Delhi High Court: In a case wherein the petitioner filed a petition under Section 11(6) and (8) of the Arbitration and Conciliation Act, 1996 (‘Act’) seeking appointment of an independent and impartial arbitrator as well as declaration to the effect that the respondent’s nomination and appointment of the arbitrator was contrary to the procedure stipulated in the Letter of Intent (‘LoI’) executed between the parties, Manoj Kumar Ohri, J.*, held that the accrual of cause of action at a place for pursuing a substantive legal action was not a consideration for determining jurisdiction for the purposes of Section 11 of the Act. The Court opined that in the present case, as per Clause 31.16 of the LoI, the place of arbitration was Faridabad (Haryana), which would be chosen as the seat, since seat had not been separately named and there was no other contrary indicia to show that the place of arbitration was not intended to be the seat of arbitration. Thus, the Court held that this Court lacked territorial jurisdiction to entertain the present petition.
On 19-03-2021, the respondent had issued a LOI to the petitioner to carry out ‘Civil and Structure Works’ for its proposed ‘Metro Cancer Building at Sector-16A, Faridabad, Haryana’ and he time for completion was twelve months from the date of the issuance of the LoI. The petitioner claimed that it had completed the project timely and to the satisfaction of the respondent but it had not received the complete payment against the final bill. The petitioner submitted that as per the Clause 5.2 of the LoI, payments were required to be released by the respondent within ninety days from the date of receipt of the Bill however, despite various meetings and reminders, the needful was not done.
The petitioner issued legal notice, thereby demanding the balance amount of Rs. 3,40,07,068, to which the respondent replied that it had appointed Justice S.N. Agarwal (Retd.) as the sole arbitrator. The petitioner objected to the appointment of the arbitrator and contended that the act of appointing the arbitrator was not as per the procedure stipulated in the LoI, which explicitly provided that the sole arbitrator was to be appointed by the Management Review Committee in consultation with the petitioner.
The respondent raised the reliminary objection to the maintainability of the petition on the ground of territorial jurisdiction. It was contended that as per the LoI, Faridabad was stated/decided as the place of arbitration, due to which the jurisdictional court for entertaining the petition would be the Punjab and Haryana High Court and not Delhi High Court. The petitioner submitted that since the LoI was signed in Delhi, the arbitrator was based in Delhi, and the preliminary hearing held by the arbitrator was in Delhi, thus, the Delhi High Court shall have jurisdiction to entertain the petition.
Analysis, Law, and Decision
The Court noted that the LoI stipulated that in cases of dispute, difference or question arising out of or in respect of the agreement, the same shall be resolved through arbitration. The Court relied on Bharat Aluminium Company v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552, wherein it was held that “once the seat of arbitration is fixed, the same would be in the nature of an exclusive jurisdiction clause binding the parties to a specific court which alone could exercise supervisory power over the arbitration”. The Court also relied on BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234, wherein it was held that “the venue so stated is not the ‘seat’ of arbitral proceedings, but only a convenient place of meeting and with there being no other significant contrary indicia that the stated venue is merely a ‘venue’ and not the ‘seat’ of the arbitral proceedings, would then conclusively show that such a clause designates a ‘seat” of the arbitral proceedings”.
The Court held that the accrual of cause of action at a place for pursuing a substantive legal action was not a consideration for determining jurisdiction for the purposes of Section 11 of the Act, and that the location of the seat of arbitration was a relevant consideration. The Court opined that in the present case, as per Clause 31.16 of the LoI, the place of arbitration was Faridabad (Haryana), which would be chosen as the seat, since seat had not been separately named and there were no other contrary indicia to show that the place of arbitration was not intended to be the seat of arbitration. Thus, the Court held that this Court lacked territorial jurisdiction to entertain the present petition, however, the petitioner shall be at liberty to approach the court concerned in accordance with law.
[G R Builders v. Metro Speciality Hospitals Pvt. Ltd., 2023 SCC OnLine Del 6037, decided on 26-09-2023]
*Judgement authored by — Justice Manoj Kumar Ohri
Advocates who appeared in this case :
For the Petitioner: Ms. Amrit Kaur Oberoi, Ms. Pallavi Maurya and Mr. Aditya Kumar Hire, Advocates.
For the Respondents: Ms. Malviya Trivedi, Senior Advocate; Mr. Deepak Gera, Mr. Sumit Kumar Dubey, Mr. Satender Adhana, Mr. Aditya Jai, Mr. Suchakshu Jain, Ms. Sujal Gupta, Mr. Nipun Katyal, Advocates.