M/S Hamdard Laboratories (India) Versus M/S Sterling Electro Enterprise

Court / Forum : High Court of Delhi
Citation : ARB. P. 218/2020
Coram : Ms. Justice Rekha Palli
Subject : Section 11 of Arbitration and Conciliation Act, 1996 (“1996 Act”)
Date of Decision : 0000-00-00

Brief Facts

• Petition under Section 11(6) of the 1996 Act was filed seeking appointment of a sole arbitrator to adjudicate the disputes between the parties arising out of the work order dated March 1, 2018 (“Work Order”).
• The Respondent has challenged the maintainability of the present Petition by stating that the Court does not have territorial jurisdiction to entertain the present petition, since neither did the cause of action arise in Delhi nor did the parties ever agree to designate Delhi as the seat of arbitration. The Respondents have further argued that once the agreement does not provide for any seat of arbitration, much less designate Delhi as one, the Petitioner was required to approach the Court within whose jurisdiction the cause of action had arisen, in accordance with Section 2 (1)(e) of the 1996 Act read with Sections 16 to 20 of the Code of Civil Procedure, 1908 (“CPC”).
• The following is relevant portion of the arbitration clause in the present matter:
  “The courts of law at Delhi alone shall have the jurisdiction…”

Issues

1. Whether the court of Delhi shall have the territorial jurisdiction to adjudicate the matter or not?

Decision

• The Courts after examining the arbitration clause, held that the sentence ‘The courts of law at Delhi alone shall have the jurisdiction` is a clear expression of the parties` intent to confer exclusive jurisdiction in all arbitrations arising out of the Work Order, upon the courts at Delhi.
• It was also observed by the Court that the clause contained in the Work Order is explicit and it is clear that Delhi has not been designated as a venue but has been designated as a seat of arbitration. Further, the absence of the term ‘seat` while referring to the courts at Delhi, does not alter the fact that the courts of law at Delhi alone have been vested with the jurisdiction upon arbitration proceedings arising out of the subject Work Order.
• The Court held that the law does not prohibit parties from agreeing to confer exclusive jurisdiction in respect of arbitration proceedings, on mutually preferred, neutral seats. Therefore, notwithstanding the fact that no part of the cause of action arose in Delhi, the clear expression of intent within the arbitration clause to confer jurisdiction on the courts at Delhi culls out the fact that the parties chose Delhi as a neutral seat of arbitration.
• In this regard, reference was made to the decision in Indus Mobile Distribution Private Limited Vs. Datawind Innovations Private Limited & Ors. (2017) 7 SCC 678 wherein the Hon`ble Supreme Court held the following:

  “…In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, 1996, the appeal against such an interim order under Section 37 must lie to the courts of Delhi being the courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the courts would have jurisdiction i.e. the court within whose jurisdiction the subject-matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution i.e. arbitration is located.”

• Further reference was also placed on the case of Virgo Softech Ltd. Vs. National Institute of Electronics and Information Technology (Arb. P. 749/2018) wherein the Court while examining an arbitration clause which provided that arbitration would be held in New Delhi but the courts in Chandigarh would have exclusive jurisdiction over disputes arising out of arbitration. Ultimately, the Court held that once, as per the express provisions of the arbitration agreement, the parties had conferred exclusive jurisdiction on the courts in Chandigarh on all arbitration proceedings, then only the courts at Chandigarh would have exclusive jurisdiction to entertain a petition under Section 11 of the 1996 Act.
• Thus, the Court held that in the present matter it is clear that the parties had envisaged conferment of exclusive jurisdiction upon the courts in Delhi to decide all disputes relating to arbitration, arising out of the Work Order in question.

Vipul Ganda is a Delhi based Advocate practicing largely at the Delhi High Court. His practice focus is Dispute Resolution and Litigation and his practice areas include Arbitration, Commercial, Civil, Constitutional, Corporate and Criminal Litigation.