Oral agreement cannot supersede terms of an arbitration agreement, Delhi HC

The Delhi High Court has held that the terms of an arbitration agreement, which is in writing as per the Arbitration and Conciliation Act, 1996, cannot be superseded by any oral demand or agreement..The judgment was pronounced by Justice Prathiba M Singh while adjudicating on a Section 34 challenge to an arbitral award passed by a three-member tribunal for being against the mandate of the arbitration agreement..The Petitioner, Mother Boon Foods Pvt Ltd, had entered into an agreement with the Respondent, Mindscape One Marketing Pvt Ltd, to manufacture and package pieces of bread as per requirements and specifications of the Respondent. The said contract was terminated subsequently due to certain disputes between the two parties, which were referred to an arbitral tribunal pursuant to the agreement’s arbitration clause..Although the arbitration clause contemplated appointment of a sole arbitrator by the Respondent, a three-member tribunal was constituted by it..The Petitioner chose not to participate in the arbitration proceedings and subsequently moved the High Court against the award thus passed by the tribunal..It was the Petitioner’s case that as per the clause in the agreement, the Respondent was empowered to appoint a Sole Arbitrator. However, a three-member tribunal which was fully chosen by the Respondent was contrary to the agreement between the parties and the provisions of the Act. Hence, the award passed could not be sustained..Respondent, on the other hand, claimed that a three-member tribunal was constituted at the instance of the Petitioner..It was submitted that the Respondent Company decided to appoint three arbitrators to afford a fairer adjudication process to the Petitioner and hence, “be on the safer side”..“The proverb, “better safe than sorry”, cannot be of universal application as the facts in the present case would show. The safe procedure for parties to an arbitration agreement is to actually adhere to the stipulation in the arbitration clause and not attempt anything which the parties may perceive to be safer.” the Court remarked..Observing that there was nothing on record to show that the Petitioner demanded the constitution of a three-member tribunal, the Justice Singh observed,.“It is nigh possible that the Respondent decided to adopt a fair attitude by appointing a three-member tribunal, however, if a three-member tribunal had to be appointed, then the same ought to have been done with the consent of the Petitioner and in accordance with the provisions of the Act.”.The Court further stated,.“The arbitration agreement, as per the 1996 Act, has to be in writing and since the arbitration clause, which is a part of the contract, was in writing, the same could not have been superseded by any oral demand or agreement. The Petitioner may have been clever in orally demanding a three-member tribunal but it is clear that the procedure adopted by the Respondent is impermissible.”.Accordingly, the Court set aside the award for not being in accordance with the arbitration agreement between the parties. .The Petitioner was represented by Advocate S.P. Saxena..The Respondent was represented by Advocate Shrey Chathly.