The Delhi High Court recently examined a petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 31 December 2022, stemming from a Dealership Agreement. The agreement mandates arbitration for unresolved disputes, specifying that the seat of arbitration is in Delhi while granting exclusive jurisdiction to the courts of Indore.
The court observed, “The fixation of the seat of arbitration at Delhi necessarily clothes curial and supervisory jurisdiction over the arbitration only on courts at Delhi. The exclusive jurisdiction clause, which generally applies, cannot override or supersede the clause fixing the seat of arbitration”.
Brief Fact :
The present petition, filed under Section 34 of the Arbitration and Conciliation Act, 1996, challenges an arbitral award dated 31 December 2022. The dispute arises from a Dealership Agreement executed on 1 April 2017, which contains a dispute resolution clause mandating arbitration in case of resolution clause mandating arbitration in case of unresolved disagreements. Clause 32 of the agreement outlines that disputes, if not settled through mutual conciliation within 30 days, shall be resolved through arbitration as per the provisions of the Arbitration and Conciliation Act, 1996. It specifies that the seat of arbitration will be in Delhi, while the courts of Indore are granted exclusive jurisdiction over all matters related to the agreement.
The primary issue before the court is determining which court, in light of these conflicting provisions, holds supervisory jurisdiction over the arbitral proceedings.
Contention of Respondent:
The Counsel for the Respondent contended that the appellant is not entitled to claim damages as the service provided was satisfactory, and any delay in service delivery was a result of circumstances beyond their control. Further, the respondent highlighted that all terms of the service agreement were adhered to, and the complaints raised by the appellant lacked sufficient evidence.
Additionally, the counsel argued that the appellant failed to follow the grievance redressal mechanism outlined in the agreement, which should have been exhausted before approaching the commission. The respondent maintained that the claims made by the appellant are unfounded and should be dismissed accordingly.
Observation of the Commission:
The court observed that the Madhya Pradesh High Court’s decision on 13 May 2020 does not accurately establish legal principles. The High Court incorrectly concluded that the arbitration agreement conferred exclusive jurisdiction to the Indore Court while merely designating Delhi as the venue. This interpretation contradicts Clause 32 of the Dealership Agreement, which explicitly states that “the seat of arbitration shall always be at Delhi.
The Court emphasized the established distinction between the “seat” and “venue” of arbitration, referencing the Supreme Court’s decision in BGS SGS Soma and BBR (India), the court said “Section 42 cannot apply to perpetuate the erroneous exercise of jurisdiction by a forum which is coram non judice. If the court which is initially approached in connection with the arbitral proceedings does not possess the jurisdiction to deal with them, Section 42 cannot be pressed into service so as to confer that court with jurisdiction to deal with further matters relating to the said proceedings. Section 42, in other words, applies only where the court which is initially approached is a court having jurisdiction”. It clarified that the seat, being contractually fixed at Delhi, grants jurisdiction to the courts there, contrary to the Indore Bench assertion. The court noted that “the exclusive jurisdiction dispensation in clause 32 of the Dealership Agreement in the present case does not make any reference to arbitration. It merely clothes the courts at Indore with ‘exclusive jurisdiction in all matters arising under this agreement’. Simultaneously, the very same clause states that the seat of arbitration shall always be at Delhi”.
Further, the court also held that “The fixation of the seat of arbitration at Delhi necessarily clothes curial and supervisory jurisdiction over the arbitration only on courts at Delhi. The exclusive jurisdiction clause, which generally applies, cannot override or supersede the clause fixing the seat of arbitration”.
The decision of the Commission:
The Court directed that the Registry is directed to place on record a report detailing the various dates when the petition was first filed and re-filed, along with the documents submitted on each occasion and any objections raised by the Registry. The report is to be placed on record within two weeks.
Title: SERVICES PVT LTD vs. M/S VE COMMERCIAL VEHICLES LTD.
Citation: O.M.P. (COMM) 248/2023, I.A. 12798/2023 & I.A.12801/2023
Coram: Justice C. Hari Shankar
Order Date: 09.09.2024
Advocate for Petitioner: Adv. Kuriakose Varghese, V. Shyamohan, Abir Phukan, Akshat Gogna
Advocate for Respondent: Adv. Gunjan Sinha Jain, Mann Bajaj, Aparna Gupta
Read Order @LatestLaws.com:
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