Arcis Clean Energy Pvt. Ltd. vs Parshva Innovation

Manoj Misra, J.

Leave granted. 2. This appeal impugns the order of the Delhi High Court^{11.The High Court} dated 11^th November 2025, whereby, in exercise of its jurisdiction under Section 11(6) of the Arbitration and Conciliation Act, 1996^{22.1996 Act}, the High Court appointed an arbitrator to resolve disputes inter se parties arising out of a “Franchise Agreement”^{33.The Agreement} dated 03^rd August 2023.

Clause 32 of the Agreement carries the arbitration clause in the following terms:

Invoking the aforesaid clause, the respondent proposed name of a sole arbitrator vide notice dated 25^th March 2025. The said proposal was rejected by the appellant vide response letter dated 19^th April, 2025. Consequently, the respondent applied to the High Court for appointing an arbitrator under Section 11(6) of the 1996 Act.

By the impugned order, the High Court appointed the arbitrator and left it open for him to select venue for the hearings in consultation with the parties.

The appellant has questioned the impugned order on the ground that the Delhi High Court lacked jurisdiction as the juridical seat of arbitration is in Goa. It is submitted that the agreement between the parties clearly discloses that the parties shall submit to the exclusive jurisdiction of the competent court in Goa, therefore the juridical seat would be Goa. In support of his submission, besides the arbitration clause, our attention was invited to Clause 38 of the Agreement, which reads as under:-

By relying on Clauses 32 and 38 of the Agreement, the learned counsel for the appellant submits that Clause 32.4, which provides for location of the arbitration within Delhi, is about the venue whereas Clauses 32.5 and 38 of the Agreement determine the juridical seat. It is urged that the High Court mistook venue as the juridical seat; therefore, the impugned order is liable to be set aside. In support of his submissions, the learned counsel for the appellant has placed reliance on the following decisions: (i) Arif Azim Company Limited v. Micromax Informatics FZE^{44.(2025) 9 SCC 750}; (ii) Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited and others^{55.(2017) 7 SCC 678}; (iii) Swastik Gases (P) Ltd. v. Indian Oil Corporation Ltd.^{66.(2013) 9 SCC 32}; (iv) BGS SGS SOMA JV v. NHPC LIMITED^{77.(2020) 4 SCC 234}; and (iv) Activitas Management Advisor Private Limited v. Mind Plus Healthcare Private Limited^{88.2025 SCC Online SC 3069}.

Per contra, the learned counsel for the respondent supported the impugned order by submitting that the arbitration agreement clause is considered independent of other parts of the contract; therefore, Clause 38 of the Agreement would not determine the juridical seat for the purposes of arbitration. More so, when Clause 32 of the Agreement specifically states that location of the arbitration shall be in Delhi. Thus, for the purposes of arbitration, the juridical seat would be Delhi and not Goa. He further contends that Clause 32.5 would not override Clause 32.4 because Clause 32.4 comes first and would prevail over any subsequent clause in the Agreement. He, therefore, prays that the appeal be dismissed.

In support of his submissions, the learned counsel for the respondent relied on the following decisions: (i) Sasan Power Ltd. v. North American Coal Corporation (India) Pvt. Ltd.^{99.(2016) 10 SCC 813, paragraphs 48 and 52}; (ii) M/s. Cable Corporation of India Ltd. v. M/s. Jay Pee Sports International Ltd. and Another^{1010.2018 SCC OnLine Del 10340, paragraphs 14, 15 and 19}; (iii) Sunil Kumar Chandra v. Spire Techpark (P) Ltd.^{1111.2023 SCC OnLine Del 286, paragraph 17}; (iv) Ramkishorelal and Another v. Kamal Narayan^{1212.1962 SCC OnLine SC 113, paragraph 12}; (v) Shree Bhowani Cotton Mills v. Union Textile Traders^{1313.1965 SCC OnLine Cal 83, paragraphs 2 and 4} ; (vi) M/s Lyrus Life Sciences Pvt. Ltd. v. M/s Acme Generics LLP^{1414.Civil Misc. Petition No.192/2020, decided by High Court of Karnataka at Bengaluru on 23.06.2021, paragraph 7}

We have accorded due consideration to the rival submissions and have perused the materials placed on record.

Before we proceed to interpret the Agreement in question for the purposes of determining whether the Delhi High Court had the jurisdiction to appoint the arbitrator, it would be useful to consider a few decisions wherein a distinction between the “seat” of arbitration and the “venue” for arbitral proceedings has been carved out.

In Indus Mobile (supra), this Court held that seat is akin to an exclusive jurisdiction clause. It was held that under the Law of Arbitration, unlike the Code of Civil Procedure, which applies to suits filed in courts, a reference to “seat” is a concept by which a neutral venue can be chosen by the parties to an arbitration agreement. The neutral venue may not, in the classical sense, have jurisdiction, that is, no part of the cause of action may have arisen at the neutral venue, and neither would any of the provisions of Sections 16 to 21 of CPC be attracted. However, the moment the “seat” is determined, the courts wherein the seat is located would have exclusive jurisdiction for purposes of regulating arbitral proceedings arising out of the agreement between the parties^{1515.Paragraph 19 of the judgment in Indus Mobile (supra)}.

In Swastik Gases (supra), the arbitration clause in question was clause 17 of the agreement. It was in the following terms:

In Brahmani River Pellets Ltd. v. Kamachi Industries Ltd^{1616.(2020) 5 SCC 462}, this Court, after considering various decisions including Swastik Gases (supra) and Indus Mobile (supra), held:

Following the decision of this Court in Brahmani River Pellets (supra), in Activitas Management (supra), this Court set aside the order of the High Court of Punjab and Haryana appointing an arbitrator in exercise of its power under Section 11 of the 1996 Act upon finding that clause 10 of the agreement relating to the Governing Law had vested exclusive jurisdiction to the courts located in Mumbai.

Clause 10 which was interpreted in Activitas Management (supra) provided as under:

Interpreting the aforesaid clause, in Activitas Management (supra) it was held:

The aforesaid decisions make it clear that parties, by agreement, can choose their own place for arbitration and may confer exclusive jurisdiction upon court(s) located at a particular place for the purpose of regulating the arbitral proceedings arising out of the agreement between the parties regardless of any part of cause of action arising within its territorial jurisdiction.

However, when an agreement specifies the place of arbitration and simultaneously confers exclusive jurisdiction on courts located at a place other than the one specified for arbitration, a question would arise whether the place of arbitration is just a “venue” or the “juridical seat”.

In Arif Azim Company Limited (supra), following an earlier three-Judge Bench judgment of this Court in BGS SGS SOMA (supra), a three-Judge Bench of this Court delineated the tests as to when “venue” can be construed as “seat” of arbitration. The relevant paragraphs of the judgment are extracted below:

In the present case, a plain reading of the arbitration clause would indicate that Delhi is not the only place specified for arbitration. Both Delhi and Goa are mentioned as places for holding arbitration. Thus, when we apply the tests laid down in BGS SGS SOMA (supra), which have been affirmed in Arif Azim (supra), the place specified i.e. venue for arbitral proceeding would not automatically be the seat of arbitration. In such a situation, the Governing Law clause i.e., Clause 38 of the Agreement would be helpful in determining the juridical seat. Since Clause 38 of the Agreement confers exclusive jurisdiction to the courts at Goa and Clause 32.5 provides that arbitration proceedings will be held in Goa, it is clear that the parties have agreed that Goa shall be the juridical seat, Delhi is just a venue.

The submission on behalf of the appellant that the arbitration agreement is independent of the main contract and, therefore, the arbitration clause would alone determine the juridical seat, and not the Governing Law clause, cannot be countenanced for the simple reason that the arbitration clause itself mentions two places, namely, Delhi and Goa. Besides, in Mankastu Impex (P) Ltd. v. Airvisual Ltd.^{1717.(2020) 5 SCC 399, paragraph 20}, this Court held “that mere expression “place of arbitration” cannot be the basis to determine the intention of the parties that they have intended that place as the “seat” of arbitration. The intention of the parties as to the “seat” should be determined from other clauses in the agreement, including the conduct of the parties.” Importantly, both Clauses 32.4 and 32.5 are part of Clause 32 of the Agreement which deals with arbitration and dispute resolution. According to Clause 32.4, location of the arbitration shall be within Delhi; whereas Clause 32.5 states that arbitration proceedings will be held in Goa. This creates an impression of conflict between the two clauses. However, when we construe them harmoniously, to ensure that none becomes redundant, and read them in conjunction with clause 38 of the Agreement, which vests exclusive jurisdiction on courts at Goa, it is clear that the juridical seat is at Goa, Delhi is just a venue.

Now we shall consider the decisions cited by the learned counsel for the respondent. In Sasan Power (supra), this Court held that arbitration agreement is an independent agreement, and the arbitration clause is not the one that governs rights and obligations arising out of the substantive contract rather it only governs the way of settling disputes between the parties. It was also held that parties can agree upon the governing law but may not have any agreement for settlement of dispute through arbitration. There can be no quarrel with the aforesaid proposition. Here, the arbitration clause itself mentions two places. One of those two has been chosen by the parties for the courts located therein to have exclusive jurisdiction. In such a situation, to determine the juridical seat, the Governing law clause 38 cannot be ignored. Similarly, in the Delhi High Court decision in M/s. Cable Corporation of India (supra), the arbitration clause specifies only a single place and not two places as is there in the present case. The said decision is therefore distinguishable. In the other decision of the Delhi High Court rendered in Sunil Kumar Chandra (supra), which has been cited on behalf of the respondent, the arbitration clause has not been extracted in the judgment. However, from the judgment, it appears that one of the clauses of the agreement made it clear that Delhi was chosen as the seat of arbitration, but it was not clear whether the other place specified therein was for arbitration. This decision too is, therefore, distinguishable. Besides, here the arbitration clause itself specifies two places for arbitration. The Constitution Bench decision of this Court in Ramkishorelal (supra) is on the general principle that to construe an instrument, an effort must be there to ascertain the intention of the parties after considering all words. We fail to understand as to how this decision would be of any help to the respondent. In Shree Bhowani Cotton Mills (supra), another decision cited on behalf of the respondent, it was held that mere conferment of exclusive jurisdiction on courts at Calcutta to entertain and try suits in respect of any claims or disputes would not nullify the arbitration agreement. In the present case, there is no issue about the existence of an arbitration agreement and, further, there is no dispute that the arbitration agreement itself specifies two places, namely, Delhi and Goa; in such circumstances, in our view, the juridical seat would have to be ascertained by reading the Agreement in its entirety so as to decipher the true intention of the parties. The last judgment relied on behalf of the respondent is one rendered by the Karnataka High Court in M/s Lyrus Life Sciences (supra). The said decision holds that where precise location of arbitration is specified as Bengaluru, the argument that the cause of action had arisen in the State of Himachal Pradesh would not be relevant for the purposes of arbitration. This decision is of no relevance to the present case because the arbitration clause itself specifies both Delhi and Goa for arbitration. Therefore, whether the juridical seat is Delhi or Goa would have to be ascertained on the basis of intention of the parties as could be evinced from a holistic reading of various clauses of the Agreement.

Upon reading the Agreement in its entirety, we find that the juridical seat of arbitration was at Goa, therefore, we are of the view that the Delhi High Court lacked jurisdiction to entertain the application under sub-section (6) of Section 11 of the 1996 Act. Consequently, the appeal is allowed. The order passed by the High Court is set aside. The parties would be at liberty to take recourse to appropriate proceedings before the jurisdictional High Court.

Pending application(s), if any, shall stand disposed of.