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Arbitration Clause In The Annexure To The Agreement Would Be Binding On The Parties: Delhi High Court

Ausaf Ayyub
4 Aug 2022 6:00 AM GMT
Delhi High Court
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The High Court of Delhi has held that an arbitration clause contained in the annexure to the main agreement would be binding on the parties to that agreement.

The Bench of Justice Neena Bansal Krishna held that in view of Section 11(6-A) the justiciability of claims and the defences can only be determined through adjudication by the arbitrator.

Facts

The petitioner filed an application for the appointment of an arbitrator to settle the dispute between the parties that arose out of the Employment Agreement dated 14.01.2019. The petitioner was serving as the Chief Human Resource Officer in the respondent company till his resignation on 31.05.2021.

During the course of the employment of the petitioner, 17. 05,023 stocks came to be vested with the petitioner for a period of 10 years. He also had 8,41,844 equity shares and 4,26,381 equity shares as performance-based options.

In his resignation letter, the petitioner stated its intention to retain the stocks in the company. However, a dispute arose between the parties related to the disposal of the said shares as the respondent contended that it has a call option over the shares held by the petitioner.

Objections

The respondent objected to the maintainability of the petition on the following grounds:

  • The Employment Agreement between the parties does not have an arbitration clause.
  • The Arbitration Clause contained in the annexure is extremely narrow and only disputes arising out of or in relation to the provisions of ESOP Plan is covered under the agreement, therefore, the dispute arising out of the Employment Agreement cannot be referred to arbitration.
  • The petitioner has failed to exercise its stock options, therefore, he is ceased to be entitled to the same.
  • The respondent has a call option over the shares of the petitioner.

Analysis By The Court

The Court held that the agreement between the parties apparently makes a reference to the annexure which contains an arbitration clause, therefore, the argument of the responden that both are independent of each other is without any merit.

The Court held that an arbitration clause contained in the annexure to the main agreement would be binding on the parties to that agreement.

The Court held that if the main agreement makes reference to the annexure or the annexure explains or defines the manner in which a right in the agreement is to be exercised, then the arbitration agreement contained in the annexures would be binding on the parties.

The Court held that in view of Section 11(6-A) the justiciability of claims and the defences can only be determined through adjudication by the arbitrator.

Accordingly, the Court appointed the arbitrator.

Case Title: Piyush Kumar Dutt v. Vishal Mega Mart Pvt. Ltd.

Citation: 2022 LiveLaw (Del) 749

Appearances:

Petitioner: Mr. Divesh C. Pandey & Mr. Dushyant Dahiya, Advocates.

Respondent: Mr. Anirudh Wadhwa, Ms. Aayushi Sharma, Mr. Keshav Gulati, Mr. Debarshi Chakraborty & Mr. Subham Jain, Advocates.

Date: 28.07.2022

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