IMPORTANT POINT
Arbitration agreement – Mere mentioning of terms ‘arbitration’ or ‘arbitrator’ in heading or existence of these terms in scattered manner in clauses of agreements between parties do not aggregate to being arbitration agreement – There must exist clear intention of parties and meeting of their minds to mandatorily submit any future dispute, that may arise, to arbitration.

JUDGMENT

Shekhar B. Saraf, J.—An interesting issue has fallen before this court with respect to the three petitions before me, which are A.P. 854 of 2022, A.P. 853 of 2022 and A.P. 852 of 2022. Since, the issue is identical in these petitions they are being decided together in this judgement. The petitions are applications under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) for appointment of an arbitrator on the basis of clauses, which are identical in the three agreements.

2. The issue would require venturing into an endeavour to ascertain the ingredients/requirements of a binding arbitration clause and later to decide whether these ingredients are present or found wanting in the identical agreements in the instant petitions.

Relevant Facts

3. Since the issue and the clauses are identical, only the pertinent facts and clauses of A.P. 852 of 2022 are produced herein below:—

(a) The petitioner, Blue Star Limited, entered into a Memorandum of Understanding (hereinafter referred to as the ‘MoU’) with the respondent, Rahul Saraf, as per which, the petitioner was to render its operation and maintenance services from January 1, 2019 to December 31, 2021.

(b) Services were provided by the petitioner, in lieu of which invoices were raised and even paid by the respondent. However, disputes arose between the parties with respect to non-payment of a few invoices. The petitioner raised requests for payments vide letters dated November 3, 2020 and March 26, 2022.

(c) On the respondent’s failure to pay the amount demanded, the petitioner invoked the alleged arbitration clause and nominated an arbitrator vide notice dated August 29, 2022, which was received by the petitioner on September 1, 2022.

(d) After expiry of a period of thirty days, the respondent issued a letter dated November 4, 2022, refusing to accept the appointment of the arbitration appointed by the petitioner and disputed the existence of any valid arbitration clause. Consequently, the petitioner filed the application, being A.P. 852 of 2022, requesting for appointment of an arbitrator.

Rival Submissions

4. Mr. Avishek Guha, learned counsel appearing on behalf of the petitioner submitted the following argument:—

(a) The dispute is arbitrable in nature and there exists a binding arbitration agreement between the parties which can be easily deduced from the provisions of the MoU, specifically, clause 7 and 13. These clauses firmly indicate the resolve and intent of the parties to refer to arbitration, in case any dispute or differences arose. Reliance was placed on Jagdish Chander v. Ramesh Chander and Others reported in (2007) 5 SCC 719 to bring home the point that intent of the parties has to be analysed, which in the present situation was to determinatively refer disputes to arbitration.

5. The counsels appearing on behalf of the respondents in A.P. 854 of 2022, A.P. 853 of 2022 and A.P. 852 of 2022 made the following submissions:—

(a) A perusal of the dispute resolution clauses would indicate that the ingredients of a valid arbitration clause, as understood on a cojoint reading of Section 2(b) and Section 7 of the Act, are not met. There is no consensus between the parties in the MoU to submit to arbitration.

(b) Mere use of the word ‘arbitration’ or ‘arbitrator’ in a heading or clause would not aggregate to an arbitration agreement. Similarly, the mere possibility of parties agreeing to arbitrate in the future, as contrasted from an obligation to refer disputes to arbitration, would not surmount to an arbitration agreement. The terms should be univocal in displaying an intention on the part of the parties to mandatorily refer their disputes to arbitration and a willingness to be bound by the decision of such tribunal. In the factual matrix of the petitioner before us, the clauses do not mandate the parties to refer the disputes to be resolved through arbitration. Reliance was placed on Foomill Pvt. Ltd. v. Affl