The Calcutta High Court allowed an application filed under S. 11 of the Arbitration and Conciliation Act, and appointed an arbitrator, rejecting the respondent’s claim that the arbitration agreement no longer exists because the earlier contract is novated/substituted by the petitioner the petitioner by a second contract with a third party/Ramesh Agarwal.
Brief Facts:
Both parties entered into an agreement “Techno-Commercial Offer (TCO)”. The TCO contains an arbitration clause that provides for disputes and differences to be settled by arbitration with three arbitrators, two of whom would be nominee arbitrators of the parties to the contract. The TCO was issued by the respondent to the petitioner. The parties thereafter entered into an Erection and Supply Contract incorporating the TCO. Thereafter, the petitioner started production and the respondent made a partial payment on it. Later, they did not pay the due amount after several reminders. The petitioner ultimately invoked the arbitration clause in the TCO dated 11.7.2018 by a notice issued under section 21 of the Act on 25.4.2022. The respondent did not reply to the letter of invocation.
Contentions of the Respondents:
The Learned Counsel for the Respondents opposed the appointment of an arbitrator on the ground that the parties did not give any effect to the TCO Agreement and the petitioner entered into a fresh agreement with a third party and therefore the TCO was superseded and novated by another agreement.
The Court noted that the argument by the respondent is fallacious since novation or substitution under section 62 of the Contract Act, 1872 requires both or all of the parties to a contract to agree on substituting or novating the earlier contract with a fresh contract. The respondent alleged that the earlier contract was allegedly novated or substituted by the petitioner by a second contract with a third party and therefore, the case sought to be made out of novation/substitution is contrary to the Act.
The Court said that there is no evidence to show that the earlier contract was not given effect. The mails sent by the petitioner simply contain an offer presumably on revised terms on the work to be performed without stating anything more. This is an undisputed fact that the petitioner performed the work in terms of the Supply Contract which is evident from the respondent making part payment to the petitioner.
The Court said that in any event, a Court dealing with an application under section 11 of the 1996 Act is not required to go into the merits of the dispute but only to see whether there is an arbitration agreement between the parties and whether disputes relatable to that arbitration agreement exist between the parties. The respondent has not been able to make out a case that no arbitration agreement exists between the parties.
The decision of the Court:
The Calcutta High Court, allowing the petition, held that a valid arbitration agreement exists in this case and appointed Mr. Domingo Gomes, Advocate as the Arbitrator, subject to the learned Arbitrator communicating his consent in the prescribed format to the Registrar.
Case Title: Trilok Infracon (India) Private Limited v. M/s. Hindustan Marketing Company
Coram: Hon’ble Justice Moushumi Bhattacharya
Case no.: AP/81/2023
Advocate for the Petitioner: Mr. Abhidipto Tarafdar
Advocate for the Respondents: Mr. Shailendra Jain
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