The credibility of an oral agreement superseding a written one is a question that arises in the legal world frequently. While, according to contractual disputes presented before the court, an oral agreement may be of equal importance as a written one, there is an obvious answer in the world of arbitration procedures. The same precedent has been set through Mother Boon Foods Pvt. Ltd. v. Mindscape One Marketing Pvt. Ltd.
Facts of the Case-
- A contract agreement regarding manufacturing consignments was entered into by the parties of the case. The same was entered into through a written and signed agreement, after which production for the goods in question was initiated.
- Over time, the parties began facing differences on a professional level regarding the agreement and performance clauses.
- The respondent of the case approached the institution of a 3-member arbitral tribunal to resolve the case. The petitioner was staunchly opposed as the written agreement only called for the appointment of a sole arbitrator.
- Although there was a lack of agreement for the constitution of a 3-member arbitral tribunal between the parties, a tribunal was constituted, and an arbitral award was passed regarding the matter.
- The matter was moved to the Delhi High Court, whereby the award was challenged on the grounds of violation of the original agreement, which did not lay down any clause for the constitution of a 3-member arbitral tribunal for dispute resolution and that the respondent did the same, without the consent of the petitioner.
- The respondent’s response to this claim was that the parties had entered into an oral agreement regarding opting for arbitration for dispute resolution by demanding a three-member tribunal.
Judgement Delivered by the High Court
- The Court acknowledged the absence of a clause related to the constitution of a 3-member tribunal for dispute resolution in the written agreement that the parties of the case entered at the first instance.
- While the respondent claims to have proceeded with the appointment of a three-member tribunal post a mutual, oral agreement, there was no proof to support the same and owing to the clause in the written agreement. The Court held that such a constitution was prohibited and was eligible to be challenged under s.34 of the Arbitration & Conciliation Act, 1996.
- An oral agreement, regardless of record to prove the same, does not hold more weightage than the wordings of the written statement of the contract or agreement entered into by the parties.
- The High Court concluded that the respondent was violative of the agreement between the parties and disqualified the weightage of an oral agreement over a written agreement, entitling the challenge of the arbitral award passed by the three-member tribunal.
The debate of whether an oral agreement can supersede a written one has been put to rest through the judgement passed in the likes of the case above along with Prime Industries Ltd. v. SEIL Ltd., 2010. The contents of a written statement hold more weight in the case of arbitration agreements.
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