLP[18] wherein in arbitration clause provided:

(i). In case of failure to appoint arbitrator mutually, a party may approach a court of competent jurisdiction at Haryana for appointment of arbitrator;

(ii) The seat of arbitration shall be New Delhi.

It was held in terms of the agreement between the parties, Section 11 of the Act, jurisdiction has contractually been specifically conferred on the High Court of Punjab and Haryana. Once such a specific conferral takes place, by the exclusive jurisdiction clause framed by the parties themselves, the same would operate to vest such exclusive jurisdiction, to that extent, only on such courts and on no other. Thus, notwithstanding New Delhi being the seat of arbitration, the Delhi High Court declined to entertain the petition under Section 11 of the Act.

 

Determination of jurisdiction when clauses of jurisdiction/seat of arbitration is absent

Grant or exclusion of jurisdiction is dependent upon a term in the contract, therefore the contracts which does not contain any term relating to jurisdiction/venue of arbitration, the courts shall be guided by principles of Code of Civil Procedure even in legal proceedings concerning arbitration. Delhi High Court in Madhu Devi Fathepuria v. Jugal Kishore Shyam Prakash[19] had the occasion to deal with a contract which contained an arbitration clause, however, the venue of the arbitration was not recorded, and nothing was said about the jurisdiction of the court. In this matter the Petitioner was a partnership firm which was registered at Delhi. It was held in the absence of the seat or the venue having been agreed upon between the parties, the registration of the firm at Delhi would be a factor to determine the territorial jurisdiction of this Court.

 

Conclusion

• Where the terms of the contract only provide the details of venue of arbitration and is silent about the jurisdiction of the court, the courts having jurisdiction over the venue shall be the court of competent jurisdiction.
• In case, terms of contract record only the jurisdiction clause and is silent about venue of arbitration, the court having jurisdiction over the named jurisdiction city will be the competent court.
• In the event where the terms of contract contain both jurisdiction and venue of arbitration clause, where the named place is same in both the clauses, court having jurisdiction over that place shall have the jurisdiction.
• Where however divergent places are mentioned in both the clauses, the venue of arbitration shall have eminence over the place mentioned in the jurisdiction clause.
• In the absence of any clause pertaining to jurisdiction and/or venue/seat of Arbitration in the contract between the parties, jurisdiction of the Court relating to legal proceedings in the arbitration matter shall be governed by section 20 of the Code read with Section 2(1)(e) of the Act.

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Anupam Srivastava

CITATIONS:

[1] Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552.

[2] Emkay Global Financial Services Ltd. v. Girdhar Sondhi, AIR 2018 SC 3894.

[3] Indus Mobile Distribution Private Limited v. Datawind Innovation Private Limited, AIR 2017 SC 2105.

[4] Indus Mobile Distribution Private Limited v. Datawind Innovation Private Limited, AIR 2017 SC 2105.

[5] Siddhast Intellectual Property Innovations Private Limited v. The Controller General of Patent Designs Trademark, MANU/DE/0040/2021.

[6] Emkay Global Financial Services Ltd. v. Girdhar Sondhi, AIR 2018 SC 3894.

[7] Brahamani River Pallets Limited v. Kamachi Industries Limited, AIR 2019 SC 3658.

[8] BGS SGS SOMA JV v. NHPC, (2020) 4 SCC 234.

[9] Ibid.

[10] Emkay Global Financial Services Ltd. v. Girdhar Sondhi, AIR 2018 SC 3894.

[11] Inox Renewable Ltd v. Jayesh Electrical Limited, MANU/SC/0285/2021.

[12] Goyal Mg Gases Private Limited v. Steel Authority of India, MANU/ DE/2068/2020.

[13] Mankatsu Impex Private Limited v. Air visual Limited, AIR 2020 SC 1297.

[14] Inox Renewable Ltd v. Jayesh Electrical Limited, MANU/SC/0285/2021.

[15] Mankatsu Impex Private Limited v. Air visual Limited, AIR 2020 SC 1297.

[16]Balancehero India Private Limited v. Arthimpact Finserve Private Limited, MANU/DE/0543/2021.

[17] My Preferred Transformation and Hospitality Pvt. Ltd. v. Sumithra Inn, MANU/DE/0019/2021.

[18] Cars24 Services Pvt. Ltd. Vs. Cyber Approach Workspace LLP, MANU/DE/2071/2020.

[19] Madhu Devi Fathepuria v. Jugal Kishore Shyam Prakash, MANU/DE/0853/2020.