Resolving Ambiguities: Exclusive Jurisdiction vis-à-vis Seat, Venue and Place of Arbitration

Introduction

In domestic arbitrations, an issue that has caused a lot of confusion in the recent past is the interplay between the concepts of “seat/venue of arbitration” and “exclusive jurisdiction” which has captivated the attention of the Bar and the Bench alike. The puzzling question then arises: Should the exclusive jurisdiction clause take precedence over the selection of the seat, or should the seat of arbitration be the overriding factor in determining the competent court’s jurisdiction? Another issue that has often come up for consideration is the interplay between the clause naming a venue/place and an exclusive jurisdiction clause to determine the seat of the arbitration.

At the heart of this discourse is the exploration of how different courts have examined the relationship between exclusive jurisdiction clauses, the venue, and the seat of arbitration. This article attempts to analyse the various judicial decisions and summarise the approach taken by the courts.³

By delving into the judicial reasoning behind these decisions, we aim to decipher the underlying principles that courts have employed to harmonise these seemingly divergent elements.

Seat versus exclusive jurisdiction: Supremacy of the seat

This portion of the article sets out the approach of the courts wherein they have interpreted the seat of arbitration to confer and denote exclusive supervisory jurisdiction over the arbitral process and accordingly, have given primacy to the seat of the arbitration.

This issue fell for consideration before the High Court of Delhi in Devyani International Ltd. v. Siddhivinayak Builders and Developers⁴, wherein Clause 11 of the agreement designated New Delhi as the seat of arbitration; however, Clause 12 provided that courts at Mumbai shall have the exclusive jurisdiction. The Court gave primacy to the seat clause and held that once the seat has been designated, only the courts at the seat would have jurisdiction to decide any applications arising out of the arbitration agreement.

In NJ Construction v. Ayursundra Health Care (P) Ltd.⁵, the agreement conferred exclusive jurisdiction on the courts at Guwahati, however, New Delhi was chosen as the seat of arbitration. The High Court of Delhi held that only the courts at the seat would have jurisdiction and not the courts at Guwahati. Several other Coordinate Benches of the Delhi High Court have also decided on similar lines.⁶

In Aniket Sa Investments LLC v. Janapriya Engineers Syndicate (P) Ltd.⁷, the Bombay High Court was dealing with an identical situation where the courts at Hyderabad were conferred with exclusive jurisdiction whereas the seat of arbitration was named as Bombay. The Court held that once the seat has been designated, it would amount to conferring exclusive jurisdiction over the courts at the seat, and no other court, including the court where the cause of action arose, would have concurrent jurisdiction.

In Ayyappa Enterprises v. Sugam Vanijya Holdings⁸, the High Court of Madras held that once the seat of arbitration has been decided by the parties, the mere presence of an opposing exclusive jurisdiction clause is inconsequential.

A similar approach has been adopted by the High Court of Delhi in the ofTalwar Auto Garages (P) Ltd. v. VE Commercial Vehicles Ltd.⁹, wherein it gave a superseding effect to the seat of arbitration over the exclusive jurisdiction clause.

Seat versus exclusive jurisdiction: Forum selection clause prevails

Set out below are judgments where the High Courts have interpreted the interplay between both the clauses differently and given precedence to the exclusive jurisdiction clause.

In CARS24 Services (P) Ltd. v. Cyber Approach Workspace LLP¹⁰, the High Court of Delhi was dealing with a peculiar situation wherein the agreement designated New Delhi as the seat of arbitration; however, the exclusive jurisdiction for the limited purpose of the appointment of the arbitrator was conferred on the courts at Haryana. Despite the fixation of the seat of arbitration which is akin to conferment of exclusive jurisdiction, the Court held that it did not have the territorial jurisdiction to appoint the arbitrator given the exclusive jurisdiction conferred on the courts at Haryana. In giving effect to the exclusive jurisdiction clause, the Court held that the exclusive jurisdiction clause would prevail over the seat clause in the arbitration agreement. The Court distinguished the judgments in Devyani case¹¹ and NJ Construction case¹² observing that when the exclusive jurisdiction is about the subject-matter of the suit, the seat prevails; however, when the exclusive jurisdiction clause directly deals with the matters of arbitration, it would be given precedence over the seat clause.

In Hunch Circle (P) Ltd. v. Futuretimes Technology India (P) Ltd.¹³, the High Court of Delhi dealt with an equally peculiar situation wherein the seat of arbitration was Delhi, however, the exclusive jurisdiction, especially for interim reliefs and enforcement of award was conferred on the courts at Haryana. Following the dicta of CARS24 case¹⁴, the Court dismissed the petition seeking the appointment of an arbitrator for the want of territorial jurisdiction by observing that once the exclusive jurisdiction, for any matter connected with the arbitration agreement, is conferred on a particular court, that court shall have exclusive jurisdiction for all other purposes including the appointment of an arbitrator regardless of the fact that some other place has been designated as the seat of arbitration. The Court also took the aid of Section 42 of the Arbitration and Conciliation Act, 1996 to substantiate its view.

The High Court of Calcutta in Commercial Division Bowlopedia Restaurants India Ltd. v. Devyani International Ltd.¹⁵ held that once the parties have, in their forum selection clause, conferred exclusive jurisdiction on a competent court, it alone shall have jurisdiction over the subject arbitration notwithstanding the selection of seat at a different place. The Court held that the selection of seat, in cases of domestic arbitration, assumes significance only in the absence of a valid forum clause and not otherwise.

In a recent case of Manmohan Kapani v. Kapani Resorts (P) Ltd.¹⁶, the High Court of Delhi has tried to harmonise the two concepts by holding that unless the exclusive jurisdiction clause explicitly deals with the arbitration related proceedings, it should not be given precedence over the seat of arbitrationjurisdiction clause would come into play only when the parties do not resort to arbitration.

An absence of direct dictum from the Supreme Court of India has left the Indian courts in a state of divergence when it comes to the interpretation of seat versus exclusive jurisdiction clauses in arbitration agreements. The jurisprudence discussed above underscores a critical point for an exclusive jurisdiction clause to assert primacy over the seat of arbitration, it must explicitly encompass arbitration related proceedings. This underscores the paramount importance of precise and unambiguous wording in a dispute resolution clause.

Venue versus exclusive jurisdiction: When choice of venue prevails

In Raman Deep Singh Taneja v. Crown Realtech (P) Ltd.¹⁷, one clause in the agreement provided for exclusive jurisdiction with the courts of Delhi, while, designating Faridabad, Haryana as the venue of arbitration. The High Court of Delhi gave precedence to the venue of arbitration over the exclusive jurisdiction vested over the courts of Delhi. It held that in cases where disputes are to be resolved outside the scope of arbitration, exclusive jurisdiction lies with the Delhi courts. However, when arbitration is the chosen method for dispute resolution with the venue being Faridabad, Haryana exclusive jurisdiction falls under the jurisdiction of the courts in Faridabad, Haryana.

In Global Credit Capital Ltd. v. Krrish Realty Nirman (P) Ltd.¹⁸, the High Court of Delhi, while dealing with an identical situation, relied on the decision of Raman Deep Singh Taneja case¹⁹ to hold that the designation of venue would override an exclusive jurisdiction clause.

In My Preferred Transformation and Hospitality (P) Ltd. v. Sumithra Inn²⁰, the place of arbitration was agreed to be New Delhi and the exclusive jurisdiction was vested in the courts of Bengaluru. The High Court of Delhi held that a generalised “exclusive jurisdiction” clause would not have the effect of nullifying the designation of a place of arbitration. It held that for an exclusive jurisdiction clause to have an overriding effect on the place of arbitration, it must specifically refer to a proceeding arising out of the arbitration agreement only. The Court also rejected the argument regarding the exclusive jurisdiction clause being a contrary indicium that would prevent the place from becoming the seat of arbitration. This view has been followed by a coordinate bench in Reliance Infrastructure Ltd. v. Madhyanchal Vidyut Vitran Nigam Ltd., wherein the Court held that a generic exclusive jurisdiction clause does not override the choice of venue exercised by the parties.²¹

The view in Raman Deep Singh Taneja case²² has been affirmed by the Division Bench of the Delhi High Court in its recent judgment in Yassh Deep Builders LLP v. Sushil Kumar Singh²³. The Division Bench clarified that an exclusive jurisdiction designation can supersede the venue designation in an arbitration clause only if it is expressly included in the arbitration clause itself, rather than being a separate clause in the agreement. The Bench further explained that the exclusive jurisdiction clause is applicable only if the parties decide to exclude themselves from the arbitration agreement or if the dispute is not covered by the arbitration clause.

The Bombay High Court in Mukta Agriculture Ltd. v. Radhegovindkripa Developers (P) Ltd.²⁴, considered the incompatibility between the venue and the exclusive jurisdiction clause. It ruled that when an agreement specifies that arbitration will take place at a particular location, it is tantamount to designating the seat of arbitration. In such a scenario, the mere inclusion of an exclusive jurisdiction clause, assigning jurisdiction to a different court, does not serve as a contrary indication.

In Height Insurance Services Ltd. v. Reliance Nippon Life Insurance Co. Ltd.²⁵, the High Court of Calcutta took a similar view and held that venue would essentially be the seat of arbitration when it is agreed that the arbitration in its entirety would be held at that place only and exclusive jurisdiction being conferred on a different court would be inconsequential.

The same issue fell for consideration before the Madras High Court in Balapreetham Guest House (P) Ltd. v. Mypreferred Transformation and Hospitality (P) Ltd.²⁶. The Court harmoniously construed the two inconsistent clauses and held that the “exclusive jurisdiction” clause would determine the jurisdiction of the court, if parties abandon their right to arbitrate the dispute and file a civil suit. However, if the parties choose to pursue the remedy of arbitration, the place/venue where the parties have agreed to have the arbitration proceedings is essentially the seat of arbitration which is akin to vesting exclusive jurisdiction on seat courts.

A similar view has been taken by the Jharkhand High Court in R.K. Mineral Development (P) Ltd. v. Hindalco Industries Ltd.²⁷, wherein the Court held that the mere presence of an exclusive jurisdiction clause in favour of a different court does not constitute contrary indicia. In such cases, the venue of arbitration remains the seat of arbitration, and an exclusive jurisdiction clause does not override the designated arbitration venue. It held that the exclusive jurisdiction clause would have force when the parties take recourse to a civil suit.

On a conspectus of the abovementioned judgments, it becomes apparent that, the courts have treated the venue as the seat of arbitration and gave it an overriding effect over the exclusive jurisdiction clause. However, there is a line of judgments by the High Courts wherein a contrary view has been taken and the choice of party in vesting exclusive jurisdiction on a different court has been regarded as a contrary indicium which prevents the venue from becoming the seat of arbitration.

Venue versus exclusive jurisdiction: When forum selection becomes a contrary indicium

In Virgo Softech Ltd. v. National Institute of Electronics and Information Technology²⁸, the High Court of Delhi held that a stipulation in the agreement that arbitration shall be conducted at New Delhi denotes merely the venue of arbitration and not the seat when the exclusive jurisdiction in relation to the disputes arising out of the arbitration proceedings is conferred on the courts at Chandigarh

In Isgec Heavy Engg. Ltd. v. Indian Oil Corpn. Ltd.²⁹, the venue of arbitration was fixed at New Delhi, but the agreement contained another clause that vested the courts at Guwahati with the exclusive jurisdiction for any dispute arising out of the agreement. The High Court of Delhi held the exclusive jurisdiction clause served as a contrary indicium and the venue was only a physical place of meeting under Section 20(4) of the agreement.

In Cravants Media (P) Ltd. v. Jharkhand State Coop. Milk Producers Federation Ltd.³⁰, the High Court was dealing with the same incongruity. It held that when the parties stipulate exclusive jurisdiction in a different location, it serves as evidence that the initially chosen arbitration venue was more a matter of convenience than the true seat of arbitration.

Similarly, in Kush Raj Bhatia v. DLF Power and Services Ltd.³¹, the High Court of Delhi held that if the parties provide for the exclusive jurisdiction on the courts at a different place, it is a contraindication that the chosen place of arbitration was merely the venue and not the seat of arbitration. This view has also been endorsed by another coordinate bench in Meenakshi Nehra Bhat v. Wave Megacity Centre (P) Ltd.³²

The Calcutta High Court also had an occasion to comment on this controversy in Homevista Décor and Furnishing (P) Ltd. v. Connect Residuary (P) Ltd.³³ It held that a specific forum clause that confers exclusive jurisdiction to courts in a different location would be considered contrary indicium while ascertaining that whether the venue is actuallythe seat of arbitration.

Similar views have been expressed by the Allahabad High Court in Hasmukh Prajapati v. Jai Prakash Associates Ltd.³⁴, the High Court of Gujarat in InstaKart Services v. Megastone Logiparks (P) Ltd.,³⁵ and the Rajasthan High Court in Aseem Watts v. Union of India³⁶.

Conclusion

Considering party autonomy is sacrosanct in arbitration proceedings, the general rule that emanates from the judicial pronouncements is that a clause providing for seat of arbitration is to prevail over an exclusive jurisdiction clause. The exception to this general rule is only where the parties have consciously and specifically agreed to the contrary. In other words, it is only when the relevant dispute resolution clause specifically carves out an exception and provides for specific kinds of matters (like appointment of arbitrator, interim relief, etc.) to be filed before specific courts, the exclusive jurisdiction clause may prevail over the clause providing for seat. A contrary exclusive jurisdiction clause may not be sufficient to be considered as a significant contrary indicium by itself (in the absence of other factors) and even a clause providing only for venue or place of arbitration may be construed as the seat of arbitration.

In situations where the arbitration agreement unequivocally designates a seat of arbitration, it is imperative to accord overriding significance to this designation to uphold the principle of party autonomy. Party autonomy is a foundational tenet of arbitration, and honouring the explicitly chosen seat of arbitration ensures that the parties’ intentions are respected.

However, a more nuanced approach is warranted when the arbitration agreement specifies only the venue or place of arbitration and is accompanied by a contradictory exclusive jurisdiction clause. This caution arises from the fundamental distinction between a mere “venue” and the “seat” of arbitration. The seat holds paramount importance as it not only dictates the legal framework under which the arbitration proceedings are conducted but also determines the supervisory jurisdiction of the relevant courts. In contrast, the venue primarily serves as a logistical convenience for the proceedings, often chosen for practical reasons. However, in the absence of a specific clause providing for seat, a venue may also be considered to be indicative of the intent of the parties to treat the same as the seat of arbitration and a contrary exclusive jurisdiction clause (in the absence of other factors) may not be a significant contrary indicium. However, in view of the divergent views it is possible for the courts to take a different approach as has been seen in some of the judgments discussed.

In the aforesaid premises, parties must ensure that the words used in an arbitration agreement or dispute resolution clause captures their intentions correctly without leaving any scope for any contrary interpretation or ambiguity and if the agreement does contain two conflicting clauses, it may be advisable for the parties to clearly specify which one would have the overriding effect over the other and in what scenarios.