Supreme Court: No Arbitration Reference Allowed in Multi-Transaction Property Dispute
On 1 May 2023, Supreme Court of India, in a recent judgement, dismissed an appeal filed by a party seeking reference to arbitration under Section 8 of the Arbitration and Conciliation Act, 1996. The case involved a dispute over multiple transactions related to a property, and the key question before the Court was whether the arbitration clause in the original license agreement could be extended to cover subsequent transactions.
The appellant, in this case, argued that the amended Section 8 of the Act of 1996, which came into effect in 2015, required courts to refer the parties to arbitration even if there was a doubt about the existence of an arbitration agreement. The appellant also relied on several earlier judgments, including Vidya Drolia v. Durga Trading Corporation, which dealt with the implications of non-stamping or under-stamping on arbitration agreements.
However, the Supreme Court rejected the appellant’s arguments, stating that the facts of the case did not support an extension of the arbitration clause to subsequent transactions. The Court noted that except for the original license agreement, none of the other agreements involved in the case contained an arbitration clause. Moreover, the Court observed that the dispute involved subsequent purchasers and allegations of fraud, which could not be resolved in any forum without reference to the tripartite agreement and its amended clause, which did not provide for arbitration.
The Court also rejected the appellant’s reliance on the memos submitted by the subsequent purchasers, in which they stated that they had no objection to arbitration. The Court held that the consent of the subsequent purchasers could not infuse an arbitration clause in the tripartite agreement.
The Supreme Court held that the view taken by the lower courts, which had declined the appellant’s prayer for reference to arbitration, was correct. Appeals Dismissed.
GUJARAT COMPOSITE LIMITED vs A INFRASTRUCTURE LIMITED & ORS.
