Case: – M/S S.K Agencies v. M/S DFM Foods; ARB.P. 1201 of 2022
The recent pronouncement by the Delhi High Court in the case of highlights the significance of arbitration clauses in commercial agreements. The court, in its judgment dated December 20, 2023, addressed the petitioner’s plea under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a Sole Arbitrator to resolve disputes between the parties.
The dispute arose from an agreement entered into on July 24, 2015, granting the petitioner the right to operate a distribution outlet/sale depot of the respondent in Kanpur, Uttar Pradesh. The agreement, initially intended for a three-year term, was extended by the parties. It included an arbitration clause, specifying that disputes would be settled through negotiation and, if necessary, through arbitration in Delhi.
The crux of the dispute revolves around the interpretation of the agreement’s operating term, with the petitioner asserting that the agreement continued beyond the initial period. The respondent contended that the agreement automatically expired on July 23, 2019, as per the contractual provision.
The court emphasized the autonomy of arbitration clauses, stating that even after the termination of the main contract, the arbitration agreement survives. This aligns with the provisions of Section 16(1)(a) and (b) of the Arbitration and Conciliation Act, 1996, reinforcing the enforceability of arbitration clauses independent of the underlying contract.
The court rejected the respondent’s argument challenging the validity of the arbitration invocation notice dated March 1, 2022. It emphasized that the notice, though not specifying the disputes or claims, sufficiently manifested the petitioner’s intent to refer the matter to arbitration.
The court dismissed the objection regarding the maintainability of the petition, clarifying that a sole proprietorship, represented by its proprietor, has the right to institute legal proceedings.
The judgment serves as a significant precedent affirming the vitality of arbitration clauses post-contractual termination. It underscores the court’s inclination to refer disputes to arbitration, consistent with the pro-arbitration stance adopted in recent legal developments. The decision highlights the importance of careful drafting and interpretation of arbitration clauses in commercial agreements to avoid disputes over their scope and applicability.

Author of this article:
Adv. Ravish Bhatt,
Partner, R&D Law Chambers,
Dual Qualified Lawyer Solicitor | International Tax Affiliate

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