Case Study: Parsvnath Developers Limited v. Brig. Devendra Singh Yadav and others

"The "seat" of arbitration determines the exclusive jurisdiction of courts, and an order under Order VII Rule 10 CPC is not appealable under Section 37 of the Arbitration and Conciliation Act, 1996."

Citation: FAO-CARB-28-2022 (O&M)

Date of Judgment: 20^th January, 2025

Court: High Court of Punjab and Haryana at Chandigarh

Bench: Arun Palli (J) and Vikram Aggarwal (J)

Facts

• On 27^th October 2005, the appellant, M/s Parsvnath Developers Limited, entered into a collaboration agreement with the respondents, who were the owners of land in Village Dharuhera, District Rewari. The agreement was for developing the land into a residential colony. The parties agreed on various terms and conditions, including provisions for jurisdiction and dispute resolution.
• As disputes arose between the parties, the respondents filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, which led to the appointment of Justice R.M. Lodha, former Chief Justice of India, as the sole arbitrator on 5^th February 2016. Arbitration proceedings were conducted entirely in Delhi, and the arbitral award was rendered on 21^st September 2020.
• Following the award, the appellant filed a petition under Section 34 of the 1996 Act in the District Court at Rewari, challenging the award. The respondents, however, contested the jurisdiction of the Rewari Court, arguing that since the arbitration proceedings were conducted in Delhi, the courts in Delhi alone had jurisdiction under Section 2(1)(e)(i) of the 1996 Act. They moved an application under Order VII Rule 10 of the CPC, 1908, read with Section 151 of the CPC and Section 2(1)(e)(i) of the 1996 Act, seeking the return of the petition for presentation before the appropriate Court in Delhi.
• In their application, the respondents argued that Delhi was the “seat” of arbitration and, therefore, the exclusive jurisdiction to hear objections under Section 34 vested with the Delhi Courts. The appellant countered this argument, relying on the jurisdiction clause in the collaboration agreement, which they claimed fixed Rewari as the jurisdictional "seat."
• On 6^th August 2022, the District Judge, Rewari, allowed the respondents’ application and ordered the return of the Section 34 petition, directing the appellant to file it before the competent Court in Delhi. This decision prompted the appellant to file the present appeal before the Punjab and Haryana High Court, challenging the Rewari Court's order.

Decision of the District Court

The District Judge, Rewari, accepted the respondents' contention that the arbitration proceedings were conducted entirely in Delhi, making Delhi the "seat" of arbitration. The Court observed that under the framework of the Arbitration and Conciliation Act, 1996, the concept of the "seat" of arbitration determines the exclusive jurisdiction of courts in matters arising out of arbitration proceedings.

The Court rejected the appellant's reliance on the jurisdiction clause in the collaboration agreement, noting that the arbitration proceedings and the arbitrator’s appointment were conducted in Delhi. It ruled that the conduct of the proceedings and the locus of the arbitral tribunal superseded any jurisdictional stipulations in the agreement. Thus, the District Judge, Rewari, allowed the respondents' application under Order VII Rule 10 of the CPC, directing the return of the Section 34 petition to be filed in Delhi.

Decision of the High Court

The Punjab and Haryana High Court dismissed the appeal on the grounds of maintainability, relying extensively on the Supreme Court’s decision in BGS SGS Soma JV v. NHPC Limited.[1] The key observations were:

1. The Court held that Section 37(1)(c) of the 1996 Act permits appeals only against orders setting aside or refusing to set aside an arbitral award under Section 34. An order directing the return of a petition under Order VII Rule 10 CPC does not amount to such an order and is, therefore, not appealable under Section 37. The Court emphasized that Section 13(1) of the Commercial Courts Act does not create an independent right of appeal but merely provides the forum for appeals permitted under Section 37 of the 1996 Act.
2. While the merits of the jurisdictional dispute were not directly adjudicated, the Court reiterated the principles laid down in BGS SGS Soma JV, clarifying that the "seat" of arbitration determines jurisdiction. The "venue" is merely a geographical location unless explicitly stated as the "seat."
3. The Court granted the appellant liberty to pursue other remedies available under the law, recognizing the procedural limitation of the present appeal.

The appeal was dismissed without delving into the merits of the jurisdictional dispute, as the decision hinged solely on the issue of maintainability.

Key legal issues discussed

1. Whether the "venue" of arbitration can be equated with the "seat" of arbitration?

No

The High Court here in its judgment, addressed the issue of whether the "venue" of arbitration can be equated with the "seat" of arbitration. The court held that the "venue" and "seat" of arbitration are distinct concepts under Indian arbitration law. While the "venue" refers to the physical location of the arbitration proceedings, the "seat" is a juridical concept that determines which court has supervisory jurisdiction over the arbitration. The court concluded that in this case, the seat of arbitration was Rewari, as explicitly indicated by the jurisdiction clause in the agreement, despite the arbitration proceedings being conducted in Delhi (the venue).

The court reiterated that under the Arbitration and Conciliation Act, 1996, the "seat" of arbitration is the center of gravity for determining the jurisdiction of courts in arbitration matters. For instance, in paragraph 13 court observed that

“Where neither "venue " nor "seat " would be mentioned, the place where arbitration would take place would be taken to be the “seat” of jurisdiction i.e. “venue” would be taken to be the “seat” of jurisdiction. The second situation would be where only the “venue” is fixed but the “seat” is not fixed. In such a case, “venue” and “seat” can be interchanged and, therefore, the “venue” of arbitration would also become the “seat” of arbitration. The third case would be where the “venue” and jurisdiction are separately provided, as is the case in the present matter. It was submitted that under such circumstances, “venue” would only be for convenience.”

Court in paragraph 9 observed that "venue," on the other hand, is merely a convenient place for conducting arbitration proceedings and does not automatically determine the court's supervisory jurisdiction unless explicitly stated otherwise.

“…that Delhi was merely the “venue” of Arbitration and in view of the exclusive jurisdiction clause, the “venue” of Arbitration would not be taken to be the “seat” of Arbitration. A detailed reference was made to the collaboration agreement, particularly Clauses 23 and 24 thereof along with the provisions of Sections 2(1)(e)(i), 20, 34 and 42 of the 1996 Act. Referring to the judgment in the case of BGS SGS Soma JV (supra), it was submitted that the ‘contrary indicia’ as referred to in the said judgment is the jurisdiction clause i.e. Clause No.24 in the Collaboration Agreement and, therefore, the “venue” of Arbitration will not be taken to be the “seat” of Arbitration.”

The court referred to the judgment in BGS SGS Soma JV v. NHPC Limited, which held that in the absence of contrary indications, the venue may be considered the seat. However, when there is a clear jurisdiction clause or contrary indicia, the seat takes precedence over the venue. It reiterated that the seat anchors the legal framework for arbitration, and jurisdiction flows from it.

2. Whether an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, read with Section 13(1) of the Commercial Courts Act, 2015, is maintainable against an Order VII Rule 10 CPC order?

No

The court held that an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, is not maintainable against an order passed under Order VII Rule 10 of the CPC. This ruling was based on the combined reading of Section 37 of the Arbitration Act and Section 13(1) of the Commercial Courts Act, 2015, which clearly circumscribe the types of orders that are appealable. Court in paragraph 17 noted that

“The issue of maintainability of an appeal under Section 37 of the 1996 Act read with Section 13(1) of the 2015 Act against an order passed under Order 7 Rule 10 CPC directing the return of the petition under Section 34 of the 1996 Act was first raised before this Court in the case of BGS SGS Soma JV (supra). Vide judgment dated 12.09.2018, a coordinate Bench held that the appeal was maintainable. When the matter reached the Supreme Court of India, apart from merits of the case, the issue of maintainability was also raised. The Supreme Court of India elaborately discussed the issue of maintainability and after referring to the statutory provisions and the entire law on the subject, came to the conclusion that against an order passed on an application under Order 7 Rule 10 CPC ordering the return of a petition filed under Section 34 of the 1996 Act for presentation to the appropriate Court, no appeal under Section 37 of the 1996 Act read with Section 13(1) of the 2015 Act, would be maintainable”

Section 37 of the Arbitration Act explicitly lists the orders that are appealable. These include:

• Refusal to refer parties to arbitration under Section 8.
• Granting or refusing to grant interim measures under Section 9.
• Setting aside or refusing to set aside an arbitral award under Section 34.

The High Court observed that an Order VII Rule 10 CPC order, which directs the return of a petition (e.g., under Section 34 of the Arbitration Act) for presentation to the appropriate court, does not fall within the ambit of Section 37. Therefore, it is not appealable under this provision. Court in paragraph 15 observed that

“Section 37 (1) of the 1996 Act reads as follows:

“37. Appealable orders. -(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: (a) refusing to refer the parties to arbitration under Section 8; (b) granting or refusing to grant any measure under Section 9; (c) setting aside or refusing to set aside an arbitral award under Section 34.”

In paragraph 16 of judgment, the court noted that Section 13(1) of the Commercial Courts Act, 2015, provides for appeals from orders of Commercial Courts to the Commercial Appellate Division. However, the proviso to Section 13(1) restricts such appeals to orders specifically enumerated under:

• Order XLIII Rule 1 of the CPC.
• Section 37 of the Arbitration and Conciliation Act, 1996.

Since Order VII Rule 10 CPC is not mentioned in either Section 37 of the Arbitration Act or Order XLIII Rule 1 of the CPC, such orders are not appealable under Section 13(1) either.

The court relied on the following precedents to support its conclusion:

1. BGS SGS Soma JV v. NHPC Ltd. (2020): The Supreme Court ruled that only those orders explicitly mentioned in Section 37 of the Arbitration Act are appealable. The court clarified that orders under Order VII Rule 10 CPC, which are procedural in nature, do not fall under the ambit of Section 37.
2. Kandla Export Corporation v. OCI Corporation[2]: In paragraph 17 high court referred this case where Supreme Court held that the Arbitration Act is a self-contained code, and appeals are strictly limited to the orders enumerated in Section 37. The High Court applied this reasoning to conclude that an Order VII Rule 10 CPC order is not appealable under Section 37
3. Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.[3]: The Supreme Court emphasized the principle that arbitration-related appeals are limited to those explicitly provided under the Arbitration Act, ruling out any implied appeal rights under other statutes.

Further High Court in paragraph 17 emphasized that Section 37 of the Arbitration Act is limited to substantive orders affecting arbitration proceedings and does not include procedural orders like those under Order VII Rule 10 CPC. An Order VII Rule 10 CPC order merely directs the return of a petition for presentation to the appropriate court. It does not adjudicate the merits of the dispute or determine any substantive rights of the parties.

[1] (2020) 4 SCC 234.

[2] 2018 (14) SCC 715.

[3] 2001 (6) SCC 356.

Download