Arbitration Clause Survives In Continuing Commercial Transactions Absent Clear Waiver: Calcutta High Court

The Calcutta High Court on 19 May held that where a series of agreements form part of a single, continuous commercial transaction, an arbitration clause in the original agreement survives in subsequent arrangements unless the later agreement clearly and unambiguously shows an intention to abandon arbitration.

Justice Gaurang Kanth allowed a Section 11 petition filed by The Peerless General Finance and Investment Company Ltd and appointed former Judge of the Calcutta High Court, Justice Indra Prasanna Mukerji, as sole arbitrator in disputes arising out of a series of agreements with Ganguly Home Search Pvt Ltd relating to a real-estate project. The Single-Judge Bench held:

“On the question of the survival of the arbitration clause, this Court is of the considered view that where a series of agreements form part of a single, integrated, and continuing commercial transaction, and where the earlier agreements contain a broad arbitration clause covering all disputes and differences arising in connection with the said transaction, the said arbitration clause does not get extinguished merely by reason of execution of a subsequent agreement which is silent on the point, unless there is a clear, express, and unambiguous provision in the subsequent agreement indicating that the parties intended to abandon and give up the right to arbitrate.”

The dispute arose from a 2012 Memorandum of Understanding (MoU) under which Peerless agreed to purchase 61 flats in a proposed real-estate project at Rajpur Sonarpur for about Rs. 29.36 crore with an assured return of 15% per annum. The MoU contained a broad arbitration clause covering disputes arising from the transaction.

Subsequently, the parties executed supplementary agreements in 2014 and 2016 extending timelines while preserving the original contractual framework, followed by a tripartite agreement in 2017 and another agreement dated 26 March 2021, which provided for adjustment of outstanding dues through allotment of flats in the “4Sight Florence” project.

The Court noted that the 26 March 2021 agreement did not contain any express clause indicating abandonment of arbitration. It held that mere absence of a continuity clause was insufficient to displace the arbitration clause contained in the 2012 MoU.

Rejecting the respondents' contention that the 2021 agreement amounted to novation, the Bench observed that whether a later agreement supersedes an earlier one is a mixed question of fact and intention, requiring examination of the contractual documents, surrounding circumstances, and conduct of the parties, and cannot be conclusively decided at the Section 11 stage.

Justice Kanth further held that issues relating to waiver, acquiescence, limitation, and delay between 2021 and 2024 fall within the arbitral tribunal's domain and cannot be grounds to refuse appointment of an arbitrator under Section 11.

Accordingly, the High Court referred the disputes to arbitration and appointed Justice Indra Prasanna Mukerji as sole arbitrator.