Arbitration & MSMED Act – Seat of Arbitration & Exclusive jurisdiction
The respondent is a registered medium enterprise under MSME Act and established at Pathankot, Punjab. On 21.1.2016, it had entered into an agreement with the petitioner for construction of a bus depot at Kharkhari Nahar village, New Delhi.
Because of the disputes in respect of dues, the respondent invoked the jurisdiction of the Facilitation Council at Pathankot, Punjab, under Section 18 of the MSME Act.
After closure of conciliation proceedings, the arbitration was started.
The petitioner’s objection to the jurisdiction of Facilitation Council was rejected by the order dated 26.10.2020.
The Facilitation Council passed the Arbitral Award dated 5.8.2021 for Rs.4,11,55,845/-.
The petitioner filed a section 34 petition against the arbitral award in the Delhi High Court.
Section 18(4) of MSME Act vests jurisdiction in the Facilitation Council to act as an arbitrator or conciliator in disputes between a supplier in its jurisdiction and a buyer located anywhere in India.
The respondent being the supplier invoked arbitration before Pathankot Council and Pathankot was the seat of the arbitration proceedings.
According to the petitioner, as per clause 7 of the Integrity Pack which forms part of the tender documents, the Courts in Delhi are vested with exclusive jurisdiction.
In the alternative, it was contended that the cause of action for arbitral proceedings arose entirely in Delhi and therefore, the cause of action is determinative of the seat of arbitration.
However, Clause 25 of the Agreement does not contain exclusive jurisdiction clause nor the seat of arbitration is stipulated. The venue of arbitration is to be fixed by the arbitrator in his sole discretion.
In para 15 of the judgment, the High Court observed that “….upon a proper interpretation of the contractual terms, the parties did not expressly provide for the seat of the arbitration under the Agreement and only provided that the venue would be at the discretion of the arbitrator.
Seat of the arbitration is to be determined based on its connection with arbitration proceedings and not cause of action for the disputes.
The “seat” of arbitration is the place where the arbitral proceedings are anchored and Sections 16 to 20 of CPC in respect of filing of the suits have no relevance.
In para 23 it was observed that the proceedings were admittedly conducted at and the Award was passed at Pathankot. There being no contrary indication in the form of an exclusive jurisdiction clause or otherwise to suggest that the seat of the arbitration was at any place other than the venue which was, even contractually, left to the learned Arbitrator to decide.
Moreover, section 18(4) of MSME Act permits an enterprise to approach Council at its place of location in the absence of an exclusive jurisdiction clause.
Judgment dated 1.5.2024 of the Delhi High Court in O.M.P. (COMM) 337 of 2021 of Delhi Tourism and Transportation Development Corporation Vs. M/s Satinder Mahajan
