Mahanagar Telephone Nigam Ltd. Vs Canara Bank & Ors. (Supreme Court of India)
Summary: The Supreme Court partly allowed the appeals filed by Mahanagar Telephone Nigam Ltd. (MTNL) and held that a valid arbitration agreement existed between MTNL and Canara Bank even though there was no formally signed arbitration agreement in the conventional form. The Court held that Section 7 of the Arbitration and Conciliation Act, 1996 does not require an arbitration agreement to assume any particular form; what is essential is a demonstrable intention of the parties to submit their disputes to arbitration. The correspondence between the parties, proceedings before the Committee on Disputes, consent recorded by the Delhi High Court, participation before the Sole Arbitrator and the exchange of statement of claim, reply and counterclaim established the requisite agreement. In particular, Section 7(4)(c) recognises an arbitration agreement through an exchange of statements of claim and defence where its existence is asserted by one party and not denied by the other. Having consented before the High Court and subsequently participated in arbitration, MTNL could not contend that no written arbitration agreement existed.
The Court further considered whether Can Bank Financial Services Ltd. (CANFINA), a wholly owned subsidiary of Canara Bank and a non-signatory to the arbitration agreement as recorded by the High Court, could nevertheless be joined to the arbitral proceedings. The dispute originated in CANFINA’s subscription to MTNL’s bonds and their subsequent transfer to Canara Bank. The Court found a direct nexus between the issuance of the bonds, their transfer and their eventual cancellation by MTNL. Resolution of the dispute only between MTNL and Canara Bank, without CANFINA, would therefore be futile.
