'Exclusive Jurisdiction Clause' In Arbitration Agreement Cannot Override Or Supersede Clause Fixing Seat Of Arbitration: Delhi HC

The Delhi High Court observed that the 'exclusive jurisdiction clause' in an arbitration agreement cannot override or supersede the clause fixing the seat of arbitration.

The Court clarified that, where there is a contractually fixed seat of arbitration, the exclusive jurisdiction clause would not apply while determining the Court which would have curial jurisdiction over the arbitral proceedings.

The Court was considering a petition filed by a company under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) challenging an arbitral award.

A Single Bench of Justice C. Hari Shankar observed, “In the present case, there is a contractually fixed seat of arbitration, which is Delhi. Where there is such a contractually fixed seat of arbitration, the exclusive jurisdiction clause, which confers jurisdiction to courts at Indore would obviously not apply while determining the court which would have curial jurisdiction over the arbitral proceedings. In this connection, the Supreme Court has also distinguished between the court which would have jurisdiction over the subject matter of dispute in arbitration and the court which would have curial jurisdiction over the arbitral proceedings.”

The Bench added that the court having curial jurisdiction over the arbitral proceedings, which can exercise supervisory jurisdiction over the arbitral proceedings, which would include jurisdiction under Section 34 of A&C Act, is only the court which has territorial jurisdiction over the set of arbitration, where such seat is contractually fixed.

Advocate Kuriakose Varghese appeared on behalf of the petitioner while Advocate Gunjan Sinha Jain appeared on behalf of the respondent.

In this case, the dispute between the parties which was decided by the arbitral award, arose in view of a Dealership Agreement. Plainly, Section 32 fixes the seat of arbitration as Delhi, even while granting exclusive jurisdiction to courts at Indore “in all matters arising under” the Dealership Agreement. The issue that arose for consideration was as to which court would, in the circumstances, exercise supervisory jurisdiction over the arbitral proceedings. As per the respondent’s counsel, the Arbitral Tribunal was constituted by an order passed by the Madhya Pradesh High Court, Indore Bench which examined the aspect of territorial jurisdiction.

It was further submitted that the petitioner specifically asserted that, as the arbitration agreement between the parties fixed the seat of arbitration as Delhi, the Madhya Pradesh High Court would have no territorial jurisdiction to deal with the matter. The petitioner had challenged the judgment of the M.P. High Court before the Supreme Court but it dismissed the SLP (Special Leave Petition). The counsel, therefore, contended that once, the M.P. High Court had exercised jurisdiction, albeit at the Section 11 stage, and the exercise of jurisdiction by the High Court stands upheld by the Supreme Court, the petition would have to be preferred before the MP High Court and nowhere else.

The High Court in the above regard, noted, “… it is not possible for this Court to accept Ms. Jain’s contention and hold that this court has no jurisdiction because the Indore Bench of High Court of Madhya Pradesh chose to exercise Section 11 jurisdiction in the matter. That exercise of jurisdiction, in the respectful opinion of this Court, was erroneous.”

The Court further reiterated that a mere dismissal of an SLP, especially where a dismissal is in limine, does not even amount to an approval of the decision of the High Court.

“Neither does the Supreme Court, thereby, lend its imprimatur to the correctness of the decision of the High Court under challenge, nor does the decision of the High Court merge in the order passed by the Supreme Court. Suffice it to say that these principles are by now too well settled to merit reiteration; one may only, if one so desires, refer, for the purpose, to Kunhayammed v State of Kerala, which is by now regarded as the authority on the point”, it said.

The Court remarked that the dismissal of the SLP against the decision of the M.P. High Court is clearly a dismissal in limine with no expression of opinion on merits and it cannot, therefore, amount to a vindication of the decision of the M.P. High Court, so as to non-suit the petitioner from approaching the Court on the principle of res judicata.

“In such circumstances, even Section 42 of the 1996 Act, cannot apply. The Supreme Court has held in BGS SGS Soma that, in order for Section 42 to apply, the court which is initially approached in the matter must possess jurisdiction. Section 42 cannot apply to perpetuate the erroneous exercise of jurisdiction by a forum which is coram non judice. If the court which is initially approached in connection with the arbitral proceedings does not possess the jurisdiction to deal with them, Section 42 cannot be pressed into service so as to confer that court with jurisdiction to deal with further matters relating to the said proceedings. Section 42, in other words, applies only where the court which is initially approached is a court having jurisdiction”, it also noted.

The Court added that the fixation of the seat of arbitration at Delhi necessarily clothes curial and supervisory jurisdiction over the arbitration only on courts at Delhi and the exclusive jurisdiction clause, which generally applies, cannot override or supersede the clause fixing the seat of arbitration.

“In that view of the matter, the objection of Ms. Jain, apropos territorial jurisdiction, is rejected. It is held that this Court has territorial jurisdiction to deal with the present petition”, it concluded.

Accordingly, the High Court directed examination of the aspect on October 3, 2024.

Cause Title- M/s Grand Motors Sales and Services Pvt. Ltd. v. M/s VE Commercial Vehicles Ltd. (Neutral Citation: 2024:DHC:7027)

Appearance:

Petitioner: Advocates Kuriakose Varghese, V. Shyamohan, Abir Phukan, and Akshat Gogna.

Respondent: Advocates Gunjan Sinha Jain, Mann Bajaj, and Aparna Gupta.

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