When two interconnected agreements have conflicting arbitration clauses, the Delhi High Court holds that priority should be given to the arbitration clause within the main agreement
In a recent ruling, the Delhi High Court determined that when two interconnected agreements contain conflicting arbitration clauses, the arbitration clause within the primary or main agreement should take precedence. The decision was made by Justice Jyoti Singh and had its basis in a case involving L&T Housing Finance Ltd. and Raheja Developers Ltd.
In this case, a Tripartite Agreement was executed, specifying arbitration and designating New Delhi as the arbitration seat. Subsequently, a Loan Agreement was signed, which had a separate arbitration clause designating the Courts at Calcutta. A dispute arose due to an increase in the Basic Prime Lending Rate (BPLR), leading the petitioner to invoke the arbitration clause and seek an arbitrator's appointment.
The petitioner argued that Clause 27 of the Tripartite Agreement was incorrectly used, but the Court found the Tripartite Agreement to be central and closely connected to the Loan Agreement, making both agreements interdependent. The dispute's core involved the BPLR increase, linked to the Tripartite Agreement's terms.
Regarding the objection of not providing a mandatory notice under Section 21, the Court emphasized that Section 21 notice is a prerequisite for invoking Section 11 jurisdiction. Even when an agreement allows unilateral arbitrator appointment, it does not exempt parties from adhering to Section 21's notice requirement.
The petitioner's argument that an email regarding third-party assistance constituted a Section 21 notice was dismissed since it did not specifically refer to the contract clause for arbitration.
Consequently, the Court dismissed the petition, reaffirming the importance of the primary agreement's arbitration clause in cases of conflicting arbitration clauses in interconnected agreements.