The purpose of including an “exclusive jurisdiction” clause in a commercial agreement is to give the parties to the agreement the convenience to choose a place to settle the disputes arising out of such commercial agreement, instead of the place where the cause of action arises in whole or in part. The exclusive jurisdiction clause overrides the effect of cause of action and confers the jurisdiction upon court(s) of the place mentioned in the exclusive jurisdiction clause of a commercial agreement.
The Indian Supreme Court and High Courts in India, through their several judgements have settled the principle that court(s) having jurisdiction over the seat of arbitration shall have the exclusive jurisdiction to adjudicate upon all the disputes arising out of the commercial agreement containing the arbitration clause. It can be rightly said that the seat of arbitration is analogous to conferring exclusive jurisdiction.
The difficulty arises when a commercial agreement mentions a different place for adjudication of disputes in the exclusive jurisdiction and at the same time, mentions another place as the seat of arbitration. This is usually an outcome of a draft which is not so well-thought and is poorly drafted, in such peculiar cases there arises a conflict as to court(s) of which place shall have jurisdiction to adjudicate upon the disputes arising out of such commercial agreement.
To clarify the confusion and conflict created by such commercial agreements, the High Courts of India, vide their several judgements have held that in peculiar situations as discussed above, the court(s) having jurisdiction over the seat of arbitration shall have exclusive jurisdiction to try, entertain, adjudicate and dispose of each and every dispute arising out of a commercial agreement pertaining to arbitration. Whereas the court(s) having jurisdiction as per the exclusive jurisdiction clause mentioned in the commercial agreement, shall have exclusive jurisdiction to try, entertain, adjudicate and dispose of such disputes arising out of a commercial agreement, which are incapable of resolution through arbitration.
Maheshari and Co.