Arbitration In IndiaSubsequent Communications can validate an ambiguous Arbitration Clause

The Hon’ble Bombay High Court in its judgment dated 19.06.2025 in the case of Nisha Ajay Agrawl v. Big V Telecom Private Limited (MANU/MH/3590/2025) has held that subsequent communications between the parties can validate an ambiguous arbitration clause.

The issue before the Court was whether an arbitration agreement exists and is valid between the parties. Nisha Ajay Agrawl (“the Applicant”) filed a Commercial Arbitration Application under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act“) against Big V Telecom Private Limited (“the Respondent”). She sought to refer disputes that arose from a Service Level Agreement (“SLA”) dated February 2, 2021, to arbitration.

The Court had to adjudicate whether the ambiguous arbitration clause in the SLA would stand validated due to subsequent exchange of correspondence between September 22, 2021, and September 24, 2021 between the parties. The Respondent challenged the existence of a binding agreement, citing a prior ruling in a similar case and arguing that their consent was unclear or equivocal.

This judgement carefully analyses whether the exchange of letters constituted a valid arbitration agreement and clarifies the impact of prior judgements when new facts are presented.

Facts

This Application was filed under Section 11 of the Act seeking reference of disputes and differences between the parties as per arbitration clause in Clause 3. Initially, the SLA contained Clause 3, which read:

“This agreement shall always be subject to the exclusive jurisdiction of the Courts and arbitration situated at Mumbai”.

The court noted that such a clause was “controversial in nature for construing a binding commitment to arbitrate”.

On September 22, 2021, the Applicant wrote to the Respondent, referring to the same SLA. In this letter, the Applicant explicitly confirmed that the parties had not provided for any arbitration clause, despite two clauses in the SLA referring to “arbitration”. The Applicant requested the Respondent’s consent to incorporate an explicit arbitration clause with specific terms. The proposed clause stated:

“All disputes/differences relating to and/ or arising out of this Agreement and/or anything done in pursuance thereof shall be referred to a Sole arbitrator to be appointed by consonance of both the parties. The place of arbitration shall be at Mumbai and the arbitration proceedings shall be carried out in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (amended from time to time) and the decision of the sole arbitrator shall be binding on the Parties“.

In response, vide letter dated September 24, 2021, the Respondent acknowledged receipt of the Applicant’s letter and agreed to the arbitration clause mentioned in it “as if it is a part of the SLA”. The Court viewed this exchange of correspondence as leading to the parties “executing and confirming an arbitration agreement“. The Court observed that Section 7 of the Act shows that one of the means of executing an arbitration agreement would be exchange of correspondence and the formal existence of it which is quite evident in this case.

Contentions of the Parties

The Applicant’s main contention was that a binding arbitration agreement existed between the parties, despite the initial ambiguity of the clause in the SLA. The Applicant asserted that on September 22, 2021 it clearly communicated to the Respondent that the SLA lacked an explicit arbitration clause, and then proposed a detailed, conventional arbitration clause. The Applicant highlighted that the Respondent, in a letter dated September 24, 2021, explicitly accepted this proposed clause, agreeing that it would be considered “as if it is a part of the SLA”.

This exchange of correspondence, the Applicant argued, unequivocally constituted a formal and binding arbitration agreement under Section 7 of the Act. The Applicant contended that this new agreement superseded any prior ambiguities or earlier invocations based on the original, problematic clause.

The Respondent, on the other hand, raised several objections and contended that its letter dated September 24, 2021 was merely a consent to the suggestion of who should be appointed as a sole arbitrator, not an agreement to a new arbitration clause itself.

Further, the Respondent claimed that arbitration had already been invoked by a letter dated September 20, 2021, which came before the exchange of correspondence confirming the elaborate arbitration clause. It argued that at the time of this invocation, the SLA only contained the original, ambiguous clause, which had previously been ruled to not constitute an arbitration agreement, making the current application pointless and worthy of rejection.

Court’s Decision

The Court ruled in favor of the Applicant, confirming the existence of a binding arbitration agreement and appointing a sole arbitrator. The Court noted that the exchange of letters from September 22, 2021 to September 24, 2021 clearly constituted a binding arbitration agreement under Section 7 of the Act.

The Court held,

“11. Even assuming that the clause in the originally executed SLA did not constitute an arbitration clause at the time the letter invoking arbitration was issued (September 20, 2021), the exchange of correspondence between September 22, 2021 and September 24, 2021, unequivocally constitutes the existence of an arbitration agreement. Parties who do not have any arbitration agreement and are involved in court proceedings, too can execute a new arbitration agreement and proceed to arbitrate. In this case, contemporaneous to the events that developed, the parties actually exchanged correspondence to confirm that they would adopt the arbitration clause proposed on September 22, 2021.

12. Under Section 11(6A) of the Act, this Court can only look to the formally executed arbitration agreement being in existence. The scope of jurisdiction is confined to such examination of existence of an arbitration agreement. Having examined the material on record, I am satisfied that an arbitration agreement is in existence.”

AMLEGALS Remarks

This judgment mark a significant clarification in the realm of arbitration law, particularly concerning the formation and validation of arbitration agreements. The Court’s unwavering position that a communication exchange can unquestionably create a legally binding arbitration agreement, despite the original contract’s uncertainty, offers important direction for businesses. It reinforces the principle that parties’ clear intent to arbitrate, demonstrated through subsequent written communication, holds legal weight.

Furthermore, the judgement emphasises the significance of a thorough factual record in legal conclusions by carefully differentiating the current case from former rulings based on the earlier proceedings’ failure to take into account important new material. This guarantees that court decisions are founded on all pertinent evidence and stops precedent from being used incorrectly. Ultimately, this judgment strengthens the enforceability of arbitration agreements formed through clear, albeit subsequent, mutual consent, and promoting efficiency in dispute resolution.

– Team AMLEGALS

For any queries or feedback, feel free to reach out to rohit.lalwani@amlegals.com