LI Network
Published on: 17 August 2023 at 16:06 IST
The Delhi High Court has ruled that the venue where arbitration proceedings are anchored serves as the ‘seat of arbitration,’ taking precedence over a generic exclusive jurisdiction clause in, Reliance Infrastructure Limited V. Madhyanchal Vidhyut Vitran Nigam Limited, OMP.
It emphasized that a generic exclusive jurisdiction clause does not serve as evidence preventing the designated venue from becoming the seat of arbitration.
Justice Sachin Datta’s bench held that, for an exclusive jurisdiction clause to supersede a venue clause, it must explicitly stipulate that the courts in a specific location hold exclusive jurisdiction over the arbitration proceedings.
A generic exclusive jurisdiction clause that does not directly reference arbitration proceedings does not take precedence over the venue clause.
Background
The respondent had solicited bids for Rural Electrification works in Pilibhit and Hardoi Districts, Uttar Pradesh, under the Rajiv Gandhi Gramin Vidyutikaran Yojana Scheme. The petitioner submitted proposals for the works.
Clause 8 of the General Conditions of Contract (GCC) granted exclusive jurisdiction to the courts in New Delhi, and Clause 48 of the GCC designated New Delhi as the venue for arbitration. However, the Letter of Award (LOA) issued to the petitioner indicated that the courts in Lucknow would have exclusive jurisdiction over all contract-related matters. Notably, the LOA made this clause subject to the GCC.
A dispute arose between the parties, leading the petitioner to invoke the arbitration clause. A three-member tribunal was initially formed, but its mandate ended by mutual agreement. Subsequently, the parties appointed a sole arbitrator.
The petitioner requested an extension of the 18-month period under Section 29A of the A&C Act for delivering the arbitral award.
The respondent contested the petition’s jurisdiction on the grounds that the seat of arbitration was in Lucknow, Uttar Pradesh, and the cause of action and contract performance occurred exclusively within Uttar Pradesh.
The respondent argued that “New Delhi” in the arbitration clause indicated a neutral venue rather than the seat of arbitration. Additionally, the LOA’s Clause 21.2 designated the “local court of Lucknow” with exclusive jurisdiction and took precedence over the GCC’s “Courts of Delhi” clause.
The petitioner argued that the court had territorial jurisdiction due to the arbitration’s seat being in Delhi. The petitioner also pointed out that Clause 21.3 of the LOA was “subjected to” the GCC, and the “Courts of Delhi” clause in the GCC prevailed over Clause 21.2 of the LOA.
Court’s Analysis
The court highlighted that Clause 8 of the GCC provided exclusive jurisdiction to the courts in New Delhi, and Clause 48 of the GCC designated New Delhi as the venue for arbitration.
It emphasized that the generic exclusive jurisdiction clause in the LOA did not specifically refer to arbitration proceedings.
The court clarified that an exclusive jurisdiction clause must explicitly state that the courts at a particular location hold exclusive jurisdiction over the arbitration proceedings to supersede a venue clause. A generic exclusive jurisdiction clause that lacks such specificity cannot override the venue clause.
The court reaffirmed the significance of the seat of arbitration as a manifestation of party autonomy enshrined in the Arbitration and Conciliation Act.
It emphasized that the seat of arbitration could serve as a neutral location and should ideally be the place where the cause of action originated.
The court dismissed the respondent’s objections and granted a one-year extension of the arbitrator’s mandate.
