Clear and unequivocal agreement must for arbitration: Bombay HC
Observing that existence of a clear and unequivocal agreement to refer disputes to an arbitrator is a pre-requisite for arbitration, the Bombay high court on Thursday dismissed a petition filed by one of consultants appointed by the Mumbai Metropolitan Region Development Authority (MMRDA).
“There must be a demonstrated consensus ad idem (a meeting of minds or agreement) to refer disputes to arbitration,” said justice Gautam Patel while rejecting the petition filed by Dhargalkar Technoesis (India) Private Limited, seeking to refer its dispute with MMRDA for arbitration.
The firm, which had acted as MMRDA’s consultant for a rehabilitation project, contended that certain clauses of its June 2004 agreement with the metropolitan authority clearly indicated the intention of the parties to refer disputes between them to arbitration, though the words arbitration, arbitrator etc. are not specifically mentioned in those clauses.
It laid stress on the termination clauses included in both, general and specific parts of the contract, claiming that these clauses mention the term arbitration and confirm or re-affirm the intention of the parties to refer their disputes to arbitration.
In support of its argument, the firm relied on the decision in Jagdish Chandler’s case, in which the Apex Court has held that “the absence of words like arbitration and arbitral tribunal or arbitrator are not determinative and an arbitration agreement may well be valid even without such wording.”
The firm further claimed that its agreement with MMRDA also fulfilled the requirements for a valid and binding arbitration clause, as laid down by the Supreme Court in the same case - that the agreement must be in writing, parties must have agreed to refer their disputes to a private tribunal, the tribunal should be empowered to adjudicate the dispute in an impartial manner and parties should have agreed to bind themselves by the decision of the tribunal.
MMRDA opposed the petition claiming there was no arbitration agreement between the parties and the dispute therefore could not be referred to arbitration. Its counsel, advocate Ajay Khaire, pointed out that the main attribute of any arbitration agreement is consensus ad idem or a meeting of minds, to refer disputes to arbitration. “If this is missing, there is no arbitration agreement,” he asserted.
Justice Patel accepted MMRDA’s stand. “If the non-use of words or phrases like arbitration or arbitrator is not determinative, then, by the same token, the mere use of these words is not determinative either,” said the judge.
HC noted that one of the clauses referred by the firm only said that any dispute was to be referred to the joint metropolitan commissioner and project director of MMRDA, whose decision will be final.
“On its own — and even allowing that the absence of words like arbitration and arbitrator is immaterial — this is not necessarily an arbitration clause,” said justice Patel. “We cannot unequivocally say this is to be an arbitration (clause) and nothing else,” he added.
HC held that the clause did not fulfil the important requirement of “adjudicating the dispute in impartial manner, giving due opportunity to the parties to put forth their case” and therefore can’t be termed as an arbitration agreement.
As regards the termination clauses, HC said the mere use of the word “arbitration” in those clauses was immaterial and those clauses indicated that the mode of “dispute resolution” contemplated in it was definitely not arbitration.
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