Calcutta HC Keeps Arbitration Agreement Issue Open in Kobelco-Lara Mining Dispute, Declines Interim Relief

The Calcutta High Court has left open the question of whether an arbitration agreement contained in two Master Facility Agreements was validly assigned to Kobelco Construction Equipment India Pvt. Ltd. through a settlement with SREI Equipment Finance Ltd.

The Court held that the issue should be decided by the appropriate forum and not in the present appeals.

A Division Bench of Justices Debangsu Basak and Md. Shabbar Rashidi ruled that findings made by a Single Judge on the non-existence of an arbitration agreement would not bind future proceedings.

“In such view, the issue as to whether or not, there exist a valid arbitration agreement between the parties is kept open to be decided by the appropriate forum. The observations and the findings returned by the learned Single Judge in the impugned judgment and order will not prejudice any of the parties in the subsequent proceedings. All points raised by the parties in this regard are kept open to be decided by the appropriate forum.”, the court ruled.

The dispute arose from two Master Facility Agreements executed on January 19, 2020 between SREI Equipment Finance Ltd and Lara Mining. Under those agreements, Lara Mining was required to make payments to SREI. Security was also created in favour of the lender. Kobelco later entered into a settlement agreement with SREI on July 11, 2021.

Kobelco contended that, under the settlement agreement, all rights, title, and interest under the Master Facility Agreements stood transferred and vested in it. It further claimed that the arbitration agreement contained in those contracts also stood assigned to it. Relying on that claim, Kobelco sought interim protection.

A Single Judge dismissed the petitions in August 2023 after holding that no subsisting arbitration agreement existed between Kobelco and Lara Mining.

Before the Division Bench, Kobelco argued that the Master Facility Agreements expressly permitted assignment. It contended that the settlement agreement transferred all rights held by SREI. According to Kobelco, the arbitration agreement was capable of assignment and therefore continued to bind Lara Mining.

Lara Mining disputed that position. It argued that the issue did not require a final determination at that stage. It further contended that the Single Judge's findings were only prima facie and that questions concerning the existence, validity and assignment of the arbitration agreement could be examined in appropriate proceedings.

Accepting that position, the High Court observed that the findings recorded by the Single Judge would not prevent either side from pursuing its case before the competent forum.

“According to the respondent, the issue as to whether or not there exist a valid arbitration agreement by way of assignment or otherwise between the parties, can be agitated at the appropriate forum and that, the findings returned by the impugned judgment and order is not an impediment for the parties in contend on either side of the divide. We accept such contention of the respondent in the facts and circumstances of the present case.”, the court noted

The bench also declined to interfere with the Single Judge's refusal of interim protection. It noted that although the petitions had been filed in March 2023, Kobelco had not invoked the arbitral process before the Single Judge delivered the impugned order in August 2023. The appeals were accordingly disposed of. All questions relating to the existence, validity, and assignment of the arbitration agreement were left open for future adjudication.