Rajasthan High Court clarified that when exclusive jurisdiction is granted to courts in a different location, the place designated for arbitration does not automatically become the seat of arbitration.
Case Title: Aseem Watts v. Union of India
Date of Decision: 02/09/2023
S.B. Arbitration Application No. 14 of 2021
Presiding Judge: Hon’ble JUSTICE PUSHPENDRA SINGH BHATI
Intro:
The Rajasthan High Court has issued a significant ruling clarifying that the designation of a place as a ‘venue’ for arbitration does not automatically confer it as the ‘seat’ of arbitration when exclusive jurisdiction is vested in the courts of another location. This decision, delivered by Justice Pushpendra Singh Bhati, underscores the importance of clear and consistent clauses in arbitration agreements.
Facts:
The case stemmed from a tender invitation for a project involving the provision and laying of a re-surfacing material. The applicant’s bid was accepted, leading to the execution of an agreement between the parties on September 22, 2015. As disputes arose regarding project delays and defaults, the petitioner sent a legal notice and invoked the arbitration clause, requesting the respondent’s cooperation in appointing an arbitrator. When the parties failed to mutually agree on an arbitrator, the petitioner filed an application under Section 11 of the Arbitration and Conciliation Act.
Contentions of the Parties: The respondent contested the maintainability of the petition on two grounds:
- The agreement stipulated that the arbitrator would be appointed by the respondent, rendering the petition non-maintainable.
- Clause 35 of the agreement designated New Delhi as the venue of arbitration, implying that New Delhi should be considered the seat of arbitration, thereby granting exclusive jurisdiction to the Delhi High Court for arbitrator appointments.
The applicant countered these objections with the following arguments:
- Clause 35 merely designated New Delhi as the venue of arbitration, and this designation did not automatically establish New Delhi as the seat of arbitration.
- The agreement contained a contradictory provision in Clause 46, which granted exclusive jurisdiction to the Courts at Bikaner.
Judgment:
The Rajasthan High Court carefully analyzed the agreement’s provisions and came to a clear conclusion. While Clause 35 indicated that New Delhi was the place of arbitration, Clause 46 explicitly conferred exclusive jurisdiction on the Courts at Bikaner. The court emphasized that when a location is designated as a ‘venue’ for arbitration, and exclusive jurisdiction is vested in the courts of another place, it serves as a “contrary indicia” that prevents the designated place from becoming the seat of arbitration.
In light of this analysis, the court rejected the respondent’s objection regarding territorial jurisdiction. Consequently, the court allowed the petitioner’s application and appointed an arbitrator. This ruling provides valuable clarity on the determination of the seat of arbitration in cases where the arbitration agreement designates a ‘venue’ and simultaneously grants exclusive jurisdiction to the courts of another location.
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Written by Yagya Agarwal