Arbitration agreement can be retrospectively applicable if the conduct of parties indicate that they continued to do business on similar terms
This was held by the Hon’ble High Court of New Delhi in the matter of Connaught Plaza Restaurants Pvt. Ltd. v. Radhakrishna Foodland Pvt. Ltd., OMP(I)(COMM) No. 103 of 2018, on 17th September, 2018.
Challenge:
The Petitioner, which operated fast food restaurants in North and East India under the name of McDonald’s, filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief against the Respondent who was the sole Purchasing and Forwarding Agent of the Petitioner. The said petition was filed as there existed an arbitration in an agreement dated 22.06.2009 between the parties. The Petitioner alleged that after the wrongful and illegal termination of the said agreement, Respondent refused to release the products/goods of Petitioner with intention of causing unlawful harm. The Respondent contended that there was no valid arbitration clause which subsisted at the time of filing of this petition as the last subsisting agreement between the parties was dated 25.03.2013 which expired on 31.03.2016, however, the parties continued to conduct business till September 2017.
Held:
The Hon’ble Court observed that the parties entered into an Agent Agreement dated 22.06.2009 wherein the Respondent was appointed its sole Purchasing and Forwarding Agent was superseded by another agreement dated 25.03.2013 which also enabled the parties to refer any disputes for arbitration. A letter dated 31.03.2015 retrospectively extended the agreement dated 25.03.2013 till 31.03.2016. That even after 31.03.2016, the parties continued to do business till September 2017. The Hon’ble Court held that the correspondence between the parties reveal the conduct of Respondent in extending the agreement retrospectively despite of the same coming to an end twice by efflux of time. Thus, the intention of the parties was to continue with their business arrangement under the agreements till disputes arose between them in September 2017. Therefore, in light of the correspondence between the parties which was placed on record and conduct of the parties in extending the agreements retrospectively wherein the parties continued doing business on similar terms, it was held that the arbitration clause contained in the agreement dated 25.03.2013 continued to operate qua the disputes that had arisen thereunder. Hence, the Respondent was estopped from taking the defense that there was no valid and subsisting arbitration agreement at the time when dispute arose and the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 was allowed.