Delhi High Court Clarifies The Implication Of ‘exclusive Jurisdiction’ And ‘venue Of Arbitration’ Clauses In A Contract
The Delhi High Court (“Delhi HC/Court”) in Reliance Infrastructure Limited v/s Madhyanchal Vidyut Vitran Nigam Limited 1 (the “Judgement”) clarified that a standard exclusive jurisdiction clause in a contract does not stand as a contrary indica which prevents a designated venue to be considered as the seat of arbitration in arbitral proceedings.
The Court also reiterated the ‘law of seat’ as laid down in BGS SGS Soma v. NHPC Limited2 that in the event an arbitration agreement does not specify the seat of the arbitration, and unless there are any contrary indications, the designation of a venue in an arbitration clause can indicate the seat for the purposes of interim orders and challenges to an award.
The brief facts of the case were as follows:
- Reliance Infrastructure Limited (“Reliance”) had submitted bids for rural electrification works vide a tender under the Rajiv Gandhi Gramin Vidyutikaran Yojana.
- The General Conditions of Contract (“GCC”) for the inviting such tenders contained a dispute resolution clause which stated that the venue of the arbitration shall be New Delhi.
- Subsequently, Reliance was declared as a successful bidder and a Letter of Award (“LOA”) was issued to it. The LOA contained the following two provisions:
- A. The local court of Lucknow, High Court of Allahabad, and the Supreme Court, shall have the exclusive jurisdiction in all matters arising out of the contract; and
- B. The provisions of the GCC would prevail over the LOA in case of any contradictions between the two.
- When a dispute arose between the parties, Reliance invoked the arbitration proceedings and later, approached the Delhi High Court under Section 29A (4) and (5) of the Arbitration and Conciliation Act,1996 for seeking an extension of the time for completion of arbitral proceedings and making of arbitral award.
Whether the Delhi High Court had the territorial jurisdiction to allow the petition in the present case.
The Court allowed the petition and held that in the present instance, the pertinent clause within the LOA purporting to bestow ‘exclusive jurisdiction’ is of a general nature and does not specifically pertain to arbitration proceedings. Consequently, the clause in the LOA does not suggest anything contrary to indicate that Delhi merely serves as the venue not the seat of arbitration. The choice of Delhi as the venue of arbitration vide the GCC Clause is demonstrative of the fact that the arbitral proceedings were intended to be conducted to Delhi, and in the absence of any contrary indicia, the conclusion is that Delhi is the seat of Arbitration.
Further, relying on the ‘test for determination of the seat of arbitral proceedings’ as laid down in BGS SOMA, the court reiterated that wherever there is an express designation of a venue, and no designation of any alternative place as the seat, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding.
Law of ‘seat’ in arbitration proceedings
The settled position of law 3 in situations where parties have designated a specific seat for conducting arbitration is that, such a designation inherently grants legal authority to the courts situated at that particular seat.
This authority allows them to allow interim measures and evaluate challenges relating to the arbitral proceedings or the awards.
Furthermore, when a specific location is indicated as venue for ‘arbitration proceedings’, the expression ‘arbitration proceedings’ makes it clear that the venue should be considered the seat of arbitration proceedings. Additionally, the wording such as ‘shall be held’ at a particular venue solidifies the connection of the arbitration process to that specific location, signifying that such place was intended to be the seat of arbitral proceedings.
In light of the above discussed position of law, the criteria for determining the seat of arbitrations can be consolidated as follows:
- If an arbitration agreement designates a specific venue, that shall be the arbitration seat unless clear indicators suggest it is just a convenient meeting place, not the seat itself.
- If a seat is unambiguously nominated (without being a mere venue), the courts at that seat hold exclusive jurisdiction for matters arising arbitration including interim measures and challenge to the awards.
- If neither a seat nor a venue has been named in an arbitration clause/agreement (or if the named place is evidently a place of convenience), other factors such as the cause of action might be considered.
Delhi HC-IA No. 9377/2020-14.08.2023
(2020) 4 SCC 234
See: BALCO vs Kaiser Aluminium (2012) 9 SCC 552Ion Exchange v. Panasonic Electric Works Company Limited (2 2014 SCC Online Del 973); Honey Bee Multitrading (P) Ltd. v. Ruchi Soya Industries Ltd (2023 SCC OnLine Bom 652).