HC: A commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than to invalidate it

 

The High Court of Gujarat recently comprising of a bench of Justice Bela M. Trivedi observed that in absence of any procedure having been agreed upon for appointing the Arbitrator, and both the parties having failed to agree on the appointment of the Arbitrator, within thirty days from the receipt of the request made by the petitioner to the respondents, the case would fall under sub­ section (5) of Section 11 for appointment of Arbitrator by this Court. (Alphard Maritime Pvt. Ltd. vs Malara Enterprises)

Facts of the case

The respondents were under a contract with the petitioners to provide dry docking services. The petitioner, sent a notice through E­ mail calling upon the respondents to pay the damages arising out of the breach of the contract and also invoked the arbitration Clause 13 requesting the respondents to appoint an independent and impartial sole Arbitrator as per the provisions of the said Act. However, the respondents refuted the very existence of the contract.

The petitioner therefore has filed the present petition seeking appointment of Arbitrator under Section 11 of the said Act, in view of the Clause­13 of the terms and conditions of the contract quoted by the respondents.

Contention of the Parties

 

The learned Advocate Mr.Ashwin Shankar appearing for the   petitioner   submitted   that   the   quotation   dated   26.9.2020 containing   the   arbitration   Clause­13   defined   the   contractual relationship between the parties. The other clauses contained in the said quotation were also referred to by the respondents in the correspondences, which had ensued at the contemporaneous time.  The purchase order was issued by the petitioner pursuant to the Clause­11 of the quotation dated 26.09.2020. From the E- mails exchanged and the conduct of the parties, it was evidently clear that there was an arbitration agreement as contemplated in Section 7 of the said Act.   Since, runs the submission of the learned   Advocate Mr.Ashwin   Shankar,   the   existence   of   the Clause­13 is not denied by the respondents, the respondents have indirectly admitted to the validity of the Arbitration Clause, by stating that there was no ad idem between the parties on the arbitration   agreement.

Mr.Shankar   invoking   the   Doctrine   of Kompentenz­Kompentenz, has relied upon the decision of the Supreme Court in case of  Uttarakhand   Purv   Sainik   Kalyan Nigam  Limited  Vs. Northern  Coal Field  Limited,  reported in (2020)   2   SCC   455  to   submit   that   the   arbitral   Tribunal   is empowered   and   has   the   competence   to   rule   on   its   own jurisdiction   including   determining   all   jurisdictional   issues   as also   the   existence   or   validity   of   the   arbitration   agreement.

The learned Advocate Mr.Parth Contractor for the respondents vehemently submitted that the quotation by the respondents was merely an offer and not a binding contract, and that there was no arbitration clause in the purchase order. Mr. Contractor further submitted that  assuming without admitting that the quotation contained the arbitration agreement, such passing reference of words in the terms and conditions of the quotation would not constitute a valid arbitration agreement as contemplated under Section 7 of the said Act. 

 

Placing heavy reliance on the decision of the Supreme Court in case of Jagdish Chander Vs. Ramesh Chander and Ors., reported in (2007) 5 SCC 719, Mr. Contractor submitted that mere use of the word “arbitration” or “arbitrator” in a clause would not make it an arbitration agreement, if it required or contemplated a further or fresh consent of the parties for reference to arbitration.

Courts Observation and Judgment

The Court after perusing the interpretation of Section 7 of the said Act, said, “it can be safely deduced from the aforesaid legal position that the Arbitration Agreement even though in writing need not be signed by the parties, if the record of the agreement is provided by the exchange of letters, telex, telegrams or other means of telecommunications It is also held that a commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than to invalidate it."

 

The bench noted, "The bone of contention raised by Mr. Contractor appearing for the respondents is that the purchase order issued by the petitioner did not contain the arbitration clause. The Court does not find any substance in the said submission.  Merely because the purchase order issued by the petitioner did not contain any terms and conditions or the arbitration clause, it could not be said   that   there   was   no   arbitration   clause,   more   particularly when   the   quotation   of   the   respondents,   containing   the arbitration clause was accepted by the petitioner, and on the basis of which the purchase order was issued by the petitioner.

There is also nothing on record to suggest that the parties had contemplated a further or fresh consent for reference of disputes to the arbitration. The said Clause 13 contained in the quotation of the respondents having neither been denied nor modified by the petitioner till the entire contract was executed, it can safely be concluded that both the parties were ad­idem about the said clause pertaining to the arbitration. It does not lie in the mouth of the respondents to say that the clause­13 which stated that the jurisdiction  of   arbitration will be at the High Court of Gujarat, was not binding  to them or that there was   no arbitration agreement as contemplated in Section 7 of the said Act. From the said documents on record namely the quotation of the respondents and the purchase order of the petitioner, it clearly  transpires that both the parties intended to refer the disputes to the arbitration and agreed that the jurisdiction of the arbitration will be at the High Court of Gujarat."

Furthermore, the Court said, “though the parties had agreed to submit to the jurisdiction at the High Court of Gujarat for the purpose of arbitration, the procedure for the appointment of the Arbitrator was not agreed upon. It has also come on record that the petitioner had already called upon the respondents by sending a Notice of Arbitration through e­mail, calling upon them to appoint an independent and impartial Sole Arbitrator as per the provisions contained in the Act, however the respondents had refused to agree to the said request. So, the case falls under section (5) of Section 11 for appointment of Arbitrator by this Court”. 

 

Hence, the appeal stands allowed.

Read Judgment ;
 

SOURCE ; /www.latestlaws.com

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