A clause in a contract that provides that disputes "may" be referred to arbitration is not an arbitration agreement because it does not show a clear intention of the parties to submit their differences to arbitration.

ORDER : In connection with the petition which has been filed by the three petitioners for the winding up of the Kota Straw Board (Private) Limited, Kota, hereinafter called "the respondent Company", an application has been made by the respondent Company under Section 34 of the Arbitration Act for stay of the proceedings. The question for decision therefore is whether that application should be allowed?

2. It will be sufficient to state, for purposes of the present controversy, that the petition for winding up has been made with the allegation that the respondent Company is unable to pay its debts within the meaning of clause (e) of Section 433 of the Companies Act and that it is just and equitable that it should be wound up under clause (f) of that section. In substance, the petitioners have alleged that the Company should be deemed to be unable to pay its debts within the meaning of Section 434 (1) (a) of the Companies Act. The respondent Company has, in its turn, made the aforesaid application under Section 34 of the Arbitration Act on March 25, 1968 and the question whether it should be allowed has arisen in these circumstances.

3. It has been argued by Mr. Lodha, learned counsel for the petitioners, that Section 389 of the Companies Act, 1956, which gave the right to a Company to refer its differences to arbitration, has been deleted by the Companies (Amendment) Act, 1960, and that any plea that there was an arbitration agreement between the respondent Company is no longer permissible and should be rejected. I am not persuaded, however, that this argument is correct. An arbitration agreement is a contract to submit the differences between the parties to a tribunal of their choice, and as a Company has a legal personality of its own, and has the power to enter into a contract, there is no reason why it should not be able to enter into an agreement to submit its differences with the other party, to arbitration out of court. In this view of the matter, Section 389, as it stood before its deletion by the Companies (Amendment) Act, 1960, did not confer any additional right on a Company apart from its ordinary contractual right, and its deletion in 1960 cannot be a matter of any consequence so far as the authority to enter into an arbitration agreement is concerned and does not, at any rate, justify the argument that a company is precluded from making an arbitration agreement because of its deletion. This view finds support from the observations made by their Lordships of the Supreme Court in Societe De Traction Et D' Electricite Societe Anonyme v. Kamani Engineering Co. Ltd., 1963-2 SCJ 509 : (AIR 1964 SC 558). 4. Having put aside this argument of Mr. Lodha, I shall proceed to examine whether there was an arbitration agreement in the present case? Mr. Garg, learned counsel for the respondent Company, has, in this connection, relied on paragraph 10 of the respondent Company's letter Ex. 2 dated January 16, 1964. That paragraph, it is admitted, is similar in the case of all the petitioners, and reads as follows : -

"(10) That in case of any dispute arising between us, the matter may be referred to arbitration mutually agreed upon and acceptable by you and us."

5. The question is whether this paragraph is an "arbitration agreement" within the meaning of clause (a) of Section 2 of the Arbitration Act? That clause defines "arbitration agreement" as follows, -

"(a) 'arbitration agreement' means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not." It is by now well settled that the question whether a particular agreement amounts to an arbitration agreement or not depends on the intention of the parties to make a submission to arbitration. The law in this respect has been stated as follows in Russell on the Law of Arbitration, 17th Edition, at page 23, -

"The essential requirement is that the parties should intend to make a submission to arbitration."

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