Lion Rubber Industries Private Limited vs Santec Exim Private Limited

CNR No : HCBM020235272026

carapl23526-2026-J.doc
AGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION APPLICATION (L) NO.23526 OF 2026
1. Lion Rubber Industries Private Limited
2. Sachin Navinchandra Goradia
… Applicants
ATUL
GANESH
KULKARNI
Vs.
1. Santec Exim Private LImited
Digitally signed by
ATUL GANESH
KULKARNI
Date: 2026.09.07
12:00:02 +0530
2. Richa Sangal
3. Umakant Sangal
… Respondents
Ms. Varshini Sunder with Ms. Payal Sethiya for the
Applicants.
Mr. Satya Saharawat with Mr. Vivek Singh for the
Respondent.
CORAM : AMIT BORKAR, J.
RESERVED ON : SEPTEMBER 2, 2026.
PRONOUNCED ON : SEPTEMBER 7, 2026
JUDGMENT:
1. By the present Application, the Applicants seek appointment
of an Arbitrator under Section 11(6) of the Arbitration and
Conciliation Act, 1996, relying upon Clause No.9 of the Purchase
Order.
2. The facts and circumstances which have led to filing of the
present Application, as stated by the Applicants, are as follows. In
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January 2024, the Applicants invited quotations for purchase of a
Machine. In response to the same, the Respondents submitted their
quotation dated 18 June 2024. Thereafter, the Applicants issued a
domestic Purchase Order dated 19 June 2024 containing the
technical details and the commercial terms for purchase of the
Machine. Between 5 August 2025 and 23 September 2025, several
correspondences took place between the parties concerning the
work. According to the Applicants, the Respondents committed
breaches, which are stated to be borne out from the record. On 15
November 2025, the Applicants received the records and
proceedings of an unnumbered Commercial Suit of 2025 filed by
the Respondents before the Gurugram Court Complex against the
Applicants. According to the Applicants, an incorrect and false
amount was claimed in the said Suit. On 11 February 2026, the
Applicants invoked the arbitration clause contained in the
Purchase Order and suggested names of Advocates to act as the
Sole Arbitrator for resolving the disputes between the parties. The
Respondents, through their Advocate's letter dated 23 February
2026, replied to the Applicants' notice and made certain assertions
which, according to the Applicants, were false. The Applicants
state that efforts were thereafter made to resolve the disputes and
differences between the parties, but those efforts did not succeed.
The Applicants were therefore required to approach this Court.
Hence, the present Arbitration Application has been filed.
3. Ms. Sunder, learned Advocate for the Applicants, submits
that there are valid and continuing Purchase Orders under which
the Respondents supplied the Machine to the Applicants. She
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submits that under these Purchase Orders, the Applicants and
Respondents had agreed to resolve their disputes through
arbitration. According to her, the Respondents have breached the
Arbitration Agreement contained in Clause No.9 of the Purchase
Orders by filing a Suit. The Applicants reserve their liberty to take
appropriate proceedings, including but not restricted to filing an
Application under Section 8 of the Arbitration and Conciliation
Act, 1996. At the same time, the Applicants apprehend that the
Respondents may proceed ex parte against them in the said Suit. It
is submitted that the Suit filed by the Respondents is clearly
without jurisdiction and is contrary to the Arbitration Agreement
contained in Clause No.9 of the Domestic Purchase Orders.
According to the Applicants, it would therefore be unfair to refuse
an order against the Respondents from proceeding before a Court
which, on the face of the matter, would have no jurisdiction in
view of Clause No.9 of the Domestic Purchase Order. She submits
that Clause 9 of the Purchase Order states "Subject to Mumbai
Jurisdiction." According to her, it is well settled that when parties
agree to give exclusive jurisdiction to a particular Court, the
jurisdiction of all other Courts is excluded. She submits that filing
the Suit at Gurugram amounts to forum shopping and is contrary
to the contractual arrangement between the parties. According to
the Applicants, the Suit has been filed only to cause difficulty and
harassment to them.
4. In support of her submissions, Ms. Sunder relies upon the
judgments in the cases of Enercon (India) Limited & Others vs.
Enercon GMBH & Another, (2014) 5 SCC 1, Janki Vikas Sant &
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Others vs. Konkan Vikas Development Company Ltd., 2015 SCC
OnLine Bom 2273, Visa International Limited vs. Continental
Resources (USA) Limited, (2009) 2 SCC 55, Poonawalla Fincorp
Limited vs. Aditya Lands Private Limited & Others,
MANU/WB/1836/2025, Hitesh Coal Traders vs. Indapur Dairy &
Milk Products Ltd., 2026 SCC OnLine Bom 2859, the decision of
Royal Courts of Justice dated 13 December 1965 in the matter
between Tritonia Shipping Incorporated vs. South Nelson Foresh
Products Corporation, and the decision dated 18 July 1969 in the
case of J.C. Kirkland LTD vs. James Cameron Kirkland .
5. Mr. Saharawat, learned Advocate for the Respondents,
submits that before filing the present Application, Applicant No.1
through Applicant No.2 had already entered appearance in
Commercial Suit No.11 of 2026 pending before the Court of the
Civil Judge (Junior Division), Gurugram, hereinafter referred to as
“the Commercial Suit”. He submits that the Applicants have filed a
detailed Written Statement in that Suit, along with an Application
under Section 151 of the Code of Civil Procedure, 1908 seeking to
have the Written Statement taken on record. More importantly,
according to the Respondents, the Applicants have stated in their
Written Statement that the applicant, being the defendant therein,
has “already preferred an application under Section 8 of the
Arbitration and Conciliation Act, 1996, seeking reference of the
disputes to arbitration”. It is submitted that till date the
Respondents have not been served with a copy of any such
Application under Section 8 of the Act. They state that they have
no knowledge of any such Application having been filed. It is
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submitted that Clause 9 of the Commercial Terms of the Purchase
Orders at Exhibits A and B, which reads in its entirety, “9.
Arbitration Subject to Mumbai Jurisdiction.” does not amount to a
valid and binding arbitration agreement between the parties
within the meaning of Section 7 of the Act. According to the
Respondents, this objection was raised in their Reply dated 23
February 2026 to the Applicants' Invocation Notice dated 11
February 2026. The same objection is reiterated and explained in
the present proceedings.
6. He submits that although there is no particular form in
which an arbitration agreement must be made, the words used by
the parties must show a clear decision and obligation to refer their
disputes to arbitration. There must be something more than a mere
possibility that the parties may choose arbitration later. According
to him, where a clause requires or suggests that some consent,
agreement or decision between the parties is necessary before the
dispute can be referred to arbitration, such clause does not
constitute a binding arbitration agreement. In support of this
submission, he relies upon Jagdish Chander v. Ramesh Chander,
(2007) 5 SCC 719. He submits that the essential requirements of a
valid arbitration agreement, as recognised by the Supreme Court,
include: (a) a clear and unambiguous intention to refer present or
future disputes to arbitration; (b) an obligation to arbitrate and
not merely an option or possibility; (c) the arbitral award being
final and binding upon the parties; and (d) sufficient clarity
regarding the manner in which the arbitral tribunal is to be
constituted. He relies upon K.K. Modi v. K.N. Modi, (1998) 3 SCC
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573. He submits that Clause 9 of the Purchase Orders at Exhibits A
and B does not satisfy these requirements when it is read plainly.
According to him, the clause contains only the three words
“Subject to Mumbai Jurisdiction” under the heading “Arbitration”.
It does not say that disputes “shall” or “will” be referred to
arbitration. It does not provide any procedure for constitution of
an arbitral tribunal. It does not state that an arbitral award would
be final and binding. It does not otherwise show any clear
intention of the parties to submit their disputes to private
arbitration instead of having them decided by a Court. According
to the Respondents, merely using the heading or word
"Arbitration" cannot by create a binding arbitration agreement
when the actual operative words do not create an unconditional
obligation to arbitrate. He relies upon Mahanadi Coalfields Ltd. v.
IVRCL AMR Joint Venture , (2022) 20 SCC 636, where a clause
headed “Settlement of Disputes / Arbitration” was held not to
amount to an arbitration agreement because the substantive part
of the clause required the non-government parties to seek
redressal “in a court of law”, despite the heading. He relies upon
BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Ltd., 2025 INSC
874, wherein the Supreme Court, in its judgment dated 18 July
2025, reiterated that permissive or unclear language is not enough
to create a binding arbitration agreement under Section 7 and that
the language must be clear and mandatory. It is submitted that, on
a natural reading, Clause 9 is at the highest an unclear and
abbreviated clause which brings together the words “arbitration”
and “jurisdiction” without making it clear which method of
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resolving disputes was intended by the parties. It does not make
clear whether the parties intended their disputes to be decided by
private arbitration or by the civil Courts at Mumbai. According to
the Respondents, such an unclear clause does not satisfy the
requirement of a clear and definite arbitration agreement. It is
submitted that the Applicants, being the parties relying upon
Section 11, are required to establish the existence of an arbitration
agreement, and that burden has not been discharged.
7. It is submitted that the Applicants are, in substance, treating
Clause 9 as an exclusive jurisdiction or forum-selection clause
giving jurisdiction to the civil Courts at Mumbai and excluding
other Courts. According to the Respondents, this position is
fundamentally inconsistent with the Applicants' other case stated
in paragraph 3 and elsewhere in the present Application, where
the Applicants contend that the very same Clause 9 is a binding
arbitration agreement requiring the parties to refer their disputes
to a private arbitral tribunal instead of a Court. It is submitted that
the same clause cannot, in law, at the same time be construed to
exclude the jurisdiction of civil Courts in favour of private
arbitration and confer exclusive jurisdiction upon a particular civil
Court to decide the dispute on its merits. According to the
Respondents, these two constructions cannot stand together.
REASONS AND FINDINGS:
8. I have considered the submissions of Ms. Sunder, learned
Advocate for the Applicants, and Mr. Saharawat, learned Advocate
for the Respondents. The question is whether there is an
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arbitration agreement in writing between the parties, so that this
Court can exercise jurisdiction under Section 11 of the Arbitration
and Conciliation Act, 1996.
9. There is no serious dispute that the Purchase Order is a
written document. It is for supply of a Hydraulic Press and
contains various technical and commercial terms. In the
commercial terms, Clause 9 is written as follows:
“9. Arbitration ~ Subject to Mumbai Jurisdiction.”
10. Therefore, these are not are written in the Purchase Order
and are part of the terms. The Purchase Order has terms regarding
delivery, payment, installation, commissioning, and warranty. From
this it can be seen that the parties had entered into a commercial
arrangement. The word “Arbitration” is separately appearing in the
terms of the same Purchase Order.
11. The Respondents submit that Clause 9 cannot be treated as
an arbitration agreement. Their submission is that the clause only
contains the words “Arbitration” and “Subject to Mumbai
Jurisdiction”. There is no statement that the disputes “shall” or
“will” be referred to arbitration. It is submitted that there is no
procedure for appointment of arbitrator, no words that the award
will be final and binding and no detailed procedure for conducting
arbitration. According to the Respondents, because of these
omissions, the clause is incomplete and does not show that there
was a final agreement to arbitrate.
12. I am not able to accept the submission. It is true that Clause
9 is very short. It is true that many things which are seen in a
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detailed arbitration clause are not mentioned. But only for this
reason it cannot be said that there is no arbitration agreement.
Section 7 of the Act does not require that any particular fixed
words must be used for making an arbitration agreement. What is
required is to see what the parties have agreed. It is not necessary
that the clause should be drafted in the legal language which a
lawyer may use for drafting an arbitration clause.
13. The Supreme Court in K.K. Modi , as reproduced in Babanrao
Rajaram Pund v. Samarth Builders & Developers , (2022) 9 SCC
691, has stated the attributes which generally show an arbitration
agreement. The relevant passage is:
“17. Among the attributes which must be present for an
agreement to be considered as an arbitration agreement are:
(1) The arbitration agreement must contemplate that the
decision of the tribunal will be binding on the parties to the
agreement,
(2) that the jurisdiction of the tribunal to decide the rights of
parties must derive either from the consent of the parties or
from an order of the court or from a statute, the terms of
which make it clear that the process is to be an arbitration,
(3) the agreement must contemplate that substantive rights
of parties will be determined by the agreed tribunal,
(4) that the tribunal will determine the rights of the parties
in an impartial and judicial manner with the tribunal owing
an equal obligation of fairness towards both sides,
(5) that the agreement of the parties to refer their disputes
to the decision of the tribunal must be intended to be
enforceable in law and lastly,
(6) the agreement must contemplate that the tribunal will
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make a decision upon a dispute which is already formulated
at the time when a reference is made to the tribunal.”
14. The Supreme Court has observed:
“18. The other factors which are relevant include, whether
the agreement contemplates that the tribunal will receive
evidence from both sides and hear their contentions or at
least give the parties an opportunity to put them forward;
whether the wording of the agreement is consistent or
inconsistent with the view that the process was intended to
be an arbitration, and whether the agreement requires the
tribunal to decide the dispute according to law.”
15. These observations do not mean that every one of these
things must be separately written in the agreement. What is to be
seen is whether the words used by the parties, if read with the
whole contract, show that the parties intended their disputes to be
decided by arbitration and not by an ordinary civil suit. This is why
the Supreme Court in Babanrao Rajaram Pund has given
importance to the substance of the clause and the intention which
comes from the agreement. In the same judgment, while
considering an arbitration clause which had more words and
detailed machinery, the Supreme Court observed in paragraph 23:
“23. Adverting to the case in hand, it may be seen that the
contents and the nature of Clause 18 are substantially
different from the dispute resolution pacts in K.K. Modi [K.K.
Modi v. K.N. Modi, (1998) 3 SCC 573] , Jagdish Chander
[Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719] ,
or Encon Builders [Bihar State Mineral Development Corpn.
v. Encon Builders (I) (P) Ltd., (2003) 7 SCC 418] . We say so
for three reasons. Firstly, apart from the fact that Clause 18
of the development agreement uses the terms “arbitration”
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and “arbitrator(s)”, it has clearly enunciated the mandatory
nature of reference to arbitration by using the term “shall be
referred to arbitration of a sole arbitrator mutually
appointed, failing which, two arbitrators, one to be
appointed by each party to dispute or difference”. Secondly,
the method of appointing the third arbitrator has been
clearly mentioned wherein the two selected arbitrators are to
appoint a third arbitrator. Finally, even the governing law
was chosen by the parties to be “the Arbitration and
Conciliation Act, 1996 or any re-enactment thereof.” These
three recitals, point towards an unambiguous intention of
the parties at the time of formation of the contract to refer
their dispute(s) to arbitration.”
16. The Respondents have relied upon this paragraph and say
that Clause 9 in the present case does not contain similar words
and therefore it cannot be enough. I am not able to accept this
submission. The Supreme Court in Babanrao has not said that
every arbitration agreement must contain exactly the same words
as were contained in Clause 18 of that case. The Court considered
the agreement before it and looked at its substance. In paragraph
24, the Supreme Court held:
“24. We are, therefore, of the firm opinion that the High
Court fell in error in holding that the appellant's application
under Section 11 was not maintainable for want of a valid
arbitration clause. We find that Clause 18 luminously
discloses the intention and obligation of the parties to be
bound by the decision of the tribunal, even though the words
“final and binding” are not expressly incorporated therein. It
can be gleaned from other parts of the arbitration agreement
that the intention of the parties was surely to refer the
disputes to arbitration. In the absence of specific exclusion of
any of the attributes of an arbitration agreement, the
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respondents' plea of non-existence of a valid arbitration
clause, is seemingly an afterthought.”
17. The same approach is required in the present case. The
clause which the Respondents say is uncertain does not say that
the parties will decide about arbitration at some later point of
time. There are no words like “if the parties agree”, “if mutually
decided” or “may seek arbitration”. The word which is before the
Court is “Arbitration”. After this the words are “Subject to Mumbai
Jurisdiction”. Therefore, it is required to see what an ordinary
commercial person would understand from these words when they
are written as Clause 9 in a concluded Purchase Order.
18. The Respondents have relied upon Jagdish Chander and
BGM and M-RPL-JMCT (JV) . The principle in Jagdish Chander is
not in dispute. The Court has to see whether the parties had
agreed to arbitrate when the contract was made, and not merely
whether they had an understanding that they may make such an
agreement later. The Supreme Court, in paragraph 8 of Jagdish
Chander , stated:
“8. … (i) … Where there is merely a possibility of the parties
agreeing to arbitration in future, as contrasted from an
obligation to refer disputes to arbitration, there is no valid
and binding arbitration agreement.
(iii) Where the clause provides that in the event of disputes
arising between the parties, the disputes shall be referred to
arbitration, it is an arbitration agreement.”
19. This principle, in my view, does not help the Respondents in
the way they suggest. In the present Clause 9, there are no words
showing that some fresh consent of both parties is required before
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arbitration can happen. The clause does not say that arbitration
will happen only if the parties later agree. This difference is
important.
20. The decision in BGM and M-RPL-JMCT (JV) has to be seen
from the actual words used in that case. Clause 13 there used the
following expression:
“may be sought through ARBITRATION AND CONCILIATION
ACT, 1996 as amended by AMENDMENT ACT OF 2015”
21. The Supreme Court, in paragraph 31, held:
“31. We do not agree with the aforesaid submission because
clause 13 does not bind parties to use arbitration for
settlement of the disputes. 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(s) through arbitration. It is just an
enabling clause whereunder, if parties agree, they could
resolve their dispute(s) 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(s) through arbitration. We are,
therefore, of the considered view that the High Court was
justified in holding that clause 13 does not constitute an
arbitration agreement.”
22. The difference between that clause and the present Clause 9
is important. In BGM , the words “may be sought” showed that
arbitration depended on some agreement between the parties. In
the present case, there are no such words. The clause directly uses
the word “Arbitration”. Therefore, the particular reason because of
which the Supreme Court did not treat Clause 13 in BGM as an
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arbitration agreement is not present in Clause 9 before this Court.
23. The Respondents have pointed out that the words “shall be
referred” or “will be referred” are not present in Clause 9. This
objection appears to give more importance to how the sentence is
written than to what the words can mean. An arbitration clause
can be written in short form. Merely because short commercial
words are used, it cannot be presumed that the word “Arbitration”
was put there without any legal meaning.
24. I am conscious of position of law that a n English judgment
has no binding force merely because it was delivered by the
English Court of Appeal. It may be used as persuasive material. In
this connection, the decision in Tritonia Shipping Incorporated v.
South Nelson Forest Products Corporation , [1966] 1 Lloyd’s Rep.
114 (Court of Appeal)(CA) is of some help because the arbitration
clause there was very short. The clause in that case was:
“29. Arbitration to be settled in London”.
25. The Court considered whether there was a binding
submission to arbitration and observed that the clause, though
brief, “could only have the one meaning”. It was expanded to
mean:
“Any dispute under this charter party to be settled by
arbitration in London”.
26. The Court then said:
“I think that was the agreement of the parties, It was an
agreement and is binding.”
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27. Thus, the decision shows that only because detailed words
are not written, an arbitration agreement does not become invalid,
where the commercial meaning of the words can reasonably be
understood. The Respondents may say that Tritonia is different
because in that case the words “to be settled in London” were
used, whereas in the present case there are only the words
“Subject to Mumbai Jurisdiction”. There is some difference in
wording, but this by does not remove the principle. In Tritonia , the
word “London” gave the territorial connection to the arbitration.
Here, “Mumbai Jurisdiction” gives a territorial connection. The
words “Subject to” do not say that arbitration is optional. They
qualify the arbitration arrangement with reference to Mumbai
jurisdiction.
28. The next decision relied upon, namely Hobbs Padgett &
Company (Reinsurance) Ltd. v. J.C. Kirkland Ltd. , [1969] 2 Lloyd’s
Rep. 547 (Court of Appeal) (CA), is useful for the limited issue of a
short arbitration clause. In that case Clause 16 was only:
“Suitable Arbitration Clause.”
29. Even then the Court held that the clause had meaning. Lord
Justice Salmon observed:
“The fact that the clause is very short does not seem to me to
make it any less meaningful.”
30. The Court then considered Tritonia and observed that an
arbitration clause almost as short had been enforced. It finally
held:
“It seems to me that "Suitable Arbitration Clause"
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Means that these parties have agreed that, if any dispute
arises between them under the contract, including any
dispute as to the meaning of the contract, that dispute
should be referred to arbitration rather than to the courts”.
31. The judgment says that the parties had made their intention
clear that their differences should be arbitrated and that the Court
should not become too technical only because of the words used.
The facts of Kirkland were different and the words used there were
“Suitable Arbitration Clause”. Therefore, that judgment cannot be
applied directly as if both clauses are the same. But the principle
that a commercial contract should not fail only because the
arbitration words are short is relevant. The Court there looked at
what a businessman could reasonably understand from the words.
Here the Purchase Order is a commercial document. It contains
terms for supply of a costly Machine, payment stages, installation,
commissioning and warranty. The word “Arbitration” is written as
Clause 9 amongst the commercial terms of the Purchase Order.
32. I, therefore, find substance in the submission of the
Applicants that the heading and the words following it have to be
read together. The Court cannot read only “Subject to Mumbai
Jurisdiction” and leave out the word “Arbitration”. Similarly, the
Court cannot read only “Arbitration” and leave out “Subject to
Mumbai Jurisdiction”. Both expressions are required to be read as
one clause.
33. The submission of the Respondents that “Arbitration” is only
a heading cannot be accepted. It is not a separate heading
followed by an unrelated provision. The actual printed term is:
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“9 Arbitration ~ Subject to Mumbai Jurisdiction.”
34. It is a numbered commercial term. There is no sentence
saying that the parties will decide later whether arbitration is to be
used. Therefore, on plain reading, arbitration was agreed and the
arbitration arrangement was made subject to Mumbai jurisdiction.
35. I have considered the submission of the Respondents that
“Mumbai Jurisdiction” means jurisdiction of civil courts and
therefore the clause cannot at the same time be an arbitration
agreement. It may be that the word “jurisdiction”, in some other
agreement or in some other setting, may refer to civil court
jurisdiction. But here the complete Clause 9 is required to be read.
If the parties intended only to give jurisdiction to Mumbai civil
courts, there is no clear reason why the word “Arbitration” was put
immediately before “Subject to Mumbai Jurisdiction”. The
interpretation suggested by the Respondents would, in effect,
require the Court to give no real meaning to the word
“Arbitration”. Such a reading should not be preferred when
another reasonable meaning can give effect to both parts of the
clause. It is not impossible to say that arbitration is subject to
Mumbai jurisdiction. Arbitration is not outside the supervision of
courts. The parties can connect the arbitration with a particular
place or jurisdiction. Therefore, merely because the words
“Arbitration” and “Mumbai Jurisdiction” are together, it cannot be
said that the clause has no meaning.
36. The Applicants have submitted that “Mumbai Jurisdiction”
gives exclusive jurisdiction to Mumbai and therefore the filing of
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the suit at Gurugram is contrary to the contract. I do not think it is
necessary for this Court, in the present application, to give a final
finding regarding the territorial jurisdiction of the Gurugram civil
court. That question can be considered by the court which is
dealing with that proceeding and as per the remedies available in
law. For the present Section 11 application, it is enough to find
that the words relating to Mumbai jurisdiction do not destroy the
arbitration agreement contained in Clause 9.
37. The Respondents have relied upon the fact that the
Applicants appeared in the Gurugram proceedings and stated in
their Written Statement that they “already preferred an application
under Section 8 of the Arbitration and Conciliation Act, 1996,
seeking reference of the disputes to arbitration”. The Applicants
have stated that they reserve their rights regarding the Section 8
proceedings and have separately invoked arbitration. In my view,
this later conduct is not necessary for creating the arbitration
agreement. The agreement, if there is one, comes from the
contract. At the same time, the act of the Applicants invoking
Clause 9 by notice dated 11 February 2026 cannot create a
contractual term which was not present in the Purchase Order. It is
only the Applicants asserting the right which, according to them,
was already agreed. Similarly, the Reply dated 23 February 2026 of
the Respondents denying the arbitration agreement cannot remove
a agreement if such agreement is otherwise found to exist.
38. The Respondents submit that the Applicants have relied
upon Section 8 proceedings and at the same time approached this
Court under Section 11 and therefore their stand is inconsistent. I
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do not find this submission enough to decide the present issue.
Section 8 and Section 11 arise in different situations. The
arbitration agreement existed when the Purchase Order was
entered into. The proceedings which came later cannot decide
whether that agreement existed.
39. I have considered the submission that Clause 9 does not give
any procedure for appointment of an arbitrator. This cannot mean
that there is no arbitration agreement. Where parties agree for
arbitration but do not give complete machinery for appointment,
the law can provide the necessary machinery. The Tritonia decision
proceeded on this understanding. The absence of a separate
appointment method was not treated there as destroying the
arbitration agreement. In the present matter, the Applicants
invoked arbitration and suggested names of Advocates for
appointment as Sole Arbitrator. The Respondents did not agree to
the appointment. Therefore, not agreeing on the name of an
arbitrator is a different matter from not agreeing to arbitration.
One issue is about procedure or machinery and the other is about
consent to arbitrate. At this stage, it is the latter which has to be
considered.
40. The Supreme Court in Babanrao has made clear that absence
of some words does not make an arbitration clause invalid.
Paragraph 25 states:
“25. Even if we were to assume that the subject clause lacks
certain essential characteristics of arbitration like “final and
binding” nature of the award, the parties have evinced clear
intention to refer the dispute to arbitration and abide by the
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decision of the tribunal. The party autonomy to this effect,
therefore, deserves to be protected.”
41. Again, in paragraph 26, while considering Enercon , the
Supreme Court quoted the following principle:
“88. In our opinion, the courts have to adopt a pragmatic
approach and not a pedantic or technical approach while
interpreting or construing an arbitration agreement or
arbitration clause. Therefore, when faced with a seemingly
unworkable arbitration clause, it would be the duty of the
court to make the same workable within the permissible
limits of the law, without stretching it beyond the boundaries
of recognition. In other words, a common sense approach
should be adopted to give effect to the intention of the
parties to arbitrate. In such a case, the court ought to adopt
the attitude of a reasonable business person, having business
common sense as well as being equipped with the knowledge
that may be peculiar to the business venture. The arbitration
clause cannot be construed with a purely legalistic mindset,
as if one is construing a provision in a statute.”
42. The Purchase Order is not a detailed institutional arbitration
agreement. It is a commercial Purchase Order for a Machine and
contains many technical and commercial conditions. In such a
document, an arbitration term may be written in short form. The
Court should not make a new contract for the parties. But equally,
the Court should not remove a contractual term only because it is
not written in detailed language.
43. The submission of the Respondents that there is no provision
about finality of the award does not take the matter. It is not
necessary that the parties should write every effect of arbitration in
the contract. Once a valid arbitration agreement is found, the
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consequences under the Arbitration and Conciliation Act will
follow. The parties are not required to write the whole Act into the
Purchase Order.
44. Another thing is required to be kept in mind. The two
English judgments relied upon by the Applicants are not being
used to make some different rule against the Arbitration and
Conciliation Act. They are being considered only for the limited
point that a commercial arbitration clause does not become
meaningless merely because it is short or not happily drafted. In
Tritonia , the words “Arbitration to be settled in London” were
given the reasonable meaning coming from the words. The Court
said, “I think that was the agreement of the parties, It was an
agreement and is binding.”
45. Similar reasoning is found in Kirkland . There the Court
found that the parties had made their intention clear that their
differences should be arbitrated. The Court did not take a technical
view merely because the clause was short. The judgment records
that if the clause had simply read “arbitration Clause”, there would
have been no doubt that it was sufficiently precise. The Court
therefore did not consider the addition of the word “Suitable”
enough to make the clause uncertain.
46. I am conscious that the Supreme Court decisions relied upon
by the Respondents require the Court to distinguish between an
actual arbitration agreement and an agreement to make an
arbitration agreement in future. There is no departure from that
principle here. If Clause 9 had said, for example, “disputes may be
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referred to arbitration if mutually agreed” or “arbitration, if parties
so decide”, then the position may have been different. Such words
would show that consent was required. There are no such words in
Clause 9. The word “subject” does not show that consent was
required. It can reasonably be read as qualifying the arbitration
arrangement with reference to Mumbai jurisdiction. The words
may not have been drafted perfectly, but imperfect drafting is not
same as no agreement. The commercial meaning can still be
understood when Clause 9 is read as a whole and along with the
Purchase Order.
47. I have considered the submission that the Applicants cannot
rely upon “Mumbai Jurisdiction” as a contractual restriction
against the Gurugram suit and at the same time say that the same
clause is an arbitration agreement. I do not find that these two
positions destroy each other. The clause can be understood as
providing arbitration for disputes while making the arbitration
subject to Mumbai jurisdiction for purposes where the law gives
supervisory jurisdiction to courts. Therefore, it is not necessary to
accept the Applicants' alternative submission that “Mumbai
Jurisdiction” is only an exclusive jurisdiction clause for civil
proceedings in Mumbai. In my view, both parts of Clause 9 should
be given some meaning as far as possible. The interpretation
suggested by the Respondents gives effect to “Mumbai
Jurisdiction” but makes the word “Arbitration” without meaning.
This does not appear to be the proper way of reading a contractual
term. The interpretation suggested by the Applicants gives some
meaning to both parts by treating “Arbitration” as the agreed
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method for resolving disputes and “Subject to Mumbai
Jurisdiction” as the qualification regarding the place or jurisdiction
connected with such arbitration.
48. The submission that Clause 9 does not say that disputes are
to be arbitrated “rather than before courts” cannot be accepted.
Such words may make the intention clearer, but they are not
compulsory if the agreement otherwise shows an intention to
arbitrate. In Kirkland , even the words “Suitable Arbitration Clause”
were treated as showing an agreement that disputes should go to
arbitration rather than the courts. The important point was that
the intention of the parties could be understood from the clause.
The material before me does not show that the word “Arbitration”
was inserted only for some future discussion. It appears as Clause
9 amongst the final commercial terms of the Purchase Order. The
other provisions of the same document are written in short
commercial language. There are terms regarding delivery,
payments and other obligations, without writing every
consequence which may come from them. Clause 9 has to be
understood in this same commercial meaning. Therefore, the
apprehension of the Respondents that by accepting this clause the
Court would be supplying an agreement which the parties never
made, is not accepted. The Court is not adding the word “shall” to
the contract as a new term. The Court is trying to understand the
words already written in the Purchase Order in their ordinary
commercial setting. The word “Arbitration”, along with the fact
that there is no condition requiring fresh consent, is sufficient to
show the intention to use arbitration for disputes arising from the
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Purchase Order.
49. Whether a particular dispute is covered by Clause 9, whether
any claim is barred by limitation, whether any amount is payable,
whether the Respondents committed the alleged breaches, whether
the Gurugram proceedings are maintainable, or what final relief
the Applicants may get, are matters which do not have to be finally
decided for deciding whether an arbitration agreement exists.
Such questions can be considered in the proper proceedings and as
per law. Similarly, it is not necessary for this Court at this stage to
decide whether statement made in the Gurugram proceedings is
correct or incorrect.
50. On considering the whole matter, I find that the Applicants
have been able to show existence of a written arbitration
agreement between the parties. I am therefore satisfied that the
basic requirement regarding existence of an arbitration agreement
is fulfilled. The disputes arising from or connected with the
Purchase Order are accordingly referable to arbitration, subject to
such questions as may arise before the Arbitral Tribunal in
accordance with law.
51. The request of the Applicants for appointment of an
arbitrator is therefore required to be considered on the basis that
Clause 9 constitutes a valid arbitration agreement. The other
questions regarding constitution of the Arbitral Tribunal and the
appropriate order under Section 11 will follow accordingly.
52. In view of the aforesaid, the present Application filed under
Section 11 of the Act, is disposed of by passing the following
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order:
A) Mr. Shadab Jan, an advocate of this Court, is
hereby appointed as the Sole Arbitrator to adjudicate
upon the disputes and differences between the parties
arising out of and in connection with the Agreement
referred to above;
Office Address:- 1701, One Infinity, Cawasji Patel Street,
Fort, Mumbai – 400001.
Email ID: [email protected]
B) A copy of this Order will be communicated to the
Learned Sole Arbitrator by the Advocates for the
Applicant within a period of one week from today. The
Applicant shall provide the contact and communication
particulars of the parties to the Arbitral Tribunal along
with a copy of this Order;
C) The Learned Sole Arbitrator is requested to forward
the statutory Statement of Disclosure under Section
11(8) read with Section 12(1) of the Act to the
Advocates for the Applicant so as to enable them to file
the same in the Registry of this Court. The Registry of
this Court shall retain the said Statement on the file of
this Applicant and a copy of the same shall be furnished
by the Advocates for the Applicant to the Advocates for
the Respondent;
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D) The Learned Sole Arbitrator is requested to forward
the statutory Statement of Disclosure under Section
11(8) read with Section 12(1) of the Act to the parties
within a period of two weeks from receipt of a copy of
this Order;
E) The parties shall appear before the Learned Sole
Arbitrator on such date and at such place as indicated, to
obtain appropriate directions with regard to conduct of
the arbitration including fixing a schedule for pleadings,
examination of witnesses, if any, schedule of hearings etc.
At such meeting, the parties shall provide a valid and
functional email address along with mobile and landline
numbers of the respective Advocates of the parties to the
Arbitral Tribunal. Communications to such email
addresses shall constitute valid service of correspondence
in connection with the arbitration;
53. All arbitral costs and fees of the Arbitral Tribunal shall be
borne by the parties equally in the first instance, and shall be
subject to any final Award that may be passed by the Tribunal in
relation to costs.
54. All issues on merits are expressly kept open to be agitated
before the arbitral tribunal appointed hereby.
55. All actions required to be taken pursuant to this order shall
be taken upon receipt of a downloaded copy as available on this
Court’s website.
(AMIT BORKAR, J.)
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