Background
Disputes arose between M/s KLA Const Technologies Pvt. Ltd. (Applicant) and M/s Gulshan Homz Private Limited (Respondent) under a construction contract. The Applicant alleged that delays in the execution arose solely due to the Respondent’s failure to perform its contractual obligations, such as not providing timely access to the site, not making timely payments etc. Later, the Respondent informed the Applicant about the discontinuation of the project due to poor market response, and pursuant to which, a mutually agreed final work bill was drawn up. The Respondent then proceeded to terminate the contract without serving the mandatory seven-day prior notice as stipulated in the contract. In order to claim the outstanding sum, the Applicant sent a notice to the Respondent, invoking the arbitration clause and proposing the appointment of an arbitrator. The Respondent did not reply to this notice, requiring the Appellant to move the present petition under Section 11 of the Arbitration & Conciliation Act, 1996 (A&C Act), for the appointment of a sole arbitrator.
Extract of the relevant Contract clauses
Clause 37 (a)…The Seat and venue of such Arbitration shall be Noida/Delhi (State of U.P./ Delhi) (b)…Subject to arbitration Clause as defined in sub-Clause (a) above District Court of Noida (Uttar Pradesh) and High Court of Allahabad shall have exclusive jurisdiction of all or any of disputes.
Clause 91 of the General Conditions of Contract (GCC) – 91.2 The Courts of New Delhi alone shall have exclusive jurisdiction in respect of any matter, claim or dispute arising out of or in relation to this Contract.
Clause 92.10 of the GCC – 92.1 The venue of arbitration shall be Noida.
Issue and Decision
Whether the Delhi High Court has the jurisdiction to entertain the present petition under Section 11 of the A&C Act, 1996, in view of the terms of the contract?
The Applicant argued that a conjunctive reading of clauses 37(a), 37(b) and 91.2 unequivocally declares that the courts at New Delhi alone possess exclusive jurisdiction over any matter arising out of or in relation to the contract. It relied on the judgements in cases such as My preferred Transformation[1], Inder Mohan Bhambri[2] and Vedanta Limited[3], to contend that where an arbitration clause contemplates multiple prospective seats, the jurisdiction of the Courts at any seat may be invoked. It also submitted, relying upon “subject to clause” in Clause 37(b), that clauses 37 (a) and 37 (b) operate independently within their own realms and do not encroach upon each other.
The Respondent, on the other hand, reading “seat and venue” as seat or venue, contended that Noida or New Delhi are designated as the same. It further added that a conjunctive reading of clauses 37(a), 37(b) and 92.1 reveals that the venue of arbitration is exclusively at Noida. It relied upon the decision in Axalta Coating Systems India (P) Ltd.[4], which holds venue to be the seat of the arbitral proceedings, in the absence of contrary indicia.
The Court noted that the terms of the contract must be read as a whole, in a harmonious manner. Placing reliance on the decisions in Devyani International Limited[5] and NJ Construction, the Court highlighted that primacy must be given to the seat of arbitration to entertain applications arising from the arbitration agreement, overriding any contrary clause [¶20-21]. Further, relying on Inder Mohan Bhambri, it was also noted that clause 37 (b) (the exclusive jurisdiction clause) has been made ‘subject to’ clause 37 (a) (the arbitration clause), thus, the arbitration clause would prevail over the exclusive jurisdiction clause [¶23-24].
Clause 91.2 clearly stipulates that the courts of New Delhi have exclusive jurisdiction over disputes relating to the contract, while clause 37(b) is made subject to clause 37(a), thereby revealing the ‘express hierarchy and intent embedded’ in the contract. In a nutshell, the parties intended to have Delhi as the seat/venue for arbitrable disputes, and invoke the jurisdiction of the courts at Noida in case of non-arbitrable disputes [¶28-29].
Significance
This ruling settles the confusion where multiple places are mentioned as the seat, venue, or exclusive jurisdiction. The Court made it clear that the seat of arbitration is key in deciding which court has authority in arbitration matters. When one clause is made “subject to” another, the main clause (here, the arbitration clause) will prevail.
Case Details
Citation Codes: 2025:DHC:4217
Date of Judgement: 14 May 2025
Forum: Delhi High Court
Bench: Purushaindra Kumar Kaurav, J.
[1] (2021) SCC OnLine Del 1536
[2] (2024) SCC OnLine Del 8208
[3] (2024) SCC OnLine 4871
[4] 2024 SCC OnLine 9303.
[5] 2017 SCC OnLine Del 11156
Author(s)
Gunjan Jain
Student at RGNUL, Punjab