Delhi High Court: A petition was filed by Faith Constructions (petitioner) under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator to resolve disputes arising from a construction agreement dated 06-07-2022 pertaining to the construction of the Bishop’s Residence Ground Floor Building for NWGEL Church in Odisha. Manoj Kumar Ohri, J., held that no part of cause of action can be said to have arisen within Delhi, ousting this Court’s territorial jurisdiction to entertain the present petition.
The agreement included an arbitration clause that provided for dispute resolution through arbitration. The petitioner alleged that the respondent breached the agreement by failing to complete the work within the stipulated timeframe and defaulting on payments. Consequently, the petitioner invoked arbitration through a notice dated 08-07-2024. However, the respondent contested the jurisdiction of the Delhi High Court, arguing that the arbitration clause did not specify a seat or venue for arbitration. The respondent asserted that the arbitration should be held in Odisha, given that the construction work occurred there, the agreement was executed and notarized there, and the respondent’s principal place of business was in Odisha. Additionally, the respondent claimed to have appointed a sole arbitrator following the petitioner’s notice.
In response, the petitioner contended that part of the cause of action arose in Delhi. It argued that its business was based in Delhi, payments were received in its Delhi bank account, and invoices were raised from its Delhi office. Further, the petitioner challenged the unilateral appointment of an arbitrator by the respondent, citing the Supreme Court rulings in TRF Limited v. Energo Engineering Projects Ltd., (2017) 8 SCC 377 and Perkins Eastman Architects DPC v. HSCC (India) Limited, (2020) 20 SCC 760 which held that unilateral appointments are invalid.
The Court observed that when an arbitration agreement is silent on the seat or venue of arbitration, the territorial jurisdiction is determined under Section 2(1)(e) of the A&C Act read with Sections 16 to 20 of the Civil Procedure Code. The Court relied on judgments in BBR (India) (P) Ltd. v. S.P. Singla Constructions (P) Ltd., 2020 SCC Online SC 1391 and Ravi Ranjan Developers (P) Ltd. v. Aditya Kumar Chatterjee, 2022 SCC Online SC 568 which held that jurisdiction is established based on where the respondent resides or carries on business, or where the cause of action arises.
Applying this legal principle, the Court determined that the primary cause of action occurred in Odisha. The agreement was executed, notarized, and performed in Odisha. Additionally, the respondent’s principal business operations were located in Odisha. The Court rejected the petitioner’s claim that payments received in a Delhi bank account constituted a material part of the cause of action. It emphasized that the issuance of cheques from the respondent’s Odisha-based bank account, without a specific payment clause designating Delhi as the payment location, did not establish jurisdiction in Delhi.
Further, the Court clarified that the mere generation of invoices from Delhi did not substantiate jurisdiction without a clear nexus to the dispute. It was held that the petitioner’s reliance on part payment in Delhi as a basis for jurisdiction was misconceived.
Consequently, the Court dismissed the petition, concluding that no substantial part of the cause of action arose within the territorial jurisdiction of the Court. Thus, the Court reaffirmed that jurisdictional challenges should be evaluated based on material and integral facts, and not incidental or trivial ones.
[Faith Constructions v NWGEL Church, ARB.P. 1318 of 2024, decided on 20-03-2025]
Advocates who appeared in this case :
Mr. Rajeev M. Roy, and Mr. P. Srinivasan, Advocates for petitioner;
Ms. Susmita Mahala, Advocate for respondent.
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