Section 20 CPC Is Not Applicable Upon Arbitration Proceedings Even If Cause Of Action Whether Trivial Or Significant Has Accrued: Delhi High Court

The Delhi High Court observed that Section 20 of the Code of Civil Procedure (CPC) does not apply to arbitration proceedings, even if a cause of action, whether trivial or significant, has accrued.

The Court dismissed a Petition seeking interim relief under Section 9 of the Arbitration and Conciliation Act (AC Act) to restrain the Respondents from carrying out any construction/development activity. The Court also noted that the mere occurrence of a board meeting does not vest the jurisdiction of Section 20 CPC upon the arbitration proceedings.

The Court observed that the agreement between the parties already stipulated Mumbai as the seat of arbitration per Clause 17.1, which aligned with Section 20 of the AC Act. 

The Bench of Justice Yogesh Khanna held, “It is now a settled law that principles of Section 20 of CPC do not apply to the arbitration proceedings, hence accrual of cause of action, howsoever trivial or significant, would not make Delhi a seat of arbitration”.

Senior Advocates Abhishek Manu Singhvi, Rajshekhar Rao, and Sunil Dalal appeared for the Petitioner, and Senior Advocate Sanjay Jain appeared for the Respondents.

The parties entered into a shareholders agreement and under Clause 17.1, Mumbai was designated as the venue of arbitration. Clause 23.1 of the agreement stipulated that either Mumbai or Delhi could have jurisdiction over the subject matter. The Petition was filed seeking interim relief under Section 9 of the Arbitration and Conciliation Act (AC Act) to restrain the Respondents from carrying out any construction/development activity based on the illegal Modified Development Plan.

The Court noted that the seat of arbitration is Mumbai, as per clause 17.1 of the agreement. Clause 21.3 does not contradict this, and clause 17.1 is in line with Section 20 of the Act. Therefore, the courts in Mumbai would have supervisory jurisdiction.

“The parties have agreed to conduct the arbitration as per the supranational body of rules i.e. SIAC Rules; there is no significant contrary indicia to show the parties intended Mumbai to be merely a venue of arbitration… Therefore, from the above, the only inevitable conclusion that can be drawn is Mumbai is the "seat" of arbitration”, the Bench observed.

The Court asserted that the occurrence of a board meeting would not vest the jurisdiction of Section 20 CPC to the arbitration proceedings. The Court also noted that no significant contrary indicia was demonstrated to establish that parties intended Mumbai to be merely a venue of arbitration as Clause 17.1 of the Agreement clearly states the seat of arbitration to be Mumbai. The Court held that an arbitration venue clause would override any exclusive jurisdiction clause if the parties expressly made the latter subject to the former.

Accordingly, the Court dismissed the Petition.

Cause Title: Vasudev Garg & Ors. v Embassy Commercial Projects (Whitefield) Private Limited & Ors. (2023:DHC:7840)

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