The interpretation of clauses referring disputes for settlement as arbitration clauses must align with the legal principles established by the Supreme Court.

ORDER :

1. Leave granted.

2. These appeals take exception to the judgment and order dated 08.09.2017 read with Modification Order dated 20.09.2017 passed in Arbitration Petition No.384/2017 and Order dated 27.11.2017 passed in I.A. No.13954/2017 filed in Arbitration Petition No.384/2017 whereby, the High Court of Delhi at New Delhi allowed the arbitration petition filed by the respondent.

3. The relevant clause in the agreement dated 13.04.2007 reads thus :

“9. principal and Agent either party can terminate the Agency Agreement by way of giving 3(three) months notice to the other.

This Agency Agreement may be executed in duplicate by the FCI/Principal and agent, and each of the said copy shall be deemed to be an original and retained by the FCI/Principal and the agent, and such counter parts together shall constitute one and the same instrument.

Any dispute between the parties arising out of this agreement or pertaining to any matter which is subject matter of this Agency Agreement shall be referred to the Chairman and Managing Director of F.C.I./Principal for settlement and whose decision shall be final and binding on the FCI/Principal and the agent”

Similarly the applicable clause in Agreement dated 04.01.2008 reads thus :

“Any dispute between the parties arising out of this agreement or pertaining to any matter which is subject matter of this Agency Agreement shall be referred to the Chairman and Managing Director of F.C.I./Principal for settlement and whose decision shall be final and binding on the both FCI/Principal and Agent”

4. The High Court construed these clauses to mean that the parties had intended to resort to arbitration, in case of any disagreement or dispute regarding the claims arising from the aforesaid agreements. While so interpreting, the High Court placed reliance on clause 37 of the third Agreement dated 29.09.2008, which reads thus:

“Any dispute between the parties arising out of this agreement or pertaining to any matter which is the subject matter of this Agreement other than an issue to which finality has been ascribed in the present agreement shall be referred for decision to the Chairman and Managing Director of FCI for settlement whose decision shall be final and binding on the FCI and the Agent. It is clearly understood by the parties that the present clause is not an arbitration clause. In case, the dispute still subsists, then Civil Court shall have jurisdiction to adjudicate the same.”

5. It is common ground that clause 37 of Agreement dated 29.09.2008 (third agreement) is not the subject matter of the present arbitration petition but the High Court relied upon the said clause to interpret the clauses contained in Agreements dated 13.04.2007 and 04.01.2008, referred to above, as being an arbitration agreement.

6. After hearing counsel for the parties, we have no manner of doubt that the above referred clauses in Agreements dated 13.04.2007 and 04.01.2008 respectively, merely predicate that the dispute shall be referred to Chairman and Managing Director of F.C.I./Principal for “settlement” whose decision shall be final and binding on both F.C.I./Principal and the Agent. Such agreement cannot be construed as an arbitration agreement, keeping in mind the exposition of the three Judge Bench decision of this Court in P. Dasaratharama Reddy Complex vs. Government of Karnataka & Anr. reported in (2014) 2 SCC 201. In paragraph 27 of the said decision this Court observed thus :-

“27. To the aforesaid proposition, we may add that in terms of Clause 29(a) and similar other clauses, any dispute or difference irrespective of its nomenclature in matters relating to specifications, designs, drawings, quality of workmanship or material used or any question relating to claim, right in any way arising out of or relating to the contract designs, drawings etc. or failure on the contractor’s part to execute the work, whether arising during the progress of the work or after its completion, termination or abandonment ha