A commercial document having an arbitration clause has to be interpreted in such a manner as to give effect to the agreement rather than to invalidate it: High Court of Gujurat

In absence of any procedure having been agreed upon for appointing the Arbitrator, and both the parties having failed to agree on the appointment of the Arbitrator, within thirty days from the receipt of the request made by the petitioner to the respondents, the case would fall under sub­ section (5) of Section 11 for appointment of Arbitrator by this Court. This was said in the case of Alphard Maritime Pvt. Ltd. vs Malara Enterprises [C/IAAP/40/2020] by Justice Bela M. Trivedi in the High Court of Gujarat at Ahmedabad. 

The facts of the case are that the respondents were under a contract with the petitioners to provide dry docking services. The petitioner, sent a notice through E­ mail calling upon the respondents to pay the damages arising out of the breach of the contract and also invoked the arbitration Clause 13 requesting the respondents to appoint an independent and impartial sole Arbitrator as per the provisions of the said Act. However, the respondents refuted the very existence of the contract. The petitioner therefore has filed the petition seeking appointment of Arbitrator under Section 11 of the said Act, in view of the Clause­13 of the terms and conditions of the contract quoted by the respondents. 

The petitioner contended that arbitration Clause­13 defined the contractual relationship between the partiesThe purchase order was issued by the petitioner pursuant to the Clause­11 of the quotation dated 26.09.2020. From the E­ mails exchanged and the conduct of the parties, it was evidently clear that there was an arbitration agreement as contemplated in Section 7 of the said Act. The existence of the Clause­13 is not denied by the respondents, the respondents have indirectly admitted to the validity of the Arbitration Clause, by stating that there was no ad idem between the parties on the arbitration agreement.

The respondents contended that the quotation by the respondents was merely an offer and not a binding contract, and that there was no arbitration clause in the purchase order. They further contended that assuming without admitting that the quotation contained the arbitration agreement, such passing reference of words in the terms and conditions of the quotation would not constitute a valid arbitration agreement as contemplated under Section 7 of the said Act.  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”.

 Furthermore, the Court said that “though the parties had agreed to submit to the jurisdiction at the High Court of Gujarat for the purpose of arbitration, the procedure for the appointment of the Arbitrator was not agreed upon. It has also come on record that the petitioner had already called upon the respondents by sending a Notice of Arbitration through e­mail, calling upon them to appoint an independent and impartial Sole Arbitrator as per the provisions contained in the Act, however the respondents had refused to agree to the said request. So, the case falls under section (5) of Section 11 for appointment of Arbitrator by this Court”. Hence, the appeal stands allowed.

Click here to read judgment