Delhi High Court Rules on Territorial Jurisdiction for Arbitrator Appointment Under Section 11(6) A&C Act: No Cause of Action, No Seat - 2025-05-13

Delhi High Court Declines Jurisdiction in Loan Arbitration Dispute: Seat Matters

In a definitive ruling highlighting the significance of territorial nexus in legal proceedings, the High Court of Delhi has dismissed two petitions filed by IIFL Home Finance Ltd seeking the appointment of a sole arbitrator. Justice Sachin Datta ruled that since the underlying home loan agreements were executed in Pune, Maharashtra, and the mortgaged property is situated there, the Delhi High Court lacks the territorial jurisdiction to entertain the request.

The Backdrop: A Dispute Without a Seat

The conflict arose from two home loan agreements dated March 31, 2018, between IIFL Home Finance Ltd (the petitioner) and the respondents. Following an alleged default in EMI payments and the subsequent auction of the mortgaged property—a flat in Pune—the petitioner alleged that a significant balance remained outstanding in both loan accounts.

When disputes regarding the repayment arose, the petitioner unsuccessfully attempted to navigate independent arbitration. After a withdrawal of the initial arbitration proceedings on the ground of jurisdictional uncertainty, the lender approached the Delhi High Court under Section 11(6) of the Arbitration and Conciliation (A&C) Act, 1996 to appoint a sole arbitrator.

The Legal Question: Can Jurisdiction Follow the Petitioner?

The crux of the matter turned on whether the Delhi High Court could exercise its powers to appoint an arbitrator despite the absence of a specified "seat" or "venue" in the arbitration clause of the Standard Terms and Conditions.

The petitioner faced a significant obstacle: the respondents were served at Pune addresses, the loan agreements were drafted in Pune, the mortgaged flat is located in Pune, and no part of the cause of action occurred within the jurisdiction of the Delhi High Court.

Court’s Reasoning: Where the Law Meets Geography

Justice Sachin Datta relied heavily on the precedent established by the Supreme Court in Ravi Ranjan Developers (P) Ltd. vs Aditya Kumar Chatterjee , which clarified that an application under Section 11(6) cannot be moved in any High Court regardless of territorial jurisdiction.

The Court emphasized the necessity of harmonizing Section 11(6) with Section 2(1)(e) of the A&C Act and Sections 16 to 20 of the Code of Civil Procedure (CPC). The Court noted:

> "It could never have been the intention of Section 11(6) of the A&C Act that arbitration proceedings should be initiated in any High Court in India, irrespective of whether the Respondent resided or carried on business within the jurisdiction of that High Court..."

Further reinforcing this, the court cited Faith Constructions vs N.W.G.E.L Church : > "In case of lack of consent between the parties as to the seat/venue of arbitration... the Court must determine jurisdiction by taking the aid of Sections 16 to 20 of the CPC."

Key Observations

The judgment clarifies that legal convenience for a corporate entity cannot outweigh the statutory requirements of territorial nexus. Justice Datta’s findings were clear:

• On Cause of Action: "The material on record clearly indicates that no part of the cause of action has arisen within the jurisdiction of this Court."
• On Legal Precedent: "It is no longer res integra that when an arbitration clause does not stipulate a seat or venue of arbitration, the provisions of Section 2(1)(e) of the A&C Act with Sections 16 to 20 of the Civil Procedure Code, 1908, are determinative."
• On Jurisdiction: "As such, this Court does not have jurisdiction to entertain the present petitions."

The Final Verdict: A Lesson in Proper Filing

Concluding that the Delhi High Court was the wrong forum for the dispute, the court dismissed the petitions. However, it granted the petitioner the liberty to move the appropriate jurisdictional court—in this case, the competent authority in Pune—to pursue their claim.

This judgment serves as a stern reminder to legal practitioners and financial institutions: in the absence of a designated contractual seat for arbitration, jurisdiction is strictly tethered to the location where the cause of action arises or where the respondent resides. Parties must ensure they knock on the correct judicial door to avoid costly procedural delays.