Delhi District Court
Delhi Development Authority vs M/S Tarachand Sumit Construction Co on 8 July, 2023
IN THE COURT OF SHRI PANKAJ GUPTA:
DISTRICT JUDGE, (S/W) (COMMERCIAL COURT)-01,
DWARKA COURTS : DELHI.
OMP (COMM) NO.113-19
CNR No. DLSW01-014302-2019
In the matter of :
Delhi Development Authority
Vikas Sadan, New Delhi.
...........Petitioner
versus
M/S Tarachand Sumit Construction Co.
55, DDA Flat, Todapur,
New Delhi-110012.
...........Respondent
Date of Institution : 21.12.2019
Date when the case reserved
for Judgment : 08.07.2023
Date of Judgment : 08.07.2023
JUDGMENT
1. This is the petition under section 34 of the Arbitration and Conciliation Act, 1996 (the Act) filed by the petitioner being aggrieved by the arbitration award dated 15.09.2019 (the impugned award) passed by Sh. Raj Singh Rana, Former Chief Engineer, PWD (V&R) Haryana (the Arbitrator).
2. Brief facts leading to filing of the present petition are that the respondent awarded the work of strengthening and Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 1 of 24 OMP (Comm) No. 113-19 upgradation of M.P. Road 209 in front of Sector-18B, Dwarka with design and mix quality of concrete, to the petitioner vide agreement dated 02.12.2015. The said agreement contained the arbitration clause i.e. the clause no.25 for resolution of the disputes between the parties. Subsequently, the dispute arose between the parties and the respondent involved the arbitration clause. In pursuance thereto, Sh. Raj Singh Rana, Former Chief Engineer, PWD (V&R) Haryana was appointed as the arbitrator. In pursuance thereto, the arbitrator entered in reference and issued letter dated 12.03.2018 to both the parties intimating them about his appointment as an arbitrator and made the disclosure under section 12 of the Act. Simultaneously, the arbitrator fixed the date and place of hearing at Faridabad, Haryana. Subsequently, some hearings took place in Delhi at various places like R.K. Puram, Neeti Bagh Club, Defence Colony and Barakhamba Road. Both the parties participated and hotly contested the case. Lastly, the arbitrator made the award and published the same on 15.09.2019 at Faridabad. Being aggrieved by the same, the petitioner filed the petition under section 34 of the Act.
3. Notice of the petition was issued to the respondent. The respondent contested the petition and prayed for its dismissal.
4. I have heard counsel for the petitioner and counsel for the respondent and have perused the material available on record including the written submissions filed by the petitioner.
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 2 of 24 OMP (Comm) No. 113-19
5. Admittedly, the petitioner and the respondent entered into the agreement dated 02.12.2015 (the agreement) and clause 25 of the agreement contained the arbitration clause. However, in the said agreement, the place of arbitration i.e. seat and venue of the arbitration proceedings were not fixed. In terms of clause 25 of the agreement, the venue of the arbitration was left to be decided by the arbitrator at his sole discretion. The arbitrator entered in the reference and held the hearings till June 2018 at Faridabad, Haryana and made and published the award at Faridabad, Haryana. As evident from the record, in between, certain arbitration hearings took place at Faridabad and some at different parts of Delhi like R.K. Puram, Neeti Bagh Club, Defence Colony and Barakhamba Road. Admittedly, no arbitration hearing had taken place within the territorial jurisdiction of this court i.e. District South West, Delhi. In the said background, this court raised an issue as to this court has the territorial jurisdiction to entertain the present petition.
6. Counsel for the petitioner pleaded that the agreement dated 02.12.2015 contained the arbitration clause for resolution of the dispute between the parties. In the said agreement, the place of arbitration i.e. the seat and venue of the arbitration proceedings were not fixed. In the present case, certain arbitration hearings took place at Faridabad and some at different parts of Delhi like R.K. Puram, Neeti Bagh Club, Defence Colony and Barakhamba Road. However, the arbitrator had not specifically fixed the seat of arbitration at Faridabad or at any other place where the arbitration hearings took place at Delhi. She also pleaded that there is Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 3 of 24 OMP (Comm) No. 113-19 nothing on record to suggest that the parties had intended that the places where the arbitration hearings had taken place would be treated as the seat of arbitration. As such, there was no specific agreement between the parties to treat the place of hearings as the seat of arbitration. She also pleaded that the places where the arbitration hearings had taken place could be considered as the "venue" within the meaning of section 20 (3) of the Act. However, the venue cannot be treated at par with the seat of arbitration. Therefore, those venues are irrelevant to decide the territorial jurisdiction of this court to entertain the present petition. She also pleaded that merely because the arbitrator had signed and published the award at Faridabad that cannot be considered as the seat of the arbitration. She also pleaded that in the given circumstances, section 20 of Code of Civil Procedure, 1908 (CPC) shall came into play to decide the territorial jurisdiction of this court to entertain the present petition. In the present case, since the office of the petitioner is situated at Dwarka, the agreement was entered into at Dwarka and the subject work was to be executed at Dwarka, hence, this court has the territorial jurisdiction to entertain the present petition. In support of her submissions, counsel for the petitioner relied upon the following judgments :-
(i) BGS SGS SOMA JV v. NHPC Ltd., reported in (2020) 4 SCC 234.
(ii) Gurumahima Heights Cooperative Housing Society Ltd.
v. M/s. Admirecon Infrastructure Pvt. Ltd., passed in (Comm.) Arbitration Petition No. 130 of 2022).
(iii) Adie Broswon Breweries Pvt. Ltd v. KLA Construction Technologies Private Limited and Ors., reported in 2019 SCC OnLine P&H 7464.
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 4 of 24 OMP (Comm) No. 113-19
(iv) Ravi Ranjan Developers Pvt. Ltd v. Aditya Kumar Chatterjee, reported in 2022 SCC On Line SC 568.
7. On the contrary, counsel for the respondent pleaded that vide clause 25 of the agreement, the parties had given the power to the arbitrator to decide the seat and the venue of the arbitration to conduct the arbitration proceedings at his sole discretion. Hence, the arbitrator was not required to pass any specific order or to obtain the consent of the parties before fixing the seat of the arbitration. She also pleaded that vide letter dated 12.03.2018, the arbitrator in exercise of his power under clause 25 of the agreement, fixed the seat of the arbitration at Faridabad, Haryana. Simultaneously, the arbitrator fixed the date of hearing to conduct the arbitration proceedings at Faridabad. In pursuance thereto, the arbitrator conducted hearings till June 2018 at Faridabad. She also pleaded that subsequently, at the request of the respondent, the arbitrator fixed the venue of the arbitration hearings at different parts of Delhi like R.K. Puram, Neeti Bagh Club, Defence Colony and Barakhamba Road. In compliance of section 31 (4) of the Act, the arbitrator mentioned the place of arbitration fixed under section 20 of the Act at Faridabad. Therefore, by all means, the arbitrator fixed the seat of arbitration at Faridabad. Therefore, section 20 of CPC is not applicable in the present case. Even otherwise, no arbitration hearing had taken place within the jurisdiction of this court i.e. District South-West, Delhi. Hence, this court does not have the territorial jurisdiction to entertain the present petition.
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 5 of 24 OMP (Comm) No. 113-19
8. In the judgment titled as "BBR (India) (P) Ltd. v. S.P. Singla Constructions (P) Ltd., reported in (2023) 1 SCC 693, the Hon'ble Supreme Court while relying upon and discussing the judgment BGS SGS SOMA JV (supra), held:
"16. ............................. Accordingly, clause
(e) to sub-section (1) of Section 2 has to be construed keeping in view the provisions of Section 20 of the Act, which are, in fact, determinative and relevant when we decide the question of "the seat of an arbitration". This interpretation recognises the principle of "party autonomy", which is the edifice of arbitration. In other words, the term "court" as defined in clause (e) to sub-section (1) of Section 2, which refers to the "subject-matter of arbitration", is not necessarily used as finally determinative of the court's territorial jurisdiction to entertain proceedings under the Act.
17 In BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] , this Court observed that any other construction of the provisions would render Section 20 of the Act nugatory. In view of the Court, the legislature had given jurisdiction to two courts : the court which should have jurisdiction where the cause of action is located; and the court where the arbitration takes place. This is necessary as, on some occasions, the agreement may provide the "seat of arbitration"
that would be neutral to both the parties. The courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. The "seat of arbitration" need not be the place where any cause of action has arisen, in the sense that the "seat of arbitration" may be different from the place where obligations are/had to be performed under the contract. In such circumstances, both the courts should have jurisdiction viz. the courts within whose jurisdiction "the subject-matter of the suit" is situated and the courts within whose jurisdiction the dispute resolution forum, that is, where the Arbitral Tribunal is located.
18. Turning to Section 20 of the Act, sub-section (1) in clear terms states that the parties can agree on the place of arbitration. The word "free" has been used to emphasise the autonomy and flexibility that the parties enjoy to agree on a place of arbitration which is unrestricted and need not be confined to the place where the "subject-matter of the suit" is situated. Sub-section (1) to Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 6 of 24 OMP (Comm) No. 113-19 Section 20 gives primacy to the agreement of the parties by which they are entitled to fix and specify "the seat of arbitration", which then, by operation of law, determines the jurisdictional court that will, in the said case, exercise territorial jurisdiction. Sub-section (2) comes into the picture only when the parties have not agreed on the place of arbitration as "the seat". [ Section 20(2) also applies when "the seat" as mentioned in the agreement is only a convenient venue.] In terms of sub-section (2) of Section 20 the Arbitral Tribunal determines the place of arbitration. The Arbitral Tribunal, while doing so, can take into regard the circumstances of the case, including the convenience of the parties. Sub-section (3) of Section 20 of the Act enables the Arbitral Tribunal, unless the parties have agreed to the contrary, to meet at any place to conduct hearing at a place of convenience in matters, such as consultation among its members, for the recording of witnesses, experts or hearing parties, inspection of documents, goods, or property.
19. Relying upon the Constitutional Bench decision in BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810], in BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 :(2020) 2 SCC (Civ) 606] , it has been held that sub-section (3) of Section 20 refers to "venue" whereas the "place"
mentioned in sub-section (1) and sub-section (2) refers to the "jurisdictional seat". To explain the difference, in BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810], a case relating to international arbitration, reference was made to several judgments, albeit the judgment in Shashoua v. Sharma [Shashoua v. Sharm a, 2009 EWHC 957 (Comm)] was extensively quoted to observe that an agreement as to the "seat of arbitration" draws in the law of that country as the curial law and is analogous to an exclusive jurisdiction clause. [C v. D, 2008 Bus LR 843 : 2007 EWCA Civ 1282 (CA)] The parties that have agreed to "the seat" must challenge an interim or final award only in the courts of the place designated as the "seat of arbitration". In other words, the choice of the "seat of arbitration" must be the choice of a forum/court for remedies seeking to attack the award.
22.BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 :
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 7 of 24 OMP (Comm) No. 113-19 (2020) 2 SCC (Civ) 606] extensively refers to the judgment of this Court in Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd. [Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd., (2017) 7 SCC 678 :
(2017) 3 SCC (Civ) 760] , which decision refers to the legislative history of Section 2(1)(e) and Section 20 of the Act and the recommendations of the 246th Law Commission Report, 2014. These recommendations, it is observed, were not implemented in consonance with the decision in BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 : (2012) 4 SCC (Civ) 810], which, in no uncertain terms, refers to the "place" as the "jurisdictional seat" for the purpose of clause (e) to sub-section (2) of Section 2 of the Act. This judgment was subsequently followed in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. [Brahmani River Pellets Ltd. v. Kamachi Industries Ltd., (2020) 5 SCC 462 : (2020) 3 SCC (Civ) 326]
23. It may, however, be noted that clause
(e) to sub-section (1) of Section 2 was amended by inserting sub-clause (ii) [ "2. (1)(e)(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;"] with the specific objective to solve the problem of conflict of jurisdiction that would arise in cases where interim measures are sought in India in cases of arbitration seated outside India. In the context of domestic arbitrations it must be held that once the "seat of arbitration" has been fixed, then the courts at the said location alone will have exclusive jurisdiction to exercise the supervisory powers over the arbitration. The courts at other locations would not have jurisdiction, including the courts where cause of action has arisen. As observed above and held in BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 8 of 24 OMP (Comm) No. 113-19 606] , and Indus Mobile [ In Indus Mobile Distribution (P) Ltd. v. Datawind Innovations (P) Ltd., (2017) 7 SCC 678 :
(2017) 3 SCC (Civ) 760, the Court after clearing the air on the meaning of Section 20 of the Arbitration Act, 1996 made it clear that the moment a seat is designated by agreement between the parties, it is akin to an exclusive jurisdiction clause, which would then vest the courts at the "seat"
with exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties.] , the moment the parties by agreement designate "the seat", it becomes akin to an exclusive jurisdiction clause. It would then vest the courts at "the seat" with exclusive jurisdiction to regulate arbitration proceedings arising out of the agreement between the parties.
24. The Court in BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] has also dealt with the situation where the parties have not agreed on or have not fixed the jurisdictional "seat of arbitration", and has laid down the following test to determine the "seat of arbitration" which would determine the location of the court that would exercise supervisory jurisdiction. The test is simple and reads :
(SCC p. 289, para 61) -
"61. It will thus be seen that wherever there is an express designation of a "venue", and no designation of any alternative place as the "seat", combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding."
For formulating the test reference was made to several Indian and foreign judgments to emphasise that where the parties had failed to choose the "jurisdictional seat" [BGS SGS Soma JV v. NHPC, (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606 case also examines and explains case law where the courts have held that so called "seat" mentioned in the Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 9 of 24 OMP (Comm) No. 113-19 agreement is convenient "venue" an aspect with which we are not concerned in the present case.] which would be governing the arbitral proceedings, the proceedings must be considered at any rate prima facie as being governed and subject to jurisdiction of the court where the arbitration is being held, on the ground that the said court is most likely to be connected with the proceedings. [ See the principle culled out by Dicey and Morris on the Conflict of Laws (11th Edn., Sweet and Maxwell, 1987).]
25. Accordingly, in BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 :
(2020) 2 SCC (Civ) 606], the law as applicable, where the parties by agreement have not fixed the jurisdictional "seat", is crystallised as under : (SCC pp. 301-02, para
82) -
"82. On a conspectus of the aforesaid judgments, it may be concluded that whenever there is the designation of a place of arbitration in an arbitration clause as being the "venue" of the arbitration proceedings, the expression "arbitration proceedings" would make it clear that the "venue" is really the "seat" of the arbitral proceedings, as the aforesaid expression does not include just one or more individual or particular hearing, but the arbitration proceedings as a whole, including the making of an award at that place. This language has to be contrasted with language such as "tribunals are to meet or have witnesses, experts or the parties" where only hearings are to take place in the "venue", which may lead to the conclusion, other things being equal, that the venue so stated is not the "seat" of arbitral proceedings, but only a convenient place of meeting. Further, the fact that the arbitral proceedings "shall be held" at a particular venue would also indicate that the parties intended to anchor Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 10 of 24 OMP (Comm) No. 113-19 arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings.
This, coupled with there being no other significant contrary indicia that the stated venue is merely a "venue" and not the "seat" of the arbitral proceedings, would then conclusively show that such a clause designates a "seat" of the arbitral proceedings. In an international context, if a supranational body of rules is to govern the arbitration, this would further be an indicia that "the venue", so stated, would be the seat of the arbitral proceedings. In a national context, this would be replaced by the Arbitration Act, 1996 as applying to the "stated venue", which then becomes the "seat" for the purposes of arbitration."
26.BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] also refers to decision of this Court in Union of India v. Hardy Exploration & Production (India) Inc. [Union of India v. Hardy Exploration & Production (India) Inc., (2019) 13 SCC 472 : (2018) 5 SCC (Civ) 790 -- In this case the parties had not chosen the seat of arbitration and the Arbitral Tribunal had also not determined the seat of arbitration. Therefore it was held that the choice of Kuala Lumpur as the venue of arbitration did not imply that Kuala Lumpur had become the seat of arbitration.] , which had held that the choice of the venue of arbitration did not imply that it had become the "seat of arbitration" and that the venue could not by itself assume the status of "the seat"; instead a venue could become "the seat" only if "something else is added to it as a concomitant". According to BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] , the reasoning given in Hardy Exploration [Union of India v. Hardy Exploration & Production (India) Inc., (2019) 13 SCC 472 : (2018) 5 SCC (Civ) 790 -- In Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 11 of 24 OMP (Comm) No. 113-19 this case the parties had not chosen the seat of arbitration and the Arbitral Tribunal had also not determined the seat of arbitration.
Therefore it was held that the choice of Kuala Lumpur as the venue of arbitration did not imply that Kuala Lumpur had become the seat of arbitration.] is per incuriam as it contradicts the ratio and law laid down in BALCO [BALCO v. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 :
(2012) 4 SCC (Civ) 810] . Hence, BGS SGS Soma [BGS SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 : (2020) 2 SCC (Civ) 606] holds that it would be correct to hold that while exercising jurisdiction under sub-section (2) of Section 20 of the Act, an arbitrator is not to pass a detailed or a considered decision.
The place where the Arbitral Tribunal holds the arbitration proceedings would, by default, be the venue of arbitration and consequently the "seat of arbitration".
28. ........................Inox Renewables [Inox Renewables Ltd. v. Jayesh Electricals Ltd., (2023) 3 SCC 733 : 2021 SCC OnLine SC 448] was a case governed under sub-section (1) of Section 20 of the Act, that is, where parties by the agreement had fixed the jurisdictional "seat" at Jaipur, Rajasthan, but thereafter, by mutual consent, had decided to change the venue of proceedings to Ahmedabad prior to the commencement of the arbitration. This evidently resulted in the decision of this Court accepting that the jurisdictional "seat of arbitration" was Ahmedabad. This decision would apply in case the parties, by consent, agree mutually that the "seat of arbitration"
would be located at a particular place. The said exercise would be in terms of sub-section (1) of Section 20 of the Act, which endorses and emphasises on party autonomy and choice that determines the "seat of arbitration". It would not apply when the arbitrator fixes "the seat" in terms of sub-section (2) of Section 20 of the Act. Once the arbitrator fixes "the seat"
in terms of sub-section (2) of Section 20 of the Act, the arbitrator cannot change "the seat" of the arbitration, except when and if the parties mutually agree and state that the "seat of arbitration" should be changed to another location, which is not so in the present case.
30. There are good reasons why we feel that subsequent hearings or proceedings at a different location other than the place fixed by the arbitrator as the "seat of arbitration"
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 12 of 24 OMP (Comm) No. 113-19 should not be regarded and treated as a change or relocation of jurisdictional "seat".
This would, in our opinion, lead to uncertainty and confusion resulting in avoidable esoteric and hermetic litigation as to the jurisdictional "seat of arbitration". "The seat" once fixed by the Arbitral Tribunal under Section 20(2), should remain static and fixed, whereas the "venue" of arbitration can change and move from "the seat" to a new location. Venue is not constant and stationary and can move and change in terms of sub-section (3) to Section 20 of the Act. Change of venue does not result in change or relocation of the "seat of arbitration".
32. ................................."The seat"
determines the jurisdiction of the courts. There would be situations where the venue of arbitration in terms of sub-section (3) of Section 20 would be different from the place of the jurisdictional "seat", and it is equally possible majority or most of the hearing may have taken place at a venue which is different from the "seat of arbitration". Further, on balance, we find that the aspect of certainty as to the court's jurisdiction must be given and accorded priority over the contention that the supervisory courts located at the place akin to the venue where the arbitration proceedings were conducted or substantially conducted should be preferred.
34. For clarity and certainty, which is required when the question of territorial jurisdiction arises, we would hold that the place or the venue fixed for arbitration proceedings, when sub-section (2) of Section 20 applies, will be the jurisdictional "seat"
and the courts having jurisdiction over the jurisdictional "seat" would have exclusive jurisdiction. This principle would have exception that would apply when by mutual consent the parties agree that the jurisdictional "seat" should be changed, and such consent must be express and clearly understood and agreed by the parties."
9. The legislature has given jurisdiction to two courts (i) the court which should have jurisdiction where the cause of action is located; and (ii) the court where the arbitration takes place. On some occasions, the agreement may provide Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 13 of 24 OMP (Comm) No. 113-19 the "seat of arbitration" that would be neutral to both the parties. The courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. The "seat of arbitration" need not be the place where any cause of action has arisen. In other words, the "seat of arbitration" may be different from the place where obligations are/had to be performed under the contract.
10. As held in the above cited judgment, section 2 (1) (e) of the Act is be construed keeping in view the provisions of Section 20 of the Act which decide the question of "the seat of an arbitration". This interpretation recognizes the principle of "party autonomy".
11. Under section 20 (1) of the Act, the parties are free to agree on the place of arbitration which is unrestricted and need not be confined to the place where the "subject-matter of the suit" is situated. This provision gives primacy to the agreement of the parties by which they are entitled to fix and specify "the seat of arbitration", which then, by operation of law, determines the jurisdictional court that will, in the said case, exercise territorial jurisdiction.
12. Section 20 (2) of the Act comes into the picture only when the parties have not agreed on the place of arbitration as "the seat" and then the arbitral tribunal determines the place of arbitration. The arbitral tribunal, while doing so, can take into regard the circumstances of the case, including the convenience of the parties.
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 14 of 24 OMP (Comm) No. 113-19
13. While exercising jurisdiction under sub-section (2) of Section 20 of the Act, an arbitrator is not to pass a detailed or a considered decision. The place where the Arbitral Tribunal holds the arbitration proceedings would, by default, be the venue of arbitration and consequently the "seat of arbitration". Once the arbitrator fixes "the seat" in terms of sub-section (2) of Section 20 of the Act, the arbitrator cannot change "the seat" of the arbitration, except when and if the parties mutually agree and state that the "seat of arbitration" should be changed to another location.
14. When the question of territorial jurisdiction arises, the place or the venue fixed for arbitration proceedings, when sub-section (2) of Section 20 applies, will be the jurisdictional "seat" and the courts having jurisdiction over the jurisdictional "seat" would have exclusive jurisdiction. This principle would have exception that would apply when by mutual consent the parties agree that the jurisdictional "seat" should be changed, and such consent must be express and clearly understood and agreed by the parties.
15. "The seat" once fixed by the Arbitral Tribunal under Section 20(2), should remain static and fixed, whereas the "venue" of arbitration can change and move from "the seat"
to a new location. Venue is not constant and stationary and can move and change in terms of sub-section (3) to Section 20 of the Act. Change of venue does not result in change or relocation of the "seat of arbitration".
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 15 of 24 OMP (Comm) No. 113-19
16. Section 20 (3) of the Act enables the arbitral tribunal, unless the parties have agreed to the contrary, to meet at any place to conduct hearing at a place of convenience in matters, such as consultation among its members, for the recording of witnesses, experts or hearing parties, inspection of documents, goods, or property. This provision refers to "venue" whereas the "place" mentioned in sub-section (1) and sub-section (2) refers to the "jurisdictional seat".
17. Where the parties have not agreed on or have not fixed the jurisdictional "seat of arbitration", then wherever there is an express designation of a "venue", and no designation of any alternative place as the "seat", combined with a supranational body of rules governing the arbitration, and no other significant contrary indicia, the inexorable conclusion is that the stated venue is actually the juridical seat of the arbitral proceeding. Further, the fact that the arbitral proceedings "shall be held" at a particular venue would also indicate that the parties intended to anchor arbitral proceedings to a particular place, signifying thereby, that that place is the seat of the arbitral proceedings. This, coupled with there being no other significant contrary indicia that the stated venue is merely a "venue" and not the "seat" of the arbitral proceedings, would then conclusively show that such a clause designates a "seat" of the arbitral proceedings.
18. The "seat" determines the jurisdiction of the courts. There would be situations where the venue of arbitration in terms of sub-section (3) of Section 20 would be different from the place of the jurisdictional "seat", and it is equally Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 16 of 24 OMP (Comm) No. 113-19 possible majority or most of the hearing may have taken place at a venue which is different from the "seat of arbitration". Further, on balance, the aspect of certainty as to the court's jurisdiction must be given and accorded priority over the contention that the supervisory courts located at the place akin to the venue where the arbitration proceedings were conducted or substantially conducted should be preferred.
19. In the context of domestic arbitrations, it must be held that once the "seat of arbitration" has been fixed, then the courts at the said location alone will have exclusive jurisdiction to exercise the supervisory powers over the arbitration. The courts at other locations would not have jurisdiction, including the courts where cause of action has arisen. It would then vest the courts at "the seat" with exclusive jurisdiction to regulate arbitration proceedings arising out of the agreement between the parties.
20. Main thrust of the arguments of counsel for the petitioner is that since the agreement is silent about the place of arbitration i.e. the seat and the venue of the arbitration, hence, section 20 (1) of the Act is not applicable in the present case. Further, since, the arbitrator had also not fixed the seat of arbitration, hence, section 20(2) of the Act is not applicable in the present case. Also, the places where the arbitration hearings had taken place i.e. Faridabad and Delhi could be construed as the venue within the meaning of section 20(3) of the Act. However, being the venue only, those places are completely irrelevant to decide the issue of territorial jurisdiction of this court to entertain Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 17 of 24 OMP (Comm) No. 113-19 the present petition. Accordingly, section 20 of the Act is not applicable in the present case. Hence, section 20 of the CPC would be applicable in the present case. Therefore, since, the office of the petitioner was/is situated at Dwarka, Delhi, the agreement was executed at Dwarka and the work was to be executed at Dwarka, hence, this court has the territorial jurisdiction to entertain the present petition.
21. The Arbitration and Conciliation Act, 1996 is the special legislation. Being so, its section 20 shall have preference over section 20 of the CPC which is the general provision in nature. In other words, if section 20 of the Act is applicable in the present case, then, the applicability of section 20 of the CPC is completely ruled out.
22. Now the question arises, whether section 20 of the Act or Section 20 of CPC is applicable in the present case.
23. Section 20 of the Act consists of 3 sub sections having the marginal note "Place of Arbitration".
24. Admittedly, the agreement containing the arbitration clause is completely silent about the place of arbitration i.e. the seat and the venue of the arbitration. As such, the parties had not exercised their power to fix the place of arbitration under section 20(1) of the Act. Accordingly, section 20 (1) of the Act is not applicable in the present case.
25. Now it is to be ascertained as whether section 20(2) of the Act is applicable in the present case.
Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 18 of 24 OMP (Comm) No. 113-19
26. Admittedly, the dispute arose between the parties and the respondent invoked the arbitration clause and the arbitrator was appointed to resolve the said dispute. Vide clause 25 of the agreement, the parties had empowered the arbitrator to solely fix the venue of the arbitration at any place. It is evident from the record that vide letter dated 12.03.2018, the arbitrator intimated the parties about his appointment as an arbitrator and made a disclosure under section 12 of the Act. Simultaneously, he intimated the parties about the date, time and place of hearing i.e. 27.03.2018 at 11:30 am at Faridabad at the address mentioned therein. Perusal of the order dated 05.04.2018 passed by the arbitrator reveals that that day, both the parties appeared before the arbitrator and confirmed that they had no objection to his appointment as the arbitrator. In para 6
(i) of the said order, it is specifically recorded that the parties had agreed that the arbitral proceedings be held at house no. 949, Sector-17, Faridabad, Haryana as per their mutual convenience. Simultaneously, the arbitrator fixed the schedule of hearing and the steps to be taken by the respective parties. The arbitrator also fixed his fee. Simultaneously, the arbitrator fixed the next date of hearing i.e. 23.06.2018 at 4:00 pm at Faridabad as per request of both the parties.
27. Perusal of the record reveals that in the proceeding conducted in June 2018, the respondent therein/petitioner herein made a request to change the place of hearing and it was agreed that the proceedings be held at R.K. Puram and Neeti Bagh Club as it had better facilities. Thereafter, some proceedings were held in different parts of Delhi like Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 19 of 24 OMP (Comm) No. 113-19 R.K.Puram, Defence Colony and Barakhamba Road. Lastly, the award was made and published in Faridabad on 15.09.2019.
28. In view of the foregoing discussions, it can be held that the arbitrator while exercising his power provided under clause 25 of the agreement, fixed the place of arbitration at Faridabad and also conducted the proceedings there till June, 2018 when the petitioner herein made a request for change of venue not on the ground that it had inconvenience in attending the proceedings at Faridabad but on the ground that the venue suggested at R.K. Puram and Neeti Bagh Club would have better facilities and the said request was acceded by the respondent and the arbitrator. While exercising the power under clause 25 of the agreement, the arbitrator was not required to pass a specific order to fix the place of arbitration at Faridabad nor he was required to obtain the consent of the respective parties to this effect. Not the least, before the arbitrator, both the parties agreed to the place of arbitration at Faridabad on 05.04.2018 and even thereafter, the arbitration hearing took place in June 2018 at Faridabad. It implies that both the parties had also consented to the act of the arbitrator fixing the place of arbitration at Faridabad while exercising its power under Section 20(2) of the Act. Not only that, thereafter, though, some hearing took place in different parts of Delhi but the arbitrator published the award at Faridabad.
29. Therefore, it can be held that firstly, the arbitrator fixed the place of arbitration i.e. the seat of the arbitration at Faridabad and then concluded the proceedings at the same Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 20 of 24 OMP (Comm) No. 113-19 place while complying with the provision of section 31 (4) of the Act. It is neither the case of the petitioner nor is evident from the record that the petitioner had ever requested the arbitrator to change the seat of arbitration and the said request was acceded by the respondent herein. Therefore, there is no substance in the plea raised by counsel for the petitioner that the arbitrator has not passed the specific order regarding fixation of seat of arbitration at Faridabad or had not obtained the consent of the parties to that effect, therefore, section 20(2) of the Act is not applicable in the present case.
30. In view of the foregoing discussions, it can be held that section 20(2) of the Act is applicable in the present case. Therefore, as held in the judgment BBR (supra), the place for arbitration fixed under section 20(2) of the Act i.e. Faridabad, Haryana will be the jurisdictional "seat" and the courts having jurisdiction over the jurisdictional "seat" would have exclusive jurisdiction.
31. Counsel for the petitioner pleaded that the arbitrator had not fixed the seat of arbitration. Therefore, the places where the arbitration hearings took place can be construed as the venues but cannot be construed as the place of arbitration to decide the territorial jurisdiction of this court. In other words, those venues are irrelevant to decide the territorial jurisdiction of this court to entertain the present petition.
32. As admitted by counsel for the petitioner, in law, section 20(3) of the Act deals with the venue of the arbitral Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 21 of 24 OMP (Comm) No. 113-19 proceedings. The said sub-section is the part of section 20 of the Act whose marginal note says "Place of Arbitration". Therefore, in view of the above-cited judgment and forgoing discussions, it can be held that there is no substance in the plea raised by counsel for the petitioner that section 20(3) of the Act is not relevant to decide the territorial jurisdiction of this court.
33. Now, I proceed while presuming for the sake of arguments only that section 20(2) of the Act is not applicable in the present case as pleaded by counsel for the petitioner. As evident from the record, the places where the hearings took place in Delhi were the venue within the meaning of section 20(3) of the Act. In the said background, it is to be ascertained as to whether this court has the territorial jurisdiction to entertain the present petition.
34. As held in the above-cited judgment, in absence of applicability of section 20(1) and (2) of the Act, the venue of the arbitration proceedings may be considered as the seat of the arbitration provided the parties intended so and the effective arbitration proceedings had taken place at those places.
35. It is evident from the record that no arbitration hearing in the subject matter took place within the territorial jurisdiction of this court i.e. District South-West, Delhi. It is also evident from the record that none of the parties had ever intended that the arbitration hearing should take place within District South-West, Delhi. It is also evident from the Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 22 of 24 OMP (Comm) No. 113-19 record that both the parties submitted themselves to the jurisdiction of the arbitrator and had never raised any objection about the place of arbitration which was outside the District South-West, Delhi. Hence, it can be held that even on application of section 20(3) of the Act in the present case, this court does not have the territorial jurisdiction to entertain the present petition.
36. In view of the foregoing discussions, it can be held that it is not a case where the arbitrator had merely signed the award at Faridabad. Therefore, there is no substance in the plea raised by counsel for the petitioner to this effect. Hence, the judgment Gurumahima (supra) relied upon by counsel for the petitioner is not applicable in the present case. The judgments Ravi Ranjan Developers Pvt. Ltd. (supra) and Adie Broswon Breweries Pvt. Ltd (supra) relied upon by counsel for the petitioner are also not applicable in the present case because in those cases, the seat of the arbitration and the juridiction of the courts had been mentioned in the arbitration agreement itself.
37. In view of the foregoing discussions, it can also be held that section 20 of the Act is applicable in the present case. Therefore, section 20 of CPC is not applicable in the present case.
38. Therefore, I am of the opinion that in the present case, the seat of the arbitration was fixed at Faridabad, Haryana. Hence, this court does not have the territorial jurisdiction to entertain the present petition. Liberty is granted to the petitioner to file the petition in the court of competent Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 23 of 24 OMP (Comm) No. 113-19 jurisdiction. No order as to the cost. Petition is disposed of accordingly.
39. File be consigned to Record Room.
ANNOUNCED IN THE OPEN COURT, On this 8th day of July, 2023 (PANKAJ GUPTA) District Judge, S/W (Commercial Court)-01:
NEW DELHI Delhi Development Authority vs. Tarachand Sumit Construction Co. Page No. 24 of 24 OMP (Comm) No. 113-19