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Conduct Of The Parties Can't Substitute Arbitration Agreement: Calcutta High Court

Ausaf Ayyub
19 Aug 2022 2:00 PM GMT
Calcutta High Court
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The Calcutta High Court has held that the Court while exercising powers under Section 11 of the A&C Act is bound to examine the existence of the arbitration agreement, in absence of the agreement, it cannot refer the parties to arbitration merely because the respondent did not raise objections.

The Bench of Justice Bebangshu Basak held that the conduct of the parties is not a substitute for an arbitration agreement.

Facts

The review applicant issued a work order dated 18.04.2018 in favour of the respondent. Clause 13 of the work order dealt with resolution of disputes between the parties. A dispute arose between the parties regarding the execution of the work.

Accordingly, the respondent filed an application under Section 11 of the A&C Act for the appointment of an arbitrator. The Court allowed the application by observing that the review applicant does not dispute the existence of the arbitration agreement.

The review applicant filed an SLP against the order of the Court and the Supreme Court directed the review applicant to file a review petition before the High Court with an observation that it could not place the relevant judgments before the High Court when the impugned order was passed. Accordingly, the review applicant filed the review application.

The Contention of the Parties

The applicant sought review of the order on the following grounds:

  • There is no arbitration agreement between the parties, therefore, the Court could not have appointed the arbitrator merely because the applicant did not dispute at the relevant stage.
  • The Supreme Court and the High Court(s) have examined a similarly worded clause and held that it is not an arbitration agreement, therefore, there cannot be any arbitration.

The respondent countered the submissions of the applicant on the following grounds:

  • The impugned order was a consent order as the applicant did not dispute the arbitration agreement in its pleadings, therefore, it cannot now be allowed to take a contrary stand.
  • The applicant has unconditionally submitted to the jurisdiction of the arbitral tribunal by filing a counterclaim against the respondent and it has also filed an application under Section 16 of the A&C Act.
  • The conduct of the respondent both prior and after the passing of the impugned order must be taken into consideration which inevitably leads to the conclusion that the parties have agreed that there is an arbitration agreement.
  • When the issue of the existence of an arbitration agreement requires a deeper consideration than a prima facie examination, then, the matter should be left for final determination by the arbitral tribunal.

Analysis by the Court

The Court held that there is no arbitration agreement as a bare perusal of Clause 13 would make it clear that option of arbitration was only available to government enterprises and the respondent is not a government enterprise and it only had the option of pursuing remedy in the Court of Law.

The Court also observed that such a view has also been taken by the Supreme Court and the High Court as well, therefore, the clause in question between the parties cannot be construed to be an arbitration agreement.

The Court then observed that while deciding an application under Section 11 of the A&C Act, the Court must satisfy itself on a prima facie view that the parties have an arbitration agreement and it cannot appoint the arbitrator merely on the ground that the respondent is not raising any objections.

The Court held that the conduct of a party cannot be the substitute for an arbitration agreement which is a sine qua non for a petition under Section 11 to be maintainable. It held that the impugned order is passed on the mere ground of non-objection without determining if there exists any agreement, therefore, the order is liable to be reviewed.

Accordingly, the Court allowed the review application.

Case Title: Eastern Coalfields Ltd. v. RREPL-KIPL (JV), RVWO No. 2 of 2022

Citation :2022 LiveLaw (Cal) 294

Date: 18.08.2022

Counsel for the Review Applicant: Mr. Manik Das, Adv. Ms. Tanushree Dasgupta, Adv.

Counsel for the Respondent: Mr. Sudip Deb, Adv. Mr. Riju Ghosh, Adv.

Click Here To Read/Download Order


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