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06 January 2017

Foreign award cannot be enforced in absence of arbitration agreement

The present case was filed before the High Court of Delhi with regard to the enforcement of an arbitral award. The case dealt with two companies involved in the sale of palm oil that were at a preliminary stage of negotiations. The seller sought to enforce the arbitral award which was rendered by the Arbitral Tribunal, presuming the existence of a binding contract between the two parties. The Tribunal held that there was ‘strongest evidence’ that the contracts were indeed in existence, based on the dealings between the parties.
 
The matter for adjudication before the High Court was whether there exists an arbitration agreement between the parties. The Delhi High Court, in its Judgement dated 5-12-2016, relying upon its previous judgments and after analyzing the facts, held that according to Section 44(a) of the Arbitration and Conciliation Act, 1996, it is mandatory for an agreement to be in writing and since the contracts had not been signed by one of the two parties, there was no valid acceptance of the other party’s proposal and therefore there existed no written contract between the parties. It held that since there was no valid contract between the parties, the question of existence of any arbitration clause would not arise and therefore, declined to enforce the foreign arbitral award.