Generic Exclusive Jurisdiction Clause In Agreement Doesn't Supersede Courts' Jurisdiction Of Arbitration Seat: Delhi High Court

Brief Facts:

The matter pertained to a Business Associate Agreement executed between Nitin Kwatra (“Petitioner”) and Stadhawk Services Pvt. Ltd. (“Respondent no.1”), with Respondent nos. 2 and 3 identified as the directors of Respondent no.1. Primarily, the disagreements revolve around monetary entitlements outlined in the aforementioned agreement. In response to these disputes, the Petitioner invoked the arbitration clause via a notice to the Respondents. However, the Respondents did not provide any response to this notice. The Petitioner filed an application in Delhi High Court (“High Court”) under Section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) for the appointment of a sole arbitrator to adjudicate the disputes.

The relevant arbitration clause is reproduced below:

“XXIV. APPLICABLE LAW AND SETTLEMENT OF DISPUTES

C. All disputes between parties shall be subject to the exclusive jurisdiction of the courts at Gurugram only.

D. Arbitration: Any and all disputes ("Disputes") arising out of or in relation to or in connection with this Agreement between the Parties or relating to the performance or non-performance of the rights and obligations set forth herein or the breach, termination, invalidity or interpretation thereof shall be referred for arbitration at New Delhi, India in accordance with the terms of Indian Arbitration and Conciliation Act, 1996 or any amendments thereof. The place of arbitration shall be Delhi. The language used in the arbitral proceedings shall be English. The arbitration shall be conducted by a sole arbitrator, who shall be appointed by the STADHAWK only. The arbitral award shall be in writing and shall be final and binding on each party and shall be enforceable in any court of competent jurisdiction.

Observations by the High Court:

The High Court noted that the arbitration clause designated Delhi as both the venue and place of arbitration. It held that the venue of arbitration is to be treated as akin to the seat of arbitration unless there are clear indications to the contrary. It held that even though the agreement included a generic clause specifying Gurugram courts' jurisdiction over disputes, this didn't diminish its authority. This interpretation has been consistently upheld in various judgments, including Reliance Infrastructure Ltd. v. Madhyanchal Vidyut Vitran Nigam Ltd. [2023 LiveLaw (Del) 690] in which the Supreme Court held that the venue specified in the arbitration clause constitutes the seat of arbitration.

The High Court held that the jurisdiction of the courts overseeing the arbitration process is tied to the designated seat of arbitration. Even if a contract includes a clause conferring exclusive jurisdiction on a different court, when the arbitration clause specifies a venue, it held that this effectively designates the venue as the seat of arbitration. Therefore, the High Court held that courts having jurisdiction over the seat of arbitration retain supervisory authority over the arbitral process. It noted that the clause in the Letter of Agreement (LOA) purporting to confer exclusive jurisdiction was generic and did not specifically refer to arbitration proceedings. Consequently, it allowed the application under Section 11(6) of the Arbitration Act and appointed Praveen Pahuja as the sole arbitrator to adjudicate the disputes between the Petitioner and Respondent No. 1.

Case Title: Nitin Kwatra vs Stadhawk Services Pvt. Ltd. & Ors.

Citation: 2024 LiveLaw (Del) 163

Case Number: ARB.P. 722/2023

Advocate for the Petitioner: Pawan Kawrani

Advocate for the Respondent: Preeti Sharma

Click Here To Read/Download Order