Delhi High Court - Orders
M/S Acuraglobe Llp vs Superchem Nutri Formulations on 22 February, 2021
Author: Talwant Singh
Bench: Talwant Singh
$~S-29
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 460/2020
M/S ACURAGLOBE LLP . ...Petitioner
Through: Dr. Harsh Pathak with Mrs. Shaveta
Mahajan, Mrs. Maya Pathak,
Mr.Sidharth Shukla and Mr. Mohit
Choubey, Advocates
Versus
SUPERCHEM NUTRI FORMULATIONS ... Respondent
Through: Mr. Vineet Kumar, Advocate
CORAM:
HON'BLE MR. JUSTICE TALWANT SINGH
ORDER
% 22.02.2021 The present matter has been taken up for hearing by way of Video Conferencing on account of COVID-19.
1. This is a petition under Section 11 (6) of the Arbitration and Conciliation Act, 1996 for appointment of Arbitrator to adjudicate the disputes between the parties.
2. The case of the petitioner is that the petitioner and the respondent had executed a work order dated 24.10.2017 for Protein Health Food Formulations for manufacturing and supplying the same. Certain disputes arose between the parties so on 10.12.2019, the petitioner issued an ARB.P. 460/2020 Page 1 of 20 arbitration notice for appointment of Arbitrator for resolution of disputes which have arisen between the parties. The respondent replied to the said notice on 08.01.2020 denying any existence of the arbitration clause or disputes between the parties, hence the present petition was filed.
3. The arbitration clause is contained in the work order sent by the respondent to the petitioner which is dated 24.10.2017 and the same is reproduced hereunder:-
"That any dispute or point of clarification shall be settled mutually or by arbitration or by court of law at Delhi as per situation."
4. In reply, the respondent has taken three preliminary objections which is as under:-
"A. NO ATTRIBUTES OF AN ARBITRATION AGREEMENT The Petitioner filed the present petition under section 11 (6) (a) of the Arbitration 8s Conciliation Act, 1996 seeking appointment of arbitral tribunal arising out of the manufacturing & supplying agreement dated 24.10.2017. It is stated by the Petitioner that the clause of the manufacturing agreement specifically provides for adjudication of disputes through arbitration. The said clause " ....that any dispute or point of clarification shall be settled mutually or by arbitration or by court of law at Delhi as per situation.... " It is respectfully submitted that clause in an agreement cannot be construed as an arbitration agreement merely word arbitration is mentioned. The attributes which are necessary for considering an agreement as an arbitration agreement has to be" expressly or impliedly spelt out from the clause. It is respectfully submitted that (i) the arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement. (ii) The jurisdiction of the tribunal to decide the rights of the parties must derive from their consent, or from an ARB.P. 460/2020 Page 2 of 20 order of the Court or from a statute, the terms of which make it clear that the process is to be arbitration, (iii) Elucidate that arbitration is an alternate dispute resolution system. Thus, it is respectfully submitted that where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement.
B. NO VALID AND BINDING ARBITRATION AGREEMENT It is respectfully submitted before the Hon'ble Court that the nuances of language have precedence over the possible intent of the parties to resolve their disputes by way of arbitration. The words "OR", "AS PER SITUATION" does not construe as arbitration agreement. That it is a possibility of the parties, agreeing to arbitration in future, as contrasted from the clause, and in most respectful submission cannot bind a party and thus there is no valid and binding arbitration agreement. It is most respectfully submitted that the intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. Mere use of the word 'arbitration' or arbitrator' in a clause will not make it an arbitration agreement. It is respectfully submitted that the manufacturing agreement dated 24.10.2017 merely indicate desire or hope and require to arrive at a further agreement to go to arbitration, as and when the dispute arise. Thus after the dispute has arisen, the parties will have to come to a further agreement that they shall go to arbitration.
C. NO CONTRATUAL DISPUTES BETWEEN PARTIES AS ALLEGEDBY PETITIONER It is most respectfully submitted that Petitioner failed to prima facie establish any dispute or breach of manufacturing and supplying agreement dated 24.10.2017. It is submitted that no arbitral dispute is in existence between petitioner and Respondent. The Respondent firm is a world know nutraceutical manufacturer having approvals from all the regulating bodies ARB.P. 460/2020 Page 3 of 20 in India and few Indian company having international certificates. It is most respectfully submitted that Petitioner with malafide intention to diverge criminal proceeding filed by Respondent under section 138 N1 act for dishonor of cheque and complaint to FSSAl for forged signatures against the Petitioner, petitioner filed the present petition to harass and prejudice to Respondent herein".
5. In rejoinder, the petitioner has denied all the contentions of the respondent and has submitted as under:-
"That the content of Para A and B of the preliminary submission is wrong and denied. It is specifically denied that no attributes of an arbitration agreement and no valid and binding arbitration agreement. It is respectfully submitted that from the language of the arbitration clause itself, it is unambiguously clear that there is a binding arbitration agreement between the parties. The Respondent has failed to act despite notice the petitioner is entitled to the relief prayed for. It is further submitted that the words ' shall' and 'or' appearing in the arbitration clause have to be given their true meaning. The expression 'shall' has to be construed mandatorily while the expression ' or' has to be read as disjunctive. Upon taking this as the correct approach, the arbitration agreement would be binding upon the parties, as to the expression 'as per situation' can be construed as an alternative remedy to the invocation of the arbitration agreement and the reference to arbitration being an alternative and agreed with remedy, the petitioner may unequivocally be allowed to invoke the arbitration agreement. It is pertinent to note that the Arbitration agreement is printed on the letterhead of the Respondent firm and fulfills all the conditions for valid arbitration agreement as mentioned under -
(i) The intention of the parties to refer their disputes to arbitration (ii) Applicable governing law (iii) Seat of arbitration (iv) Signed by both parties, and (v) it can be the exchange of agreement between the parties. Therefore, the agreement dated 24.10.2017 is a valid arbitration agreement.ARB.P. 460/2020 Page 4 of 20
In this regard the Hon 'ble Supreme Court in the matter of Visa International Ltd. Vs. Conventional Resources (USA) Ltd. [(2009) 2 SCC 55] and in the matter of Power tech World Wide Ltd Vs. Delvin International Arbitration Petition No. 5 of 2010 held that: "No party can be allowed to take advantage of inartistic drafting of arbitration clause in any agreement as long as clear intention of parties to go for arbitration in case of any future disputes is evident from the agreement & material on record, including surrounding circumstances"
2. That the content of Para C of the preliminary submission is wrong and denied. It is specifically denied that no arbitral dispute is in existence between the parties. Further, it is denied for want of knowledge that the criminal case filed by the Respondent against the Petitioner. It is respectfully submitted that earlier in the Arbitration Act, the Hon'ble Chief Justice had been given the power to examine other aspects as well, i.e. limitation, whether the claims were referable for arbitration, etc. Now, as per sub-section (6A) of Section 11, the power of the Court has been restricted only to see whether there exists an arbitration agreement. Therefore, the ground for arbitral dispute raised by the Respondent in the reply is not maintainable and not to be decided at this stage. Further, it is submitted that the amended provision in subsection (7) of Section 11 provides that the order passed under Section 11(6) shall not be appealable and thus finality is attached to the order passed under this Section, therefore this Hon 'ble Court rejects the plea of arbitral dispute and other grounds raised by the Respondent and appoint the arbitrator in the interest of justice.
In this regard in the matter of NCC Ltd. Vs. Indian Oil Corporation Ltd. in Arbitration Petition No. 115/2018 the Hon'ble Delhi High Court passed the Judgment dated 08.02.2019 held in our Conclusion that:
"Para 81. Having regard to the foregoing discussion hereinabove my conclusions can be summed up as follows: -
I) Where there is contestation or the decision rendered by the General Manager leaves scope for argument as to whether the ARB.P. 460/2020 Page 5 of 20 claims lodged by a Contractor can be categorized as Notified Claims is best left to the Arbitral Tribunal. In other words, except for the situation where there is no doubt that the claims were not lodged with the Engineer and the Site Engineer as required under Clause 6. 6.1. 068 read with 6. 6.3. 069, the matter would have to be left for resolution by Arbitral Tribunal. II) Aspects with regard to accord and satisfaction of the claims or where there is a dispute will also have to be left to the Arbitral Tribunal. The position in law in this regard remains the same both pre and post amendment brought about in the 1996 Act after 23.10.2015.
III) After the insertion of Subsection (6A) in 11 of the 1996 Act the scope of inquiry by the Court in a Section 11 petition, (once it is satisfied that it has jurisdiction in the matter) is confined to ascertaining as to whether or not a binding arbitration agreement exists qua the parties before it which is relatable to the disputes at hand.
IV) The space for correlating the dispute at hand with the arbitration agreement is very narrow. Thus, except for an open and shut case which throws up a circumstance indicative of the fact that a particular dispute does it not fall within the four comers of the arbitration agreement obtaining between the parties the matter would have to be resolved by an Arbitral Tribunal. In other words, if there is contestation on this score, the Court will allow the Arbitral Tribunal to reach a conclusion on way or another. This approach would be in keeping with the doctrine of Kompetenz Kompetenz; a doctrine which has statutory recognition under Section 16 of the 1996 Act."
6. I have heard arguments on behalf of both the parties. The main dispute is regarding interpretation of the arbitration clause. As per the petitioner, it has the option either to approach the Court of Law or get the dispute settled through arbitration in terms of the arbitration clause contained in the work order dated 24.10.2017. Learned counsel for the ARB.P. 460/2020 Page 6 of 20 petitioner submits that the first option is to settle the disputes amicably and if it is not possible to settle the disputes mutually or amicably, the next step to go for is arbitration or approach in the Court of Law at Delhi, as per situation. It was not possible to settle the disputes amicably or mutually as the respondent is denying even the existence of any dispute. So, the only option available before the petitioner was either to invoke the Arbitration or to approach the Court of Law in Delhi. The petitioner has chosen the first option and has invoked the arbitration vide notice dated 10.12.2019.
7. On the other hand, the contention of the respondent is that the last clause in the work order cannot be construed as an arbitration agreement because only the word 'arbitration' is mentioned, but the arbitration clause must contain that the decision of the Tribunal will be binding on both the parties and there has to be a consent of both the parties to submit to the jurisdiction of Arbitration Tribunal and arbitration award has to be final and binding on both the parties. All these necessary ingredients are missing in the present matter. So, in the words of the respondent, there is no valid and binding arbitration clause and moreover there are no disputes between the parties. Hence, the present petition is liable to be dismissed.
8. The petitioner has relied upon the following judgments:
"(i) In Power tech World Wide Ltd vs. Delvin International (2012) 1 SCC 361 it was held that:
1........ The contract also contained an arbitration clause which reads as under:ARB.P. 460/2020 Page 7 of 20
Any disputes arising out of this Purchase Contract shall be settled amicably between both the parties or through an Arbitrator in India/UAE.
11. The aforesaid contentions have been raised by the advocates for the petitioner in view of the judgment of this Court in the case of Jagdish Chander v. Ramesh Chander & Ors. [(2007) 5 SCC 719] wherein this Court had taken the view that such an arbitration clause would not have satisfied the pre-requisites of a valid arbitration reference. In that case, this Court was concerned with Clause 16 of the contract between the parties that read as under:
'(16) If during the continuance of the partnership or at any time afterwards ay dispute touching the partnership arises between the partners, the same shall be mutually decided by the partners or shall be referred for arbitration if the parties so determine.'
12. The Court felt that the main attribute of an arbitration agreement, namely, consensus ad idem to refer the disputes to arbitration, is missing in Clause 16 relating to settlement of disputes. Therefore, it is not an arbitration agreement as defined under Section 7 of the Act. In absence of an arbitration agreement, the question of exercising power under Section11 of the Act to appoint an arbitrator does not arise.
13. A similar view was expressed by this Court in the case of Wellington Associates Ltd. v. Kirit Mehta (AIR 2000 SC 1379) through the arbitration clause in that case was different.
14. Now, I may refer to the pre-requisites of a valid and binding arbitration agreement leading to an appropriate reference under the Act. Section 2(1)(b) defines 'arbitration agreement' to be an agreement referred to in Section 7. Section 7 of the Act states that an 'arbitration agreement' is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. The arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement and shall be an ARB.P. 460/2020 Page 8 of 20 agreement in writing. An arbitration agreement is in writing if it is contained in any of the clauses, i.e., clauses (a) to (c) of Sub-
section (4) of Section 7 of the Act. Once these ingredients are satisfied, there would be a binding arbitration agreement between eh parties and the aggrieved party would be in a capacity to invoke the jurisdiction of this Court under Section 11(6) of the Act.
21. It is in light of these provisions, one has to construe whether the clause in the present case, reproduced above, in Para 1, constitutes a valid and binding agreement. It is clear from a reading of the said clause that the parties were ad idem to amicable settle their disputes or settle the disputes through an arbitrator in India/UAE. There was apparently some ambiguity caused by the language of the arbitration clause..... The parties obviously had committed to settle their disputes by arbitration, which they could not settle, as claims and counter claims had been raised in the correspondence exchanged between them. In view of the above, even the pre-condition for invocation of an arbitration agreement stands satisfied. The arbitration agreement does not provide for any specific mode/methodology to be adopted while appointing an arbitrator."
(ii) In VISA International Ltd. Versus Continental Resources (USA) Ltd. 2008 (15) SCALE 497, it was held as under:
"18. That an arbitration agreement is not required to be in any particular form has been reiterated in more than one decision. [see: Bihar State Mineral Development Corporation Vs. Encon building (2003) 7 SCC 418]. What is required is to gather the intention of the parties as to whether they have agreed for resolution of the disputes through arbitration. What is required to be decided in an application under Section 11 of the Act is whether there is any arbitration agreement as defined in the Act? It needs no reiteration that Section 7 of the Act does not prescribe any particular form and it is immaterial whether or not expression 'arbitration' or 'arbitrator' or 'arbitrators' has been used in the agreement."ARB.P. 460/2020 Page 9 of 20
(iii) In NCC Ltd. Vs. Indian Oil Corporation Ltd. Arbitration Petition No. 115/2018 the Hon'ble Delhi High Court on 08.02.2019 held in conclusion as under:
"Para 81. Having regard to the foregoing discussion hereinabove my conclusions can be summed up as follows:
I) Where there is contestation or the decision rendered by the General Manager leaves scope for argument as to whether the claims lodged by a Contractor can be categorized as Notified Claims is best left to the Arbitral Tribunal. In other words, except for the situation where there is no doubt that the claims were not lodged with the Engineer and the Site Engineer as required under Clause 6.6.1.068 read with 6.6.3.069, the matter would have to be left for resolution by Arbitral Tribunal.
II) Aspects with regard to accord and satisfaction of the claims or where there is a dispute will also have to be left to the Arbitral Tribunal. The position in law in this regard remains the same both pre- and post-amendment brought about in the 1996 Act after 23.10.2015.
III) After the insertion of Subsection (6A) in 11 of the 1996 Act the scope of inquiry by the Court in a Section 11 petition, (once it is satisfied that it has jurisdiction in the matter) is confined to ascertaining as to whether or not a binding arbitration agreement exists qua the parties before it which is relatable to the disputes at hand.
IV) The space for correlating the dispute at hand with the arbitration agreement is very narrow. Thus, except for an open and shut case which throws up a circumstance indicative of the fact that a particular dispute does it not fall within the four corners of the arbitration agreement obtaining between the parties the matter would have to be resolved by an Arbitral Tribunal. In other words, if there is contestation on this score, the court will allow the Arbitral Tribunal to reach a conclusion one way or ARB.P. 460/2020 Page 10 of 20 another. This approach would be in keeping with the doctrine of Kompetenz Kompetenz; a doctrine which has statutory recognition under Section 16 of the 1996 Act."
9. The respondent has relied upon the following judgments:
(i) JAGDISH CHANDER versus RAMESH CHANDER AND OTHERS (2007) 5 Supreme Court Cases 719:
"11. The existence of an arbitration agreement as defined under Section 7 of the Act is a condition precedent for exercise of power to appoint an Arbitrator/Arbitral Tribunal, under Section 11 of the Act by the Chief Justice or his designate. It is not permissible to appoint an arbitrator to adjudicate the disputes between the parties, in the absence of an arbitration agreement or mutual consent. The designate of the Chief Justice of Delhi High court could not have appointed the arbitrator in the absence of an arbitration agreement."
(ii) WELLINGTON ASSOCIATES LTD. versus KIRIT MEHTA (2000) 4 Supreme Court Cases 272:
"4. It is hereby agreed that, if any dispute arises in connection with these presents, only courts in Bombay would have jurisdiction to try and determine the suit and the parties hereto submit themselves to the exclusive jurisdiction of the courts in Bombay.
5. It is also agreed by and between the parties that any dispute or differences arising in connection with these presents may be referred to arbitration in pursuance of the Arbitration Act, 1940 by each party appointing one arbitrator and the arbitrators so appointed selecting an umpire. The venue of arbitration shall be at Bombay.ARB.P. 460/2020 Page 11 of 20
25. Suffice it to say, that the words "may be referred"
used in clause 5, read with clause 4, lead me to the conclusion that clause 5 is not a firm or mandatory arbitration clause and in my view, it postulates a fresh agreement between the parties that they will go to arbitration. Point 2 is decided accordingly against the petitioner.
26. In the light of the finding on Point 2, it is obvious that I have, to dismiss this petition."
(iii) Linde Heavy Truck Division Ltd. versus Container Corporation of India Ltd. 2012 SCC OnLine Del 5434 "15.3 Jurisdiction of Courts: The Courts of the place from where the acceptance of tender has been issued shall alone have jurisdiction to decide any dispute arising out of or in respect of the contract i.e., New Delhi (INDIA) 15.5 If, after 30 (thirty) day from the commencement of such informal negotiation, CONCOR and the supplier have been unable to resolve amicably the contract dispute, either party may require that the dispute be referred for resolution by arbitration in accordance with the rules of Arbitration of "Standing Committee on Public Enterprises" of India (SCOPE) from the "Conciliation and Arbitration" and award made in pursuance thereof shall be binding on the parties.
8. A perusal of clause 15.3 would show that the parties agreed that the Courts of the place from where the acceptance of tender is issued, alone shall have jurisdiction to decide any dispute arising out of or in respect of the contract. This clause clearly contemplates adjudication of disputes by a Civil Court though only by the Court at the place where the acceptance of the tender ARB.P. 460/2020 Page 12 of 20 is issued, i.e., New Delhi (INDIA). This clause in the contract clearly indicates that the parties did not enter into a binding arbitration agreement and contemplated resolution of their disputes through the process of a civil Court at New Delhi. It would be pertinent to recall here that in Wellington Associates Ltd. (supra) also clause 4 of the agreement between the parties provided for jurisdiction of Bombay Courts in case of any dispute arising in connection with the agreement. It is true that the word "suit" used in clause 4 of the agreement in Wellington Associates Ltd. (supra) has not been used in clause 15.3 of the agreement in the case before this Court, but that, to my mind, would not be of any consequence, considering the fact that clause 15.3 envisages adjudication by a Civil Court and it does not pertain to place of the Court, which would have jurisdiction in respect of the arbitration proceedings.
9. For the reasons stated hereinabove, the application is hereby dismissed."
10. As far as the judgments in the matter of Jagdish Chander v. Ramesh Chander (supra) and Wellington Associates Ltd. v. Kirit Mehta (supra) are concerned, both these judgments were duly considered by Hon'ble Mr. Justice Swatanter Kumar in judgment in the matter of Power tech World Wide Ltd v. Delvin International (supra) and in the said matter, the Hon'ble Supreme Court was pleased to reached to a conclusion that although there was some ambiguity caused by the language of the arbitration clause, but the parties had committed to settle their disputes obviously by arbitration, although, the arbitration agreement does not provide any specific mode to be adopted while appointing an Arbitrator. As far as judgment of this Court in Linde Heavy Truck Division Ltd. v. Container Corporation of India Ltd. (supra) is concerned, it is clear that in ARB.P. 460/2020 Page 13 of 20 clause 15.5 of the agreement, the word used is 'may', whereas in the present case, the word so used in the arbitration clause is 'shall'. Hence, the ratio of the judgment in the matter of Linde Heavy Truck Division Ltd. v. Container Corporation of India Ltd. (supra) is not applicable to the present matter. Moreover, in view of the subsequent judgment of the Hon'ble Supreme Court, as cited above, the conclusion reached by the learned Judge of this Court that where adjudication of disputes is to be done by the Civil Courts of a particular jurisdiction, then in that case, the arbitration clause loses its significance, is not the correct law. The arbitration clause and the agreement are to be read in full and where the dominant intention of the parties is to settle their disputes through arbitration, in that case, the reference to the civil jurisdiction of the Court at best can be taken to be the Courts where all the petitions/applications under the Arbitration and Conciliation Act, 1996 are to be filed or once an award is pronounced, any party may challenge the same before the Civil Court of competent jurisdiction.
11. As far as the interpretation of the arbitration clause in the similar circumstances is concerned, Hon'ble Supreme Court in the matter of M/s Zhejiang Bonly Elevator Guuide Rail Manufacture Co. Ltd. vs. M/s Jade Elevator Components in Arbitration Petition (Civil) No. 22 of 2018 has discussed the same issue in detail and has laid down the law in this regard as under:-
"4. To appreciate the controversy, it is required to be seen whether there is an arbitration clause for resolution of the disputes. Clause 15 of the agreement as translated in English reads as follows:ARB.P. 460/2020 Page 14 of 20
"15. Dispute handling.--Common processing contract disputes, the parties should be settled through consultation; consultation fails by treatment of to the arbitration body for arbitration or the court."
5. It is submitted by the learned counsel for the petitioner that if the clause of "dispute handling" is scrutinised appropriately, the disputes are to be settled through consultation and, if the consultation fails by treatment of to the arbitration body for arbitration or court and, therefore, the matter has to be referred to arbitration. It is canvassed by him that the clause is not categorically specific that it has to be adjudicated in a court of law. It leads to choices and the choice expressed by the petitioner is arbitration.
6. The learned counsel for the respondent, in his turn, would urge that when it is stated as arbitration or court, the petitioner should knock at the doors of the competent court but not resort to arbitration, for the clause cannot be regarded as an arbitration clause which stipulates that the disputes shall be referred to arbitration.
7. To appreciate the clause in question, it is necessary to appositely understand the anatomy of the clause. It stipulates the caption given to the clause "dispute handling". It states that the disputes should be settled through consultation and if the consultation fails by treatment of to the arbitration body for arbitration or the court. On a query being made, the learned counsel for the parties very fairly stated that though the translation is not happily worded, yet it postulates that the words "arbitration or the court" are indisputable as far as the adjudication of the disputes is concerned. There is assertion that disputes have arisen between the parties. The intention of the parties, as it flows from the clause, is that efforts have to be made to settle the disputes in an amicable manner and, therefore, two options are available, either to go for arbitration or for litigation in a court of law.
8. This Court had the occasion to deal with such a clause in the agreement in Indtel Technical Services (P) Ltd. v. W.S. ARB.P. 460/2020 Page 15 of 20 Atkins Rail Ltd. [Indtel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd., (2008) 10 SCC 308] In the said agreement, Clause 13 dealt with the settlement of disputes. Clauses 13.2 and 13.3 that throw light on the present case were couched in the following language:
".13.2. Subject to Clause 13.3 all disputes or differences arising out of, or in connection with, this agreement which cannot be settled amicably by the parties shall be referred to adjudication;
13.3. If any dispute or difference under this agreement touches or concerns any dispute or difference under either of the sub-contract agreements, then the parties agree that such dispute or difference hereunder will be referred to the adjudicator or the courts as the case may be appointed to decide the dispute or difference under the relevant sub-contract agreement and the parties hereto agree to abide by such decision as if it were a decision under this agreement.'"
9. Interpreting the aforesaid clauses, the Judge designated by the learned Chief Justice of India held thus:
"38. Furthermore, from the wording of Clause 13.2 and Clause 13.3 I am convinced, for the purpose of this application, that the parties to the memorandum intended to have their disputes resolved by arbitration and in the facts of this case the petition has to be allowed."
10. The aforesaid passage makes it clear as crystal that emphasis has been laid on the intention of the parties to have their disputes resolved by arbitration.
11. In the case at hand, as we find, Clause 15 refers to arbitration or court. Thus, there is an option and the petitioner has invoked the arbitration clause and, therefore, we have no ARB.P. 460/2020 Page 16 of 20 hesitation, in the obtaining factual matrix of the case, for appointment of an arbitrator ...."
12. The Hon'ble High Court of Judicature at Bombay also had an occasion to interpret the arbitration clause in the similar circumstances in the matter of M/s Jay Bhagwati Construction Co. vs. Haware Engineers & Buiders Pvt. Ltd. in Commercial Arbitration Application No. 121 of 2018 decided on 25.10.2018 and it was observed by the said Hon'ble Court as under:-
"26. A short question arises for consideration of this Court is whether clause 32 of the work order dated 18th June 2013 constitutes an arbitration agreement between the parties or not.
27. A perusal of clause 32 of the work order indicates that the said clause refers to the expression "dispute" and also refers to the decision of the Managing Director of the respondent, in case of such dispute, will be final and binding on both the parties. There is no punctuation between the words "both the parties" and "any disputes shall be referred to Arbitration or any Court." It is not the case of the respondent that the dispute does not exist between the parties. The application for appointment of an arbitrator is opposed mainly on the ground that the said clause 32 did not provide for any procedure, for complying with the principles of natural justice or adjudication of disputes in a judicial manner by the managing director. It is the case of the respondent that the said clause would only indicate that inspite of intervention of the managing director, if the dispute between the parties is not resolved, in that event, the parties have option either to refer the dispute to arbitration or seeks remedies through the judicial process and thus it was not the intention of the parties that the arbitration be the sole dispute resolution mechanism. In paragraph 6.4 of the affidavit-in-reply filed by the respondent, it is the contention of the respondent that at the most, the said clause 32 is only a reflection of a possibility of the parties agreeing to arbitration in the future. On the other hand, it is the case of the applicant ARB.P. 460/2020 Page 17 of 20 that the managing director of the respondent was a named arbitrator under the said clause 32 for the purpose of resolution of disputes and differences between the parties.
28. Section 12(1)(a) of the Arbitration and Conciliation Act, 1996 provides that when a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality. Explanation (1) is added to the said provision which provides that the grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of the arbitrator.
29. Section 12(5) of the Arbitration and Conciliation Act, 1996 provides that Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator.
30. The first part of clause 32 of the work order dated 18th June 2013 is extracted as under:--
"Incase of any dispute, our Managing Director's decision will be final and binding on both the parties."
31. The said provision thus clearly contemplates that in case of any dispute, the same shall be referred to the Manging Director whose decision will be final and binding on both the parties. The managing director referred to in the said clause obviously refers to the managing director of the respondent".
13. In view of the above mentioned judicial pronouncements there is no dispute that the last clause in the work order dated 24.10.2017 is in fact an arbitration clause and a pragmatic approach has to be made to interpret or ARB.P. 460/2020 Page 18 of 20 while construing an arbitration agreement or an arbitration clause and the Court should not be very technical in its approach while interpreting the said clause if the arbitration is permissible within the limits of law, the Court should choose the said option which is a common sense approach. When the parties draft work orders like this, they do so as per their own prudence and generally they do not consult the legal minds while drafting these documents so, that is the reason that the arbitration clause is not very happily worded but there is no ambiguity as far as their intention is concerned as has been held in the matter of Jay Bhagwati Construction Co. (supra).
14. Hence, I held that both the parties had the intention to decide their disputes by way of arbitration and the last clause in the work order dated 24.10.2017 is to be construed as an arbitration clause, which is binding on both the parties and the petitioner has rightly approached this Court for appointment of an arbitrator.
15. As far as the question of existence of any dispute or claims/counter claims on behalf of the parties is concerned, it is within the domain of the learned sole Arbitrator to take a call as to whether any disputes exists between the parties or not.
16. In these circumstances, I hereby appoint Mr. O.P. Gupta, Retired District & Sessions Judge, as a sole Arbitrator to adjudicate the dispute between the parties without getting influenced by anything stated in the present order. The arbitration shall take place under the aegis of Delhi ARB.P. 460/2020 Page 19 of 20 Arbitration Centre. Learned Sole Arbitrator shall make a declaration as required under Section 12 of the Arbitration and Conciliation Act.
17. The petition is accordingly disposed of.
TALWANT SINGH, J FEBRUARY 22, 2021 nk/pa Click here to check corrigendum, if any ARB.P. 460/2020 Page 20 of 20