Delhi HC Clarifies “may” vs “shall” test for binding arbitration

Revenue Sharing Agreement to operate the pathology lab – Arbitration Clause used the word “may”Although the arbitration clause 29 provided that the dispute “may” be referred to the arbitration, various sub-clauses of clause (d)

Emphasizing that the deficiency of words in an agreement, which otherwise fortifies the intention of the parties to arbitrate their disputes, cannot legitimize the annulment of an Arbitration Clause.

Mere use of the prefix “may‟, which is followed by a detailed binding adjudicatory mechanism, shall not make the dispute resolution clause in the present case as a non-binding Arbitration Clause. Thus, a comprehensive, harmonious and wholesome construction of Clause 29 makes clear the intent of the parties to refer the disputes to arbitration, in the eventuality the same are not resolved amicably.

Courts must adopt a pragmatic and commercially efficacious approach to uphold and operationalise Arbitration Clauses, ensuring that intention to arbitrate is not defeated merely due to inartistic drafting or apparent un-workability.

Though the dispute resolution clause in the present case envisages amicable discussion between the parties, however, it is a settled legal position that any pre-arbitral mechanism making it obligatory to seek resolution of disputes through mediation, conciliation or the like, is directory and not mandatory

Judgment dated 10.4.2026 of the High Court of Delhi in ARB.P. 36/2026 of Lifewell Diagnostics Private Limited  Vs.  Micron Laboratory