INTRODUCTION:
The Delhi High Court in its decision in M/s KLA Const. Technologies Pvt. Ltd. vs M/s Gulshan Homz Private Limited1 inter alia held that the designation of a seat of arbitration carries with it exclusive supervisory jurisdiction, overriding any contrary clause under an agreement on Court's jurisdiction.
FACTS:
On 29th July, 2023, M/s Gulshan Homz Private Limited ("Respondent") issued a Letter of Intent to M/s KLA Const. Technologies Pvt. Ltd. ("Petitioner") for carrying out civil and structural works for the Gulshan Dynasty Moradabad Project and executed an agreement on 6th September, 2023 ("Agreement").
The Petitioner contended that despite mobilizing necessary resources and commencing execution of the work in accordance with the Agreement, delays occurred due to Respondent's failure to fulfill its contractual obligations. The Petitioner contended further that the Respondent did not make timely payments against Running Account Bills and failed to compensate for the additional work executed by it.
In August, 2024, the Respondent informed the Petitioner of the project discontinuation due to poor market response. Thereafter, a mutually agreed final work bill of INR 9.64 crores was recorded in the minutes of the meetings dated 9th September, 2024 and 17th September, 2024 with a balance of INR 2 Crore.
Subsequent thereto, in accordance with clause 33 of the said Agreement, the Respondent issued a termination notice on 6th November, 2024, however, the Respondent did not serve the mandatory 7-day prior notice as required under the said clause.
Thereafter, the Petitioner invoked arbitration through its notice dated 13th November, 2024 and proposed the appointment of a Sole Arbitrator. However, the Respondent failed to respond to the said proposal.
Thereafter, the Petitioner filed a Petition under Section 11 of the Arbitration and Conciliation Act, 1996 ("Act") for appointment of an arbitrator ("Petition").
Upon the notice being issued, the Respondent filed its reply, raising an objection on the territorial jurisdiction of the Delhi High Court to entertain the Petition.
ISSUE FOR CONSIDERATION:
The issue for consideration before the Delhi High Court was whether the Court had territorial jurisdiction to entertain the Petition.
SUBMISSIONS ON BEHALF OF THE PETITIONER:
The Petitioner refuting the contentions of the Respondent invited Court's attention to Clauses 37(a) & 37(b) of the Agreement, as well as Clause 91.2 of the General Conditions of Contract ("GCC") and emphasized that even if the Clauses 37(a) & 37(b) are to be read in conjunction with the clauses of the GCC, the Courts at New Delhi alone would have exclusive jurisdiction over any matter, claim, or dispute arising out of or in relation to the Agreement.
Clause 37(a) of the Agreement provided inter alia that all disputes or differences arising between the parties touching or concerning the Agreement or otherwise touching the subject matter of the Agreement would be referred to arbitration by a sole arbitrator to be appointed mutually by the parties. Under the said clause the seat and venue of such arbitration was Noida/Delhi (State of UP/Delhi). Clause 37(b) of the Agreement inter alia provided that the Agreement and all other matters arising thereto would be subject to clause 37(a) and that the district court of Noida (Uttar Pradesh) and High Court of Allahabad would have exclusive jurisdiction of all or any of disputes.
Clause 91 of the GCC provided inter alia that the Courts of New Delhi alone would have exclusive jurisdiction in respect of any matter, claim or dispute arising out of or in relation to the Agreement. Further, Clause 92 of the GCC provided that the venue of arbitration would be Noida.
The Petitioner relied on the decision of the Supreme Court in Ramkishorelal & Anr. Vs Kamal Narayan2 and on the decisions of the Delhi High Court in My Preferred Transformation vs Sumithra Inn3, Inder Mohan Bhambri vs Landmark Apartments Pvt. Ltd.4 and Vedanta Limited vs Shreeji Shipping5 to submit that where an arbitration clause contemplates multiple prospective seats, the jurisdiction of the Courts at any of the defined seats can be invoked.
The Petitioner contended further that it rightly invoked the jurisdiction of the Delhi High Court for appointment of an arbitrator while maintaining that, in any case, Clause 37(b) of the Agreement allows sufficient scope for Clauses 37(a) and 37(b) of the Agreement to operate independently as they both apply within their respective spheres and do not encroach upon each other.
SUBMISSIONS ON BEHALF OF THE RESPONDENT:
The Respondent raised an objection with respect to the territorial jurisdiction of the Court and submitted inter alia that clauses 37(a) and 37(b) of the Agreement indicate that the Courts at Noida/New Delhi are designated as the seat/venue of arbitration. However, when these clauses are read in conjunction with Clause 92.10 of the GCC, the venue of arbitration is exclusively at Noida.
In support of the above contention, the Respondent placed reliance on the decisions of the Supreme Court in the matters of Radha Sunder Dutta vs Mohd. Jahadur Rahim6 and South East Asia Marine Engg. & Constructions Ltd. (SEAMEC LTD.) vs Oil India Ltd.7 along with the decision of the Delhi High Court in the matter of Axalta Coating Systems India (P) Ltd. vs Madhuban Motors (P) Ltd.8
JUDGMENT:
The Delhi High Court relied on its own decision in Devyani International Ltd. vs Siddhivinayak Builders and Developers9 wherein it was held that when a clause of an agreement designated New Delhi as the seat of arbitration but another clause conferred exclusive jurisdiction on the Courts at Mumbai, primacy must be given to the seat and that once the seat has been designated, only the Courts at the seat would have jurisdiction to entertain applications arising out of the arbitration agreement.
The Court also placed reliance on its earlier decision in NJ Construction vs Ayursundra Health Care (P) Ltd.10 observing that although the agreement therein conferred exclusive jurisdiction on the Courts of Guwahati, the seat of arbitration was New Delhi. In the aforesaid matter, the Court ruled that only the Courts at New Delhi would have jurisdiction, rejecting the claim of jurisdiction by Courts at Guwahati. The Court also observed that several other coordinate Benches of the Delhi High Court have consistently followed this line of reasoning reaffirming that the designation of a seat of arbitration carries with it exclusive supervisory jurisdiction, overriding any contrary clause on Court's jurisdiction. The Court observed that if Clauses 37(a) and 37(b) of the Agreement are considered in the correct perspective then what emerges from Clause 37(a) is that all disputes and differences arising between the parties which are arbitrable in nature shall be referred to arbitration by a sole arbitrator to be mutually appointed by the parties and that the arbitration shall be conducted in accordance with the Act. Since Clause 37 unequivocally states that the seat and venue of arbitration shall be Noida/New Delhi (State of U.P./Delhi), it is evident that there is no conflict regarding the seat and venue of arbitration which may be either Noida or Delhi.
The Court further observed that Clause 37(b) conferred exclusive jurisdiction upon the District Courts of Noida, Uttar Pradesh and the High Court of Judicature at Allahabad subject to the arbitration clause in Clause 37(a) which confers jurisdiction in the Courts at Delhi as the Petitioner has chosen the seat as Delhi.
In furtherance to the above, the Court placed reliance upon Inder Mohan (supra) wherein it was held that when an exclusive jurisdiction clause is expressly made subject to the arbitration clause and the arbitration clause specifies a different territorial location as the seat of arbitration then the arbitration clause, including the stipulation regarding the seat shall prevail over the exclusive jurisdiction clause. The Court also observed that the above interpretation is supported by the judgments relied upon by the Respondent, particularly in Radha Sundar Dutta (supra). The Court also placed reliance on the decision passed in the case of Vedanta Limited (supra) observing that when the arbitration clause provides for multiple jurisdictional seats, the jurisdiction of the Courts of any of the defined seats can be invoked.
In view of the above, the Court further observed that clause 92.10 of the GCC must be read in the context of Clauses 91.2 which unequivocally states that the Courts at New Delhi shall have exclusive jurisdiction over any matter, claim, or dispute arising out of or in relation to the contract. Further, that Clause 37(b) of the Agreement must be construed as being "Subject to" clause 37(a) in order to uphold the express hierarchy and intent embedded in the Agreement. Any other construction would defeat the clear intent and express mandate of the Agreement. The Court held that the interpretation outlined therein is the only way to harmoniously construe the relevant clauses and give meaningful effect to every word used therein.
Accordingly, the Court held that it had territorial jurisdiction to adjudicate the Petition.
Footnotes
1. Arbitration Petition No. 90 of 2025
2. (1962) SCC OnLine SC 113
3. (2021) SCC OnLine Del 1536
4. (2024) SCC OnLine Del 8208
5. (2024) SCC OnLine Del 4871
6. 11958 SSC OnLine SC 38
7. (2020) 5 SCC 164
8. 2024 SCC OnLine Del 9303
9. 2017 SCC OnLine Del 11156
10. 2018 SCC OnLine Del 7009
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
