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Arbitration clause in Commercial document must be construed to give effect rather than invalidate it: Gujarat HC

Introduction: If no procedure had been agreed upon for appointing the Arbitrator and both parties had failed to agree on the appointment of the Arbitrator within thirty days of the petitioner's request to the respondents, then the case would fall under sub­section (5) of Section 11 for appointment of Arbitrator. This ruling was given in the Alphard Maritime Pvt. Ltd. vs. Malara Enterprises [C/IAAP/40/2020] by the HC of Gujarat while dealing with the facts of the case.

Facts: According to the facts of the case, the respondents were hired by the petitioners to offer dry docking services. The petitioner sent an e­mail notice to the respondents, demanding that they pay the damages resulting from the breach of contract, invoke the arbitration Clause 13, and request that the respondents appoint an independent and impartial sole Arbitrator following the provisions of the said Act. The replies, on the other hand, disputed the contract's very existence. In light of Clause 13 of the respondents' contract terms and conditions, the petitioner has filed a petition requesting the appointment of an arbitrator under Section 11 of the same Act.

Contentions: The petitioner argued that arbitration Clause 13 defined the parties' contractual relationship. The petitioner issued the purchase order in accordance with Clause 11 of the quotation dated September 26, 2020. It was obvious from the E­ emails exchanged and the parties' conduct that an arbitration agreement existed as defined in Section 7 of the Act mentioned above. The respondents do not contest the presence of Clause 13; but, by saying that there was no ad idem between the parties on the arbitration agreement, the respondents have inadvertently accepted the legality of the Arbitration Clause.

The respondents claimed that the quotation was just an offer and not a binding contract and that the purchase order did not include an arbitration clause. They further argued that, even if the quote did contain the arbitration agreement, such a fleeting reference to language in the quotation's terms and conditions would not constitute a legitimate arbitration agreement as defined by Section 7 of the Act.

Decision: The Court, after perusing the interpretation of Section 7 of the said Act, said that “it can be safely deduced from the aforesaid legal position that the Arbitration Agreement even though in writing need not be signed by the parties, if the record of the agreement is provided by the exchange of letters, telex, telegrams or other means of telecommunications.”

“Though the parties had agreed to submit to the jurisdiction of the High Court of Gujarat for arbitration, the procedure for the selection of the Arbitrator was not agreed upon,” the Court added. The court admitted that the petitioner had already requested that the respondents select an independent and impartial Sole Arbitrator following the Act's requirements by submitting an e­mail Notice of Arbitration, but that the respondents had refused to comply with the request. As a result, the matter comes under Section 11(5) for the appointment of an arbitrator by this Court.” Hence, the court granted the appeal. 

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(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)

  • Facts
  • Contentions
  • Decision

BY : Devika Jayaraj

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