Read Order: Andriz Hydro Private Limited v. Ray Construction Limited

Tulip Kanth 

Chandigarh, October 11, 2021 : The Punjab and Haryana High Court has observed that where the parties by agreement or by exchange of letters or by separate meeting fixed the seat of arbitration, then the seat of arbitration would govern the jurisdiction of the Court.

The Bench of Justice Jaswant Singh and Justice Sant Parkash observed that as per Section 2(1)(e) of the Arbitration & Conciliation Act, 1996, the jurisdiction of the court would be where the cause of action arises or where the defendant resides or carries on business and Section 20 CPC should apply for the purpose of jurisdiction but where the parties by agreement or by exchange of letters or by separate meeting fixed the seat of arbitration, then the seat of arbitration would govern the jurisdiction of the court.

The Appeal in this case had been preferred against order passed by the Special Commercial Court, Gurugram, whereby the objection petition in original was returned to the appellant-petitioner against certified copy and proper receipt for presentation to the proper court having jurisdiction in Delhi as the court below had no territorial jurisdiction to entertain the same.

The appellant-company had been engaged in the business of engineering, procurement and construction (EPC/Turnkey) of Hydro Electric Power Plants and manufacture, supply, erection and commissioning of electro mechanical equipments for hydro power plants. In January 2002, Orissa Power Consortium Limited awarded the appellant a contract for design, manufacture, supply, erection and commissioning of electro mechanical equipment and execution of entire civil works of 54 MW Samal Hydro Electric Power Project at Samal Barrage, Orissa.

The appellant invited bids for sub-contractor in respect of above contract. Pursuant to the said tender, respondent-Ray Construction Limited was short listed for execution of civil works. Later, respondent failed to execute the works as per the construction schedule of civil works submitted by it. The appellant reminded the respondent of its contractual obligations and insisted the respondent to initiate remedial measures for speeding up the work. Since the respondent failed to complete the work even despite extension of time, appellant terminated the contract on the ground of enormous and inordinate delay in execution of contract.

Consequently, the respondent filed a petition under the Arbitration Act, before High Court of Delhi, however, no cause of action had arisen in Delhi, wherein  by an Order dated October 6,2006 it recorded the statement of parties to the effect that both the parties shall nominate arbitrators, who thereafter shall appoint a Presiding Arbitrator. The aforesaid petition was disposed of by the High Court of Delhi by appointing an Arbitral Tribunal comprising of three Arbitrators.

However, the Government of Haryana by a Notification constituted Special Commercial Court at Gurugram and objections filed by the appellant were transferred to the Special Commercial Court, Gurugram, by which an order dated December 18, 2017 held that the Court had got no territorial jurisdiction to entertain the objections filed by the appellant under Section 34 of the Arbitration Act.

The appellant had challenged the impugned order passed by the Special Commercial Court, Gurugram, before this Court.

The Court observed that the parties in meeting, held at Faridabad, had fixed the seat/ chosen place of arbitration by inserting Clause 76.0 of General Conditions of Contract- Arbitration stating that in the event of arbitration, the role and exclusive jurisdiction of the courts stationed in New Delhi shall apply.

According to the Court, it was also not in dispute that application under Section 9 of the Arbitration Act was preferred by the respondent before High Court of Delhi wherein an Arbitrator was appointed and parties agreed to the venue of arbitration to be at Delhi. 

Subsequently, the aforesaid petition/application was disposed of by the High Court of Delhi by an order dated October 11,2006 by appointing an Arbitral Tribunal comprising of three Arbitrators. Undisputedly, neither any objection whatsoever was raised by the appellant nor the earlier orders dated October 6,2006 and October 11,2006 were challenged. Thus, having accepted the jurisdiction at New Delhi, now the appellant couldnot argue to the contrary, noted the Bench.

The Bench also referred to the decision of the Supreme Court in case of Hindustan Construction Company Limited vs. NHPC Limited and another which reiterated the findings delivered in BGS SGS Soma JV vs. NHPC, while deciding similar issue of jurisdiction, where contract between the parties was executed at Faridabad, held jurisdiction at New Delhi as the parties had agreed to courts at Delhi to be the chosen seat of the arbitrator.

In view of this discussion and the chosen seat by the parties to be at Delhi, the Court was of the considered opinion that the court below rightly held that it had no territorial jurisdiction to entertain the objections under Section 34 of the Arbitration Act filed by the appellant. 

Accordingly the Bench dismissed the appeal and upheld the order, passed by the Special Commercial Court, Gurugram returning the objections for being presented in the Courts at Delhi, with the observation that any objection taken on the ground that such an objection petition filed under Section 34 of the Arbitration Act is out of time, couldnot be countenanced. 

It was further clarified that status quo would operate for 8 weeks from the date of this order for taking recourse to present the objection petition before the High Court of Delhi. It was also stated by the Bench, that since, the aforesaid judgment passed had been in the main appeal, no separate order was required to be passed in all other civil miscellaneous applications and were disposed of accordingly.

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