Interpretation of Arbitration Agreement’s Validity Post Expiration of the Principal Contract — Section 37(2)(a) of the Arbitration and Conciliation Act, 1996

The Court relied on the principle that an arbitration clause, being a distinct contract, can survive the expiration of the primary contract when the parties continue their business relationship under the same terms.

The Court emphasized the need to examine evidence like communications and business conduct to determine the implied extension of contractual terms, including arbitration provisions.(Paras 11, 19, 21, 31, 38, 42)

The High Court quashed the Arbitral Tribunal’s order, holding that the conduct and written communications between the parties indicated an extension of the Distributor Agreement on the same terms, including the arbitration clause.

Acts and Sections Discussed:

• Arbitration and Conciliation Act, 1996 — Section 37(2)(a), Section 16, Section 7

Subjects: Arbitration Clause, Contract Extension, Implied Agreement, Jurisdiction, Arbitral Tribunal, Section 37 Appeal

Nature of the Litigation: The litigation involved an appeal filed under Section 37(2)(a) of the Arbitration and Conciliation Act, 1996, challenging the order of the Arbitral Tribunal upholding its lack of jurisdiction.

Petitioner’s Relief Sought: Raymond Limited sought the Court’s intervention to set aside the Tribunal’s order, asserting the validity of the arbitration clause post-expiration of the Distributor Agreement.

Reason for Filing the Case: The Arbitral Tribunal held that the claims made by Raymond Limited were beyond the period covered by the written Distributor Agreement and therefore not bound by the arbitration clause.

Prior Decisions: The Arbitral Tribunal’s Impugned Order dated October 4, 2023, ruled that the arbitration agreement expired with the Distributor Agreement’s two-year term.

Issues:

• Whether the Distributor Agreement and the arbitration clause stood extended by the parties’ conduct.

• Whether the arbitration clause could be invoked for disputes arising after the formal expiration of the Distributor Agreement.

Submissions/Arguments: (a) Petitioner: Asserted that the Distributor Agreement was impliedly extended through mutual conduct and supported by communications like emails, WhatsApp chats, and verbal agreements. (b) Respondents: Contended that the arbitration agreement expired with the Distributor Agreement’s term and there was no explicit written extension.