Arbitration agreement cannot be inferred against a guarantor absent written assent to the clause.

A guarantor cannot be compelled to arbitrate unless a written arbitration agreement with that guarantor is proved. A mere connection to loan transactions, participation in section 11 proceedings, or an earlier letter expressing willingness to stand surety does not amount to assent to the arbitration clause in later loan agreements. The analysis also rejects any inference of arbitration agreement from non-denial in the section 11 application where no specific allegation of such an agreement was made. On that basis, the guarantor was not bound by the arbitration clause and the arbitral awards against him could not be sustained.

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Issues: Whether a guarantor who was not a party to the loan agreements containing the arbitration clause could be referred to arbitration and bound by the arbitral awards, and whether an arbitration agreement could be inferred from the section 11 proceedings or the guarantor's prior guarantee letter.

Analysis: An arbitration can be invoked only between parties to an arbitration agreement. A guarantor who did not sign the loan agreements, did not execute any deed of guarantee in favour of the lender, and whose letter of guarantee did not contain or refer to any arbitration clause, cannot be treated as a party to the arbitration agreement merely because the lender and other borrowers/guarantors agreed to arbitration. The reference in the section 11 application to the guarantor as a person connected with the loan did not amount to a specific allegation that there was an arbitration agreement with him, and therefore there was no basis to invoke section 7(4)(c) on the footing of non-denial. The guarantor's earlier letter expressing willingness to stand surety did not show any assent to future loan agreements or their arbitration clause. Questions relating to the merits of the guarantee or liability for interest did not survive once the absence of arbitration agreement was held against the lender.

Conclusion: The guarantor was not bound by the arbitration clause, the reference to arbitration against him was incompetent, and the arbitral awards against him could not be sustained.

Ratio Decidendi: A person who is not a party to an arbitration agreement cannot be compelled to arbitrate or be bound by an award unless a written arbitration agreement with that person is proved in accordance with section 7.

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