Case Note & Summary
The case involves an appeal against a judgment of a Learned Single Judge of the Bombay High Court, which set aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. The dispute arose from four separate contracts between Edifice Developers and Project Engineers Ltd. (Appellant) and M/s. Essar Projects (India) Ltd. (Respondent). Two contracts contained an arbitration agreement, while two did not. The Arbitrator overruled the Respondent's objection to jurisdiction, holding that the parties were ad idem in treating all works under one head with General Conditions of Contract incorporating an arbitration agreement, and alternatively, that a court order dated 24 January 2003 referring disputes to arbitration constituted an arbitration agreement. The Learned Single Judge set aside the award, finding no arbitration agreement in writing for the two contracts. The Division Bench upheld this decision, emphasizing that an arbitration agreement must be in writing under Section 7 of the Act, and a court order referring disputes does not create an arbitration agreement. The appeal was dismissed.
Headnote
A) Arbitration Law - Existence of Arbitration Agreement - Section 7, Arbitration and Conciliation Act, 1996 - The court held that an arbitration agreement must be in writing as per Section 7 of the Act. Letters referred to by the Arbitrator did not constitute an arbitration agreement in writing. The absence of an arbitration clause in two contracts meant the Arbitrator lacked jurisdiction over disputes arising from those contracts. (Paras 2-4)
B) Arbitration Law - Effect of Court Order Referring Disputes - Section 16(2), Arbitration and Conciliation Act, 1996 - The court held that a court order referring disputes to arbitration does not create an arbitration agreement. Section 16(2) does not preclude a party from raising a plea that the Arbitrator lacks jurisdiction, and such a plea can be raised at any stage. The Learned Single Judge correctly set aside the award for lack of jurisdiction. (Paras 3-4)
Issue of Consideration
Whether an arbitration agreement existed in respect of two contracts that did not contain an arbitration clause, and whether a court order referring disputes to arbitration can be construed as an arbitration agreement.
Final Decision
The appeal is dismissed. The judgment of the Learned Single Judge setting aside the arbitral award is upheld.
Law Points
- Arbitration agreement must be in writing
- Section 7 of Arbitration and Conciliation Act 1996
- Section 16(2) of Arbitration and Conciliation Act 1996
- Court order referring disputes does not constitute arbitration agreement
Case Details
2013 LawText (BOM) (01) 43
APPEAL NO.13 OF 2012 IN ARBITRATION PETITION NO.314 OF 2007
Dr. D.Y. Chandrachud, A.A. Sayed
Mr. Shailesh Shah, Senior Advocate i/b Ms. Vaishali Choudhari for the Appellant; Mr. Nishant Sasidharan with Mr. Nikhil Karnawat i/b Maniar Srivastava Associates for the Respondent
Edifice Developers and Project Engineers Ltd.
M/s. Essar Projects (India) Ltd.
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Nature of Litigation
Appeal against judgment setting aside arbitral award under Section 34 of Arbitration and Conciliation Act, 1996
Remedy Sought
Appellant sought to uphold the arbitral award and set aside the judgment of the Learned Single Judge
Filing Reason
Appellant challenged the judgment of the Learned Single Judge which set aside the arbitral award on the ground that the Arbitrator lacked jurisdiction over two contracts without an arbitration agreement
Previous Decisions
Arbitrator's order dated 29 August 2003 overruled objection to jurisdiction; Learned Single Judge's judgment dated 11 November 2011 set aside the award
Issues
Whether an arbitration agreement existed in respect of two contracts that did not contain an arbitration clause
Whether a court order referring disputes to arbitration can be construed as an arbitration agreement
Submissions/Arguments
Appellant argued that the parties were ad idem in treating all works under one head with General Conditions of Contract incorporating an arbitration agreement, and that the court order dated 24 January 2003 constituted an arbitration agreement
Respondent argued that there was no arbitration agreement in writing for the two contracts, and the Arbitrator lacked jurisdiction
Ratio Decidendi
An arbitration agreement must be in writing as per Section 7 of the Arbitration and Conciliation Act, 1996. A court order referring disputes to arbitration does not create an arbitration agreement. The Arbitrator lacked jurisdiction over contracts without an arbitration clause.
Judgment Excerpts
The Arbitrator in his order dated 29 August 2003, held on the basis of certain letters which were adverted to in paragraph 7 of the order that the parties were 'ad idem in treating all the said works including the said two works under one head to which the General Conditions of Contract applied' and which incorporated an arbitration agreement.
While setting aside the arbitral award the Learned Single Judge has held that in the absence of an arbitration agreement in the two contracts in question at the highest, the Appellant could have sought to establish a separate arbitration agreement on the basis of the correspondence or documents on the record. However, none of the letters referred to in paragraph 7 of the order of the Arbitrator dated 29 August 2003 would spell out an arbitration agreement in writing.
Procedural History
The Arbitrator passed an award on 15 January 2007. The Respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the Bombay High Court. The Learned Single Judge set aside the award on 11 November 2011. The Appellant appealed against that judgment, leading to the present appeal.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 7, Section 16(2), Section 34
