The single judge bench of Justice Shekhar B. Saraf of the Calcutta high court in the case of Blue Star Limited Vs Rahul Saraf held that mere mentioning of the terms ‘arbitration’ or ‘arbitrator’ in a heading or existence of these terms in a scattered manner in clauses of agreements between parties do not aggregate to being an arbitration agreement.
Brief facts:
The factual matrix of the case is that the memorandum of understanding was signed between blue star limited and Rahul Saraf with respect to rendering operation and maintenance services. Thereafter, the services were provided and the invoices were also raised for the services provided and some of them were paid by the Respondent. The dispute between the parties arose because of the non-payment of a few invoices. The Petitioner also made a request for the payment, however, the Respondent failed to make the payment. Furthermore, the Petitioner invoked the arbitration clause and the appointment of an arbitrator was made. However, the Respondent refused to accept the arbitrator appointed by the Petitioner. The present application under Section 11 of the Arbitration and Conciliation Act, 1996 was filed by the Petitioner requesting for appointment of an arbitrator.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the Petitioner contended that the provisions of the Memorandum of Understanding, notably clauses 7 and 13, make it clear that the dispute is arbitrable in nature and that there is a binding arbitration agreement between the parties.
The learned counsel relied upon the judgment titled Jagdish Chander v. Ramesh Chander and Others.
Contentions of the Respondents:
The learned counsel appearing on behalf of the Respondents contended that there is mutual consent between the parties to submit the dispute for arbitration. It was further contended that an arbitration agreement would not automatically result from the simple insertion of the words "arbitration" or "arbitrator" in a heading or clause. The provisions should be unambiguous in expressing the parties’ determination to arbitrate their disputes on a mandatory basis and their readiness to abide by the decision of the tribunal.
The learned counsel relied upon the judgment titled Foomill Pvt. Ltd. v. Affle (India) Ltd, Jagdish Chander V. Ramesh Chander and Others, Niwas Enterprise v. Rabindra Pandorang Ratnaparkhi & Anr, Nagreeka Indcon Products (P) Ltd. v. Cargocare Logistics (India) (P) Ltd, and Wellington Associates Ltd. v. Kirti Mehta.
Observations of the court:
The Hon’ble Court observed that the parties must have a mutual understanding and a clear determination of the necessity of arbitration for any potential future disputes. Such an intention ought to demonstrate itself in the form of a clear duty that binds the parties, rather than just as a potential that could come to pass if the parties elect to do so after a post-facto occurrence of disputes.
The Hon’ble High Court furthermore observed that the second party must continue to offer services while litigation or arbitration is pending, according to clause 7. It is reasonable to assume that the possibility of referring the dispute to arbitration is left open, if the parties, later decide to pursue arbitration, the opportunity is still present. Additionally, such a probability is insufficient to integrate an arbitration agreement.
It was noted that as per clause 7 and clause 13, it is precluded that it is not a mandatory obligation among the parties to refer the dispute for arbitration.
Based on these considerations, the Hon’ble Court was of the view that there exists no arbitration agreement between the parties, therefore, the arbitrator cannot be appointed.
The decision of the court:
With the above direction, the Hon’ble Court dismissed the application.
Case Title: Blue Star Limited Vs Rahul Saraf
Coram: Hon’ble Mr. Justice Shekhar B. Saraf
Citation: A.P. No. 852 of 2022
Advocates for the Petitioner: Mr. Avishek Guha, Adv Mr. Sourajit Dasgupta, Adv Ms. Akansha Chopra, Adv. Mrs. Debarati Das, Adv.
Advocates for the Respondents: Mr. Pranit Bag, Adv. Ms. Riti Basu, Adv. Ms. Piyali Pan, Adv Mr. Sayan Banerjee, Adv.
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