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Arbitration when party initiates proceedings to blacklist another

26 October 2015

Punjab & Haryana High Court has held that it is open to parties to refer the issue of blacklisting to arbitration. The Court in this regard noted that there is no rule of law that prohibits parties from referring an issue relating to blacklisting to arbitration, and there is no bar to such reference of all other disputes arising under the arbitration agreement merely because one of the parties decides to blacklist the other or initiates a process to consider whether the other party ought to be blacklisted or not. It was held that a view to the contrary would frustrate not only the arbitration agreement between the parties but the Arbitration and Conciliation Act, 1996, itself.

Observing that the unilateral act of blacklisting cannot deprive the other contracting party of its rights under the contract including the right to invoke the arbitration agreement contained therein, the High Court on 29-9-2015, was of the view that if a blacklisted party can file an action in Court, there is no reason why it cannot refer the dispute to arbitration. It was also held that in this case of KV Fire Chemicals (I) Pvt. Ltd. v. Indian Oil Corporation Limited  mere fact that a writ against blacklisting can be issued in a case does not denude the civil court or an arbitrator of the jurisdiction to entertain and try the case.

Considering that the arbitration agreement referred to ‘all disputes arising out of the purchase order’, it was held that the arbitration clause was wide enough to cover the disputes including in relation to the issue of blacklisting.
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