Arbitration Clause Prevails Over Exclusive Jurisdiction Clause, Court At Designated Seat Retains Jurisdiction: Delhi High Court

The Delhi High Court bench of Justice Purushaindra Kumar Kaurav has held that when an exclusive jurisdiction clause is expressly made "subject to" the arbitration clause, and the arbitration clause designates a different territorial location as the seat of arbitration, the arbitration clause prevails. In case of conflict, the jurisdiction of the court is determined by the seat designated in the arbitration agreement which overrides the exclusive jurisdictional clause mentioned in the agreement. Brief Facts: On 29.07.2023, the respondent, i.e., M/s Gulshan Homz Private Limited, issued a Letter of Intent to the petitioner, i.e., M/s KLA Const. Technologies Pvt. Ltd., for carrying out civil and structural works for the Gulshan Dynasty Moradabad Project. The total contract value is stated to be Rs. 101.8 Crores and a formal Agreement was executed on 06.09.2023. It is the case of the petitioner that despite mobilizing resources and commencing work, delays were caused solely by the failure of the respondent to fulfill contractual obligations—such as not providing timely site access, incomplete escalation details, unapproved BOQ changes, irregular water and electricity supply, delayed payments, and non-compensation for additional work. The respondent issued a termination notice on 06.11.2024 under Clause 33 of the Agreement without serving the mandatory 7-day prior notice as required under the said Clause. Subsequently, the petitioner invoked the arbitration Clause through a notice dated 13.11.2024 and proposed the appointment of a Sole Arbitrator; however, the respondent did not respond to the said proposal. It is the case of the Respondent that when Clause 37(a) is read with and 37(b) of the Agreement dated 06.09.2023, it becomes evident that Noida/New Delhi is designated as the seat/venue of arbitration. However, when read with Clause 92.10 of the General Conditions of Contract (GCC), it becomes clear that Noida is the exclusive venue for arbitration. In reply, the applicant refers to Clauses 37(a) and 37(b) of the Agreement and Clause 91.2 of the GCC, asserting that even when read with other GCC provisions, Clause 91.2 clearly provides that only the Courts at New Delhi shall have exclusive jurisdiction over any dispute arising out of or related to the contract. It was further submitted that where an arbitration Clause contemplates multiple prospective seats, the jurisdiction of the Courts at any of the defined seats can be invoked. Observations: The court noted that the Supreme Court in Ramkishorelal held that the golden rule of interpretation mandates that the entire document must be read as a whole in order to cull out a true intention of the parties by using the ordinary and natural meaning of the words, while considering the context and background, including the status and expertise of the parties. It further added that where conflicting clauses exist—such as an earlier clause granting absolute title and a later clause imposing restrictions—the former generally prevails if it is clear and unambiguous. Courts should first strive to harmonize conflicting parts, and only if harmony is impossible should the later inconsistent clause be disregarded. The Delhi High Court in Devyani International Ltd. v. Siddhivinayak Builders and Developers held that where Clause 11 of the Agreement designated New Delhi as the seat of arbitration, and Clause 12 conferred exclusive jurisdiction on Mumbai courts, the designation of the seat prevails. The Court further held that once a seat is fixed, it carries with it the exclusive jurisdiction of the courts at that place for matters arising from the arbitration agreement. The court further observed that if Clauses 37(a) and 37(b) are properly construed, Clause 37(a) clearly stipulates that all disputes shall be referred to a sole arbitrator mutually appointed by the parties and that arbitration will be conducted under the Arbitration Act. The court further added that it expressly provides that the seat and venue of arbitration shall be Noida/Delhi (State of U.P./Delhi), indicating that there is no inconsistency—the seat and venue may be either Noida or Delhi, and both locations are contractually valid. It further noted that in Inder Mohan, the Court held that when an exclusive jurisdiction clause is expressly made "subject to" the arbitration clause, and the arbitration clause specifies a different territorial location as the seat, the arbitration clause prevails. This means the designated seat of arbitration determines jurisdiction, overriding the exclusive jurisdiction clause in case of conflict. In Vedanta Limited, the Court held that when an arbitration Clause provides for multiple jurisdictional seats, the jurisdiction of the Courts at any of the defined seats can be invoked. Based on the above, it held that Clause 92.10 must be interpreted in light of...

Arbitration Clause Prevails Over Exclusive Jurisdiction Clause, Court At Designated Seat Retains Jurisdiction: Delhi High Court

Mohd Malik Chauhan

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