When Agreement Gets Extended By Conduct Of Parties, Arbitration Clause Also Gets Extended: Allahabad High Court

The Allahabad High Court has recently held that when an agreement is extended by the conduct of the parties, though it may have expired on paper, the applicability of the arbitration clause is also extended.Relying on the decision of the Supreme Court in Bharat Petroleum Corporation Ltd. vs. Great Eastern Shipping Co. Ltd., the bench of Chief Justice Arun Bhansali and Justice Kshitij Shailendra observed “A perusal of the above determination made by Hon'ble Supreme Court reveals that though the agreement may have come to an end on expiry of its term, the arbitration clause operated and for the purpose of determination of the disputes, the arbitration clause could be invoked and that the agreement had not come to an end by efflux time and the same got extended on account of conduct of the parties.”Banaras Hindu University manages and operates Sir Sunderlal Hospital within its campus. Respondent was licensed to open a 24hour pharmacy in the hospital. The license was continuously renewed and in 2016, the license was renewed for 5 years. Though the period expired in 2021, a formal order was passed treating the period from 23.09.2021 to 03.01.2023, where there was no license, as deemed extended period. After 31.03.2023, a fresh licence was offered to the respondents with revised fees, however, the respondents continued paying the old license fees. Though respondent was served eviction notice in 2023 and various legal notices, it continued to occupy the premises and run the pharmacy. Since appellant was taking measures like disconnecting electricity connection to have the premises vacated, the respondent filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim protection. First, an interim order was passed against the appellant from taking any coercive steps. Subsequently, an order was passed protecting the respondents from eviction, against which the appellant-University approached the High Court under Section 37 of the Act of 1996. Relying on Anoop Maheshwari vs. Thomas T. Kurian, counsel for appellant argued that since the extended license agreement had expired in 2023, the arbitration clause had perished with that and could not be invoked in 2025. The Court observed that the aforesaid judgment was not good law as it did not take into consideration decision of the Supreme Court in Bharat Petroleum Corporation Ltd. vs. Great Eastern Shipping Co. Ltd. wherein it was held that the all terms and conditions of the agreement including the arbitration clause are extended by implication when the agreement is extended. “The present circumstances, as noticed hereinbefore, are quite similar wherein despite the expiry of the term in the year 2021, the same was extended from time to time till 31.03.2023 and thereafter also, the appellants had continued to receive the license fee as paid by the respondent, which is also a conscious decision inasmuch the amount has not been directly deposited in the accounts of the appellants rather cheques/drafts were sent which had been deposited by the appellants in its Bank accounts.”Noting that the plea regarding non-existence of the arbitration clause had been taken for the first time before the High Court, it was held that the same had no substance.However, since the Commercial Court had not specified the existence of a prima facie case, balance of convenience and irreparable injury while granting interim injunction, the Court set aside the order and remanded the matter back for fresh consideration. Case Title: Banaras Hindu University, Varanasi through its Registrar Versus M/s Umang Cure Pvt. Ltd. and 3 others [APPEAL UNDER SECTION 37 OF ARBITRATION AND CONCILIATION ACT 1996 No. - 289 of 2025]Click Here To Read/Download Order

When Agreement Gets Extended By Conduct Of Parties, Arbitration Clause Also Gets Extended: Allahabad High Court

Upasna Agrawal

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