Unilateral Selection of Venue Becomes Binding Seat upon Party’s Failure to Object and Participation in Judicial Proceedings

The Petitioner, a Non-Banking Financial Company (NBFC) with a branch office in Kolkata, provided a business loan of Rs. 41,35,000 to the Respondents for business expansion

A Business Loan Agreement was executed on August 28, 2024, at the Petitioner’s Kolkata office

Upon default in installments, the Petitioner issued a demand notice and subsequently filed a Section 9 application before the City Civil Court, Calcutta, for the appointment of a receiver to repossess the hypothecated machinery

The Respondents appealed the Section 9 interim order before the High Court (Division Bench), which remanded the matter back to the City Civil Court without the Respondents raising any jurisdictional objections

The Petitioner then invoked Arbitration under Section 21, proposing Kolkata as the venue and seat as per Clause 13.5 of the agreement, which allowed the lender "sole discretion" to determine the venue

The Respondents challenged the maintainability of this Section 11 application, arguing that a unilateral choice of venue violates party autonomy

1. Whether the Petitioner/Lender could unilaterally determine the venue and seat of arbitration as Kolkata in the absence of express consent from the Respondents at the time of invocation

2. Whether the Respondents, by participating in Section 9 proceedings in Kolkata and failing to object to the Section 21 notice, waived their right to challenge the jurisdiction of the Kolkata courts

The Court applied Section 11 of the Arbitration and Conciliation Act, 1996, regarding the appointment of arbitrators, and Section 20, which emphasizes party autonomy in determining the place of arbitration

It examined Section 2(1)(e) to define the "Court" having jurisdiction over the subject matter

The court distinguished B.G.S. Soma JV vs. NHPC Limited (2020) 4 SCC 234, noting that a stated venue is the seat unless there is a "contrary indication"

It also addressed the principle of "waiver of right to object" under the doctrine of conduct and derogation from Section 20

The Court reasoned that while Clause 13.5 gave the lender discretion to choose a venue other than Pune, the validity of such a "unilateral" clause was secondary to the subsequent conduct of the parties

The Court observed that the Petitioner had explicitly notified the Respondents of the choice of Kolkata as the seat and venue in the demand notice and the Section 21 invocation notice, to which the Respondents did not object

Crucially, the Court found that the Respondents had already submitted to the jurisdiction of the Kolkata courts by contesting the Section 9 application and filing an appeal before the Calcutta High Court without raising any jurisdictional plea

The Court held that the Division Bench’s order remanding the matter to the City Civil Court at Calcutta attained finality on the issue of jurisdiction

Unlike the precedent in Cholamandalam Investment, where the lender shifted jurisdictions inconsistently, the Petitioner here maintained a consistent choice of Kolkata, which the Respondents accepted through their conduct

The Section 11 application was allowed

The Court appointed Mr. Pourush Bandopadhyay as the sole arbitrator to adjudicate the disputes, with the arbitration to be conducted in Kolkata

All other issues, including limitation and quantification of claims, were left to the arbitrator’s determination