21 May 2024 Arbitration >> Corporate Law   |   Contract Law >> Corporate Law  

A recent judgement by the Delhi High Court sheds light on the importance of clear and specific language in arbitration clauses. The case involved a disagreement between a contractor and a company building a hotel regarding the location for appointing an arbitrator in a contractual dispute.

The crux of the issue stemmed from an MEP (mechanical, electrical, and plumbing) contract signed between the petitioner, a contractor, and the respondent, a company constructing a hotel. The contract included a clause mandating arbitration for any disputes that might arise. However, this clause lacked any mention of a specific location for the arbitration proceedings.

Further complicating matters, another clause within the contract stated "all disputes subjected to Delhi Jurisdiction only." This seemingly straightforward clause became a point of contention. The petitioner interpreted it as establishing Delhi as the designated location for arbitration.

The respondent, however, disagreed. They argued that the mere mention of "Delhi jurisdiction" wasn't sufficient to designate Delhi as the seat of arbitration. Additionally, they pointed out that the contract was likely signed and the work itself was to be performed in Madhya Pradesh, not Delhi.

The Delhi High Court ultimately sided with the respondent. The court acknowledged the presence of the "Delhi jurisdiction" clause but determined it wasn't enough to establish Delhi as the seat of arbitration. Since the contract lacked a clear designation for the arbitration location, the court ruled that the appropriate jurisdiction would be determined based on the Code of Civil Procedure (CPC) guidelines. These guidelines typically consider factors like where the cause of action arose or the location of the respondent's business operations.

  Arbitration and Conciliation Act, 1996