Source: Delhi High Court 

Why in News?

A bench of Justice C Hari Shankar held that exclusive jurisdiction clause prevails over seat of arbitration. 

• The Delhi High Court held this in the case of Precitech Enclosures Systems Pvt Ltd v. Rudrapur Precision Industries & Anr. (2025). 

What was the Background of Precitech Enclosures Systems Pvt Ltd v. Rudrapur Precision Industries & Anr. (2025) Case?

• Rudrapur and Precitech entered into a Rent Agreement on 15th  July 2017, where Rudrapur sub-leased an industrial land plot in SIDCUL, IIE, Pant Nagar, Uttarakhand to Precitech for manufacturing and storage purposes. 
• The Rent Agreement's Clause 20 specified that courts in Rudrapur, Uttarakhand would have exclusive jurisdiction for resolving any disputes between the parties. 
• Precitech paid rent regularly until March 2021, when financial difficulties arose due to the COVID-19 pandemic and disputes among its directors, which led to the freezing of Precitech's bank account. 
• On 3rd  March 2021, the parties signed a Compromise Deed, settling the total rent at ₹27,75,547/- and agreeing that Precitech would sell a property to Rudrapur for ₹90 lakhs, with the rent to be deducted from the sale proceeds. 
• On 15th  May 2021, Rudrapur unilaterally increased the agreed rent to ₹42,26,854/- and threatened to take forcible possession of Precitech's belongings. 
• Rudrapur also unilaterally appointed Dr. Pankaj Garg as an arbitrator, which Precitech objected to, leading to a court case to terminate Dr. Garg's mandate. 
• Precitech alleges that Rudrapur has taken forcible possession of the disputed premises, preventing Precitech from accessing its machinery and goods. 
• Precitech filed a Section 9 petition requesting the court to: 
  • Restrain Rudrapur from selling or creating third-party interests in Precitech's machineries and stocks. 
  • Direct Rudrapur to hand over possession of Precitech's machineries and equipment. 
• Rudrapur has objected to the maintainability of the petition, asserting that the court lacks territorial jurisdiction. 

What were the Court’s Observations?

• The Court first of all held that the law in regard to seat has been fossilized in law as follows: 
  • Where there is a designated seat of arbitration the Court having jurisdiction over the designated seat would have jurisdiction. 
  • Where there is no seat of arbitration but only venue is provided the venue will be deemed to be the arbitral seat 
  • In such a situation, exclusive jurisdiction clause in the arbitration agreement, vesting jurisdiction in Courts elsewhere, would make no difference. 
• Therefore, generally the legal position is if the agreement contains one clause designating the seat / venue of arbitration and another conferring exclusive jurisdiction on Courts elsewhere over the agreement and disputes that arise out of it, legal or judicial proceedings would only lie before the Court having territorial jurisdiction over the arbitral sweat/ venue. 
• However, a peculiar situation arises where the agreement contains a clause providing the exclusive jurisdiction clause which also expressly covers proceedings relating to arbitration. 
• In the present facts Clause 20 of the Rent Agreement provides exclusive jurisdiction clause. It specifically vests jurisdiction with courts at Rudrapur in respect of “any application to be made under the Arbitration and Conciliation Act, 1996”. This would include, needless to say, the present petition under Section 9 of the 1996 Act. 
• In the present case, even if the seat of arbitration has been contractually fixed at Delhi in view of the e-mail dated 4th  April 2022, the e-mail does not purport to re-write Clause 20 of the Rent Agreement. 
• Clause 20 of the Rent Agreement obligates the parties to move the Courts at Rudrapur in that regard, even if, by consent, they have agreed to have the arbitral proceedings conducted at Delhi. 
• Therefore, the Court held that the objection of Rudrapur sustains.

What is the Seat of Arbitration?

• The Seat of Arbitration determines the applicable law governing the Arbitration including the procedural aspects. 
• The regulation of conduct of Arbitration and challenge to an award would have to be done by the courts of the country in which the Seat of Arbitration is located as such Court would be the supervisory court possessed with the power to annul the award. 
• Difference between ‘seat’ and ‘venue’: 
  • The Seat of Arbitration may well be quite independent of the place or the venue where the hearings or other parts of the arbitral process occur or take place. 
  • The Seat of Arbitration is of vital importance, for it is the courts of the Seat that have the supervisory jurisdiction over the arbitral process. 
  • It is not necessary for the Seat of Arbitration and the venue of the Arbitration to be the same. 
  • Location and even when hearings take place during the course of the Arbitration in several different countries, the chosen Seat of Arbitration will remain unaffected independent of the geographical place where the hearings take place.