Arbitration Clause Contained In Incomplete Memorandum Of Understanding Cannot Form Basis For Arbitration Proceedings: Calcutta HC

The Calcutta High Court bench of Justice Shampa Sarkar has held that an arbitration clause in a memorandum of understanding that was not finalized, as indicated by the correspondences between the parties, cannot serve as the basis for initiating arbitration proceedings. Clause 12.3 of the said MOU constituted a valid and binding arbitration clause between the parties, in terms of Section 7 of the Arbitration Act. Lastly, it was submitted that had the petitioner believed that the draft MOU had been finalized and clause 12.3 was a binding arbitration agreement between the parties, in that event, in the demand notice dated September 14, 2023, the petitioner, would have mentioned the existence of the arbitration clause. The court further said that the tenor of the demand letter dated September 14, 2023, which was issued by the learned Advocate of the petitioner much after the circulation of the email, does not contain any mention or reference to the arbitration clause which further clarifies the position that the petitioner was asserting the terms and conditions of an oral agreement and the signed agreement of December 7, 2020.