Calcutta High Court | Conduct of Parties – not a substitute for an arbitration agreement

Calcutta High Court

   

Calcutta High Court: While deciding a review petition, Debangsu Basak, J. held that the court while exercising powers under Section 11 of the Arbitration and Conciliation Act, 1996 cannot substitute arbitration agreement with conduct of parties.

Facts of the Case

The respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 for the appointment of an arbitrator after a dispute arose between the parties regarding the execution of the work as per Clause 13 of the work order issued by the applicant in favor of respondent.

On the direction of the Supreme Court, the applicant filed a review petition as he could not place relevant judgement before the High Court when the impugned order was passed for which he filed Special Leave Petition before the Supreme Court.

Contention of the Parties

The Applicant contended that there was no arbitration agreement between the parties and merely because the applicant did not dispute the same at the relevant stage, the Court couldn't have appointed the arbitrator.

The respondent contended that since the applicant did not dispute the arbitration agreement in its pleadings, therefore, it was a consent order, and it cannot be allowed to take a different stand now. Moreover, the applicant has submitted to the jurisdiction of the Arbitration Tribunal as he filed the counter claim and also, filed an application under Section 16 of the Arbitration and Conciliation Act, 1996.

The respondent also contended that if there is a dispute regarding the existence of arbitration agreement, the same shall be determined by the Arbitration Tribunal.

Observation and Analysis:

The Court observed that as per Clause 13, the option of arbitration was only available to government enterprises and since the respondent is not a government enterprise, it cannot avail the same remedy.

Relying on Pravin Electricals (P) Ltd. v. Galaxy Infra and Engineering (P) Ltd., (2021) 5 SCC 671, the Court held that “…the fundamental basis for referring the parties to arbitration being an arbitration agreement in writing between them, never existed between the parties for the applicant herein to waive or acquiesce any of its rights.”

The Court also observed that the Court while exercising powers under Section 11 of the Arbitration and Conciliation Act, 1996 is bound to examine the existence of the arbitration agreement and if it is not possible for the court “to weed out manifestly and ex-facie non-existent and invalid arbitration agreements and non-arbitrable disputes” then only it can refer the issue related to existence of arbitration agreement to the arbitrator for determination as a preliminary issue.

The Court held that in absence of the agreement, the Court cannot refer the parties to arbitration merely because the respondent did not raise objections.

[Eastern Coalfields Ltd. v. RREPL-KIPL (JV), 2022 SCC OnLine Cal 2350]


*Ritu Singh, Editorial Assistant has put this report together.

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