[Insights from the case of Durgapur Freight Terminal Vs. Palogix Infrastructure Pvt. Ltd, High Court Delhi]
Arbitration agreements commonly include provisions for determining the ‘seat’ and ‘venue’ of the arbitration. The ‘seat’ signifies the legal jurisdiction governing the arbitration proceedings, while the ‘venue’ denotes the physical location where the hearings occur. However, when disputes arise regarding jurisdiction in writ cases, the prescribed seat of arbitration does not necessarily dictate the jurisdiction of the court. The Durgapur Freight Case before the Delhi High Court explored this very question, examining whether a Writ Court could exercise jurisdiction solely based on the agreed seat/venue in the arbitration agreement, even if that seat/venue lacks traditional jurisdiction.
The case involved the license for the operation and management of the Durgapur Freight Terminal (Durgapur PFT) in West Bengal. Palogix Infrastructure Pvt. Ltd. (Palogix) initially held the license granted by the Railway Board, Kolkata, under a License Agreement. Subsequently, Palogix entered into a Memorandum of Understanding (MoU) with Durgapur Freight Terminal Pvt. Ltd. (DFTPL) to transfer the license for Durgapur PFT’s operation and management to DFTPL. However, before the transfer was completed, Palogix faced insolvency proceedings initiated by the NCLT, Kolkata Bench.
Following the acceptance of a resolution plan by the Committee of Creditors and the approval by the NCLT, DFTPL began operating at Durgapur PFT as per the agreement. Disputes subsequently arose between the shareholders/directors of Palogix, leading to complaints being lodged with the Railway Board, Kolkata, and the Calcutta High Court. The Railway Board, Kolkata, issued letters suspending DFTPL’s operations at Durgapur PFT pending resolution of the disputes. Feeling aggrieved, DFTPL filed a writ petition in the Delhi High Court seeking directions to prevent interference by the Railway Boards.
In addressing the jurisdictional issue, the Delhi High Court clarified that the prescribed seat of arbitration in the License Agreement, even if it was Delhi, does not determine the statutory jurisdiction of a Writ Court. Jurisdiction clauses in contracts only establish the jurisdiction for resolving contractual disputes arising from the specific contract. However, the extraordinary writ jurisdiction of a constitutional court is guided by norms established under constitutional law, rather than contractual clauses. Thus, the seat of arbitration cannot be relied upon to invoke the extraordinary writ jurisdiction of the Delhi High Court; instead, jurisdiction depends on the merits of the case.
On examining the merits, the Delhi High Court found that it lacked jurisdiction. Referring to precedents, the Court explained that under Article 226 of the Indian Constitution, a High Court’s territorial jurisdiction is based on the situs or location of the cause of action. In this case, the Delhi High Court observed that the pleaded facts did not establish that the cause of action, wholly or in part, arose within its jurisdiction noting that the proceedings were already pending between the parties before the NCLT, Kolkata Bench, and the High Court at Kolkata, addressing similar issues.
