In a judgement issued on 1 July 2025, the Delhi High Court upheld the principle of party autonomy in arbitration proceedings, while ruling that the discretion given to an arbitration under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) cannot override an exclusive jurisdiction clause agreed upon by the parties in the arbitration agreement.
The matter was regarding a tender for construction of road works in the city of Noida which was awarded to the petitioner by the respondent – and the subsequent execution of an agreement with an arbitration clause. A dispute arose between the parties, and a sole arbitrator was appointed in accordance with the terms of the agreement. The arbitrator, in a procedural order, fixed the seat of arbitration as New Delhi. However, as per the agreement, exclusive jurisdiction had been awarded to the courts of Gautam Buddh Nagar (Noida) for matters relating to the enforcement of the arbitration agreement. The petitioner approached the Delhi High Court with an application to extend the mandate of the arbitrator, which was contested by the respondent for lack of territorial jurisdiction.
As per the provisions of the Arbitration Act, parties are free to decide the venue of arbitration, and as per established judicial precedent, this venue would also serve as the jurisdictional “seat” of the arbitration unless expressly provided for otherwise. In the event the parties do not agree to a venue, the arbitrator is required to determine the venue of arbitration. In the present case, the arbitration clause stated that the venue of arbitration may be decided by the arbitrator. However, there was also an express provision conferring exclusive jurisdiction to the courts located in Noida for matters relating to the enforcement of the arbitration agreement.
Given the above, the Delhi High Court held that the venue determined by the arbitrator cannot be deemed to override the express jurisdiction conferred by agreement between the parties – while the venue may be decided by the arbitrator, this would not serve as the jurisdictional “seat” of the arbitration in this instance. As such, the petition was dismissed by the Delhi High Court as it held that it would not have territorial jurisdiction over the dispute.
Distributors and franchisors engaging in business relationships in India must take care to ensure that arbitration clauses in their agreements clearly specify matters relating to the venue and seat of the arbitration to ensure that there is a clear and distinct route for addressing disputes if courts are required to be approached. Ambiguity in the arbitration clauses may lead to issues similar to the present case arising, leading to delays and administrative burdens.
Srijoy Das, IDI country Expert for agency and franchising in India
