1. Appeal challenging High Court dismissal of Section 11 application for arbitrator appointment, disputing whether contract clause 13 constitutes an arbitration agreement under the Arbitration and Conciliation Act, 1996. (Para 2 , 3 , 4 , 5 )
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SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, MANOJ MISRA, JJ.
BGM And M-RPL-JMCT (JV) – Appellant
Versus
Eastern Coalfields Limited – Respondent
Civil Appeal No. of 2025 (Arising out of SLP (C) Diary No. 21451 of 2024)
Decided on : 18-07-2025
(A) Arbitration and Conciliation Act, 1996 – Sections 11 and 7 – Appointment of Arbitrator – Arbitration agreement is foundation of arbitration – Referral Court before appointing Arbitral Tribunal will have to be prima facie satisfied that arbitration agreement as contemplated in Section 7 of 1996 Act exists – For this limited purpose it can scrutinize documents relied upon by parties in proof of its existence – Though burden of proving existence of arbitration agreement lies on party seeking to rely on such agreement, only prima facie proof of its existence must be adduced before Referral Court because Referral Court is not the appropriate forum to conduct a mini-trial by allowing parties to adduce evidence in regard to its existence – However, where professed arbitration agreement is found in an undisputed document, no trial or inquiry is required as to its existence. (Paras 16, 17 and 20)
(B) Arbitration and Conciliation Act, 1996 – Section 7 – Arbitration agreement – Mere use of word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration – Any agreement, or clause in an agreement, requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement. (Para 26)
Facts of the case:
This appeal impugns an order of High Court1 dated 19.01.2024 whereby the application of appellant, under Section 11 of Arbitration and Conciliation Act, 19963, was dismissed on the ground that there exists no arbitration agreement between the parties.
Findings of Court:
As it is not the case of appellant that parties at any later stage have agreed to refer disputes to arbitration, High Court was justified in rejecting application seeking appointment of Arbitrator.
Result : Appeal dismissed.
1. Appeal challenging High Court dismissal of Section 11 application for arbitrator appointment, disputing whether contract clause 13 constitutes an arbitration agreement under the Arbitration and Conciliation Act, 1996. (Para 2 , 3 , 4 , 5 )
2. Appellant contends clause 13 is a binding arbitration agreement; respondent argues the word 'may' negates any ad idem intention to refer disputes to arbitration. (Para 8 , 9 , 10 , 11 , 12 , 30 )
3. Appeal dismissed; clause 13 does not constitute an arbitration agreement and the High Court rightly rejected the application for appointment of an arbitrator. (Para 31 , 34 , 35 , 36 )
No. The use of 'may be sought' indicates no subsisting binding agreement; it merely enables parties to optionally seek arbitration, lacking the essential ingredients of an arbitration agreement. (Para 13 , 20 , 22 , 27 , 28 , 31 )
The examination is limited to a prima facie determination of whether an arbitration agreement exists. The Referral Court cannot conduct a mini-trial; only prima facie proof is required, and substantive existence and validity are left to the Arbitral Tribunal under Section 16. (Para 14 , 15 , 16 , 17 , 18 )
Yes. The word 'may' indicates the parties were not ad idem on referring disputes to arbitration; it merely contemplates a possibility or enables future agreement, rather than creating a binding obligation to arbitrate. (Para 26 , 29 , 31 )
No. Clause 32 does not exclude resolution of disputes through arbitration; it only fixes jurisdiction and the juridical seat, and could determine the seat if an arbitration agreement exists between the parties. (Para 11 , 33 )
JUDGMENT :
MANOJ MISRA, J.
1. Leave granted.
2. This appeal impugns an order of the High Court1[The High Court at Calcutta] dated 19.01.2024 whereby the application2[A.P. No. 745 of 2023] of the appellant, under Section 11 of the Arbitration and Conciliation Act, 19963[1996 Act], was dismissed on the ground that there exists no arbitration agreement between the parties.
FACTS
3. The appellant and the respondent entered into a contract relating to transportation/handling of goods. Disputes arose between the parties during the subsistence of the contract. Clause 13 of the General Terms and Conditions, appended to the e-tender notice, which forms part of the contract and relied upon by the appellant as an arbitration agreement, is the subject matter of interpretation. The same is extracted below:
“13. SETTLEMENT OF DISPUTES
It is incumbent upon the contractor to avoid litigation and disputes during the course of execution. However, if such disputes take place between the contractor and the department, effort shall be made first to settle the disputes at the company level.
The contractor should make request in writing to the Engineer-in-charge for settlement of such disputes/claims within 30 (thirty) days of arising of the cause of dispute/claim failing which no disputes/claims of the contractor shall be entertained by the company.
Effort shall be made to resolve the dispute in two stages.
In first stage dispute shall be referred to Area CGM, GM. If difference still persist the dispute shall be referred to a committee constituted by the owner. The Committee shall have one member of the rank of Director of the company who shall be chairman of the company.
If differences still persist, the settlement of the dispute shall be resolved in the following manner:
In the event of any dispute or difference relating to the interpretation and application of the provisions of commercial contract(s) between Central Public Sector Enterprises (CPSEs)/Port Trusts inter se and also between CPSEs and Government Departments/Organizations (excluding disputes concerning railways, Income Tax, Customs & Excise Departments), such dispute or difference shall be taken up by either party for resolution through AMRCD as mentioned in DPE OM No. 4(1)/2013-DPE (GM)/FTS-1835 dated 22-05-2018.
In case of parties other than Govt. Agencies, the redressal of the dispute may be sought through ARBITRATION AND CONCILIATION ACT , 1996 as amended by AMENDMENT ACT OF 2015” (Emphasis supplied)
4. Treating the underscored portion of clause 13 as an arbitration agreement, the appellant filed an application under Section 11 (6) of the 1996 Act for appointment of an Arbitrator for settlement of the disputes inter se the parties.
5. The respondent objected to the prayer for appointment of an Arbitrator, inter-alia, on the ground that clause 13 is bereft of the essential ingredients to constitute an arbitration agreement and therefore the application seeking appointment of an Arbitrator deserves rejection.
6. The High Court accepted the objection and dismissed the application. While rejecting the prayer, the High Court laid emphasis on use of the word “may” before “be sought” in the underscored portion of clause 13 and, inter alia, relied on two decisions of this Court, namely, Jagdish Chander vs. Ramesh Chander and Others , (2007) 5 SCC 719 and Mahanadi Coalfields Ltd. vs. IVRCL AMR Joint Venture , (2022) 20 SCC 636 to hold that where the word “may” is used there is no clear intention of the parties to refer the dispute between them to arbitration and therefore, the prayer to appoint an Arbitrator is not sustainable.
7. We have heard learned counsel for the parties and have perused the materials on record.
SUBMISSIONS ON BEHALF OF THE APPELLANT
8. The learned counsel for the appellant contended that the use of the word “may” is only to indicate that parties to the agreement have an option to take recourse to settlement of dispute(s) through arbitration under the 1996 Act. However, once that
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