IMPORTANT POINTS
(1) Reference of disputes to arbitration – Alternate Dispute Resolution mechanisms or more particularly, arbitration, can only be the chosen method if both/all parties to dispute can agree that it will be so – It encompasses choice of forum, applicable law and to some extent even procedural norms.
(2) Written word is foundation of legal obligation.

JUDGMENT :

SANJAY KAROL J.

Leave Granted.

2. The short but significant question arising in this appeal is, when the arbitration clause in the contract uses the word ‘can’, does it necessitate the reference of all disputes to arbitration or is recourse to other dispute resolution mechanisms, including that of the Civil Court, open for the parties.

3. The facts of this case lie in a narrow compass. The appellant is a manufacturer of aluminium foil containers and kitchen rolls. In the course of business, it received a contract for purchase of corrugated boxes of aluminium foil from M/s. American Alupack Industries¹[‘AAI’]. The eventual product was to be delivered to South Carolina, USA, and regarding such transport, the appellant contracted with the respondent for a total consideration of Rs.2,23,550/- which was inclusive of freight charges, ocean freight, ACD charges, container maintenance charges etc. The total consignment was of six containers, out of which four were delivered successfully prior to the dispute arising between the parties. When it came to the delivery of the fifth container, the dispute in question arose. Apparently, when the respondent delivered the fifth consignment to AAI, the latter failed to pay the requisite amount or, as per established practice, produced the original bill of lading at the time of delivery. Despite this the respondent handed over the goods to AAI on 21st October 2020 resulting into financial loss to the appellant as did not receive payment for supply of the goods to the tune of USD 28064.86. On 10th December 2020 the appellant raised this issue with the respondent, who asserted the factum of a differing past practice of handing over the goods without production of the original bill of lading and denied any liability.

It may be noted here that the bills of lading issued by the respondent contained as Clause 25, a dispute resolution mechanism captioned arbitration which reads as under:

“25. Arbitration:

The contract evaluated hereby or contained herein shall be governed by and construed according to Indian Laws. Any difference of opinion or dispute thereunder can be settled by arbitration in India or a place mutually agreed with each party appointing an arbitrator.”

In view of the above dispute, by notice of invocation dated 10th March 2022 the appellant suggested the matter be referred to arbitration for a total amount of USD 13230.86. Apart from replying to the merits of the notice, the respondent also disputed the reference to arbitration suggesting that the clause reproduced supra is not a mandate but leaves open the option to the parties to take the matter to arbitration.

4. The appellant preferred Arbitration Application No.168 of 2022 before the High Court of Judicature at Bombay, seeking appointment of sole arbitrator, which was disposed of in terms of the impugned judgment dated 23rd February 2023 whereby the learned Single Judge held as follows:

“…However, in the present case when it is manifestly and ex-facie certain that there is no agreement between the parties to mandatorily refer the disputes that have arisen between them for arbitration, I am unable to be persuade myself by the submission of the learned counsel for the Applicant that the clause involved make arbitration as a compulsory choice for the parties for resolution of disputes.

18] In the wake of above discussion, since I am of the view that Arbitration clause, which had used the word ‘can’, do not make it imperative for the parties to be referred for arbitration and specifically when the Respondent has refused to be referred for arbitration, in the wake of the choice being available, in terms of the clause contained in the agreement. The Arbitration Application deserve to be dismissed, as it cannot be construed as amounting to ‘Arbitration’ as the mode of” resolving disputes, in absence of affirmation at the end of the opposing party.

Hence, Arbitration Application No.168 of 2022 is dismissed.”

5. We have heard learned counse