Delhi High Court Upholds Jurisdiction in Arbitration Dispute, Setting Aside District Judge's Order
Court affirms Delhi's jurisdiction over arbitration proceedings despite Chennai being designated as the venue in the loan agreement.
In a significant ruling, the Delhi High Court has upheld the jurisdiction of Delhi courts over arbitration proceedings between M/S KCA Infrastructure and HDB Financial Services Limited, despite the loan agreement designating Chennai as the venue for arbitration. The decision, delivered by the division bench comprising Justices V. Kameswar Rao and Vinod Kumar, sets aside the order dated August 29, 2022, by the District Judge at Patiala House Courts, New Delhi, which had dismissed the petition under Section 34 of the Arbitration and Conciliation Act, 1996 and allowed the respondent's application under Order VII Rule 10 of the Code of Civil Procedure, 1980 for returning the petition for lack of jurisdiction.
The dispute arose when the appellants challenged an arbitral award passed by the sole arbitrator, which had been conducted at Chennai, awarding a significant sum to the respondent. The appellants argued that the jurisdiction should remain with Delhi courts as an initial application under Section 9 of the Arbitration and Conciliation Act had been filed in Delhi, thus invoking Section 42 of the Act which mandates that all subsequent applications must be filed in the same court where the initial application was made.
The High Court noted that the concept of 'venue' and 'seat' of arbitration holds critical importance in determining jurisdiction. The court emphasized that while Chennai was designated as the venue, the conduct and actions of the parties indicated that Delhi was effectively the seat of arbitration, especially given the respondent's initial application under Section 9 in Delhi, which sought interim measures from the court.
The judgment meticulously referenced the Supreme Court's rulings on the interplay between 'venue' and 'seat', particularly the principles laid down in the case of BGS SGS SOMA JV v. NHPC Ltd., and Arif Azim Co. Ltd. v. Micromax Informatics FZE. It was observed that the designation of Chennai as a venue did not automatically confer exclusive jurisdiction, especially when the initial application under Section 9 was filed in Delhi, thus making Delhi the controlling court under Section 42 of the Act.
The court further criticized the District Judge's reliance on precedents without correctly applying the principles to the facts of the case, which led to an incorrect conclusion of Chennai being the seat due to its mention as the venue in the agreement.
In conclusion, the appeal was allowed, and the order passed by the District Judge was set aside, restoring the petition under Section 34 on the file of the learned District Judge for further proceedings. This decision reaffirms the importance of initial jurisdictional filings in arbitration proceedings and ensures consistency in the judicial approach to arbitration disputes.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Jurisdiction of Court under Section 34 - Venue vs. Seat of Arbitration - Application under Section 9 filed in Delhi - Jurisdiction of Delhi Court upheld due to acquiescence and Section 42 of the Act.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 9, 34, 37(1)(c), 42, Code of Civil Procedure, 1980 Order VII Rule 10
M/S KCA Infrastructure v. HDB Financial Services Limited, (Delhi)(DB) : Law Finder Doc Id # 2789845
