Arbitration Clause In Original Lease Deed Incorporated Into Deed Of Assignment When Deeds Are Interconnected And Consistent: Calcutta High Court

The Calcutta High Court bench of Justice Ravi Krishan Kapur has held that if a deed of assignment is properly interpreted as being interconnected and related to the original lease deed containing an arbitration clause, then the parties intended for the arbitration clause to be included in the deed of assignment. The bench held that interrelationship was not merely superficial but indicative of a deliberate and mutual intent between the parties to incorporate certain terms from the initial lease deed into the new agreement. The arbitration clause, originally present in the initial lease deed, was a focal point of the dispute. By reading both documents together, the High Court found that the parties had unmistakably intended for the arbitration clause to be carried over into the deed of assignment. Brief Facts: Tata Communications Limited (Petitioner) owner of a plot of land located in Kolkata leased this plot to Respondent no. 2 under a lease deed for business purposes. Due to repeated breaches of obligations under the initial lease deed, the parties entered into a tripartite agreement, known as the deed of assignment, which involved Rudrapriya Constructions LLP (Respondent no. 1) continuing the business of event management, food court, and ceremonial functions. Disputes arose between the parties which made the Petitioner to terminate both agreements on 18 December 2023 primarily due to non-payment of lease rentals. On 15 February 2024, the Petitioner issued a notice under Section 21 of the Arbitration and Conciliation Act invoking the arbitration clause specified in the initial lease deed and the deed of assignment. The Respondents did not respond to this notice. Feeling aggrieved, the Petitioner approached the High Court under Section 11 of the Arbitration Act for appointment of an arbitrator. In response to the application, Respondent no. 1 raised an objection and argued that the deed of assignment does not contain an arbitration clause since it was not explicitly incorporated. The Petitioner contended that, when reading the deed of assignment in conjunction with the initial lease deed, it is evident that the arbitration clause in Clause 19.3 of the initial lease deed should be considered incorporated into the deed of assignment. The Petitioner argued that the mutual intention of the parties was to resolve disputes through arbitration, and the deed of assignment is not an independent document but should be viewed as interconnected with the initial lease deed. Clause 19.3 of the initial lease deed provides as follows: “19.3: Dispute resolution- (a) Any dispute arising out of or in connection with this Lease Deed (including a dispute regarding the existence, validity or termination of this Lease Deed or the consequences of its nullity) shall be sought to be resolved and settled amicably between the parties, within 15 (Fifteen) Business Days of written notice of such dispute arising, failing which it shall be referred to and finally resolved by arbitration under the Arbitration and Conciliation Act, 1996 …………..” Observations by the High Court: The issue before the High Court was whether an arbitration clause from an initial lease deed could be incorporated into a subsequent deed of assignment by reference. The initial lease deed contained a detailed arbitration clause, outlined in Clause 19.3, which provided a mechanism for dispute resolution. This included the appointment of an arbitrator, the conduct of proceedings in English, and the specification that the arbitration would take place in Kolkata. The clause also specified that the arbitration award would be final and binding, and that the costs would be borne equally by the parties. The deed of assignment, which was executed subsequent to the initial lease deed, contained provisions that confirmed the terms and conditions of the initial lease deed would apply to the assignment, except for the revised terms specifically recorded in the deed of assignment. Notably, the deed of assignment referenced the initial lease deed but did not explicitly incorporate the arbitration clause from the initial lease deed. The High Court examined Section 7(5) of the Arbitration Act which addresses the incorporation of an arbitration clause from one document into another by reference. According to Section 7(5), a reference in a contract to a document containing an arbitration clause can constitute an arbitration agreement if the reference is such that it makes the arbitration clause part of the contract. The High Court noted that for incorporation by reference to be effective, the reference must be clear and indicate an intention to include the arbitration clause in the contract. Additionally, the arbitration clause must be suitable for resolving disputes under the new contract and should not contradict its terms. The High Court that there is need for a clear...

Arbitration Clause In Original Lease Deed Incorporated Into Deed Of Assignment When Deeds Are Interconnected And Consistent: Calcutta High Court

Rajesh Kumar

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