Sanchayita Lahkar

The Delhi High Court, Single Bench of  Justice C. Hari Shankar dismissed a petition filed under Section 9 of the Arbitration and Conciliation Act, 1996, for lack of territorial jurisdiction. The court stated that the exclusive jurisdiction clause in the rent agreement between Precitech Enclosures Systems Pvt Ltd and Rudrapur Precision Industries mandated that disputes be adjudicated by courts in Rudrapur, Uttarakhand.

Precitech Enclosures Systems Pvt Ltd ("Precitech") had entered into a rent agreement with Rudrapur Precision Industries ("Rudrapur") on July 15, 2017, leasing industrial land located at Plot 33, Sector 4, SIDCUL, IIE, Pant Nagar, Uttarakhand. The agreement designated Rudrapur as the sub-lessor and Precitech as the sub-lessee.

Also Read: "Prosecution Failed to Prove Demand and Acceptance of Bribe Beyond Reasonable Doubt": Supreme Court Acquits Accused in Corruption Case

The lease agreement outlined the terms and conditions of occupancy, including payment obligations and dispute resolution mechanisms. Clause 20 of the agreement explicitly conferred exclusive jurisdiction to the courts at Rudrapur, stating:

“The court at Rudrapur Uttarakhand, India shall have exclusive jurisdiction to determine any question issue dispute or claim between the parties including but not limited to any application to be made under the Arbitration and Conciliation Act, 1996 as amended and re-enacted from time to time.”

Precitech initially paid the agreed rent, but due to financial difficulties exacerbated by the COVID-19 pandemic and internal disputes among its directors, the company was unable to meet its rental obligations from March 2021 onwards. As a result, the parties entered into a compromise deed on March 3, 2021, which settled the outstanding rent at ₹27,75,547. The agreement also included an arrangement wherein Precitech agreed to sell its property at Plot No. 24, Sector 7, SIDCUL, to Rudrapur for ₹90 lakhs, with Rudrapur deducting the agreed rent from this sum.

However, the dispute escalated when Rudrapur sent an email on May 15, 2021, increasing the rental dues to ₹42,26,854 and subsequently attempted to take possession of Precitech’s equipment and machinery at the premises. Rudrapur also unilaterally appointed Dr. Pankaj Garg as the arbitrator, despite Precitech’s objection. Consequently, Precitech challenged the appointment and filed OMP (T) (Comm) 25/2023 before the Delhi High Court, which led to the arbitral proceedings being stayed on March 24, 2023.

Following this, Precitech filed the present petition under Section 9 of the Arbitration Act, seeking an injunction restraining Rudrapur from selling or parting with its machinery and stock located at the leased premises. It also sought a direction to regain possession of its equipment.

Rudrapur opposed the petition, arguing that the exclusive jurisdiction clause restricted all arbitration-related proceedings to the courts at Rudrapur. Precitech, however, contended that an email exchange on April 4, 2022, demonstrated Rudrapur’s agreement to conduct arbitration in Delhi, thereby vesting jurisdiction with the Delhi High Court.

The court examined the legal principles governing jurisdiction in arbitration-related matters, particularly the interplay between a designated arbitral seat and an exclusive jurisdiction clause. Justice Shankar stated:

“Where there is a designated seat of arbitration, the court having territorial jurisdiction over the designated seat alone would have jurisdiction to deal with all matters relating to the arbitral proceedings. However, if an exclusive jurisdiction clause specifically includes applications under the Arbitration and Conciliation Act, then such a clause will override the seat of arbitration.”

The court referred to precedents, including BGS SGS Soma JV v. NHPC Ltd and Mankastu Impex Pvt Ltd v. Airvisual Ltd, which clarified that while an arbitration seat generally determines jurisdiction, an exclusive jurisdiction clause covering arbitration-related applications holds greater weight.

The court also considered the implications of Section 42 of the Arbitration Act, which stipulates that once a court has been approached concerning an arbitration agreement, all subsequent applications must be filed in the same court. However, Justice Shankar clarified:

“Section 42 cannot operate in a manner that confers jurisdiction upon a court that was never vested with it in the first place. The filing of OMP (T) (Comm) 25/2023 before this court does not override Clause 20 of the rent agreement.”

Regarding the April 4, 2022, email exchange, the court analysed whether it could modify the existing jurisdiction clause. Rudrapur's email had stated:

“If both parties are ok, we can have arbitration in Delhi also with mutual acceptance. We are ok for arbitration in Delhi.”

Precitech had responded:

“I am ok with Delhi arbitration.”

The court noted that while this exchange indicated an agreement to conduct arbitration proceedings in Delhi, it did not explicitly amend the jurisdiction clause governing applications under the Arbitration Act. Justice Shankar remarked:

“The email does not purport to re-write Clause 20 of the Rent Agreement. It merely agrees to have the arbitration conducted at Delhi. Clause 20, insofar as it confers exclusive jurisdiction on courts at Rudrapur over applications under the 1996 Act, stands as it is.”

Additionally, the court addressed Rudrapur’s unilateral appointment of an arbitrator. The court reiterated that as per Perkins Eastman Architects DPC v. HSCC (India) Ltd., unilateral appointments without mutual consent were legally impermissible. However, the issue was pending in the separate Section 14 petition (OMP (T) (Comm) 25/2023) and was not relevant to the present Section 9 petition.

Also Read: “Organized Tax Evasion” and “Intentional Undervaluation”: Allahabad High Court Upholds Seizure under GST Act, States “Primary Duty of Movement Not Discharged”

Based on these findings, the Delhi High Court stated:

“OMP (I) (Comm) 305/2023, consequently, stands dismissed for want of territorial jurisdiction.”

The court held that arbitration-related applications, including those under Section 9, must be filed before courts in Rudrapur, as stipulated in Clause 20 of the rent agreement.

Advocates Representing the Parties

For the Petitioner:  Mr. L.B. Rai, Mr. Krishan Kumar Arora, Mr. Shivam Bedi

For the Respondents:  Mr. Avdhesh Chaudhary, Ms. Geetanjali Setia (for Respondents 1 and 2), Mr. Zaryab Jamal Rizvi, Ms. Firdouse Qutb Wani (for Respondents 3 and 4)

Case title: Precitech Enclosures Systems Pvt Ltd v. Rudrapur Precision Industries & Anr.

Neutral Citation: 2025: DHC:1677

Case Number: O.M.P.(I) (COMM.) 305/2023

Bench: Justice C. Hari Shankar

[Read/Download order]