Arbitration – Use of Words “May be sought through Arbitration”

 

 

 

 

 

Clause 13 Settlement of Disputes of the GCC of the contract for transportation / handling of goods is the subject matter of interpretation as to the existence of “arbitration agreement”.   The relevant portion is as follows:-

“In case of parties other than Govt. Agencies, the redressal of the dispute may be sought through ARBITRATION AND CONCILIATION ACT, 1996 a amended by AMENDMENT ACT OF 2015”.

The appellant filed section 11 petition for appointment of arbitrator to resolve the disputes.  The respondent objected that clause 13 lacks essential ingredients of arbitration agreement and therefore, the application is not maintainable.

The High Court held that the words “may be sought through Arbitration…” indicate that the parties were not at ad idem that the dispute shall be resolved through arbitration.   Therefore, it is not an arbitration agreement.

The question is whether Clause 13 is an arbitration agreement or only an enabling provision for parties to agree to refer the dispute to arbitration.

HELD that Clause 13 does not bind parties to arbitration.  Use of the words “may be sought” imply that there is no subsisting agreement between parties that they, or any one of them, would have to seek settlement of dispute through arbitration.   It is just an enabling clause whereunder if parties agree they could resolve their disputes through arbitration.   In our view, the phraseology of clause 13 is not indicative of a binding agreement that any of the parties on its own could seek redressal of inter se dispute through arbitration. 

Judgment dated 18.7.2025 of the Supreme Court of India in SLP (Civil) Diary No.21451 of 2024 of BGM AND M-RPL-JMCT (JV)   vs.  EASTERN COALFIELDS LIMITED