Delhi High Court Clarifies Section 11(6) Cannot Vest Jurisdiction Where None Exists

In a recent judgment reaffirming the jurisdictional limits under Section 11 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), the Hon’ble Delhi High Court in IIFL Home Finance Ltd. v. Punkaj Bhagchand Chhallani & Ors., ARB.P. 827/2024 & 828/2024, held that Section 11(6) of the Arbitration Act does not confer jurisdiction upon a court that otherwise lacks territorial competence. The decision marks an important reaffirmation of settled principles that judicial forums cannot be forum-shopped and that territorial jurisdiction must be determined in light of substantial and material facts giving rise to a dispute.

The case stemmed from two separate but identically structured home loan agreements dated 31.03.2018 executed between IIFL Home Finance Ltd. and the Respondents, under which the Petitioner sanctioned loans of ₹1.24 crores and ₹2.76 crores respectively. The loans were secured by mortgage of a residential property situated in Pune, Maharashtra. Due to alleged defaults by the Respondents in payment of EMIs, the petitioner invoked its statutory remedy under SARFAESI Act and auctioned the mortgaged property. Despite this, significant dues remained outstanding.

Subsequently, the Petitioner issued arbitration invocation notices on 09.03.2023 and 04.07.2023 and appointed a sole arbitrator. When the respondents raised objections to the Arbitrator’s jurisdiction, the petitioner withdrew the arbitration reference and filed two petitions before the Delhi High Court under Section 11(6) of the Arbitration Act for appointment of a new arbitrator.

1. Whether the Delhi High Court had territorial jurisdiction to entertain petitions under Section 11(6) of the Arbitration Act in the absence of a designated seat or venue in the arbitration agreement?
2. Whether procedural liberty under Section 11(6) overrides the territorial requirements under Section 2(1)(e) of the Arbitration Act read with Sections 16–20 of the CPC?
3. Whether dispatch of notices or corporate office location of the petitioner constitutes sufficient basis for territorial jurisdiction?

1. Absence of Designated Seat or Venue in the Arbitration Clause: The Delhi High Court began its analysis by noting that the arbitration clause within the standard home loan agreements executed between the petitioner and the respondents was silent on both the seat and venue of arbitration. In the absence of an express designation of seat, the Court held that jurisdiction had to be determined in accordance with Section 2(1)(e) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), which mandates that the “court” must be one competent to decide the dispute as if it were a suit. The Court clarified that this provision must be read in harmony with Sections 16 to 20 of the Code of Civil Procedure, 1908 (“CPC”), which govern territorial jurisdiction. It thus held that arbitration jurisdiction cannot be manufactured through administrative convenience or unilateral communications by one party, especially when the situs of the dispute and cause of action lies elsewhere.
2. Cause of Action and Territorial Jurisdiction: Pune, Not Delhi: The Court meticulously examined the material facts and concluded that no part of the cause of action arose within its jurisdiction. It found that both loan agreements were executed in Pune, the property mortgaged was located in Pune, and the respondents resided and carried on business there. The petitioner’s registered office was in Mumbai, and its head office was located in Gurugram. On this basis, the Court observed that:“The material on record clearly indicates that the present Court does not have the territorial jurisdiction to entertain the petitions.”In light of this finding, the Court decisively rejected the argument that service of notices from Delhi constituted part of the cause of action. Citing the Supreme Court’s authoritative decision in Alchemist Ltd. v. State Bank of Sikkim, (2007) 11 SCC 335, it reiterated that territorial jurisdiction must be based on substantial and material facts that form an integral part of the dispute—not on trivial or incidental facts such as issuance of notices: “The test is whether a particular fact(s) is (are) of substance and can be said to be material, integral or essential part of the lis between the parties. If it is not, it does not form a part of the cause of action.”
3. Section 11(6) Cannot Confer Jurisdiction Where It Does Not Exist: The Court clarified that Section 11(6) of the Arbitration Act does not operate as an independent or overriding provision to confer jurisdiction where it otherwise does not exist. The petitioner’s argument that a court could be moved under Section 11 merely due to the filing of an arbitration notice from that location was found to be legally untenable. In this regard, the Court strongly relied on the Supreme Court’s ruling in Ravi Ranjan Developers (P) Ltd. v. Aditya Kumar Chatterjee, 2022 SCC OnLine SC 568, wherein the Apex Court had expressly cautioned against attempts to exploit Section 11 to enable forum shopping: “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, and irrespective of whether any part of the cause of action arose within the jurisdiction of that Court, to put an opponent at a disadvantage and steal a march over the opponent.” The Delhi High Court echoed this reasoning, noting that allowing parties to approach any court at their convenience—even when there is no nexus to the dispute—would erode the foundational principles of the Arbitration Act and vitiate the jurisdictional scheme carefully built into it.
4. Judicial Precedent and Interpretative Clarity: To bolster its conclusion, the Court also referred to its own prior decision in Faith Constructions v. N.W.G.E.L. Church, 2025 SCC OnLine Del 1746, where it had held that when no arbitration seat is specified, the court competent under Section 11 is to be determined based on the cause of action and the parties’ place of residence or business. It affirmed that under such circumstances, the “court” must be one that satisfies the test of jurisdiction under the CPC, and that Section 11 cannot override these established procedural requirements. Thus, the Court concluded that merely because the petitioner had its corporate communications office in Delhi, or issued the notice of arbitration from Delhi, this did not confer territorial jurisdiction upon it.

The Delhi High Court ultimately dismissed the petitions filed by IIFL Home Finance Ltd., holding that it lacked territorial jurisdiction under Section 11(6) of the Arbitration Act. The judgment reinforces that jurisdictional competence cannot be bypassed or created through procedural devices, especially where the contractual and factual matrix is rooted elsewhere. Courts must be approached in accordance with the legal framework governing territorial jurisdiction.

This post is for educational and informational purposes only. It is not intended to defame, discredit, or tarnish the reputation of any individual, entity, or organization. The opinions expressed are based on publicly available judicial decisions and are aimed at fostering a better understanding of legal principles. For specific legal advice, readers are encouraged to consult a professional.