Intention To Arbitrate Can Be Derived From Agreement Clauses Read With Letters Exchanged Between Parties: Allahabad High Court

The Allahabad High Court has held that the intent of the parties to submit their dispute to arbitration can be derived from the clauses of their agreement read along with the letters exchanged between them.

Applicant and the Opposite Party entered into a partnership agreement on 01.12.2016. Clause 21 of the agreement stipulated that in case of any dispute among the partners, the law of arbitration prevailing at the time shall be applicable.

“21. That in case of any dispute among the partners the Law of Arbitration prevailing at the time shall be applicable.”

Since the dispute arose, a notice was sent to the Opposite Party requesting for appointment of one Rishi Sood, Advocate as arbitrator which was duly acknowledged. However, the Opposite Party denied the existence of any dispute between the parties and consequently stated that there was no reason or basis for the appointment of any arbitrator. Hence, the present application for the appointment of an arbitrator.

Objections were raised by the Opposite Party as to the maintainability of the application on the ground that there is no specific arbitration clause in the agreement.

The Court observed that Section 7(1) of the Act defines arbitration agreement as an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

Justice Ashwani Kumar Mishra held,

“The statute while defining arbitration agreement in writing not only limits it to the specified clause of arbitration in the agreement but permits such agreement in the form of exchange of letters etc also. Clause 21 of the agreement is thus to be construed together with the exchange of letters and correspondence between the parties. The legal notice sent by the applicants on 09.02.2022 invoking clause 21 of the partnership deal dated 01.12.2016 specifically refers to the existence of an arbitration clause.”

Thus, the Court held that Clause 21, though “not happily worded”, read along with the letters exchanged between the parties showed that the intention of the parties was to resolve disputes through arbitration.

Accordingly, the Court allowed the application for the appointment of arbitrator.

Case Title: Anand Agarwal And Another v. Dr. Narendra Malhotra And Another 2023 LiveLaw (AB) 264 [Arbitration And Concili. Appl.U/S11(4) No. -74 of 2022 ]

Case Citation: 2023 LiveLaw (AB) 264

Click Here To Read/Download Order