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2025 Supreme(Online)(Mad) 78081
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Mr. N.ANAND VENKATESH, J
Mr.M.Arumugam – Appellant
Versus
M/s.CP Foods, rep.by its Partner Mr.S.Manikanda Prabhu – Respondent
Arbitration O.P.(Com.Div.) No.142 of 2025
For the Appellants/Petitioners: Mr.V.Raghavachari, SC for Mr.B.Sudarshan
For the Respondents: Mr.M.S.Krishnan, SC for Mr.Abhinav Parthasarathy
The mere use of 'may' in an arbitration clause indicates an option for the parties that requires mutual consent, failing which arbitration cannot be enforced.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11(5) - Petition for appointment of a sole arbitrator - Dispute arose regarding interpretation of the word 'may' in offer letter dated 01.3.2015 - The respondent's interpretation of the agreement was countered by the petitioner claiming a binding arbitration agreement - The offer letter does not provide a firm arbitration clause but an option which requires mutual consent between parties to be binding - Court cannot appoint arbitrator based on the offer letter as it does not satisfy requirements under Section 7 of the Act. (Paras 20, 21)
(B) The court addressed the precondition for invoking arbitration and necessitated mutual consent in the arbitration clause, highlighting its optional nature.
Facts of the case:
The petitioner claims unpaid commissions from the respondent based on an offer letter from March 2015. Efforts for settlement failed and a petition for arbitration was filed.
Findings of Court:
The letter does not constitute a mandatory arbitration clause. Parties must consent for the arbitration to be binding.
Issues: The court evaluated whether the offer letter created a binding arbitration agreement and the implications of the word 'may' within it.
Ratio Decidendi: The court emphasized that the invitation for arbitration lacked definitive terms, implying a need for further mutual agreement, thereby dismissing the petition.
Result: The original petition is dismissed, with liberty granted for legal remedies exactly per law.
| Table of Content |
|---|
| 1. application filed under section 11(5) for arbitration. (Para 1 , 2 , 3) |
| 2. interpretation of offer letter focusing on word 'may'. (Para 4 , 5) |
| 3. 'may' indicates optional agreement requiring consent. (Para 6 , 7 , 8) |
| 4. lack of binding arbitration agreement under the act. (Para 20 , 21) |
ORDER
This petition has been filed under Section 11(5) of the Arbitration and Conciliation Act, 1996 (for short, the Act) for appointment of a sole arbitrator to adjudicate upon and resolve the disputes between the petitioner and the respondent under offer letter dated 01.3.2015.
2. Heard both.
3. The case of the petitioner is as follows :
(i) The petitioner is a trader. Since 2011, the petitioner is involved in the services of procuring Dhall varieties and other essential commodities to the respondent through tenders. During the year 2015, the respondent promised and offered to compensate the prioritized services of the petitioner. In this regard, the respondent issued an offer letter dated 01.3.2015 and it was accepted by the petitioner vide letter dated 02.3.2015. Based on the offer made by the respondent, the petitioner sincerely and meticulously worked giving top priority to the respondent by procuring orders for about 79,030 Metric Tons of Dhall varieties and supplied to other companies on behalf of the respondent between 2015 and 2022.
(ii) The total commission charges payable to the petitioner comes to Rs.7,13,32,000/-, out of which, the respondent paid only a sum of Rs.1,23,00,500/- and retained the major portion of the sum, which remained due and payable to the petitioner. During December 2023, the petitioner approached the respondent regarding settlement of the balance amount. However, the respondent was evasive and was dodging the payments.
(iii) Hence, a legal notice dated 24.6.2024 was issued to the respondent calling upon them to settle the entire balance outstanding. To the said legal notice, the respondent sent a reply dated 23.7.2024 making untenable claims. In the light of the above, a trigger notice dated 12.12.2024 came to be issued by the petitioner to the respondent under Section 21 of the Act for appointment of an arbitrator. Pursuant to that, the respondent sent a reply dated 13.1.2025 objecting to that and refused to give consent to the proposed arbitration. It is under these circumstances, the above original petition has been filed before this Court.
4. When the matter came up for hearing on 03.9.2025, this Court passed the following order :
"This Court, heard Mr.V.Raghavachari, learned Senior counsel appearing on behalf of the petitioner and Mr.Abhinav Parthasarathy, learned counsel for the respondent.
2. The entire issue revolves upon the interpretation of the word ''may'' found in a letter dated 01.03.2015.
3. The learned counsel for the respondent by relying upon the judgment of the Apex Court in BGM and M-RPL-JMCT(JV) Vs. Eastern Coalfields Limited dated 18.07.2025 submitted that the word 'may' gives an option to the party to either accept the proposal given by the other side to refer the matter for arbitration or if the parties do not accept, the parties can only go before the regular Court and the other party cannot insist to refer the dispute for arbitration.
4. Per contra, the learned Senior counsel appearing for the petitioner submitted that the respondent on the one hand is denying the genuineness of the offer letter dated 01.03.2015 and on the other hand, he is trying to interpret the letter to suit his case. He further submitted that a plain reading of the offer letter makes it clear that the parties must first resort to settlement by mutual talks and if the same fails, the dispute must be resolved through arbitration. It is contended that the word 'may' does not give any other option to the parties.
5. This Court, after hearing the learned counsel on either side expressed its mind to the learned counsel for the respondent that if the respondent is questioning the genuineness of the offer letter dated
