The Delhi High Court Has Confirmed the Arbitrability of Disputes Related to MOCA: Directed the Involved Parties to Resolve Their Issues Through Arbitration

Case Title – M/s. Oravel Stays Pvt. Ltd. Vs. Nikhil Bhalla

Case Number – FAO (COMM) 212/2023 & CM NO. 54229/2023

Order Number – 23^rd April, 2024

Quorum – Justice Vibhu Bakhru and Justice Ravinder Dudeja

FACTS OF THE CASE

In the case of M/s. Oravel Stays Pvt. Ltd. Vs. Nikhil Bhalla, a company in the industry of hospitality namely M/s. Oravel Stays Pvt. Ltd., proffers services expediting the listing of properties on its online platform. Nikhil Bhalla is the owner of a hotel named “The Spruce Mansion” and is tied up in a Marketing and Operational Consulting Agreement (MOCA) with OSPL. The MOCA entailed a provision (Clause 15) that included the Terms and Conditions available on the website of OSPL, which in turn girdled an arbitration agreement (Clause 14). However, disputes arose between Nikhil and OSPL concerning the failure of the obligations relating to the minimum guarantee amounts and the stipulated incentives in the MOCA. As a result of which, Nikhil initiated legal proceedings to retrieve the remaining dues from the OSPL. Responding to the same, OSPL invoked the arbitration clause (Clause 14) within the MOCA, seeking for resolution through the way of arbitration. However, the application of OSPL for arbitration was dismissed by the Commercial Court stating that the arbitration provision did not extend to disputes arising from the non-compliance with the terms and conditions of the MOCA. In effect of the same, the dispute revolved around whether the arbitration clause within the MOCA covered disagreements arising from the alleged breaches of the contractual obligations, such as the failure to meet minimum guarantees and incentives, or if it was limited to other types of disputes.

CONTENTIONS OF THE APPELLANT

1. The appellant, through their counsel, in the said case contented that the disputes fell under the ambit of the arbitration agreement (Clause 14) as they concerned the “application” of the provisions of the MOCA, including the non-compliance.
2. The appellant, through their counsel, in the said case contented that any disputes in respect to the failure of fulfilment of obligations under the MOCA would be covered by the arbitration clause.
3. The appellant, through their counsel, in the said case stressed on the fact that the distinguished terms such as “application” encircled disputes of non-compliance.

CONTENTIONS OF THE RESPONDENT 

1. The respondent, through their counsel, in the said case contented that the arbitration clause was not specifically incorporated into the MOCA, as there was no specific reference to it in the digitally signed agreement.
2. The respondent, through their counsel, in the said case relied on the legal precedents to contend that an arbitration clause cannot be inferred by reference unless specifically stated in the agreement.
3. The respondent, through their counsel, in the said case contented that the link provided in the Clause 15 of the MOCA did not lead to the relevant Terms and Conditions containing the arbitration clause.

 LEGAL PROVISIONS

1. Section 8 of the Arbitration and Reconciliation Act, 1996 prescribes the power to refer parties to arbitration where there is an arbitration agreement.

ISSUES

1. The main issue of the case revolved around whether the arbitration agreement (Clause 14) was incorporated validly into the MOCA?
2. Whether the disputes arose in the suit fell within the ambit of the arbitration agreement?

COURT ANALYSIS AND JUDGMENT

 The court in the case of M/s. Oravel Stays Pvt. Ltd. Vs. Nikhil Bhalla, observed that the Clause 15 of the MOCA expressly incorporated the Terms and Conditions, including the Arbitration agreement (Clause 14). The court established that the arbitration clause was indeed a part of the contractual agreement between OSPL and Nikhil. The court in this case, relying on the legal precedents, affirmed that the reference to the Terms and Conditions constituted valid incorporation of the arbitration clause into the MOCA. The court observed that the arbitration agreement was legally binding on both parties and could be invoked to resolve disputes arising from the contract. The court in this case, stated the reason that the disputes concerning non-payment under the MOCA were arbitrable. Additionally, the court stated that such disputes inherently involved the interpretation, construction, and application of the provisions of the MOCA itself. Therefore, they fell in the ambit of matters that could be resolved through arbitration. The court stressed on the fact that a prima facie examination was sufficient to establish the existence of an arbitration agreement. The court in this case, deferred the determination of the arbitrability of the specific disputes to the Arbitral Tribunal. The court referred the parties to arbitration to resolve the dispute between them. The court highlighted that the role of the Arbitral Tribunal would be to determine the arbitrability of the disputes in detail, taking into consideration, the specific facts and circumstances of the case.

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Judgement Reviewed by – Sruti Sikha Maharana

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