Arbitration Clause Binding Even If Subsequent Agreements Do Not Contain It: Omega Finvest LLP v Direct News Pvt Ltd1 – Arbitration & Dispute Resolution

ARBITRATION CLAUSE BINDING EVEN IF SUBSEQUENT AGREEMENTS DO NOT
CONTAIN IT: OMEGA FINVEST LLP v DIRECT NEWS PVT
LTD¹

The Delhi High Court has held that an arbitration clause in an
earlier agreement remains binding on the parties even after they
enter into subsequent agreements which do not contain an
arbitration clause.

Facts

The parties entered into 2 agreements for the lease of premises.
Differences arose between them which were settled by way of
settlement agreements. One of the parties failed to honour its
obligations under the settlement agreements and the aggrieved party
invoked arbitration under the lease agreements.

This was opposed on the grounds that: (i) the lease agreements
containing the arbitration clause had expired, and (ii) the
disputes between the parties were governed by the settlement
agreements, which were independent contracts devoid of any
arbitration clause.

Delhi High Court

The Court held that in the settlement agreements there was no
stipulation rescinding the arbitration clause in the lease
agreements. The existence of the arbitration clause was thus
confirmed.

The Court further relied on precedents² to conclude
that a §11 Court cannot adjudicate on whether the arbitration
clause in the lease agreements had been superseded or novated by
the settlement agreements. It could only examine the existence of
an arbitration agreement, and not its validity.

Conclusion

The scope of the Court’s enquiry under §11 of the
Arbitration & Conciliation Act 1996 is limited only to
examining the existence of an arbitration agreement.

Footnotes

1. Decision dated 11 October 2022 passed by the Delhi
High Court in Arbitration Petition No. 818/2021

2. Vidya Drolia v Durga Trading Corporation
(2021) 2 SCC 1; Sanjiv Prakash v Seema Kukreja and Ors.
(2021) 9 SCC 732

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