When Arbitration Clause Lacks Seat Or Venue, Jurisdiction U/s. 11 Of Arbitration Act Must Be Determined U/s. 16 To 20 Of CPC: Delhi High Court

The Single Bench of Justice Manoj Kumar Ohri observed, “…at the stage of determining the jurisdiction of the Court to entertain a petition under Section 11 A&C Act, in case of lack of consent between the parties as to the seat/venue of arbitration, which is reflected from the arbitration clause of the subject agreement, the Court must determine jurisdiction by taking the aid of Sections 16 to 20 of the CPC.”

The Court added, “A catena of Supreme Court decisions have clarified that while determining territorial jurisdiction of a Court, what is decisive is the accrual of cause of action…In fact, for a fact to be considered material enough to lead to the conclusion as to accrual of cause of action, it must be proved that the said fact has a nexus with lis between the parties and that it is integral to the dispute at hand.”

The Petitioner was represented by Advocate Rajeev M. Roy, while Advocate Susmita Mahala appeared for the Respondent.

Brief Facts

The Petitioner filed a petition under Section 11(5) and (6) of the Arbitration seeking appointment of an Arbitral Tribunal comprising of a Sole Arbitrator, to adjudicate upon the disputes that have arisen between the parties.

The parties entered into an agreement for construction work in Odisha. The agreement contained an arbitration clause which stipulated resolution of disputes between parties by way of arbitration.

The Petitioner alleged breach by the Respondent saying that not only did the Respondent fail to complete the work within the stipulated time period, but also defaulted in making payments. The Petitioner invoked arbitration by issuing notice under Section 21 of the Arbitration Act.

The Respondent objected to the Court's jurisdiction, arguing that arbitration should be in Odisha, not Delhi. The Respondent contended that the construction work was carried out on the subject property in Odisha. The agreement was executed and notarized in Odisha, payments were received by the Petitioner in Odisha. It was further submitted that the Respondent was based in Odisha and that the arbitration clause specified that the Sole Arbitrator was to be appointed by the property owner, i.e., the Respondent.

The Petitioner submitted that when the arbitration clause did not specify a seat or venue, jurisdiction was determined per Section 2(1)(e) of the Arbitration Act and Sections 16 to 20 of CPC. The Court where the respondent resided, conducted business, or where any part of the cause of action arose had territorial jurisdiction.

In its rejoinder, the Petitioner asserted the Delhi High Court's jurisdiction, stating that part of the cause of action arose in Delhi, the Petitioner’s business was in Delhi, part payment was received in its Delhi bank account, and bills and invoices for the works were raised from its Delhi office. The Petitioner further argued that the Respondent had appointed a Sole Arbitrator unilaterally, which was not binding and was invalid in light of the precedent set by the Apex Court in TRF Limited v. Energo Engineering Projects Ltd. (2017) and Perkins Eastman Architects DPC v. HSCC (India) Ltd. (2019).

Reasoning of the Court

The Single Bench observed, “It is a settled position in law that when the arbitration agreement is silent on the aspect of ‘seat’, ‘venue’ or ‘place’ of arbitration, the determining factor will be where the cause of action arises as well as where the defendant/respondent actually or voluntarily resides or carries on their business. In other words, Section 2(1)(e) of the A&C Act has to be read in light with Sections 16 to 20 of CPC to determine the territorial jurisdiction of the Court at the stage of considering referral to arbitration in a Section 11 A&C Act petition.”

The Court relied upon the decision of the Supreme Court in Ravi Ranjan Developers (P) Ltd. v. Aditya Kumar Chatterjee (2022) wherein it was held that an application under Section 11(6) of the Arbitration Act could not be filed in any High Court regardless of territorial jurisdiction but had to be read with Section 2(1)(e) to mean the High Court with supervisory jurisdiction over the relevant Court.

The Bench noted, “Territorial jurisdiction of a Court is ascertained having regard to the place of accrual of cause of action. Some of the relevant principles that have developed in this area of jurisprudence are, including but not limited to, that making and signing of a contract constitutes cause of action; that facts which are necessary to decide the lis between the parties must have wholly or at least in part, arisen within the territorial jurisdiction of the Court; that each fact pleaded in the petition would not ipso facto be considered relevant while determining cause of action and that they must have a nexus with the issues involved in the matter; and importantly, that an insignificant or trivial part of cause of action would not be sufficient to confer territorial jurisdiction, even if incidentally forming a part of cause of action.”

The Bench observed that in the present case, the agreement was executed, notarized, and performed in Odisha, where the Respondent's principal business was also located, making it the place where the material cause of action arose. Mere receipt of part payment in a Delhi bank account did not establish jurisdiction, as payments were made through cheques from the Respondent’s bank in Odisha, and no clause specified Delhi as the place of payment.

Consequently, the Court dismissed the petition and held that no part of the cause of action could have been said to have arisen within Delhi.

Cause Title: Faith Constructions v. N.W.G.E.L. Church (Neutral Citation No. 2025:DHC:1806)

Appearance:

Petitioner: Advocates Rajeev M. Roy, P. Srinivasan

Respondents: Advocate Susmita Mahala

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