In Grand Motors Sales and Services Pvt Ltd v VE Commercial Vehicles Ltd[i], the Delhi High Court recently reiterated that fixing the seat of arbitration necessarily attracts exclusive supervisory jurisdiction of the seat court, to the exclusion of all other courts. In so doing, the Delhi High Court followed the law laid down by the Supreme Court of India in BGS SGS Soma JV v NHPC Ltd[ii].
Background
The Delhi High Court was hearing a challenge to an arbitral award under Section 34 of India’s Arbitration and Conciliation Act 1996 (“Arbitration Act”).
Arbitral proceedings had arisen out of a dispute resolution clause in a dealership agreement. The clause provided for arbitration under the Arbitration Act. It further read: “The seat of arbitration shall always be at Delhi. The courts of Indore shall have exclusive jurisdiction in all matters arising under this Agreement”.
In May 2020, the Indore Bench of the Madhya Pradesh High Court (“MPHC”) constituted the arbitral tribunal under Section 11 of the Arbitration Act. The MPHC dismissed an objection to its jurisdiction raised on the ground that parties had by agreement designated Delhi as the seat.
When the matter reached the Delhi High Court, the respondent objected to the Delhi High Court’s jurisdiction to deal with the Section 34 challenge on the grounds that:
1. The MPHC had considered and rejected the territorial jurisdiction argument. The MPHC’s order had been challenged before the Supreme Court of India, which did not interfere with it. Hence, the order had attained finality;
2. Since the application under Section 11 had been preferred before the MPHC, a challenge under Section 34 could not be preferred before the Delhi High Court, basis Section 42 of the Arbitration Act[iii];
3. Courts in Indore had exclusive jurisdiction by parties’ agreement. The decision in BGS SGS Soma would not be applicable to the present reference since that decision had changed the law as it existed at the time of the MPHC’s Section 11 order.
The Delhi High Court’s view
Rejecting these objections, the Delhi High Court held that:
1. If the contract fixes a seat, any other clause conferring exclusive jurisdiction on any court other than the seat court would be invalid (following BGS SGS Soma);
2. The bar under Section 42 applies only if the court first approached had the necessary jurisdiction (also following BGS SGS Soma);
3. Under Article 141 of the Constitution of India, decisions of the Supreme Court of India only declare—and don’t change—Indian law. As such, it cannot be said that the Supreme Court’s decisions (including BGS SGS Soma) don’t have a retrospective effect. Where the Supreme Court intends its decisions to apply only prospectively, it says so.
On this basis, the Delhi High Court held that, in light of the language of the dispute resolution clause, the exclusive jurisdiction to supervise the arbitral proceedings between the petitioner and respondent lay with it—and not with the MPHC.
Our view
This decision involves a classic dispute resolution clause which other Indian courts have had occasion to deal with over the past few years.
In 2021, the Bombay High Court[iv] was faced with a similar clause specifying Mumbai as the seat and giving exclusive jurisdiction to Hyderabad courts. A two-judge bench of the court held, basis BGS SGS Soma, that Mumbai courts have exclusive jurisdiction over the arbitral proceedings.
As such, the present decision goes some distance in bringing the Delhi High Court’s understanding of the law in BGS SGS Soma in line with that of the Bombay High Court.
Shiv Iyer
Managing Partner
Ankita Sen
Senior Associate
Chinmay A. Deshpande
Junior Associate
[i] 2024:DHC:7027, 2024 SCC OnLine Del 6436
[ii] (2020) 4 SCC 234
[iii] Under Section 42 of the Arbitration Act, once an application under Part I of the Arbitration Act has been presented before a court, all subsequent applications would have to be made only to that court and to no other court.
[iv] Aniket SA Investments LLC v Janapriya Engineers Syndicate Pvt Ltd 2021(4) Mh.L.J. 123, revd 2019 SCC OnLine Bom 31874
This article is for information purposes only and should not be treated as legal advice.
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