Mere Conduct Of Arbitration Under DIAC, By Itself, Doesn't Make Delhi The Seat: Delhi High Court

The Delhi High Court on Tuesday set aside a district court order that refused to hear a challenge to an arbitral award. It held that arbitration conducted under the aegis of the Delhi International Arbitration Centre does not, by itself, make Delhi the seat of arbitration.

The Court said that where no seat is expressly designated, courts where a part of the cause of action arises can exercise jurisdiction. Once a competent court is approached first, Section 42 requires that all further court proceedings arising from the same arbitration be heard by that court alone.

A Division Bench of Justice Anil Kshetrapal and Justice Amit Mahajan said courts often confuse the seat of arbitration with the venue of hearings. The Bench said the seat is the juridical centre of the arbitral proceedings.

It determines which court exercises supervisory jurisdiction. The venue, by contrast, is only the place where hearings are held for convenience.

“The two concepts are distinct and cannot be used interchangeably,” the Court observed. It added that merely because arbitral proceedings are conducted at a particular place does not, by itself, confer exclusive jurisdiction on courts there.

The Court also examined its earlier order dated December 1, 2016, by which the parties were referred to arbitration. It noted that the order merely directed that the arbitration be conducted under the aegis of the Delhi International Arbitration Centre and in accordance with its rules.

“The said order does not designate DIAC, New Delhi, or any other place as the juridical seat of arbitration. The conduct of proceedings at DIAC, therefore, cannot be elevated to the status of a determination of seat.”, it said.

The case concerns a residential property in Janakpuri. A disagreement over the construction of a house between Arun Mehrotra and contractor Kishan Lal led the parties to arbitration. An arbitral award passed in November 2018 directed Mehrotra to pay about Rs 22.06 lakh. Interest at 9% per annum and costs were also awarded. Mehrotra challenged the award under Section 34 before the Dwarka district court. The court declined to examine the challenge on its merits.

It held that it lacked jurisdiction since the Delhi High Court had earlier referred the parties to arbitration under the aegis of DIAC.

Before the High Court, Mehrotra said the arbitration clause did not name any seat of arbitration. He pointed out that the property was located within the jurisdiction of the Dwarka courts. He said substantial parts of the cause of action arose there. He also relied on the conduct of both sides.

He noted that not only his Section 34 (appeal) challenge but also even an application filed by Lal under Section 29A seeking extension of the arbitrator's mandate had been moved before the Dwarka courts. Lal argued that since the arbitration was conducted at DIAC in Delhi, only courts in Delhi could hear challenges to the award.

The High Court rejected this view. It held that its earlier order directing arbitration under the aegis of DIAC did not amount to a designation of Delhi as the seat of arbitration. The Court said the mere application of DIAC Rules, without an express stipulation on the seat, could not confer exclusive territorial jurisdiction on Delhi courts.

It noted that the suit property was situated within the jurisdiction of the Dwarka courts. It also noted that both parties had invoked that court's jurisdiction during the arbitration.

“Such conduct amounts to a clear submission to the jurisdiction of the Dwarka Courts and attracts the bar under Section 42,” the Court said.

Holding that the district judge had erred in refusing to hear the appeal, the High Court set aside the order. It directed the Dwarka court to decide the matter afresh on its merits.