Allahabad High Court: Intention to Arbitrate Evident from Agreement Clauses and Correspondence Exchanged Between Parties

Allahabad High Court: Intention to Arbitrate Evident from Agreement Clauses and Correspondence Exchanged Between Parties

The Allahabad High Court has ruled that the intention of the parties to refer their dispute to arbitration can be inferred from the provisions of their agreement, considered in conjunction with the correspondence exchanged between them.

On December 1, 2016, the Applicant and the Opposite Party established a partnership through a formal agreement. Clause 21 of this agreement explicitly outlined that in the event of any disagreements between the partners, the prevailing arbitration law would govern the resolution process.

Following the emergence of the dispute, a notice was dispatched to the Opposite Party, requesting the appointment of Rishi Sood, Advocate, as the arbitrator. This communication was duly acknowledged. However, the Opposite Party refuted the presence of any conflict between the parties and subsequently asserted that no grounds or rationale existed to warrant the selection of an arbitrator, leading to the present application being filed to facilitate the appointment of an arbitrator.

The Opposite Party raised objections concerning the admissibility of the application, citing the absence of a specific arbitration clause within the agreement.

The Court noted that Section 7(1) of the Act defines an arbitration agreement as an accord between the parties to resolve either all or specific disputes, currently existing or potentially arising, about a distinct legal relationship – whether contractual or not – through arbitration.

Justice Ashwani Kumar Mishra determined that the statute's definition of a written arbitration agreement not only confines it to the stipulated arbitration clause within an agreement but also allows for such an agreement to be formed through the exchange of letters and similar means.

“Clause 21 of the agreement is thus to be construed together with the exchange of letters and correspondence between the parties. The legal notice sent by the applicants on 09.02.2022 invoking clause 21 of the partnership deal dated 01.12.2016 specifically refers to the existence of an arbitration clause,” Justice Mishra stated.

The Court concluded that while Clause 21 might not be ideally phrased when examined in conjunction with the correspondences exchanged between the parties, it demonstrated the parties' intent to settle disputes via arbitration. This assessment led to the Court granting approval for the appointment of an arbitrator.