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2023 (3) TMI 1494 - HC - Indian Laws


Issues involved:
1. Territorial jurisdiction for challenging an arbitral award.
2. Overriding effect of MSMED Act over Arbitration and Conciliation Act, 1996.
3. Interpretation of exclusive jurisdiction clause in agreements.

Summary:

Issue 1: Territorial Jurisdiction for Challenging an Arbitral Award

The High Court of Delhi addressed whether the learned District Judge was correct in rejecting the petition filed by the appellant challenging the award dated January 09, 2022, passed by the Facilitation Council at Kanpur, on the grounds of lack of territorial jurisdiction. The District Judge concluded that the arbitration proceedings under the MSMED Act, held at Kanpur, determined the jurisdiction. However, the High Court disagreed, stating that the "seat of arbitration" as per the agreement between the parties, which conferred exclusive jurisdiction to the courts in Delhi, should govern the territorial jurisdiction. The Court relied on the judgment in *Indian Oil Corporation Ltd. v. FEPL Engineering (P) Ltd.* and held that the jurisdiction clause in the agreement determines the territorial jurisdiction, not the venue of arbitration proceedings.

Issue 2: Overriding Effect of MSMED Act over Arbitration and Conciliation Act, 1996

The appellant argued that the MSMED Act, being a special statute, overrides the provisions of the Arbitration and Conciliation Act, 1996. The Court acknowledged this but clarified that the overriding effect pertains to the conduct of arbitration proceedings and not to the jurisdiction clause agreed upon between the parties. The Court cited the judgment in *Gujarat State Civil Supplies Corporation Ltd. v. Mahakali Foods Pvt. Ltd.* to support the view that the MSMED Act does not nullify the jurisdiction clause in the agreement.

Issue 3: Interpretation of Exclusive Jurisdiction Clause in Agreements

The Court emphasized that the exclusive jurisdiction clause in the agreement, which conferred jurisdiction to the courts in Delhi, remains valid despite the arbitration proceedings being conducted under the MSMED Act at Kanpur. The Court referred to the judgment in *Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd.*, which held that the designated "seat" of arbitration determines the territorial jurisdiction of courts for challenging arbitral awards. The Court concluded that the proceedings held at Kanpur were the "venue" and not the "seat" of arbitration, thus upholding the jurisdiction of Delhi courts as per the agreement.

Conclusion:

The High Court set aside the impugned order of the District Judge and restored the objections filed by the appellant under Section 19 of the MSMED Act read with Section 34 of the Arbitration and Conciliation Act, 1996, for adjudication on merits by the District Judge (Commercial Court), Shahdara, Delhi. The Court reiterated that the jurisdiction clause in the agreement conferring exclusive jurisdiction to the courts in Delhi should prevail.

 

 

 

 

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