In PCP International Limited v Lanco Infratech Ltd, Delhi High Court recently held that parties engaged in arbitration cannot agree to confer jurisdiction on a court that otherwise has no jurisdiction, and that only the seat of arbitration will give territorial jurisdiction and not the venue of jurisdiction.
The court was considering a petition filed by PCP under section 9 of the Arbitration and Conciliation Act, 1996, by which a party may apply to a court for interim measures.
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PCP was awarded a contract at a power project owned by Lanco. Neither company was based in Delhi. PCP argued that Delhi High Court had territorial jurisdiction on the basis of general conditions of the contract, which gave exclusive jurisdiction to the courts in New Delhi.
The court held that jurisdiction in a contractual matter lies with four courts: where the contract is executed; where the contract is to be performed; where payment under the contract is to be made; and where the defendant or respondent resides. Observing that Delhi was not where the contract between PCP and Lanco was executed nor where it was to be performed or where payment was made, the court held that it had no territorial jurisdiction to try the petition.
Explaining the difference between the venue and the seat of arbitration, the single judge said PCP’s argument that Delhi High Court had territorial jurisdiction as Delhi was the venue of the arbitration was “misconceived”. Under section 2(1)(e) of the Arbitration and Conciliation Act, “court” is defined as a court that would have jurisdiction to decide the questions that are the subject matter of the arbitration, if the questions had been the subject matter of a suit.
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The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.
