14 September 2021, Tuesday

2 months ago

Effect of signing a letter that became an addendum to a prior agreement containing arbitration clause—the signing party became signatory (Delhi High Court)

29 July 2021 | Blue Star Ltd. v. Bhasin Infotech & Infrastructure Pvt. Ltd. and another | Arb. Pet. No. 444 of 2021| Sanjeev Narula J | 2021 SCC OnLine Del 3900

[Ed. The date of this judgment is wrongly reported by SCC as 05 August 2021]

Blue Star and Bhasin entered into a Service Agreement that had an arbitration clause. Later, both signed a letter with an additional party Venice. The letter did not refer to dispute resolution or arbitration. Instead, it noted that the Service Agreement “has the same effect and all clauses are binding on all parties,” and only the billing name was changed from Bhasin to Venice. Also, the letter “shall be attached as an addendum to the Service Agreement.”

In Blue Star’s petition for the arbitrator's appointment, the question before Narula J was if, under the letter, Venice became a party to the arbitration agreement within the terms of Section 7 ACA.

Narula said yes, prima facie, and left the matter for final determination by the arbitrator. His reasoning was as follows:-

  1. First, he relied on a decision of a co-ordinate bench (Vibhu Bakhru J) in Indiacan Education v. Amit Popli, 2016 SCC OnLine Del. 4497, where it was held that the addendum there (not containing an arbitration clause) did not give a go-by to the main agreement (that had an arbitration clause), and instead was in addition. He noted that “in the present case, too, the letter ... was … meant to serve as an addendum.”
  2. Second, he relied on MTNL v. Canara Bank, (2020) 12 SCC 767 and noted that there was “an objection of joinder of a party” and “the clinching factor which weighed on the mind of the Court … that the party sought to be joined was a wholly-owned subsidiary of the Respondent.”
  3. Third, “applying the principles enshrined” and “as made clear from the conduct of the parties”, he said that Venice was a “necessary and proper party to the arbitration proceedings.” He relied on the language of the letter and said, “it cannot be assumed that the parties agreed to be bound by all the clauses in the service agreement, as clearly stipulated, but not the arbitration clause.”

Access the decision here.

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