A petition u/s 11(6) of the Arbitration and Conciliation Act, 1996 (the Act) seeking appointment of a sole arbitrator to adjudicate the disputes between the parties arising out of the Work Order dated 01.03.2018, was preferred by the Petitioner (pharmaceutical products manufacturer) before the Delhi High Court.
The Petitioner entered into a Work Contract with the Respondent for carrying out electrical installment works at one of its plants in Maharashtra. The Petitioner paid an advance to the Respondent against an advance bank guarantee furnished by the latter. The Respondent was to complete the work within the stipulated time and ensure supply of electrical fittings as also their installation. In execution of its obligations, the Respondents purchased electrical fittings to be utilized at the project site however, the same could not be done due to some impediments caused by incomplete work of Civil Engineers. Consequently, on Petitioner’s requested for resumption of work, the Respondent demanded cost escalation of 19% in the Work Contract, to which the Petitioner agreed for 5% escalation. However, when no settlement was reached, the Petitioner terminated the Contract & asked the Respondent to take back the electrical fitting material from the site and payback the advance paid to it.
It was the Petitioner’s claim that it wanted the matter to be referred to an Arbitrator but due to non- responsiveness of the Respondent the same could not materialized and hence, the Petitioner preferred the matter to the Delhi High Court. The question for determination for the Court was; whether Delhi High Court would have jurisdiction to entertain the plea when the cause of action arose in Maharashtra. The parties agreed on the fact that Delhi Court would be competent if the Work Contract had already determined the fact that Arbitral seat would be at Delhi. To this question, the Respondent objected to maintainability of this (Section 11) Petition on the ground that no cause of action arose in Delhi and that Delhi was not designated as the seat.
Decision of the Court:
The Court while allowing the Petition, held that “in my view, the absence of the term ‘seat’ while referring to the courts at Delhi, does not alter the significant fact that the courts of law at Delhi alone have been vested with the jurisdiction upon arbitration proceedings arising out of the subject Work Order. In fact, on this ground alone, if the respondent’s plea were to be accepted and this Court were to disregard the entire phrase ‘the courts of law at Delhi alone shall have the jurisdiction’ within the arbitration clause, it would render a vital portion of the clause meaningless and futile. Ultimately, the law does not prohibit parties from agreeing to confer exclusive jurisdiction in respect of arbitration proceedings, on mutually preferred, neutral seats. Therefore, notwithstanding the fact that no part of the cause of action arose in Delhi, the clear expression of intent within the arbitration clause to confer jurisdiction on the courts at Delhi helps cull out the fact that the parties chose Delhi as a neutral seat of arbitration.”
It was further held that: “thus, by necessary implication, the parties also agreed to make Delhi the seat of arbitration, which leaves no merit in the respondent’s contention that this Court does not have territorial jurisdiction to adjudicate the present petition.”
Case Details:
Before: Delhi High Court
Bench: Hon’ble Ms. Justice Rekha Palli
Case title: M/S. Hamdard Laboratories (India) v M/S. Sterling Electro Enterprises
Case No. ARB. P. 218/2020
Date of Decision: 21.07.2020
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