2024 (6) TMI 34 - HC - Indian Laws

Validity of arbitral award - invocation of jurisdiction of the Facilitation Council under Section 18 of the MSME Act - territorial jurisdiction of this Court to entertain this petition - exclusive jurisdiction clause contained in the agreement between the parties - seat of the arbitration in Delhi or Pathankot. Whether the Agreement between the parties contains an exclusive jurisdiction clause for the purposes of the present petition? - HELD THAT - It is found that, upon a proper interpretation of the contractual terms, the parties did not expressly provide for the seat of the arbitration under the Agreement, and only provided that the venue would be at the discretion of the arbitrator. In Indian Oil Corporation 2019 (9) TMI 1701 - DELHI HIGH COURT , the arbitral proceedings were conducted by the Maharashtra Facilitation Council at Thane. The Division Bench nevertheless held that this Court had jurisdiction to entertain the petition under Section 34 the Arbitration Act, in view of an exclusive jurisdiction clause contained in the agreement between the parties therein, which was read as providing for exclusive jurisdiction of the Courts at New Delhi. This judgment has been followed by the Division Bench in IRCON INTERNATIONAL LIMITED. VERSUS PIONEER FABRICATORS PVT. LTD. 2023 (3) TMI 1494 - DELHI HIGH COURT . In the said case also, the concerned MSME Facilitation Council was located outside Delhi, but the agreement between the parties conferred exclusive jurisdiction upon the Courts in Delhi. The aforesaid judgments of the Division Bench are applicable in cases where parties agree to confer exclusive jurisdiction for supervision of the arbitration proceedings, upon a particular Court in their contract. Both the judgments proceed on the basis that the exclusive jurisdiction clause in the agreements between the parties, would not be overridden by conferment of jurisdiction upon a particular MSME Facilitation Council under Section 18 of the MSME Act. For the reasons stated above, it is concluded that, in the present Agreement, there is no exclusive jurisdiction clause. The aforesaid judgments of the Division Bench are therefore inapplicable to the present case. Whether the seat of the arbitration was, in any event, in Delhi? - HELD THAT - The seat of arbitration is the place where the arbitral proceedings are anchored - the determination of jurisdiction under Sections 16 to 20 of the CPC for the purposes of filing a suit has no relevance - In the present case, the proceedings were admittedly conducted exclusively in Pathankot and the award was made there. There being no contrary indication, in the form of an exclusive jurisdiction clause or otherwise, to suggest that the seat of the arbitration was at any place other than the venue which was, even contractually, left to the learned Arbitrator to decide, there are no reason to depart from the general principle that, the seat of the arbitration was at the place where the arbitration was conducted, i.e., in Pathankot. This Court does not have jurisdiction to entertain the present petition - Petition dismissed.

Summary

Issues Involved:
1. Territorial jurisdiction of the Delhi High Court to entertain the petition.
2. Existence of an exclusive jurisdiction clause in the Agreement.
3. Determination of the seat of arbitration.

Issue-wise Detailed Analysis:

1. Territorial Jurisdiction of the Delhi High Court:
The respondent objected to the territorial jurisdiction of the Delhi High Court, arguing that the arbitral award was made by the Facilitation Council in Pathankot, and thus, any challenge should be filed there. The respondent cited Section 18(4) of the MSME Act, which allows the Facilitation Council to act as an arbitrator for disputes involving suppliers within its jurisdiction, and referenced judgments from the Kerala and Madhya Pradesh High Courts supporting this view.

The petitioner countered by asserting that the Delhi High Court had jurisdiction due to an exclusive jurisdiction clause in the Agreement. They cited two Division Bench judgments of the Delhi High Court, which held that the courts in Delhi had jurisdiction for challenges to awards under the MSME Act if the Agreement conferred exclusive jurisdiction to Delhi courts.

2. Existence of an Exclusive Jurisdiction Clause:
The Agreement contained an arbitration clause (Clause 25 of the GCC), which did not specify an exclusive jurisdiction clause or the seat of arbitration but allowed the arbitrator to fix the venue. The petitioner relied on Article 7(1) of the "Integrity Pact" attached to the tender documents, which mentioned jurisdiction at the headquarters of the petitioner. However, the court found that Article 7(1) did not deal with the jurisdiction of courts or dispute resolution under the main Agreement. Clause 7(5) of the Integrity Pact explicitly excluded arbitration for disputes arising under the Integrity Pact, indicating that the dispute resolution mechanisms for the main Agreement and the Integrity Pact were intended to be different.

3. Determination of the Seat of Arbitration:
The court examined whether the seat of arbitration was in Pathankot or Delhi. The petitioner argued that the cause of action arose entirely in Delhi, but the court emphasized that the seat of arbitration is determined by the location of the arbitral proceedings, not the cause of action. The proceedings were conducted exclusively in Pathankot, and the award was made there. The court referred to the Supreme Court's judgment in BGS SGS SOMA JV v. NHPC, which held that the venue of arbitration proceedings is the juridical seat unless there is a significant contrary indication.

Conclusion:
The court concluded that it did not have jurisdiction to entertain the petition as the seat of arbitration was in Pathankot. The petition was rejected, but the petitioner was allowed to approach the jurisdictional court for setting aside the award. The amount deposited by the petitioner would be released upon proof of filing a petition in the appropriate court within three months, failing which the parties could seek further directions regarding the deposited amount.