Bombay High Court Upholds Arbitration Agreement Using Business Efficacy Test

Introduction

In a recent decision in Lords Inn Hotels and Resorts v. Pushpam Resorts LLP¹, the Bombay High Court has addressed a fundamental question in arbitration law, i.e., whether an arbitration agreement can be inferred from an ambiguous contract. The judgment applies the business efficacy test to determine whether the parties had a binding arbitration agreement despite the absence of an explicitly worded arbitration clause. The ruling has significant implications for commercial agreements, reinforcing the principle that party autonomy in dispute resolution must be respected, even if the agreement is inartfully drafted. In this article, we navigate through the facts of the case and the findings of the High Court.