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Mere use of words ‘Arbitration’ or ‘Arbitrator’ in a clause won’t make it Arbitration Agreement: Supreme Court.

Mere use of words ‘Arbitration’ or ‘Arbitrator’ in a clause won’t make it Arbitration Agreement: Supreme Court.

Written By- Pretika Tiwari

[Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture]

The bench of justices DY Chandrachud and AS Bopanna observed that a party’s decision and responsibility to submit a matter to arbitration must be disclosed in an arbitration agreement. It was emphasized that if a clause calls for or anticipates additional or new consent from the parties before referring to arbitration, it does not automatically constitute an arbitration agreement.

Clause 15 of the agreement between the parties was titled “Settlement of Disputes/Arbitration”. The clause read, “It is incumbent upon the contractor to avoid litigation and disputes during the execution. However, if such disputes occur between the contractor and the department, an effort shall be made to settle the disputes at the company level. The contractor should make a request in writing to the Engineer-in-Charge for settlement of such disputes/claims within 30 (thirty) days of arising of the case of dispute/claim failing which no disputes/claims of the contractor shall be entertained by the company. If differences persist, the settlement of the dispute with Govt. Agencies shall be dealt with as per the Guidelines issued by the Ministry of Finance, Govt. of India in this regard. In case of parties other than Govt. Agencies, the redressal of the disputes may be sought in the Court of Law.

A sole arbitrator was appointed when the contractor filed an application before the High Court of Orissa. But the Attorney General contended that clause 15 does not constitute an arbitration clause, and the acknowledgement of the jurisdiction under section 11(6) was invalid. The court noted that, in this instance, the substantive component of Clause 15 makes it apparent that there is no agreement between the parties to arbitrate either current conflicts or those in the future. Thus, the High Court should not have construed clause 15 of the contract as an arbitration agreement.

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