Case: M/s Pramila Motors Pvt. Ltd. versus M/s Okinawa Autotech International Pvt. Ltd
Facts of the Case
The dispute arose out of a dealership agreement between the petitioner, M/s Pramila Motors Pvt. Ltd., and the respondent, M/s Okinawa Autotech International Pvt. Ltd., concerning the supply and sale of electric vehicles. The petitioner, acting as a dealer, terminated the agreement citing the respondent’s failure to supply the vehicles within the stipulated time. This termination led to a disagreement between the parties, prompting the petitioner to invoke the arbitration clause contained in the agreement.
As per the agreement, the petitioner proposed the name of an arbitrator and requested the respondent either to consent to that nomination or suggest an alternative. However, the parties failed to reach a consensus regarding the appointment of the arbitrator. Consequently, the petitioner approached the Patna High Court under Section 11(6) of the Arbitration and Conciliation Act, seeking the appointment of an independent and impartial arbitrator.
Observations of the Court
The court carefully examined Clause 36.3 of the agreement and noted that it unambiguously provided for the “venue” of arbitration as New Delhi. While acknowledging the general distinction between “seat” and “venue” as laid down in previous judgments, the court relied significantly on the Supreme Court decision in Brahmani River Pellets Ltd. v. Kamachi Industries Ltd. (2020). In that case, the apex court had held that where parties had agreed to a specific venue for arbitration, it must be presumed that they intended to exclude the jurisdiction of all other courts.
Applying the same logic, the Patna High Court held that in the absence of any contrary clause or indication in the agreement, the mention of New Delhi as the venue of arbitration reflected the parties’ intention to confer exclusive jurisdiction on the courts in New Delhi. The court emphasized that there was no other clause indicating a different seat or court having jurisdiction.
Further, the court clarified that in this case, there was no express provision designating any other location as the “seat” of arbitration. Therefore, it was not open for the petitioner to argue that the venue and seat should be treated differently. The court found that, in context, the “venue” effectively served as the seat.
On these grounds, the Patna High Court held that it lacked the territorial jurisdiction to entertain the Section 11(6) petition. The court concluded that only the Delhi High Court was competent to hear such a request for the appointment of an arbitrator. Consequently, the petition was dismissed.
Our Comments
This judgment reaffirms the need for parties to exercise clarity and precision in drafting arbitration agreements. The Court held that, in the absence of any clause other than Clause 36.3—which refers only to the “venue” being New Delhi—the intention of the parties must be taken as having agreed upon New Delhi as the juridical seat as well.
While the Court’s reasoning is consistent with precedents such as Brahmani River Pellets, this approach does raise concerns. Treating “venue” as conclusive evidence of the “seat” risks overlooking the nuanced distinction recognized in judgments like Ravi Ranjan Developers that wherein the Supreme Court has held that “seat of arbitration” and “venue of arbitration” cannot be used interchangeably. More importantly, it reflects the burden placed on courts to infer party intent from incomplete or imprecise drafting.
This is particularly problematic in commercial contexts where standard-form contracts or hastily negotiated agreements are common. In such cases, courts are effectively required to reconstruct the parties’ intention based solely on one loosely-worded clause. This is not ideal.
A more effective approach lies in proactive drafting. Arbitration clauses should expressly mention the seat of arbitration and, where necessary, also specify exclusive jurisdiction for related court proceedings. This prevents unnecessary litigation and jurisdictional objections at the stage of enforcement or appointment.
This is yet another addition to the growing line of Indian cases that wrestle with the distinction between seat and venue—a line that continues to evolve with each contractual oversight.