Does the phrase 'venue shall be Pune or such other place as the lender may determine' make the clause void?

No. The Court held that such a clause is not void if it names a specific venue (Pune) and provides an alternative, and if the parties' conduct indicates acceptance of the alternative venue, as in this case where Kolkata was treated as the seat.

What happens if a party does not object to the venue in the arbitration notice?

Silence after a clear notice of venue selection, especially when coupled with participation in court proceedings before the designated forum, amounts to waiver of objection and may be treated as consent under Section 20 of the Act.

Arbitration venue silence consent Calcutta HC

Q: Can a party unilaterally choose the seat of arbitration under a clause granting sole discretion?

Yes, if the opposing party is given clear notice of the choice and fails to object, and subsequently participates in proceedings before the designated court, such conduct constitutes implied consent under Section 20 of the Arbitration and Conciliation Act, 1996.

The Calcutta High Court has clarified that a lender’s unilateral designation of an arbitration venue, even under a clause granting sole discretion, is enforceable when the opposing party, despite clear notice and opportunity to object, remains silent and subsequently participates in proceedings before the designated court. This decision reinforces that party autonomy under the Arbitration and Conciliation Act, 1996, includes conduct-based consent.

Background & Facts

The Dispute

The petitioner, M/s Electronica Finance Limited, a Non-Banking Financial Company headquartered in Pune with a branch office at 16, Strand Road, Diamond Heritage Building, 5th Floor, Room No. 525, P.S. Hare Street, Kolkata - 700001, entered into a Business Loan Agreement (APPL00146765) dated 01.11.2023 with respondent no. 1, Quality Offset Printers, for a loan of Rs. 17,10,000. Respondents no. 2 and 3 acted as guarantors. The loan was secured by hypothecation of a machine installed at the respondent’s premises in New Delhi. The agreement was signed, sealed, and concluded by the petitioner at its Kolkata branch.

Key Facts

The loan agreement was executed on 01.11.2023 at the petitioner’s Kolkata branch.
The machine, the secured asset, was installed at the respondent’s premises in New Delhi.
The respondents signed the agreement in New Delhi; their registered address in the agreement was Ghaziabad.
The respondents made payments up to the thirteenth instalment, with the last payment of Rs. 1,72,851 made on 01.06.2025.
On 01.03.2025, the petitioner issued a demand notice through its advocate from its Kolkata office, demanding Rs. 1,14,468 as outstanding dues and explicitly referencing the arbitration clause.
The notice stated: "as per the said agreement the venue of Arbitration shall be Pune or such other place that the lender may in the sole discretion determine..."
On 17.06.2025, the petitioner issued a formal notice under Section 21 of the Arbitration and Conciliation Act, 1996, invoking arbitration.
The 17.06.2025 notice explicitly declared: "we determine the same [venue] to be in Kolkata for all purposes and events... Juridical Seat of Arbitration shall be at Kolkata, India."
The notice invited respondents to object within seven days to the venue, seat, or proposed arbitrators.
No response was received from the respondents.
The petitioner filed an application under Section 9 before the City Civil Court, Calcutta, on 15.04.2025, seeking appointment of a receiver for the machine.
On 22.04.2025, the 13th Judge, City Civil Court, appointed a receiver.
The respondents filed F.M.A.T (ARB) No. 29 of 2025 challenging the receiver’s appointment.
The Division Bench of the Calcutta High Court, on 28.04.2025, disposed of the appeal by consent and directed respondents to ventilate grievances before the City Civil Court.

Procedural History

01.11.2023: Business Loan Agreement executed at petitioner’s Kolkata branch.
01.03.2025: Demand notice issued from Kolkata office.
17.06.2025: Notice under Section 21 invoking arbitration; venue declared as Kolkata.
15.04.2025: Section 9 application filed before City Civil Court, Calcutta.
22.04.2025: City Civil Court appoints receiver.
28.04.2025: Division Bench disposes of F.M.A.T (ARB) No. 29 of 2025, remanding matter to City Civil Court.
16.04.2026: Application under Section 11 heard.
30.04.2026: Judgment pronounced.

The Parties' Positions

Petitioner: Argued that the arbitration clause permitted unilateral selection of venue by the lender, and respondents’ silence after two notices, coupled with their participation in proceedings before Kolkata courts, constituted implied consent. Relied on the fact that the agreement was concluded in Kolkata and the Section 9 application was filed and adjudicated there.

Respondents: Contended that clause 11.4 was void under Section 20 of the Act and Article 14 of the Constitution because it allowed unilateral determination of venue and seat, violating party autonomy. Relied on B.G.S. Soma JV v. NHPC Limited and Cholamandalam Investment v. Uma Earth Mover to argue that Pune was the implied seat.

Relief Sought

The petitioner sought appointment of a sole arbitrator with Kolkata as the juridical seat, and directed the respondents to participate in arbitration proceedings under the terms of the agreement.

The Legal Issue

Can a party unilaterally designate the venue and juridical seat of arbitration under a clause granting sole discretion, where the opposing party does not object despite clear notice and subsequently participates in proceedings before the designated court?

Arguments Presented

For the Petitioner

The petitioner relied on the express language of clause 11.4, which permitted the lender to determine the venue "in its sole discretion." It emphasized that the agreement was executed in Kolkata, the demand notice was issued from Kolkata, and the Section 9 application was filed and adjudicated before the City Civil Court, Calcutta. The respondents’ failure to object to the venue in either the Section 21 notice or during the appeal before the Division Bench constituted conduct-based consent. The petitioner cited L&T Finance Ltd. v. Manoj Pathak to argue that where a venue is named and a discretion clause exists, the named venue becomes the seat unless contradicted by conduct.

For the Respondent

The respondents contended that clause 11.4 was void for violating Section 20 of the Arbitration and Conciliation Act, which mandates mutual consent in the choice of venue and seat. They argued that the phrase "Pune or such other place" created ambiguity and that the mere existence of discretion rendered the clause arbitrary and unconscionable. Relying on Cholamandalam Investment v. Uma Earth Mover, they asserted that unilateral selection of seat is impermissible and that Pune, as the first-named venue, must be treated as the seat. They further argued that the respondents’ business and the secured asset were located in New Delhi, making Kolkata an inconvenient and unjust forum.

The Court's Analysis

The Court undertook a detailed examination of the arbitration clause, the conduct of the parties, and the jurisprudence on party autonomy under Section 20. It rejected the respondents’ argument that Pune was the implied seat, noting that the clause explicitly provided for an alternative: "Pune or such other place that the lender may in its sole discretion determine." This language, the Court held, was not ambiguous but deliberately structured to grant discretion.

"The use of the expression ‘or such other place’ demonstrates a contrary indication, insofar as, the selection of venue is concerned."

The Court emphasized that the respondents received two notices - one on 01.03.2025 and another on 17.06.2025 - both clearly stating that Kolkata was the chosen venue and juridical seat. The respondents did not respond to either. Crucially, the respondents did not raise any jurisdictional objection when they appealed the Section 9 order to the Division Bench. Instead, they accepted the jurisdiction of the City Civil Court, Calcutta, and participated in proceedings before it.

The Court distinguished Cholamandalam Investment v. Uma Earth Mover, where the lender had initially approached a court without jurisdiction and later withdrew. Here, the petitioner filed the Section 9 application in Kolkata, the court accepted jurisdiction, and the respondents actively participated without objection. The Division Bench’s order remanding the matter to the City Civil Court was treated as an implicit recognition of jurisdiction.

The Court further relied on L&T Finance Ltd. v. Manoj Pathak, holding that where a venue is specified and a discretion clause exists, the specified venue becomes the seat unless conduct indicates otherwise. Here, the conduct of the respondents - silence after notice and participation before Kolkata courts - indicated acceptance of Kolkata as the seat.

"The issue of lack of jurisdiction was not raised in the appeal from the order of the City Civil Court. The appeal was disposed of on consent with a direction upon the respondents to ventilate their grievances before the learned City Civil Court."

The Court concluded that party autonomy includes not only express agreement but also conduct that demonstrates acquiescence. The respondents’ failure to object, despite multiple opportunities, amounted to waiver under Section 20.

The Verdict

The application was allowed. The Court appointed Mr. Ishaan Saha, Advocate, as the sole arbitrator with Kolkata as the juridical seat. The arbitrator is directed to conduct proceedings in accordance with the Arbitration and Conciliation Act, 1996, and may fix his remuneration as per the statutory schedule. All other issues, including the validity of the claim, quantum of dues, and limitation, are reserved for determination by the arbitrator.

What This Means For Similar Cases

Conduct Can Override Ambiguous Contractual Language

Practitioners must now treat silence after a clear notice of venue selection as potential waiver, even if the clause appears one-sided.
In arbitration applications under Section 11, evidence of conduct - such as filing or responding to proceedings in a forum - will be decisive over textual ambiguity.
Drafting arbitration clauses with "sole discretion" language is not per se invalid, provided the other party is given a clear opportunity to object.

Parties cannot later challenge jurisdiction if they have participated in proceedings without objection, even if the clause is arguably unfair.
Courts will look at the entire litigation history: filing of Section 9 applications, participation in hearings, and failure to raise jurisdictional objections.
This judgment reinforces that Section 20 protects party autonomy, but does not shield parties from the consequences of their own inaction.

Strategic Implications for Lenders and Borrowers

Lenders should ensure that notices invoking arbitration explicitly state the chosen venue and seat, and provide a clear window (e.g., 7 days) for objections.
Borrowers must respond promptly to venue notices - silence may be construed as consent.
In cross-border or inter-city financing, parties should negotiate venue terms upfront; post-default unilateral designation may be upheld if procedural fairness is demonstrated.

Section 20 Arbitration Act | Silence & Participation Amount to Consent for Unilateral Venue Designation : Calcutta HC