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Which is the competent court to hear plea for appointment of arbitrator when seat of arbitration is not specified? Delhi HC answers

The order was passed by a single Judge Bench of Justice JR Midha.

Aditi Singh

When the parties have not agreed on the seat of the arbitration, the court competent to entertain an application under Section 11 of the Arbitration and Conciliation Act is the one defined in Section 2(1)(e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure, Delhi High Court has held. (Aarka Sports Management vs Kalsi Buildcon Pvt Ltd)

The order was passed by a single Judge Bench of Justice JR Midha.

The Petitioner, Aarka Sports Management had moved a Section 11 petition against the Respondent, Kalsi Buildcon Pvt Ltd.

The Respondent did not dispute the arbitration agreement or the notice of invocation but contended that the Delhi High Court lacked the jurisdiction to entertain the petition.

It was submitted that Delhi was neither the seat of arbitration nor any cause of action arose at Delhi.

The Respondent informed the Court that the agreement was drawn at Ranchi; the agreement was signed at Lucknow and the place of performance/execution of the agreement was Patna, Bihar.

Respondent added that as per the Arbitration clause, parties were required to approach the “Court of proper jurisdiction" for the invocation of the sole arbitrator.

The Petitioner, on the other hand, stated that the agreement vested exclusive jurisdiction to courts in Delhi and hence, Delhi High Court had the power to decide the petition.

After considering the submissions of the parties, the relevant provisions of the Arbitration Act and judgments relied upon by the parties, the Court observed that in terms of Section 20, parties had the autonomy to choose a "neutral seat of arbitration" i.e. where no part of the cause of action has arisen and this place may not otherwise have jurisdiction under Sections 16 to 21 of Code of Civil Procedure.

Once the seat is determined, the court of that place would have the exclusive jurisdiction to regulate the arbitration proceedings arising out of the agreement between the parties, it added.

However, when the parties have not determined the seat of arbitration, the seat of arbitration shall be determined by the Arbitral Tribunal under Section 20(2) of the Arbitration and Conciliation Act, the Court further stated.

As far as the issue of determination of the competent court to entertain the plea for the appointment of an arbitrator was concerned, the Court held,

If the parties have not agreed on the seat of the arbitration, the Court competent to entertain an application under Section 11 of the Arbitration and Conciliation Act would be the “Court" as defined in Section 2(1) (e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure.
Delhi High Court

Applying the above principles, the Court concluded that in the present case, since the arbitration agreement did not stipulate any seat of arbitration, the courts in Delhi lacked territorial jurisdiction to hear the petition.

It said,

This Court lacks territorial jurisdiction as Delhi is not the seat of arbitration; no cause of action arose at Delhi and the respondent does not work at Delhi. The agreement was drawn at Ranchi, signed at Lucknow and was to be performed at Patna. The petitioner could have succeeded if the agreement had provided the seat of arbitration to be Delhi. In that case, this Court would have exclusive jurisdiction to entertain this application.
Delhi High Court

The Court added that the exclusive jurisdiction clause in the agreement would not come to the rescue of the Petitioner as the parties could not have conferred jurisdiction on a court which otherwise had no jurisdiction.

The Petition was thus dismissed with liberty to the Petitioner to approach the Court of competent jurisdiction.

The Petitioner was represented by Advocates Kumar Mihir, Shamik Narain.

The Respondent was represented by Advocates Sharan Thakur, Siddharth Thakur, Gurmehar Sistani, Ketan Paul, Vijay Kumar.

Read the Order:

Aarka Sports Management vs Kalsi Buildcon Pvt Ltd.pdf
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