On 23rd September, a bench of Delhi High Court consisting of Justice Suresh Kumar Kait while hearing a suit relating to the seat of arbitration in case of dispute between the parties, held that the intention of the parties to the seat has to be determined from other clauses of the Agreement and the conduct of the parties. The Hon‟ble Court reiterated that once the parties designate the seat of arbitration, only the courts governing the seat have exclusive jurisdiction to govern such arbitration proceeding and jurisdiction of all other courts stand ousted.

Facts of the case:

Respondent had invited proposals for Qualification cum Request for Proposal dated 06.04.2016 to undertake design, engineering, procurement and construction of a dedicated corridor for old and differently-abled persons during Kumbh and Magh Mela at Sangam, Allahabad, UP, India. Petitioner participated in the bidding process and was adjudged as the successful bidder with the lowest bid. Therefore, respondent had issued a Letter of Award dated 03.01.2017 in favour of the petitioner and a formal Contract dated 08.02.2017 was executed between the parties.

According to petitioner, to execute the Contract in question, petitioner had immediately taken steps like mobilisation of resources, appointment of various third-party Consultants etc. However, respondent utterly failed in fulfilling its part of obligations, as in terms of Clause- 4.1.3 of the said Contract, the "Right of Way" in respect to the said works was to be provided by the respondent to the petitioner within 15 days.

Contention of the petitioner:

The Learned counsel for the petitioner submitted the following contention:

  1. It was submitted that despite communications dated 27.06.2017, 17.07.2017, 12.09.2019 and 03.03.2020, respondent has not even compensated the petitioner for the cost incurred by it towards fulfilling its part of obligations due to which the petitioner claims to have incurred huge loss of productivity, turnover, overhead costs, Contractor's profits and earning capacity besides cost of construction under the Contract in question.
  2. It was submitted that not only respondent failed to honour the payment of Rs.174,36,50,777/- towards “Termination Payment” but vide letter dated 27.07.2020 demanded extension of bank guarantees for a further period in an attempt to disown the termination.
  3. It was submitted that learned counsel drew attention of this Court to Clause 26.3 of the Contract in question to submit that if dispute is not resolved amicably by conciliation, as provided in Clause 26.2, , the same shall be finally decided by reference to arbitration by a Board of Arbitrators appointed in accordance with Clause 26.3.2.
  4. Learned counsel for petitioner next submitted that Clause 26.3 of the Contract is specific that the arbitration shall be held “in accordance with the Rules of the International Centre for Alternative Dispute Resolution, New Delhi” and that by incorporating the Rules of ICADR, New Delhi into the Contract in question, the parties have expressly chosen the seat /place of arbitration at New Delhi.

Contention of the respondent:

The learned counsel for the respondent submitted the following:

  1. It was next submitted by learned respondent‟s counsel that as per the Agreement dated 08.02.2017, it was agreed between the parties that any dispute, difference or controversy shall be first tried to be resolved through conciliation and if it fails, then all disputes shall be referred to arbitration in terms of Arbitration and Conciliation Act, 1996.
  2. It was further submitted that reliance placed by petitioner upon ICADR Rules for want of jurisdiction of this Court is erroneous and unwarranted, as ICADR Rules shall come into play only after arbitral tribunal is constituted.
  3. Learned counsel also submitted that as per Rule 17 of ICADR Rules, even if seat of arbitration is to be decided as per ICADR Rules, mutual consent of both the sides is required and in the present case, respondent has never consented to the seat of arbitration as New Delhi.
  4. Learned counsel for respondent next drew attention of the Court to Clause 27.1 of the aforesaid Agreement to submit that the Courts at Lucknow shall have the exclusive jurisdiction over matters arising out of the Agreement

Observation and judgment of the court:

The following observation has been made by the Hon’ble bench of the court:

  1. It was observed that existence of Agreement dated 08.02.2017 entered into between the parties is not disputed. Parties have also not disputed that in terms of aforesaid Agreement, the disputes between the parties have to be referred to an Arbitrator.
  2. It was submitted by the petitioner that petitioner has rightly invoked the arbitration Clause 26.3.1 of the Contract and by its communication dated 06.02.2021 proposed name of Hon'ble Mr. Justice (Retd.) S. J. Mukhopadhyay, as its nominee Arbitrator.
  3. A bare reading of aforesaid Clause 26.3.1 shows that upon invocation of arbitration by either party, the proceedings shall be conducted in accordance with the Rules of Arbitration of the International Centre for Alternative Dispute Resolution, New Delhi and the venue of such Arbitration shall be Lucknow.

Thus, it was held that the Clause-26.3.1 of Article26 of the Agreement dated 08.02.2017 stipulates that the arbitration shall be held in accordance with the Rules of ICADR but soon thereafter it follows the condition that the venue of arbitration shall be “Lucknow‟. Accordingly, in the considered opinion of this Court, the role of ICADR Rules shall come into play with regard to procedure to be followed, only after the arbitration commences before the appropriate jurisdiction of law, which in this case is “Lucknow”.

Thus, the court observed that it has no jurisdiction to entertain the present petition seeking appointment of Arbitrator. 

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