The Delhi High Court opined that the substance of the agreement is relevant over the nomenclature used and hence when a clause uses the word “Mediation” but has features resembling the Arbitration clause, the clause would be considered as an arbitration clause.
Brief Facts:
The parties entered into a Concession Agreement pursuant to a tender issued by the Respondent and the same being awarded to the Petitioner. Thereafter, disputes arose, and the Petitioner called upon the Respondent for appointment of the Arbitrator. However, the existence of the Arbitration clause in the said Agreement was disputed by the Respondent and hence, the present petition has been filed by the Petitioner for the appointment of an Arbitrator.
The Clause in the said Agreement had used the words “Mediation by Commissioner” and not “Arbitration” which is why there was a dispute over the existence of an Arbitration Agreement.
Background of the Case:
In the present case, the hearing was adjourned to await the judgment of the Supreme Court in South Delhi Municipal Corporation v. SMS Ltd. (S.L.P. (C) 16913/2017) vide which the Court had stayed the judgment in the SMS Ltd. Case. It was believed that the Arbitration clause was similar in both cases, however, later it was observed that there were substantial differences in the Arbitration clauses and hence, the present case is independent and can be decided by this High Court.
Observations of the Court:
The Court compared the clauses in the SMS Ltd. Case and the present case. The Clause in the present case explicitly provides an opportunity for both parties to submit their cases including documentary evidence and lays down that the decision would be final and binding.
It was opined by the High Court that the guiding factor for the Court is the substance of the agreement and not the nomenclature used.
Noting the features of the clause in the said Agreement, the Bench remarked that the agreement was in writing and the jurisdiction of the concerned Authority was deriving from the consent of the parties. The decision was made to be final and binding and there was absolutely no characteristic or feature of the Clause that negates it from being an Arbitration clause.
The Delhi High Court further expounded that using the word “Mediation” does not devoid the clause of being the Arbitration clause, especially when some of the features of the clause are inconsistent with the principles of mediation such as recording of evidence, determination of rights, etc.
The decision of the Court:
Therefore, the High Court declared the clause as the Arbitration Clause and referred the dispute to the Delhi International Arbitration Centre. Accordingly, the petition was allowed.
Case Title: Consolidated Construction Consortium Limited v. South Delhi Municipal Corporation
Coram: Hon’ble Mr. Justice Prateek Jalan
Case No.: ARB.P.319/2017
Advocates for Petitioner: Adv. Mr. Anand Jha
Advocates for Respondent: Adv. Mr. Rakesh Mittal (Standing Counsel)
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