What is the competency of the Court when the parties have not agreed on the seat of the arbitration? The competency of Court to entertain an application under Section 11 of the Arbitration and Conciliation Act is in Section 2(1)(e) of the Act. It is read with Sections 16 to 20 of the Code of Civil Procedure (Parka Sports Management Pvt. Ltd. vs Kalsi Buildcon Pvt. Ltd).
Brief Facts of the Case
The Petitioner, Parka Sports Management, had moved Section 11 petition against the Respondent, Kalsi Buildcon Pvt Ltd. This came up on the agreement dated 16th March 2018. The Respondent did not dispute the arbitration agreement or the notice of invocation. They hold that the Delhi High Court lacks the jurisdiction to entertain the Petition.
Contentions of the Petitioner
The Petitioner stated that the agreement vested exclusive jurisdiction to courts in Delhi at the time of hearing under Clause 15.1. Hence, the Delhi High Court had the power to decide the Petition. They relied on Indus Mobile Distribution Pvt Ltd vs Datawind Innovations Pvt Ltd (2017). Also, Brahmani River Pellets Limited vs Kamachi Industries Limited (2019), and several other cases.
Contentions of the Respondent
The learned counsel disputed over the Court jurisdiction to entertain the Petition. They stated that Delhi was neither the seat of arbitration nor had any cause of action arisen there. The Respondent informed the Court that the agreement begun at Ranchi. It got signed at Lucknow, and the place of performance/execution of the agreement was Patna, Bihar. They relied on Interglobe Aviation Limited v N. Satchidanand (2011).
Respondent added that Clause 15.1 was not absolute as it was subject to arbitration Clause 15.3. As per this, parties need to approach the “Court of proper jurisdiction” for the invocation of the sole arbitrator. This was according to Section 2(1)(e) of the Arbitration and Conciliation Act. They further relied on GE Countrywide Consumer Financial Services Ltd. Vs Surjit Singh Bhatia (2006), Apparel Export Promotion Council v. Prabhati Patni (2005), and several others. Indus Mobile Distribution Pvt Ltd, relied upon by the Petitioner, had the seat of arbitration at Mumbai. However, the present case did not provide for a seat. They had mentioned Sections 2(1) (e), 20, 31(4) to support their arguments.
Court’s Observation
A single Judge Bench of Justice JR Midha had been setup. Advocates Kumar Mihir, Shamik Narain, represented the Petitioner. For Respondents, other groups of advocates took charge. They are Sharan Thakur, Siddharth Thakur, Gurmehar Sistani, Ketan Paul, and Vijay Kumar.
The Court observed that in Section 20, parties had the autonomy to choose a “neutral seat of arbitration”. This means where no part of the cause of action had arisen, or this place may not otherwise have had jurisdiction under Sections 16 to 21 of CPC. It added that the Court of that place had the exclusive jurisdiction, once the seat got determined. It could regulate the arbitration proceedings arising out of the agreement between the parties. However, when the parties had not determined the seat of arbitration, the Arbitral Tribunal would determine the same. This is under Section 20(2) of the Arbitration and Conciliation Act. The Court held:
“If the parties have not agreed on the seat of the arbitration, the Court competent to entertain an application under Section 11 of the Arbitration and Conciliation Act would be the “Court” as defined in Section 2(1) (e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure.”
Court’s Decision
The Court concluded that the arbitration agreement did not stipulate any seat of arbitration. Thus, the courts in Delhi lacked territorial jurisdiction to hear the Petition. It said:
“This Court lacks territorial jurisdiction as Delhi is not the seat of arbitration; no cause of action arose at Delhi, and the Respondent does not work at Delhi. The Petitioner could have succeeded if the agreement had provided the seat of arbitration to be Delhi. In that case, this Court would have exclusive jurisdiction to entertain this application.”
The Court added that the exclusive jurisdiction clause in the agreement would not come for Petitioner’s rescue. This is so as the parties could not have conferred jurisdiction on a court which otherwise had no jurisdiction. The Petition was thus dismissed with liberty to the Petitioner to approach the Court of competent jurisdiction.
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