Supreme Court: Harmonization and Reconciliation of the two existing arbitration clauses are required to determine the nature of arbitral proceedings

 

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The Supreme Court bench comprising of CJI S. A. Bobde, Justice A. S. Bopanna and Justice V. Ramasubramanian, in the case of Balasore Alloys Limited v. Medima LLC on September 16, 2020 discussed the issue of applicability of arbitration clause when two different arbitration clauses in two related agreements between the same parties exists.

The Applicant and the Respondent had entered into a purchase agreement dated 19.07.2017. Thereafter, on 31.03.2018 the parties entered into another agreement relating to the same transaction. Both these transactions contain arbitration clauses which are not similar to each other.

Thereafter, the Applicant filed a petition under Section 11(6) read with Section 11 (12)(a) of the Arbitration and Conciliation Act, 1996 for the appointment of a sole arbitrator, thereby invoking the initial agreement dated 19.06.2017. The applicant also prayed for appointment of a second arbitrator on account of Respondent’s failure to nominate an arbitrator. The Respondent filed a counter affidavit contending that the entire transaction is governed under the agreement dated 31.03.2018 which provides for institutional arbitration by the International Chamber of Commerce (ICC).

Issue

Which arbitration clause will be applicable in case where two agreements containing two different arbitration clauses subsists between the parties in relation to the same transactions.

Decision

The court relied on the judgement of Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan & Ors. (read here) and observed that when two agreements between the same parties relating to the same transaction subsists and both such documents contain an arbitration clause which are different from each other, then in such cases the two documents must be read in harmony or reconciled in order to take note of the nature of dispute that had arisen.

Read judgement here.

By Sakshi Dewangan


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