Delhi High Court Rules: Arbitration Clause with Designated Seat Prevails Over Exclusive Jurisdiction Clause in Contract

Summary

The Delhi High Court, in the case of M/s KLA Const Technologies Pvt Ltd v. M/s Gulshan Homz Private Limited (decided on 14 May 2025), addressed the interplay between an exclusive jurisdiction clause and an arbitration clause within a contract. The Court held that when a contract specifies both a seat of arbitration and exclusive jurisdiction for courts at a particular location, the court at the designated seat of arbitration retains exclusive jurisdiction over matters arising from the arbitration. The arbitration clause prevails over any conflicting exclusive jurisdiction clause. 

Facts

• The Petitioner in this case was M/s KLA Const Technologies Pvt Ltd and the Respondent was M/s Gulshan Homz Private Limited. 

• On 29 July 2023, the Respondent issued a Letter of Intent to the Petitioner for civil and structural works for the Gulshan Dynasty Moradabad Project, valued at Rs. 101.8 Crores. A formal agreement was executed on 6^th September 2023. 

• The Petitioner alleged delays and non-payment by the respondent, who later discontinued the project and issued a termination notice on 6 November 2024. The Petitioner invoked arbitration on 13 November 2024, but the Respondent did not respond. 

• The Petitioner approached the Delhi High Court under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of a sole arbitrator. 

• The Respondent objected to the territorial jurisdiction of the Delhi High Court, citing clauses that allegedly conferred exclusive jurisdiction on courts at Noida and the High Court of Allahabad. 

Issues

• Whether the Delhi High Court has jurisdiction to entertain the petition under Section 11 of the Arbitration and Conciliation Act, 1996, in light of conflicting clauses regarding seat/venue of arbitration and exclusive jurisdiction. 

• Which clause prevails: the arbitration clause designating the seat/venue, or the exclusive jurisdiction clause? 

Held

• The Court held that the seat of arbitration determines exclusive jurisdiction for matters arising out of the arbitration agreement. 

• Where the contract designates the seat of arbitration as Noida/Delhi, the courts at the seat (Delhi or Noida) have exclusive jurisdiction, overriding any conflicting exclusive jurisdiction clause. 

• The Delhi High Court, as a court at one of the designated seats, has jurisdiction to appoint an arbitrator. 

• The arbitration clause prevails over an exclusive jurisdiction clause when both exist, and the seat of arbitration is determinative. 

Analysis

• Clause 37(a): Disputes to be referred to arbitration, with seat and venue at Noida/Delhi. 

• Clause 37(b): Subject to arbitration, exclusive jurisdiction conferred on District Court of Noida and High Court of Allahabad. 

• Clause 91.2 (GCC): Courts of New Delhi alone have exclusive jurisdiction. 

• Clause 92.1 (GCC): Venue of arbitration is Noida. 

• The Court cited Supreme Court precedents (e.g., Indus Mobile Distribution Pvt Ltd v. Datawind Innovations Pvt Ltd) establishing that the seat of arbitration confers exclusive jurisdiction to courts at that seat. 

• The intention of the parties must be gathered from the contract as a whole, and clauses should be harmoniously construed. 

• When a seat is designated, it is akin to an exclusive jurisdiction clause for arbitration-related matters. 

• The Court found that the arbitration clause (seat/venue: Noida/Delhi) and the exclusive jurisdiction clause (Noida/Allahabad or New Delhi) must be read harmoniously. 

• In case of conflict, the seat of arbitration prevails for matters under the Arbitration Act. 

• The Court rejected the respondent’s argument that only Noida courts had jurisdiction, holding that Delhi was also a designated seat. 

• The Delhi High Court had jurisdiction to entertain the petition under Section 11 and to appoint an arbitrator, as Delhi was one of the agreed seats of arbitration.