IN ARB P. 847 OF 2022- DEL HC- Arbitration Agreement indicated that the parties did not merely intend New Delhi to be venue but the seat of arbitration as well: Delhi High Court while perusing theClause which provided for arbitration to be ‘conducted’at New Delhi which was an all-encompassing term
Justice Neena Bansal Krishna [04-07-2023]

Read More: Samsung India Electronics Pvt. Ltd v. EnnEnnCorp Limited

Simran Singh

New Delhi, July 6, 2023: The Delhi High Court has held that the Arbitration Agreement between the two parties indicated that the parties did not merely intend New Delhi to be the venue but the seat of arbitration as well. The Clause provided for arbitration to be ‘conducted’ at New Delhi which was an all-encompassing term. The conduct of proceedings shall include all aspects of the arbitral proceedings, including and not limited to the appointment of the arbitrator.

The Single Judge Bench of Justice Neena Bansal Krishna stated that the parties intended Delhi to be the Seat was also evident from the words “in accordance with the provisions of the Arbitration and Conciliation Act, 1996 or any statutory modification or re-enactment thereof” which clearly reflected the intention of the parties that Delhi was not intended to be merely the venue of the arbitration proceedings; rather the very fact that no other place was indicated as the seat of the arbitration was to be any other Court. Hence, in absence of any contrary indicia, the Court found that New Delhi was the seat of the proceedings.

It was further stated that “The legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action arises and the courts where the arbitration takes place. The Arbitration Act envisages a situation where the parties agree to confer jurisdiction upon a court where no cause of action arose and which was neutral. Thus, it was stated that in Arbitration proceedings the parties by way of agreement, could confer jurisdiction upon a Court where no cause of action arose, i.e. a neutral venue and the Courts in Delhi could have jurisdiction even if no cause of action arose.”

In the matter at hand, Samsung India Electronics (petitioner), who was a globally recognised Company as an Industry leader in Technology, sought appointment of a sole arbitrator for adjudication of disputes between the parties. It had entered into the Sub-Lease Deed on 31.10.2020 with the respondent, a public incorporated Company engaged inter alia, in the business of real estate, whereby the respondent had agreed to sub-lease the Ground to 10th Floor of the property situated at Tower D, Logix Cyber, Noida (Property) for a period of 5 years on a monthly rent of INR 1,50,03,452.

In terms of Clause 4.1 of the Sub-Lease Deed, the petitioner had deposited an Interest Free Refundable Security Deposit (IFRSD) of INR 9,00,20,712 at the time of signing of Lease Deed with the respondent. The petitioner vide email dated 30.11.2021 gave the requisite written notice period of 3 months in terms of Clause 11 of the Agreement, to terminate the Sub-Lease Agreement and also stated that the premises would be vacated and the possession of property shall be handed over to the Lessor/respondent by 28-02-2022. The notice of Termination was duly acknowledged and confirmed by the respondent vide return email dated 13-12-2021.

The petitioner had made a reference to the agreement between the parties to retain the furniture and fixtures in the lease premises. However, in view of putting dispute to rest, the petitioner stated that they would get the fixtures removed and urged the respondent to refund the Security Deposit. Despite this offer, the respondent refused to return the Security Deposit by illegally retaining the Security Deposit against the payment of the purported rent and charges beyond the date of handover of the premises. Consequently, disputes arose between the parties with respect to the refund of security deposit

The Bench noted that the only objection to the appointment of the arbitrator taken by the respondent was that this Court lacked territorial jurisdiction to entertain the petition under Section 11 of the Arbitration and Conciliation Act, 1966 (Arbitration Act) asNew Delhi was agreed to be the venue and not the seat of Arbitration

The Bench dwelled upon the the distinction between the ‘seat’ and ‘venue’. The Arbitration Law envisaged two jurisdictions; onewas the ‘place’ where the arbitration may be conducted keeping the convenience of the parties in mind, and the other was the ‘seat’ which determined the jurisdiction of the Courts where the parties may agitate any controversy arising out of the Arbitration. “Much controversy over a period of time has arisen in regard to the concept of ‘seat’ and ‘venue' as the Act does not define the term ‘Seat’ or ‘Venue’. The term ‘Seat’ is of utmost importance as it connotes the situs of arbitration. The term ‘Venue’ though often confused with the term ‘Seat’, is a place chosen as convenient location by the parties to carry out the arbitration proceedings, but it should not be confused with ‘Seat’. The term ‘Seat’ carries more weight than ‘Venue’ or ‘place’.”

The Bench stated that the parties in the commercial parlance, use seat and venue interchangeably and the true sense of whether the reference to the place was meant to be ‘seat’ or ‘venue’ had to be derived from a reading of the agreement in question.

While navigating through the issue of the jurisdiction of the Court that no part of the cause of action arose in the territorial jurisdiction of this Court, it was stated that the provision in Section 2(1)(e)  of the Arbitration Act had to be construed keeping in view the provisions in Section 20 of the Arbitration Act which gave recognition to party autonomy. It stated that accepting the arguments of the respondent would be to render Section 20 of the Arbitration Act otiose.

Moreover, the Court stated that the claim in the dispute was regarding the refund of security deposit and not for ‘the immovable property’. In light of the above observations, the argument of the respondent had no legs to stand on.

The Bench concluded that the respondent was at liberty to raise his rights and contentions including limitation before the arbitrator and in view thereof, while stating the petition as a success, appointed Justice V.B. Gupta, High Court of Delhi (Retd.) as the Arbitrator to adjudicate the disputes between the parties as per clause 14 of the Sub-Lease Deed dated 31.10.2020. On request of the request of the parties, it was directed for the arbitration to be held under the aegis of the Delhi International Arbitration Centre, Delhi High Court.