DELHI HIGH COURT: CORRESPONDENCE STATING NON-ARBITRABILITY OF DISPUTE DUE TO NEGOTIABLE INSTRUMENTS ACT PROCEEDINGS IMPLIES RECOGNITION OF ARBITRATION CLAUSE

The Delhi High Court Dhanlaxmi Sales in the case M/S. Corporation Vs Boston Scientific India Pvt Ltd observed and has held that correspondence from a party stating that ongoing proceedings under the Negotiable Instruments Act, 1881 barred initiation of arbitration implicitly acknowledged the existence of the arbitration clause.

The Delhi High Court bench of Justice Prateek Jalan was hearing the present matter.

FACTS OF THE CASE:

The present matter relates to an application filed under Section 11 of the Arbitration and Conciliation Act, 1996 wherein the Petitioner i.e., Sales Corporation sought the appointment of an arbitrator to resolve disputes arising under a Dealership Agreement. The core issue in the said dispute was the existence of an arbitration agreement that governs the resolution of conflicts between the parties involved.

The Petitioner i.e., Sales Corporation argued that Clause 7.6 of the Agreement, which mentioned 'Dispute resolution by Arbitration,' should be interpreted as an arbitration agreement. The said clause includes language stating that any dispute or claim, whether arising out of or relating to the Agreement or not, shall be referred to the courts of New Delhi.

The petitioner in the plea contended that the clause was invoked for arbitration through a communication and that the respondent's reply did not contest the presence of an arbitration clause but rather rejected the request for arbitration. This, the Petitioner argued, indicates an acknowledgment of the arbitration clause.

On the other hand, the Respondent opposed the petition for arbitration and argued that Clause 7.6 does not qualify as an arbitration agreement as stated under Section 7 of the Arbitration Act.

It was argued before the court that the clause lacked the necessary intent to resolve disputes through binding arbitration, as merely mentioning ‘arbitration' in the heading does not suffice.