The Lucknow Bench of the Allahabad High Court has dismissed a petition filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator in a franchisee dispute. The Court held that it lacked territorial jurisdiction to entertain the petition as the parties had contractually agreed to Mumbai as the exclusive seat and forum for arbitration.
The judgment was delivered by Justice Jaspreet Singh in Devi Prasad Mishra v. M/s Nayara Energy Limited (formerly Essar Oil Ltd).
Background
The petitioner, Devi Prasad Mishra, had entered into a franchise agreement dated January 18, 2018, initially with Essar Oil Ltd. (now Nayara Energy Ltd.), investing approximately ₹1.5 crore to establish a petrol pump in Amethi, Uttar Pradesh.
He alleged that Nayara Energy unilaterally terminated the franchise agreement on August 18, 2023, in violation of its terms. Following this, the petitioner invoked the arbitration clause in the agreement through a letter dated September 18, 2023, proposing a former judge as the sole arbitrator. However, no response was received from the respondent, prompting the petitioner to approach the High Court under Section 11(6) seeking appointment of an arbitrator.
Respondent’s Objection
Appearing for Nayara Energy, Advocate Kumar Ayush challenged the maintainability of the petition, arguing that the Court lacked jurisdiction. He submitted that the franchise agreement clearly provided for arbitration proceedings to be held in Mumbai, and Clause 22 of the agreement vested exclusive jurisdiction in the courts at Mumbai.
Citing Indus Mobile Distribution Pvt. Ltd. v. Datawind Innovations Pvt. Ltd., (2017) 7 SCC 678, counsel argued that the designation of Mumbai as the seat of arbitration was akin to conferring exclusive jurisdiction on the Mumbai courts.
Petitioner’s Counter
The petitioner’s counsel contended that the agreement mentioned Mumbai only as the “venue” of arbitration, not the “seat”, and argued that part of the cause of action arose in Amethi. Therefore, the Lucknow Bench should also have jurisdiction. Reliance was placed on State of West Bengal v. Associated Contractors, (2015) 1 SCC 32 and certain decisions of the Delhi High Court.
Court’s Analysis
The Court closely examined Clauses 21 and 22 of the agreement:
- Clause 21 (Dispute Resolution) stated that arbitration proceedings “shall be held in Mumbai”.
- Clause 22 (Jurisdiction Clause) conferred “exclusive jurisdiction of the courts at Mumbai only”.
Justice Jaspreet Singh observed:
“In the instant agreement, the parties had clearly agreed that the arbitration will be held at Mumbai. If the arbitration agreement mentions only one place and even if it is termed as the ‘venue’, then unless there is a contrary indicia, the ‘venue’ is construed as the ‘seat’.”
The Court applied the three-fold test laid down by the Supreme Court in B.G.S. SGS Soma JV v. NHPC Ltd., (2020) 4 SCC 234 and Arif Azeem Company Ltd. v. Micromax Informatics FZE, 2024 SCC OnLine SC 3212. It held that all three conditions were satisfied: only one place (Mumbai) was designated, arbitral proceedings were anchored there, and there were no contrary indicators.
Quoting from Indus Mobile and BGS Soma, the Court held:
“The moment the seat is designated, it is akin to an exclusive jurisdiction clause… Mumbai courts alone have jurisdiction to the exclusion of all other courts.”
Decision
Accordingly, the Court concluded that it lacked territorial jurisdiction:
“It can safely be held that it is the Courts at Mumbai, who would have the jurisdiction as the parties had fixed the ‘seat’ of arbitration at Mumbai… this Court at Lucknow has no jurisdiction to entertain the petition.”
The petition was dismissed with liberty to the petitioner to approach the appropriate court in Mumbai.
