Appointment of Arbitrator when Seat of Arbitration is not Specified: A Primer

Contributed by Hammurabi & Solomon Partners





I. Introduction


This Primer seeks to elaborately review the judgement of the Delhi High Court in the case of Aarka Sports Management vs. Kalsi Buildcon Pvt. Ltd. Delivered on 06.07.2020 adjudicated upon the following question:

  • Which is the competent court to hear plea for appointment of arbitrator when seat of arbitration is not specified?


II. Summary of Judgment and Guidelines in Aarka Sports Management vs. Kalsi Buildcon Pvt. Ltd.

The Hon’ble High Court of Delhi has made the following observation with regard to the issue of the competent court to hear plea for appointment of arbitrator when seat of arbitration is not specified:

When the parties have not agreed on the seat of the arbitration, the court competent to entertain an application under Section 11 of the Arbitration and Conciliation Act is the one defined in Section 2(1)(e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure.

III. Factual Matrix


The Petitioner, namely Aarka Sports Management had moved a Section 11 petition against the Respondent, Kalsi Buildcon Pvt Ltd. The Respondent did not dispute the arbitration agreement or the notice of invocation but contended that the Delhi High Court lacked the jurisdiction to entertain the petition. It was submitted that Delhi was neither the seat of arbitration nor any cause of action arose at Delhi.

The Respondent informed the Court that the agreement was drawn at Ranchi; the agreement was signed at Lucknow and the place of performance/execution of the agreement was Patna, Bihar. Respondent added that as per the Arbitration clause, parties were required to approach the “Court of proper jurisdiction" for the invocation of the sole arbitrator. The Petitioner, on the other hand, stated that the agreement vested exclusive jurisdiction to courts in Delhi and hence, Delhi High Court had the power to decide the petition.

IV. Issue dealt by the Delhi High Court

  • Which is the competent court to hear plea for appointment of arbitrator when seat of arbitration is not specified?

The court explained the legal position with respect to the Arbitration and Conciliation Act as such:

Section 2(1)(e) of the Arbitration and Conciliation Act defines “Court” which is reproduced hereunder:-

“Section 2.

Definitions.-

1. In this Part, unless the context otherwise requires-

(e) ―Court means the Principal Civil Court of Original Jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having, jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such Principal Civil Court, or any Court of Small Causes;


2. This Part shall apply where the place of arbitration is in India.”

Section 20 of the Arbitration and Conciliation Act defines “Place of Arbitration” which is reproduced hereunder:-

“Section 20

Place of arbitration.-

  1. The parties are free to agree on the place of arbitration.

  2. Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the Arbitral Tribunal having regard to the circumstances of the case, including the convenience of the parties.

  3. Notwithstanding sub-section (1) or sub-section (2), the Arbitral Tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witness, experts or the parties, or for inspection of documents, goods or other property.”

A bare reading of Section 20 (1) of the Arbitration and Conciliation Act makes it clear that the said provision empowers the parties to determine the seat of arbitration. The parties are at liberty to choose a neutral seat of arbitration where neither the cause of action arose nor the parties reside or work and Sections 16 to 20 of the Code of Civil Procedure would not be attracted.

Once the seat is determined, the Court of that place shall have exclusive jurisdiction to deal with all matters relating to arbitration agreement between the parties.

If the parties have not determined the seat of arbitration, the seat of arbitration shall be determined by the Arbitral Tribunal under Section 20(2) of the Arbitration and Conciliation Act.

If the parties have not agreed on the seat of the arbitration, the Court competent to entertain an application under Section 11 of the Arbitration and Conciliation Act would be the “Court” as defined in Section 2(1) (e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure.

Judgments elucidating on the aspect of “Seat of Arbitration”

The Hon’ble Supreme Court in Indus Mobile Distribution Private Limited vs. Datawind Innovations Private Limited, (2017) 7 SCC 678 held that Section 20 recognizes autonomy of the parties to choose a neutral seat of arbitration where no part of the cause of action arose. The Supreme Court further held that the once the seat is determined, the Court of that place would have exclusive jurisdiction to regulate the arbitration proceedings arising out of the agreement between the parties. The Supreme Court further held that the neutral seat chosen by the parties may not have jurisdiction under any of the provisions of Section 16 to 21 of Code of Civil Procedure.

The Hon’ble Supreme Court in the case of BGS SGS Soma JV vs. NHPC Ltd., 2019 SCC Online SC 1585 held that once the parties designate the seat of arbitration, only the courts governing the seat have exclusive jurisdiction to govern such arbitration proceeding and jurisdiction of all other courts stand ousted.

The Supreme Court in Union of India vs. Hardy Exploration and Production (India) Inc., (2019) 13 SCC 472 held that the arbitration clause should be read holistically to gauge the intention of the parties with respect to “seat of arbitration”. If the “seat” is not explicitly mentioned, then it has to be deduced from the arbitration clause and related factors. This principle has been reaffirmed in the judgment of Mankatsu Impex Private Limited vs. Airvisual Limited, 2020 SCC OnLine SC 301.

V. Findings of the High Court


After considering the submissions of the parties, the relevant provisions of the Arbitration Act and judgments relied upon by the parties, the Court observed that in terms of Section 20, parties had the autonomy to choose a “neutral seat of arbitration” i.e. where no part of the cause of action has arisen and this place may not otherwise have jurisdiction under Sections 16 to 21 of Code of Civil Procedure. Once the seat is determined, the court of that place would have the exclusive jurisdiction to regulate the arbitration proceedings arising out of the agreement between the parties, it added. However, when the parties have not determined the seat of arbitration, the seat of arbitration shall be determined by the Arbitral Tribunal under Section 20(2) of the Arbitration and Conciliation Act, the Court further stated.

As far as the issue of determination of the competent court to entertain the plea for the appointment of an arbitrator was concerned, the Court held,

If the parties have not agreed on the seat of the arbitration, the Court competent to entertain an application under Section 11 of the Arbitration and Conciliation Act would be the “Court" as defined in Section 2(1) (e) of the Act read with Sections 16 to 20 of the Code of Civil Procedure.

Applying the above principles, the Court concluded that in the present case, since the arbitration agreement did not stipulate any seat of arbitration, the courts in Delhi lacked territorial jurisdiction to hear the petition.

It further observed that,

This Court lacks territorial jurisdiction as Delhi is not the seat of arbitration; no cause of action arose at Delhi and the respondent does not work at Delhi. The agreement was drawn at Ranchi, signed at Lucknow and was to be performed at Patna. The petitioner could have succeeded if the agreement had provided the seat of arbitration to be Delhi. In that case, this Court would have exclusive jurisdiction to entertain this application.

The Court added that the exclusive jurisdiction clause in the agreement would not come to the rescue of the Petitioner as the parties could not have conferred jurisdiction on a court which otherwise had no jurisdiction. The Petition was thus dismissed with liberty to the Petitioner to approach the Court of competent jurisdiction.


Contributed by Hammurabi & Solomon Partners


The above article has been authored by Ms. Shweta Bharti(Senior Partner) and Mr. Anil Tiwari(Partner) from Hammurabi & Solomon Partners, New Delhi.


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