South Delhi Municipal Corporation vs. Sms Limited

REPORTABLE
2025 INSC 693

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

Civil Appeal No. ____/2025
(Arising out of SLP (C) No. 16913/2017)

South Delhi Municipal Corporation of Delhi …Appellant
versus
SMS Limited …Respondent

WITH

Civil Appeal No. ____/2025
(Arising out of SLP (C) No. 21437/2022)

M/s DSC Limited …Appellant
versus
Municipal Corporation of Delhi …Respondent

WITH

Civil Appeal No. ____/2025
(Arising out of SLP (C) No. 17510/2023)

Municipal Corporation of Delhi …Appellant
Signature Not Verified
Digitally signed by
NITIN TALREJA
Date: 2025.05.15
12:56:54 IST
Reason:
versus
M/s Consolidated Construction Consortium Limited …Respondent
Page 1 of 37




J U D G E M E N T
SURYA KANT, J.
Leave granted.
2. The captioned appeals challenge the judgments dated 09.03.2017,
29.07.2022, and 02.11.2022 all delivered by the High Court of Delhi
( High Court ), in three separate proceedings pertaining to multiple
Concession Agreements executed between the Municipal Corporation(s)
of Delhi and certain private contractors for the development of parking
and commercial complexes. At the heart of each dissension is the
interpretation of the dispute resolution clauses contained therein—
specifically, whether they constitute an arbitration clause, thus making
the disputes arbitrable. This alleged ambiguity has led to protracted
litigation before multiple fora.
3. To further contextualise, the private contractors assert that these
dispute resolution clauses necessarily mandate arbitration; whereas
the Municipal Corporations contend that they be construed as those
prescribing mediation.
ACTS
A. F
4. We deem it necessary, at this juncture, to delve into the facts giving rise
to this controversy. While the factual matrices differ in detail, they
converge on a common interpretative dissonance concerning the
dispute resolution clauses. Consequently, although the distinct
Page 2 of 37



contextual backgrounds of these three legal proceedings may not be
directly determinative of the ultimate adjudication, we have nonetheless
set them out briefly, in seriatim , for clarity and completeness.
5. South Delhi Municipal Corporation v. SMS Limited [SLP (C) No.
16913/2017] (SMS Ltd. Case)

5.1. The Municipal Corporation of Delhi ( MCD ) executed a Concession
Agreement with the Respondent, SMS Ltd. on 24.04.2012, for the
construction of a multi-storeyed parking facility at Defence Colony, New
Delhi, on a Design, Build, Finance, Operate, and Transfer ( DBFOT )
basis. Subsequently, the MCD was trifurcated into the New Delhi
Municipal Corporation ( NDMC ), the East Delhi Municipal Corporation
( EDMC ), and the South Delhi Municipal Corporation ( SDMC ) in 2012,
with the subject-Concession Agreement falling under the jurisdiction of
the SDMC.
5.2. Shortly thereafter, the SDMC executed a lease deed for the project site,
transferring all rights and interests therein to SMS Ltd. Disputes
quickly arose between the parties, with SMS Ltd. alleging that SDMC’s
failure to grant timely approvals for its architectural drawings resulted
in it incurring substantial losses and additional expenditure.
5.3. During this time, while construction at the project site had commenced
in earnest, the Defence Colony Welfare Association ( DCWA ) filed W.P.
(C) No. 1076/2013 before the High Court, inter alia seeking the
quashing of the subject-Concession Agreement and an injunction
Page 3 of 37



restraining SMS Ltd. from proceeding with the construction. The DCWA
alleged that SDMC did not own the very land on which it sought to
construct, and that the planned project would only worsen the existing
traffic in the area. The High Court by way of a status quo order dated
20.02.2013 halted further progress on the project. This impediment
ultimately led SMS Ltd. to seek termination of the Concession
Agreement.
5.4. SMS Ltd., by letter dated 15.01.2014, formally sought termination of
the subject-Concession Agreement, along with a refund of its deposited
amounts, reimbursement of incurred expenditure, and the return of its
Bank Guarantee as stipulated in the Concession Agreement. Following
a meeting with the SDMC Commissioner on 18.02.2014, an initial
understanding was reached between the parties, regarding partial
refunds. However, SMS Ltd. subsequently raised additional claims,
seeking interest on the refunded amounts as well as compensation for
loss of profits. Upon receiving no response to these demands, SMS Ltd.
vide letter dated 07.12.2015, invoked Article 20 of the Concession
Agreement calling upon SDMC to refer the disputes to ‘mediation.’
Notably, in the same letter, SMS Ltd. also acknowledged the absence of
an ‘express arbitration clause’ in the Concession Agreement but
nonetheless expressed its willingness to submit its claims before an
arbitrator.
5.5. It is a matter of record that SMS Ltd. later modified its stance as to the
arbitrability of the subsisting dispute, stating that its initial position
Page 4 of 37



was based on erroneous legal advice. Its novel position was that Article
20 of the Concession Agreement indubitably constituted an arbitration
clause. On this basis, SMS Ltd. made further representations, seeking
additional refunds and the appointment of an arbitrator. In response,
SDMC, by its letter dated 23.09.2016, rejected SMS Ltd.'s request for
arbitration as untenable. SDMC maintained that the meeting on
18.02.2014 had been convened by the Commissioner in pursuance of
the mandate laid down by Article 20, which they understood to be as a
clause prescribing mediation. It added that since the two parties had
already concluded a negotiation session chaired by the Commissioner,
any further claims for interest or damages were strictly precluded.
5.6. SMS Ltd. then approached the High Court by way of Arbitration
Petition No. 793/2016 under Section 11(6)(a) read with Section
11(12)(b) of the Arbitration & Conciliation Act, 1996 ( Arbitration Act )
seeking appointment of an arbitrator. By way of the impugned
judgment dated 09.03.2017, a learned Single Judge of the High Court
overruled SDMC’s objections, conclusively holding that Article 20 of the
Concession Agreement constituted an arbitration clause and
accordingly proposed the appointment of a sole arbitrator.
5.7. Aggrieved by the High Court’s decision, SDMC has preferred the instant
appeal, in which while issuing notice this Court vide an interim order
dated 07.07.2017, had directed that status quo shall be maintained
between the parties.
Page 5 of 37



6. M/s DSC Limited v. Municipal Corporation of Delhi [SLP (C) No.
21437/2022] (DSC Ltd. Case)
6.1. Similar to the previous appeal, the dispute was borne out of the
issuance of a Notice Inviting Tender ( NIT ) by the MCD on 02.01.2009
for the development of an integrated multilevel automatic car parking
facility at M-Block, Greater Kailash I, New Delhi, on DBFOT basis.
6.2. M/s DSC Ltd. ( DSC Ltd. ) entered into a consortium with SIMMATEC
Parking Technologies Ltd. under a Memorandum of Understanding
( MoU ), and jointly submitted a bid for the project. The MCD accepted
their bid on 09.11.2010, culminating in the execution of the subject-
Concession Agreement on 11.08.2011. In accordance with the terms of
the said Agreement, DSC Ltd., as the lead member of the consortium,
submitted a concession fee of INR 16,65,00,000 to the MCD.
6.3. However, as in the preceding appeal’s factual matrix, differences arose
between the parties. DSC Ltd. alleged that the MCD failed to fulfil its
obligations under the Concession Agreement, particularly in respect of
the condition requiring the delivery of an encumbrance-free project site
and execution of the requisite lease deeds. It moreover stated that it
could not begin its work in earnest until it was delivered the project site
as stipulated under the subject-Concession Agreement. On the other
hand, the MCD being faced with prolonged delays issued a termination
notice on 13.06.2017 unilaterally closing the Concession Agreement.
MCD retained INR 14,93,40,000, submitted by DSC Ltd. as the
Page 6 of 37



performance guarantee, treating it as forfeited and refunded the
concession fee without interest.
6.4. In contrast, DSC Ltd. maintained that the breaches leading to the
impracticability of the project were attributable solely to the MCD and
sought compensation amounting to approximately INR 406 crores, in
addition to a full refund. It thus, much like SMS Ltd., invoked Article
20 of the Concession Agreement, construing it as an ‘arbitration
clause’. The MCD, however, reiterated that the subject-Concession
Agreement was already closed, apart from categorically denying the
existence of any arbitration clause in the same.
6.5. Aggrieved by the MCD’s refusal to accede to the arbitral process, DSC
Ltd. approached the High Court by filing Arbitration Petition No.
234/2018, seeking the appointment of an arbitrator. However, vide the
impugned judgment dated 29.07.2022, a learned Single Judge of the
High Court dismissed DSC Ltd.’s petition, holding that Article 20 of the
Concession Agreement provided for mediation, not arbitration.
Furthermore, the High Court declined to follow the Co-ordinate Bench’s
stance in SMS Ltd.’s case, noting that it had been effectively stayed by
this Court ( vide order dated 07.07.2017 noted hereinabove).
6.6. The aggrieved DSC Ltd. has preferred this appeal, wherein notice was
issued by this Court vide order dated 07.12.2022.

Page 7 of 37



7. Municipal Corporation of Delhi v. M/s Consolidated Construction
Consortium Limited [SLP (C) No. 17510/2023] (CCC Ltd. Case)
7.1. As in the previous instances, here too the MCD awarded a Concession
Agreement on 30.07.2010 to M/s Consolidated Construction
Consortium Limited ( CCC Ltd. ) pursuant to a tender issued for the
development of a multi-level automated parking-cum-commercial
complex at South Extension Parts I & II, New Delhi.
7.2. Analogously, disputes arose between the parties herein, prompting CCC
Ltd. to issue a legal notice to MCD on 01.07.2016, demanding payment
of INR 41,88,50,435 as compensation/damages with interest, or the
appointment of an arbitrator as an alternative. The MCD, however,
categorically denied the existence of any arbitration clause in the
Concession Agreement, specifically rejecting CCC Ltd.’s reliance on
Article 20.
7.3. Consequently, CCC Ltd. approached the High Court by filing
Arbitration Petition No. 319/2017 under the Arbitration Act. By its
order dated 02.11.2022, a learned Single Judge of the High Court,
while noting that an identical question of law was pending adjudication
before this Court in the SMS Ltd. case, nonetheless construed Article
20 as an arbitration clause and directed that arbitration will proceed
under the aegis of the Delhi International Arbitration Centre ( DIAC ).
7.4. The aggrieved MCD has preferred the instant appeal wherein notice was
issued on 24.07.2023.
Page 8 of 37



8. It, thus, becomes evident that the focal issue in all three cases before
us is whether Article 20 of the respective Concession Agreements
constitutes an ‘arbitration clause’ or merely prescribes ‘mediation’.
Given the commonality of the interpretative challenge, a uniform
determination by this Court is necessary to ensure clarity and
consistency in the underlying disputes.
9. Before we proceed further, it would be apposite to reproduce the
dispute resolution clauses across all three appeals (contained in Article
20), whose interpretation forms the bone of contention in these appeals.
9.1. Firstly , the Concession Agreement in the SMS Ltd. Case provided the
following dispute resolution clause:
“ ARTICLE 20: DISPUTES
In the event that any dispute, controversy or claim arises
among the Parties in connection with or under this Agreement
or the interpretation of any of its provisions or upon the
occurrence of an event of Default any party shall refer the
dispute, controversy or claim to the Commissioner, MCD.
Section 20.1 Mediation by Commissioner
The Party that initially issue the notice of intention to refer
the matter to the MCD and MCD in Consultation with
Consultant will appoint a officer from within or outside MCD
who will look into the written documents; (i) a description of
dispute; ii) a statement of that party's position; and (iii) copies
of relevant documentary evidence in support of such position.
Section 20.2 Performance during Dispute Resolution
Pending the submission of a dispute, controversy or claim to
the officer appointed by the MCD and thereafter until the
final decision of the officer appointed by the MCD, as the
case may be, the parties shall continue to perform all of their
obligations under this Agreement, without prejudice to a final
adjustment in accordance with such decision.
Section 20.3 Survival
The provisions relating to indemnification contained in
Section 15.2, intellectual property contained in Section 18,
confidentiality contained in Section 19.1 and the dispute
Page 9 of 37



resolution provisions contained in this Article 20 shall survive
the termination of this Agreement. ”
9.2. Secondly , in the DSC Ltd. Case, Article 20 provides as follows:
“ ARTICLE 20: DISPUTES
In the event that any dispute, controversy or claim arises
among the Parties in connection with or under this Agreement
or the interpretation of any of its provisions or upon the
occurrence of an event of Default any party shall refer the
dispute, controversy or claim to the Commissioner, MCD.
Section 20.1 Mediation by Commissioner
The Party that initially issued the notice of intention to refer
the matter to the MCD and MCD in Consultation with
Consultant will appoint a officer who will look into the written
documents; (i) a description of dispute; (ii) a statement of that
party's position; and iii) copies of relevant documentary
evidence in support of such position.
(a) Within 10 days of receipt of the above documents, the other
parties shall submit; (i) a description of dispute; (ii) a
statement of that party's position; and iii) copies of relevant
documentary evidence in support of such position.
(b) The officer appointed by MCD may call for such further
documentary evidence and/or interview such persons, as it
may deem necessary in order to reach a decision.
(c) The officer appointed by MCD shall give notice to the parties
of its decision within 20 days of receipt of the documents
provided by the parties pursuant to subsection (b) and (c)
above. The decision of the officer appointed by MCD shall be
binding.
(d) The officer appointed by the MCD should give decision in
writing. The decision of the MCD shall be final and binding
on party… ”

9.3. Lastly , the CCC Ltd. Case lays down the following dispute resolution
clause:
“ ARTICLE 20: DISPUTES
In the event that any dispute, controversy or claim arises
among the Parties in connection with or under this Agreement
or the interpretation of any of its provisions or upon the
occurrence of an event of Default any party shall refer the
dispute, controversy or claim to the Commissioner, MCD.
Section 20.1 Mediation by Commissioner
Page 10 of 37



The Party that initially issued the notice of intention to refer
the matter to the MCD and MCD in Consultation with
Consultant will appoint a officer who will look into the written
documents; (i) a description of dispute; (ii) a statement of that
party's position; and iii) copies of relevant documentary
evidence in support of such position.
(e) Within 10 days of receipt of the above documents, the other
parties shall submit; (i) a description of dispute; (ii) a
statement of that party's position; and iii) copies of relevant
documentary evidence in support of such position.
(f) The officer appointed by MCD may call for such further
documentary evidence and/or interview such persons, as it
may deem necessary in order to reach a decision.

(g) The officer appointed by MCD shall give notice to the parties
of its decision within 20 days of receipt of the documents
provided by the parties pursuant to subsection (b) and (c)
above. The decision of the officer appointed by MCD shall be
binding.
(h) The officer appointed by the MCD should give decision in
writing. The decision of the MCD shall be final and binding
on party… ”
B. C ONTENTIONS
10. It is necessary for us at this juncture to delineate the contentions
advanced by the rival parties. For the sake of clarity and coherence, we
have categorized the submissions into two groups—( i ) those made on
behalf of SDMC/MCD, and ( ii ) those advanced by the private
contractors (SMS Ltd., DSC Ltd., and CCC Ltd.). This classification
reflects the evident similarities in their respective arguments, as well as
the reliefs sought.
11. Mr. Sanjiv Sen, learned Senior Counsel appearing on behalf of
SDMC/MCD, sought to assail the High Court’s interpretation of the
disputed clauses contained in Article 20 of the respective Concession
Agreements as one mandating arbitration (SMS Ltd. and CCC Ltd.
Cases). In the same vein, he urged in favour of upholding the impugned
Page 11 of 37



decision in the case of DSC Ltd., wherein the High Court refused to
read arbitration into the Concession Agreement. To that end, he
submitted the following:
a) The issue for adjudication in the present appeals is no longer res
integra , in light of this Court’s decision in South Delhi Municipal
1
Corporation v. SMS AAMW Tollways (P) Ltd. In that case, this
Court set aside the High Court’s erroneous interpretation of a
similarly worded dispute resolution clause as an ‘arbitration
agreement’. Given the substantial similarity between the impugned
clauses in the cases in hand and the clause considered in
Tollways (supra) , they must meet the same fate.
b) The private contractors cannot successfully distinguish the ruling
in Tollways (supra) on the sole ground that, while in that case
only the contractor could make a reference to the Commissioner,
the impugned clauses in these appeals allow either party to do so.
The ability of both parties to initiate the reference does not, in
itself, transform the clause into an arbitration agreement. As
reaffirmed by this Court in Food Corporation of India v.
2
National Collateral Management Services Limited , a reference
to an officer of the authority, even if made by both parties, does
not meet the essential attributes of an arbitration clause.

1
(2019) 11 SCC 776.
2
2020 (19) SCC 464.
Page 12 of 37



c) The impugned clauses fail to satisfy the fundamental ingredients
of an arbitration agreement, as laid down by this Court in Bihar
3
State Mineral Development Corp v. Encon Builders (I) (P) Ltd.
Unlike a valid arbitration clause, Article 20 does not provide for
reference to a private tribunal or an independent adjudicator.
Instead, it envisages a process controlled by the MCD
Commissioner or his appointee, an arrangement that lacks the
neutrality and party autonomy inherent in arbitration. Further,
the private contractors are not devoid of any remedy as they can
always approach the civil court for the dispute resolution.
d) The conduct of the private contractors further reveals that
resorting to arbitration was a mere afterthought, seemingly
intended to prolong and complicate the dispute resolution process.
In the case of SMS Ltd., the legal notice issued by the contractor
expressly sought the initiation of mediation and, significantly,
acknowledged that no arbitration agreement subsisted between the
parties. Similarly, CCC Ltd. initially issued a notice under Section
80 of the Code of Civil Procedure, 1908, which is a procedural
requirement before instituting a civil suit, thereby contradicting its
later assertion that an arbitration agreement existed. DSC Ltd.
similarly misconstrued Article 20 to claim existence of an
arbitration agreement, where none existed.

3
(2003) 7 SCC 418.
Page 13 of 37



e) The High Court’s decision in CCC Ltd., rendered after this Court’s
unequivocal ruling in Tollways (supra) , is clearly per incuriam , as
it failed to consider that a similar dispute resolution clause had
already been held to not constitute arbitration. Furthermore, the
High Court’s ruling in CCC Ltd. stands in stark contrast to its own
decision in DSC Ltd. , wherein the learned Single Judge correctly
applied the principles laid down in Tollways (supra) and refused
to read an arbitration agreement into the Concession Agreement.
f) The private contractor, at all relevant times, had access to non-
exclusive remedies, as expressly contemplated under Article 21 of
the Concession Agreements, which recognizes the availability of
remedies under applicable law (Section 21.3 of Article 21) and lays
down the governing legal framework (Section 21.7 of Article 21).
Given that Section 42 of the Arbitration Act mandates that all
arbitral proceedings be filed before a designated court, the
inclusion of provisions preserving recourse to other legal remedies
further demonstrates that the Concession Agreements did not
envisage an arbitration framework.
g) This Court has consistently emphasized that contractual terms
must be given their due meaning and cannot be rendered
redundant or superfluous. In Ramana Dayaram Shetty v.
4
International Airport Authority of India , it was held that
words used in formal documents must be accorded their full

4
(1979) 3 SCC 489.
Page 14 of 37



significance. Applying this principle, the explicit reference to
‘mediation’ in the Concession Agreements, coupled with the
existence of other provisions allowing for civil remedies, must be
interpreted in a manner that preserves their intended effect. Any
attempt to dilute the plain meaning of these provisions would
result in an impermissible rewriting of the contract, which is
contrary to settled legal principles.
12. On the other hand, the private contractors, represented by learned
Senior Counsel Mr. Ritin Rai and Mr. Nakul Diwan, ardently urged that
Article 20 across all three Concession Agreements clearly represents
the form of an arbitration clause. In this regard, they canvassed the
following submissions:
a) A conjoint reading of Article 20 establishes a clear intent by the
parties to refer disputes to arbitration. The principles laid down in
5
K.K. Modi v. K.N. Modi , wherein this Court outlined the essential
attributes of an arbitration agreement, are fully satisfied. Firstly ,
either party is entitled to invoke the process, ensuring mutual
recourse. Secondly , the adjudicator is independent and impartial,
as they may be appointed from ‘within or outside’ the MCD ( in the
case of SMS Ltd., at least ). Thirdly , the process is structured and
adjudicatory, closely resembling arbitral proceedings, as it involves
the submission of written arguments, tendering of documentary
evidence, and a binding decision. Additionally, Section 20.2 of

5
(1998) 3 SCC 573.
Page 15 of 37



Article 20 explicitly provides that the decision of the appointed
authority shall be final, further strengthening the claim that the
clause creates an arbitration framework.
b) It is a settled principle that an arbitration agreement need not be
6
in any specific form; what is determinative is the parties' intent.
Even in the absence of the explicit use of the words ‘arbitration’ or
‘arbitrator’, the substance of the clause determines its true
7
character. The intent to submit disputes to arbitration must be
ascertained from a holistic reading of the contract rather than an
8
isolated textual analysis of Article 20.
c) The conduct of the MCD in similar contractual arrangements
9
contradicts its present stance. In a comparable dispute, the MCD
had previously admitted that an analogous clause amounted to an
arbitration agreement and even participated in arbitral
proceedings, resulting in an arbitral award in its favour. The MCD
cannot now be permitted to approbate and reprobate, adopting
contradictory positions at its convenience. Such an inconsistent
stance is legally impermissible and renders MCD's present
objection untenable.
d) The cases in hand are factually distinguishable from Tollways
(supra) since the dispute resolution framework under Article 20 of

6
Rukmanibai Gupta v. Collector, Jabalpur, (1989) 4 SCC 556; Punjab State v. Dina Nath,
(2007) 5 SCC 28.
7
Jagdish Chander v. Ramesh Chander and ors., 2007 (5) SCC 719.
8
MTNL v. Canara Bank, 2020 (12) SCC 767.
9
SMS Parking Solutions Private Limited v. North Delhi Municipal Corporation, Arb. P.
166/2017.
Page 16 of 37



the Concession Agreements allows either party to initiate the
process, demonstrating a bilateral mechanism rather than an
authority-driven process. The decision in Tollways (supra) dealt
with a two-tiered internal review process, which involved an initial
resolution by a ‘Competent Officer’ followed by an appellate review,
resembling a departmental appeal rather than arbitration. By
contrast, Article 20 does not contemplate such an internal review
process but instead provides for final dispute resolution by an
independent adjudicator. In recognition of these key factual
distinctions, this Court had de-tagged the present matters from
Tollways (supra) by its order dated 26.09.2018, thereby implicitly
acknowledging that the two sets of cases are not identical in
nature.
e) In SMS Ltd.’s case, SDMC has suppressed material facts before
this Court, raising serious doubts regarding its bona fides in the
appeal. After the High Court’s order, a learned arbitrator was
appointed, and arbitration proceedings had commenced. The
SDMC did not object to the jurisdiction of the Arbitrator at that
stage; rather, it actively filed its Statement of Claim ( SOC ), thereby
accepting and participating in the arbitral process. By failing to
object to jurisdiction at the appropriate stage, SDMC waived its
right to seek invalidation of the arbitral process.
f) Governmental agencies must ensure that arbitration procedures
comply with principles of equality and non-arbitrariness in public-
Page 17 of 37



private contracts so that the rights of private parties are
adequately safeguarded. The MCD cannot rely on ambiguous or
10
cleverly drafted provisions to evade its contractual commitments.
As a State entity, the MCD is bound by principles of fairness,
transparency, and reasonableness and cannot be allowed to take
advantage of obscure textual clues at the expense of private
parties’ rights.
SSUES
C. I
13. After considering the rival contentions, the voluminous record, the
statutory framework, as well as the factual circumstances colouring
these appeals, we find that the singular issue that falls for our
consideration is:
i. Whether the dispute resolution clauses viz . Article 20 in the
subject-Concession Agreements, constitute a valid arbitration
agreement between the parties?
D. A NALYSIS
14. While considering the singular issue as formulated above, we find that
its analysis necessitates a two-pronged inquiry: ( i ) what are the
necessary ingredients of an enforceable arbitration agreement; and ( ii )
whether Article 20 of the subject-Concession Agreements contain those
ingredients.


10
Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint
Venture Company, 2024 SCC OnLine SC 3219.
Page 18 of 37



D.1 What are the ingredients of an arbitration agreement?
15. We must first explicate what a valid arbitration agreement contains
under Indian law, as we are sufficiently cognizant of the factum that an
agreement for arbitration is the sine qua non for invocation of the
arbitral process—as is prayed for by the private contractors in the
instant appeals.
D.1.1. The Indian Position
16. The Indian statutory framework governing arbitration gains primacy in
our quest to untie the knot projected by the parties before us. The
Arbitration Act serves as the principal legislation which forms a holistic
code on the subject. Since its enactment back in 1996, it has been
supplemented by several key Amendments, in the years 2015, 2019,
and 2021. These changes have been a consistent endeavour to grant
greater autonomy to arbitral tribunals by restricting judicial
intervention and expanding their powers and privileges.
17. In the context of the current controversy, we may firstly pivot our
attention to Section 7 of the Arbitration Act, which defines an
arbitration agreement as follows:
“ 7. Arbitration agreement. — (1) In this Part, “arbitration
agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which
may arise between them in respect of a defined legal
relationship, whether contractual or not.
(2) An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate
agreement.
(3) An arbitration agreement shall be in writing.
Page 19 of 37



(4) An arbitration agreement is in writing if it is contained
in—
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication 1 [including communication through
electronic means] which provide a record of the agreement; or
(c) an exchange of statements of claim and defence in which
the existence of the agreement is alleged by one party and
not denied by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make
that arbitration clause part of the contract. ”
18. It may be seen that the above-reproduced provision succinctly
summarises the basic building blocks of a valid arbitration agreement,
including its genesis and structure. The emphasis laid on the existence
of a defined legal relationship, whether contractual or not, underscores
the breadth of applicability of arbitration law. Furthermore, Section 7
places significant weight on the form and record of the agreement, with
a view to ensure clarity and certainty in arbitral arrangements.
19. The statutory requirement that the agreement be in writing—whether
through a formally signed document, an exchange of communications,
or even unchallenged pleadings—reflects the Legislature’s intent to
liberally accommodate the realities of modern commercial
communication, including electronic correspondence.
20. Another notable feature is found in sub-section (5), which serves to
widen the expression ‘arbitration clause’ by expressly providing for
incorporation by reference. Overall, this statutory approach is one
which prioritises substance over form in the case of valid arbitration
Page 20 of 37



agreements, which ultimately culminate in an arbitral award,
enforceable under Section 36 of the Arbitration Act.
21. In the decisions cited by the parties before us, it is evident that this
Court has consistently attempted to de-fog the surroundings of a
proper arbitration clause, to make its precise form and substance more
discernible. For instance, in Encon Builders (supra) , this Court held
that the essential elements of an arbitration agreement comprise the
parties’ consensual intent to settle a present or future difference
through a private tribunal, and that such a decision would be binding
upon them. In other words, consensus and intent of both parties is
given elaborate weightage in the determination of an arbitration
agreement.
22. K. K. Modi (supra) adroitly consolidated and reiterated the law relating
to arbitration agreements, and held as follows:
“ 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,
Page 21 of 37



(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
make a decision upon a dispute which is already formulated
at the time when a reference is made to the tribunal.

[Emphasis supplied]
23. K. K. Modi (supra) thus afforded importance to the elements of finality,
consent, and impartiality in a valid arbitration clause. In the Tollways
(supra) case, which has been studiously relied upon by the parties
before us, this Court precisely explained that, “ Arbitration has always
been understood to mean the process by which a dispute is resolved
by an arbitrator chosen or acceptable to both sides under an
arbitration agreement between the two parties … ”
D.1.2. The Consonance between Indian Law & Foreign Jurisdictions

24. The structure of valid arbitration agreements across jurisdictions
reveals a broadly consistent understanding of arbitration, with Indian
law largely aligning with international norms derived from the United
Nations Commission on International Trade Law ( UNCITRAL ) Model
Law on International Commercial Arbitration, 1985, which has
significantly influenced arbitral legislation worldwide.
Page 22 of 37



25. For example, in the United Kingdom , the Arbitration Act, 1996 governs
both domestic and international arbitrations. Section 5 thereof
stipulates that an arbitration agreement must be in writing, while
Section 6(1) defines such an agreement as one under which parties
agree to submit present or future disputes to arbitration. This Act does
not expressly require that the legal relationship be contractual;
however, the context of a defined relationship is presumed.
26. In the United States of America , the Federal Arbitration Act, 9 U.S.C.
§ 2, provides that an arbitration clause must be in writing and
contained within a contract involving commerce. The provision must
also evince the parties’ agreement to submit future disputes to
arbitration. While the Federal Arbitration Act applies primarily to inter-
state commerce, in purely domestic contexts, several States within the
United States have enacted complementary statutes mirroring its core
requirement of a written agreement to arbitrate disputes arising from a
contractual relationship.
27. The Arbitration Act (Cap. 10) in Singapore governs domestic
arbitrations and requires an arbitration agreement to firstly be in
writing. The agreement must pertain to disputes arising from a defined
legal relationship, contractual or otherwise, and must reflect the
parties’ intention to submit those disputes to arbitration, either
generally or in respect of particular disputes.
Page 23 of 37



28. In France , the Code of Civil Procedure, Book IV, pertains to domestic
arbitration. Article 1442 thereof mandates that the arbitration
agreement be in writing and relate to existing or future disputes. While
the Code does not require an express reference to a legal relationship,
the statutory and commercial context implies such a connection. Article
1443, moreover, mandates that a valid arbitration clause must itself
appoint the arbitrator, or provide for the method of such an
appointment.
29. What we discern from the limited comparative analysis above is that
legislative frameworks around the world have common elements
governing their arbitration agreements inter alia including a written
agreement, a defined legal relationship, and a clear agreement to
submit present or future disputes to arbitration.
D.1.3. The Necessary Ingredients of a Valid Arbitration Agreement
30. Considering the global position on the validity of arbitration agreements
in tandem with the settled law that holds the field in India, we find that
the existence of an arbitration agreement necessarily postulates the
presence of the following ingredients:
i. Clear Intent to Arbitrate
The agreement must reflect a definitive and mutual intention to
refer disputes to arbitration, excluding the jurisdiction of civil
courts in respect of such matters. Consensus ad-idem or ‘meeting
of the minds’ of the respective parties towards settling any
Page 24 of 37



disputes that may arise between them through the process of
arbitration must be made out from the form and substance of the
legal agreement or contract. This ideally entails the parties
reducing their intention of entering into an arbitration agreement
into some tangible medium.
ii. Binding Adjudicatory Process
The arbitration agreement must contemplate a binding and
enforceable resolution of disputes. The process must culminate in
a final and conclusive award, not a non-binding recommendation
or mediation outcome. In essence, the result of the arbitral process
should be final and binding on both the parties.
iii. Compliance with Arbitration Norms
While the statutory minimums do not universally require
specification of seat, venue, or applicable procedural rules, best
practices and several foreign jurisdictions encourage clarity in
these respects to ensure legal certainty. The agreement should
allow for party autonomy in the appointment of arbitrators and
procedural conduct, subject to statutory safeguards. The
adversarial process, which inheres in the institution of arbitration,
must also be given due credence via provision for an impartial
adjudicatory body, whose decisions involve deference to the
principles of natural justice.
Page 25 of 37



31. We may, however, hasten to add that the aforementioned elemental test
is a conjunctive one, and not a disjunctive one. In other words, all the
elements identified hereinabove must co-exist, apart from being duly
proven by the party which seeks to assert that an arbitration agreement
subsists.
32. Consequently, it stands clarified that a dispute resolution clause may
only rise to the level of a valid arbitration clause or agreement when it
signifies a clear intent to arbitrate, entails a binding adjudicatory
process, and contemplates compliance with general arbitral norms.
D.2. Does Article 20 of the subject-Concession Agreements constitute
an arbitration agreement?
33. The second limb of this issue, concerns the consideration of the facts
and circumstances of these appeals amidst the legal backdrop we have
previously set out. We may, at this stage, revert back to paragraph 9
where the dispute resolution clauses contained in all the three
Concession Agreements are extracted and reproduced.
34. At the very outset, it may be seen that Articles 20 in the cases of DSC
Ltd. and CCC Ltd. are identical for all intents and purposes while the
same clause in the case of SMS Ltd. is faintly different. For the sake of
completeness, we may note these minute differences before proceeding
with the analysis.
35. Firstly , the cases of DSC Ltd. and CCC Ltd. add certain specific sub-
provisions regarding the ‘ mediation ’ process itself, while only summary
Page 26 of 37



procedure is prescribed in the case of SMS Ltd. Secondly , the
stipulation that an officer may be appointed ‘ from within or without
MCD ’ features solely in the SMS Ltd. agreement, and is conspicuously
absent in the clauses pertaining to DSC Ltd. and CCC Ltd. Thirdly , the
latter two agreements introduce an express declaration that the officer’s
decision shall be ‘ , a formulation that is absent in the
final and binding’
SMS Ltd. version.
36. Having equipped ourselves with the requisite recitals, we now turn to
appraising the same on the anvil of the law elucidated hereinabove
pertaining to valid arbitration agreements.
D.2.1. Intent to Arbitrate
37. The first and foremost requirement of an arbitration agreement, when it
is in writing, is that the parties must have consciously and
unambiguously agreed to submit their disputes to arbitration. This
intent must be evident from the language of the contract and the
surrounding contractual framework.

38. A plain reading of Article 20 across all three Concession Agreements
does not reveal any express intent to arbitrate. We say so for the
following reasons:
(a) It may be noted that the subject-clause itself is titled as ‘Mediation
by Commissioner’, which immediately raises a conundrum as to
the mode of dispute resolution. We are well aware of the judicial
precedents that waive the need for express reference to arbitration
Page 27 of 37



11
or an excessive focus on nomenclature. However, such principles
cannot be stretched so far so as to make them wholly unworkable.
It is inconceivable to us as to why two parties, who are ad idem in
wanting to settle their disputes through arbitration, would label
the dispute resolution clause in such a befuddling manner. The
title of the clause (Section 20.1 of Article 20) unequivocally
indicates a non-adjudicatory and conciliatory process rather than
an arbitration mechanism.
(b) What adds fuel to the fire is the conspicuous absence of the words
‘arbitration’ or ‘arbitrator’ from the dispute resolution clauses.
Even the expression `Arbitration Act’ is itself entirely missing.
These terms are generally included in arbitration agreements to
reflect the parties’ true intention.
(c) Moreover, the reference is to the ‘Commissioner, MCD,’ rather than
to an arbitral tribunal or an independent third-party adjudicator.
This suggests an internal dispute resolution mechanism rather
than an external arbitration forum.

(d) The DSC Ltd. and CCC Ltd. agreements introduce further
procedural details, such as the officer calling for additional
documents and conducting interviews. However, none of these
procedural steps alter the fundamental nature of the process,

11
Infrastructure Leasing & Financial Services Ltd. v. HDFC Bank Ltd., 2023 SCC OnLine
SC 1371; Yellapu Uma Maheswari v. Buddha Jagadheeswararao, (2015) 16 SCC 787;
Assam Small Scale Ind. Dev. Corp. Ltd. & Ors. v. J.D. Pharmaceuticals & Anr, 2005 Supp
(4) SCR 232.
Page 28 of 37



which at best is an elaborate administrative fact-finding exercise,
rather than an arbitral adjudication.
(e) Additionally, the appointment of the decision-maker is entirely
within the control of MCD, with no role for the other contracting
party in selecting or influencing the selection of the officer. This
further undermines the claim that the clause was intended to
establish an arbitration framework.
D.2.2. Final and Binding Nature
39. A key argument advanced by the private contractors is that the
decision rendered under Article 20 is ‘final and binding’, thereby
making it akin to an arbitral award. While it is true that an arbitration
clause must result in a conclusive determination, finality alone does
not equate it to arbitration.
40. We may note at the outset that in SMS Ltd. the phrase used is ‘final’,
not ‘final and binding’ which instead finds mention in the cases of DSC
Ltd. and CCC Ltd. On a textual and surface-level analysis, Article 20
across all cases thus prima facie seems to satisfy the subject-
ingredient; however, it does not impact the outcome of these cases.
41. We say so because other forms of decision-making—such as expert
determinations, departmental adjudications, and administrative
reviews—even when found to be final and binding, do not ipso facto
constitute arbitration. The arduous task of ascertaining and identifying
Page 29 of 37



the category to which these cases fall is beyond the scope of these
appeals.
D.2.3. Compliance with Arbitral Norms
42. Finally, we turn to analyzing Article 20 under the lens of its alliance
with the norms of arbitration. This particular characteristic is quite
important for a valid arbitration agreement. If a clause does not
sufficiently align with the accepted best practices of contemporary
arbitration, it will generally be unworkable and essentially dead letter.
What is also envisaged under this element is the compliance with the
Arbitration Act and its subsequent Amendments.
43. It may be clarified here that there is no straitjacket formula for listing
arbitral norms exhaustively, as these norms may vary from time to
time. While we cannot delineate arbitral norms from stem to stern, we
have short-listed some of these norms for the purposes of these
appeals, which unfortunately do not find any explicit or implicit
mention in the subject-dispute resolution clauses.
D.2.3.1. Party Autonomy in Arbitrator Appointment

44. Clearly, in the facts of the instant appeals, the officer who decides the
dispute(s) is appointed exclusively by MCD/SDMC, with no input from
the other contracting party, i.e. the private contractors. In contrast,
valid arbitration agreements invariably provide for a mutually agreed-
upon arbitrator or an independent appointing authority, such as a
Page 30 of 37



Court or an arbitral institution lest they run afoul of the settled
principles of bi-partisanship and equality.
D.2.3.2. Adversarial Process
45. In Encon Builders (supra) , this Court held that arbitration must be a
structured adjudicatory process, where parties are afforded the
opportunity to argue their case before a neutral and independent
decision-maker. In our considered opinion, Article 20 lacks such an
inquiry. It is admitted that there are no provisions for ( i ) oral hearings;
( ii ) examination and cross-examination of witnesses; and ( iii )
application of formal rules of evidence or procedure in the impugned
clauses. The appointed officer merely reviews written submissions and,
at most, may seek additional documents or conduct interviews.
46. We have thus no hesitation in holding that Article 20 lacks the judicial
element that lends arbitration its unique credibility as an adjudicatory
mechanism, distinct from other forms of dispute resolution. By omitting
the essential procedural safeguards of adversarial proceedings and
impartial adjudication, the clause fails to meet the threshold
requirements of arbitration and cannot be sustained as such.
D.2.3.3. Neutrality and Independence of the Arbitrator
47. The principles of natural justice, of course, must inhere in any judicial
process, even if that process is pseudo-judicial. That is precisely why it
is necessary for the Arbitrator to be an impartial functionary in any
supposed arbitration agreement. When such a requirement is unmet,
Page 31 of 37



that mode of dispute resolution may not have the benefit of being
termed as ‘arbitration’. In Tollways (supra) , this Court expressly held
that a dispute resolution mechanism controlled by one party lacks the
independence required for arbitration.
48. Under Article 20, the decision-maker is an officer of MCD, making the
process inherently biased in favour of the Municipal Corporation(s). It
does not even provide for the officer to be a legally qualified adjudicator,
further calling into question the nature of the decision-making process.
Moreover, while Article 20 in the case of SMS Ltd. at the very least
specifies that the appointed officer may be from ‘within or without
MCD’, the latter two cases—DSC Ltd. and CCC Ltd.—completely
dispense with even this limited semblance of impartiality. The absence
of any requirement for an external appointee in these cases further
entrenches the one-sided nature of the appointment process, allowing
MCD to unilaterally select a decision-maker from within its own ranks,
thereby compromising the neutrality essential to any adjudicatory
mechanism.

49. In conclusion, a holistic analysis of Article 20 across the subject
Concession Agreements leads us to the inescapable conclusion that it
does not satisfy the requirements of an arbitration agreement under
Section 7 of the Arbitration Act. While certain textual elements—such
as the use of the phrase ‘final and binding’ in the cases of DSC Ltd. and
CCC Ltd.—may superficially resemble arbitration, a deeper examination
reveals that the clause is procedurally and structurally deficient in
Page 32 of 37



ways that render it incapable of operating as an arbitration clause in
law.
50. Article 20 lacks the judicial element that lends arbitration its distinct
credibility as an adjudicatory mechanism. It is not an arbitration clause
either in letter, or in spirit and effect. Its ambiguity and lack of
procedural integrity have, if anything, resulted in greater litigation
rather than expeditious resolution, thereby undermining the very
purpose of arbitration.
51. Accordingly, we hold that Article 20 does not constitute an arbitration
agreement under the Arbitration Act. The impugned judgments of the
High Court in the cases SMS Ltd. and CCC Ltd., dated 09.03.2017 and
02.11.2022 respectively, which construed it as such, are set aside. The
view taken in DSC Ltd. vide judgment dated 29.07.2022, which
correctly rejected arbitration, is affirmed.
52. We may also clarify that the controversy this Court was faced with in
Tollways (supra) was broadly similar to the instant appeals. The
dispute resolution clauses in Tollways (supra) and the present cases
both evidently lack the ingredients that we have comprehensively set
out hereinabove. Consequently, we see no reason to take a different
view than the one taken by a Co-ordinate Bench of this Court in
Tollways (supra) , which is hereby reiterated.


Page 33 of 37



E. E PILOGUE
53. Having already reached a conclusion vis-à-vis the core contentious
issue in these set of appeals, we would nonetheless like to make certain
observations regarding arbitration agreements in the Indian legal milieu
before parting with these appeals.

54. It is doubtless laudable how rapidly the Indian legal ecosystem has
evolved to accommodate arbitration. The Indian Legislature and
Judiciary have clearly worked in lockstep to ensure that the arbitral
process is regulated efficiently, and suffers from minimal judicial
intervention. That being said, we are constrained to observe that much
and more remains to be done.
55. As the facts of these appeals clearly illustrate, the drafting of
arbitration clauses in commercial agreements in India leaves much to
be desired. Despite arbitration being introduced as a means of ensuring
speedy and effective dispute resolution, it is evident and ironic that, in
certain cases, the process has been misused to further complicate and
prolong the resolution of disputes. The manner in which ambiguity is
embedded into such agreements raises serious concerns. Whether this
stems from administrative oversight or deficient legal advice is a matter
best left for separate consideration.
56. However, it is evident that the rival parties in these appeals are neither
paupers nor indigent individuals who may have been disadvantaged by
inadequate legal representation, thereby prolonging the litigation. On
Page 34 of 37



the contrary, one party is a statutory civil body in the National Capital
Region, ostensibly operating with its own legal department, while the
other comprises prominent and affluent contractor-builders with ample
resources to retain the finest legal counsel available in the country.
57. What is most shocking to our judicial conscience is the incontrovertible
reality that the parties in the present cases have spent nigh a decade
acrimoniously litigating over the method of dispute resolution itself,
while their actual qualms against each other remain deeply buried
under the surface—effectively stuck in limbo. A legal dispute that
lingers for years over the mere mode of adjudication, before even
touching the merits, is akin to a traveller stranded at a crossroads,
endlessly debating which path to take while the journey itself remains
unbegun. Justice, like the destination, recedes further into the horizon,
not for lack of resolution but for want of a decision on how to resolve.
58. This willful and wanton wastage of judicial time is similarly a practice
that is highly deplorable, to say the least. It is high time that arbitration
clauses are worded with piercing precision and clarity, and that they
are not couched in ambiguous phraseology. This is a responsibility and
onus that every legal counsel, advisor, and practitioner must shoulder
most dutifully. We would, in fact, take this opportunity to advise, if not
caution and warn, the legal fraternity against engaging in such
practices which result in a criminal wastage of precious judicial time.
Indeed, their professional credentials will not earn any stripes if they
indulge in such juggling of words.
Page 35 of 37



59. Equally, the Courts or judicial fora of our country—as a matter of
judicial best policy—must show an unwavering tendency towards
rejecting shoddily drafted clauses at the very threshold. Such cases,
which prima facie disclose mala fides woven into the very Agreement
they seek adjudication over, must be thrown out of the Court, as they
have been indulged for far too long. We would complementarily urge the
Courts to invoke their suo moto powers in appropriate cases wherein
legal firms or counsel are found designing ‘arbitration clauses’ which
deliberately mislead and misguide. The time is not far when personal
liability must be assigned for such unscrupulous acts, along with the
sanctioning of the harshest punitive measures against the actors. We
are confident that these steps are vital to infuse probity, transparency,
and professionalism into Indian arbitration. Needless to say, to uphold
the integrity of the arbitral process, the sanctity of such agreements
must be preserved.
F. C ONCLUSION AND D IRECTIONS
60. In light of the foregoing analysis, and in continuation of the conclusions
arrived at hereinabove we seek it fit to dispose of these appeals with the
following directions:
i. Article 20 of the Concession Agreements executed in all the three
appeals before does not form an arbitration agreement, and thus
cannot be brought under the purview of the Arbitration Act.
ii. The impugned judgments of the High Court in the cases of SMS
Ltd. and CCC Ltd. are hereby set aside.
Page 36 of 37



iii. The impugned judgment of the High Court in the case of DSC Ltd.
is hereby upheld.
iv. It is, however, clarified that the parties across all three appeals are
at liberty to pursue their alternative remedies in accordance with
law.

61. The instant appeals stand disposed of in the above terms.
62. Consequently, pending interlocutory applications, if any, are also
disposed of.
63. Ordered accordingly.

…………………….J.
(SURYA KANT)




..………………………………………………..J.
(NONGMEIKAPAM KOTISWAR SINGH)


NEW DELHI
DATED: 15.05.2025

Page 37 of 37