Arbitration In IndiaUncategorizedObligation of the Court to refer Parties to Arbitration irrespective of Materialization of Agreement

The Delhi High Court, in President Lala Sher Singh Memorial Jeevan Vigyan Trust Society v. Sutlej Eduvision Private Limited [Civil Suit Commercial Number 158 of 2021 and others, decided on 21.02.2024], held that it is obligatory for the court to refer the parties to arbitration in terms of the Agreement irrespective of materialization of Agreement.

FACTS

Lala Sher Singh Memorial Jeevan Vigyan Trust (hereinafter referred to as the “Plaintiff”), has filed the present suit for recovery of INR 5 crore along with interest from Sutlej Eduvision Private Limited (hereinafter referred to as the “Defendant”). Defendant had proposed to the plaintiff for the establishment of a school in Sector – 40 of Gurugram, in lieu of one one-time interest fee security deposit of INR 5 crore.

The said agreement was entered into orally between the parties, pursuant to which Plaintiff had transferred INR 5 crore to the bank account of Defendant. The Plaintiff alleged that the agreement never took off and hence demanded from the Defendant the security deposit to be paid back.

The Defendant filed application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “A&C Act”),  vide IA No.14085/2021 stating that an “Education collaboration agreement” dated 18.01.2018 (hereinafter referred to as the “Agreement”), was entered into between the representatives of the party, which includes an arbitration clause which states that, all disputes or differences arising between the parties with respect to this deed or any matter arising or touching this deed shall be settled by a sole arbitrator in accordance with provisions of A&C Act and the venue shall be in Delhi.

ISSUE BEFORE THE DELHI HIGH COURT

1. Whether materialization of the agreement would affect the decision to refer the parties to arbitration under Section 8 of the A&C Act?

CONTENTIONS OF THE PARTIES

The Plaintiff denied the existence of any Agreement as mentioned by the Defendant.

The Defendant submitted evidence to prove the validity of the Agreement, which empowered Mr. Akash Gupta (the treasurer) to enter into the said Agreement.

DECISION AND FINDINGS

The Delhi High Court relied on Sundaram Finance Ltd. v. T. Thankam, MANU/SC/0177/2015: 2015:INSC:141 : (2015) 14 SCC 444 and held that it is undisputed that an Agreement has been entered into, then the dispute arising between the parties ought to be referred to arbitration under Section 8 of A&C Act.

The High Court allowed the IA  of the Defendant and referred to the Delhi International Arbitration Centre.

AMLEGALS REMARKS

The Delhi High Court has upheld the principle of party autonomy and the intention of the parties to arbitrate. It is the obligatory duty of the courts to consider the arbitration agreement entered into between the parties and refer the parties to arbitration in lieu of the disputes risen irrespective of whether the terms of the agreement have been materialized or otherwise.

-Team AMLEGALS, assisted by Ms. Dhwani Tandon (Intern)

For any query or feedback, please feel free to get in touch with rohit.lalwani@amlegals.com or himanshi.patwa@amlegals.com