Arbitration Clause Upheld by Delhi High Court Despite Multiple Seat Options

LI Network

Published on: February 18, 2024 at 15:13 IST

In a recent ruling, the Delhi High Court, through a single bench headed by Justice Jasmeet Singh, has affirmed the validity of an arbitration clause stipulating multiple seats.

The Court held that such a provision, offering parties a choice, is not rendered void under Section 29 of the Indian Contract Act, 1872, which deems agreements uncertain in meaning or incapable of being made certain as void.

The case involved a Purchase Order between Vedanta Limited (the “Petitioner”) and Shreeji Shipping (the “Respondent”) for coal transportation.

The Petitioner, citing shortfalls and contractual disputes, invoked the arbitration clause and filed a Section 11 petition under the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator.

The Respondent disputed the existence of an arbitration agreement, arguing that the Purchase Order was never accepted and that the arbitration clause was not agreed upon.

The Respondent also challenged the jurisdiction of the arbitration agreement, contending that the specified seat options were void under Section 29 of the Indian Contract Act, 1872.

The High Court, in its observations, highlighted that its role in a Section 11 petition is limited to determining the prima facie existence of an arbitration agreement. It noted that the Purchase Order, though denied by the Respondent, was sent via email, and the Respondent’s invoices referenced the Purchase Order, indicating acknowledgment of the Contract and the arbitration agreement.

Addressing the applicability of Section 29, the court clarified that the arbitration clause, specifying multiple seats (Goa, Karnataka, or Delhi), did not fall within the purview of agreements declared void under the section.

The Court referred to the Supreme Court’s decision in Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. and likened designating the seat of arbitration to an exclusive jurisdiction clause.

The Delhi High Court upheld its jurisdiction to entertain the Section 11 petition, as the arbitration clause provided clear options for jurisdiction.

Consequently, the Court allowed the petition, appointing Mr. Abhijat as the sole arbitrator to adjudicate the dispute between Vedanta Limited and Shreeji Shipping.

Case Title: Vedanta Limited vs. Shreeji Shipping, with the case number ARB.P. 342/2023.

Related Post