In the case of Dhansar Engineering Company Pvt. Ltd. v. Eastern Coalfields Ltd., decided on April 18, 2024, the Calcutta High Court addressed the issue of whether a policy circular could constitute a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.
Brief Facts:
- Dhansar Engineering Company Pvt. Ltd. (the applicant) entered into a contract with Eastern Coalfields Ltd. (the respondent).
- The contract did not explicitly contain an arbitration clause.
- The applicant sought to invoke arbitration based on a policy circular issued by the respondent, which mentioned arbitration as a mode of dispute resolution.
- The applicant filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator.
Procedural History:
- On December 1, 2022, the High Court dismissed the application, stating that there was no valid arbitration clause between the parties.
- The applicant filed a Special Leave Petition before the Supreme Court, which granted liberty to file a review application.
- Subsequently, the applicant filed a review application (RVWO No. 38 of 2023) before the Calcutta High Court.
Judgment:
- The Calcutta High Court held that the policy circular did not constitute a valid arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.
- The court emphasized that for an arbitration agreement to be valid, there must be a clear intention between the parties to refer disputes to arbitration, which was absent in this case.
- The court dismissed the review application, upholding its earlier decision that no valid arbitration clause existed between the parties.
This judgment underscores the necessity for explicit mutual consent to arbitrate disputes, as outlined in Section 7 of the Arbitration and Conciliation Act, 1996.