Delhi High Court
Panchsheel Constructions ... vs Davinder Pal Singh Chauhan & Anr. on 15 February, 2019
$~1
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ARB.P. 380/2018
Date of Decision : 15th February, 2019
PANCHSHEEL CONSTRUCTIONS THROUGH: ITS
ATTORNEY BALIK RAM GAUTAM ..... Petitioner
Through: Mr.Devinder Chaudhary, Adv.
versus
DAVINDER PAL SINGH CHAUHAN & ANR.
..... Respondents
Through: Mr.Piyush Mishra, Adv. for
R-1.
Mr.Naveen Kumar, Adv. for
R-2.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This petition under Section 11 of the Arbitration and
Conciliation Act, 1996 has been filed by the petitioner seeking
appointment of an Arbitrator for adjudicating the disputes that have
arisen between the parties in relation to the Collaboration Agreement
dated 30.04.2011 executed between the parties.
2. Learned counsels for the respondents submit that there is no
binding Arbitration Agreement between the parties contained in the
Arb.P.380/2018 Page 1
Collaboration Agreement and therefore, the present petition is not
maintainable.
3. The alleged Arbitration Agreement relied upon by the petitioner
in support of the present petition is reproduced hereinbelow:
"That in case of any difference of opinion between the
first party/owner and second party/builder in regard
to the interpretation or scope of his agreement of any
part thereof they should try to solve the problem to
any Arbitrator." (Emphasis Supplied)
4. The Collaboration Agreement also contains another clause
which is reproduced hereinbelow:
"That this transaction has taken place at New Delhi
and as such Delhi courts shall have exclusive
jurisdiction to entertain any dispute arising out or in
any way touching or concerning this Deed."
5. Learned counsels for the respondents submit that by use of the
words "try to solve the problem", there is no binding Arbitration
Agreement between the parties. In absence of any such binding
agreement, the arbitration proceedings cannot take place without the
consent of the respondents to agree to such arbitration. They rely
upon the judgment of the Supreme Court in Wellington Associates
Ltd.v. Kirit Mehta, AIR 2000 SC 1379 in support of their contention.
Arb.P.380/2018 Page 2
6. On the other hand, learned counsel for the petitioner submits
that mere use of the words "try to solve the problem" does not in any
manner denude the Arbitration Agreement of its binding nature. He
places reliance on the judgment of the Supreme Court in M/s Zhejiang
Bonly Elevator Guide Rail Manufacture Co. Ltd. v. Jade Elevator
Components, (2018) 9 SCC 774 in this regard.
7. I have considered the submissions made by the learned counsels
for the parties. In my opinion, the above referred clause does not
constitute an Arbitration Agreement between the parties. The
Agreement merely states that the parties should try to solve the
disputes through arbitration. This, therefore, would not give a binding
effect to the arbitration agreement, in the true sense of the word. The
Agreement further states that the disputes, if any, arising between the
parties shall be adjudicated through Courts at Delhi.
8. In Wellington Associates Ltd. (supra) the Supreme Court was
confronted with the following clause which was being relied upon as
an Arbitration Agreement between the parties:
"5. It is also agreed by and between the parties that
any dispute or differences arising in connection with
these presents may be referred to arbitration in
pursuance of the Arbitration Act, 1940 by each party
appointing one arbitrator and the arbitrators so
appointed selecting an umpire. The venue of arbitration
shall be at Bombay."
9. The Supreme Court, held as under:
Arb.P.380/2018 Page 3
"The words in sub-section (1) of Section 7, "means an
agreement by the parties to submit to arbitration", in my
opinion, postulate an agreement which necessarily or
rather mandatorily requires the appointment of an
arbitrator/arbitrators. Section 7 does not cover a case
where the parties agree that they "may" go to a suit or
that they "may" also go to arbitration.
xxx
22. It is contended for the petitioner that the word
"may" in clause 5 has to be construed as "shall".
According to the petitioner's counsel, that is the true
intention of the parties. The question then is as to what is
the intention of the parties. The parties, in my view, used
the words "may" not without reason. If one looks at the
fact that clause 4 precedes clause 5, one can see that
under clause 4 parties desired that in case of disputes,
the civil courts at Bombay are to be approached by way
of a suit. Then follows clause 5 with the words "it
is also agreed" that the dispute "may" be referred to
arbitration implying that parties need not necessarily go
to the civil court by way of suit but can also go before an
arbitrator. Thus, clause 5 is merely an enabling
provision as contended by the respondents. I may also
state that in cases where there is a sole arbitration
clause couched in mandatory language, it is not
preceded by a clause like clause 4 which discloses a
general intention of the parties to go before a civil court
by way of suit. Thus, reading clause 4 and clause 5
together, I am of the view that it is not the intention of
the parties that arbitration is to be the sole remedy. It
appears that the parties agreed that they can "also" go
to arbitration in case the aggrieved party does not wish
Arb.P.380/2018 Page 4
to go to a civil court by way of a suit. But in that event,
obviously, fresh consent to go to arbitration is
necessary. Further, in the present case, the same clause
5, so far as the venue of arbitration is concerned, uses
the word "shall". The parties, in my view, must be
deemed to have used the words "may" and "shall" at
different places, after due deliberation.
23. A somewhat similar situation arose in B. Gopal
Das v. Kota Straw Board. In that case the clause read as
follows:
"That in case of any dispute arising between us,
the matter may be referred to arbitrator mutually
agreed upon and acceptable by you and us."
It was held that fresh consent for arbitration was
necessary. No doubt, the above clause was a little
clearer there than in the case before me. In the above
case too, the clause used the word "may" as in the
present case. The above decision is therefore directly in
point.
xxx
25. Suffice it to say, that the words "may be referred"
used in clause 5, read with clause 4, lead me to the
conclusion that clause 5 is not a firm or mandatory
arbitration clause and in my view, it postulates a fresh
agreement between the parties that they will to go to
arbitration. Point 2 is decided accordingly against the
petitioner."
10. In my opinion the judgment would squarely apply to the facts of
the present case. The use of the word "try to solve" does not give a
binding effect to the purported Arbitration Agreement between the
parties. It, in fact, does not even give a binding effect to the decision
Arb.P.380/2018 Page 5
that may be taken on such so called arbitration. What if after an
Award the losing party says that it tried to solve the problem through
arbitration, however, as the same has not been solved, it will now go
and file a suit.
11. In any case, arbitration being an alternate dispute resolution
mechanism, where the regular Courts are bypassed and challenge to an
Award is permitted only within a very narrow scope, clear words
expressing an unequivocal intent to accede to such a mechanism is a
prerequisite before a party is referred to arbitration. In the present
case, such words are missing.
12. In M/s Zhejiang Bonly Elevator Guide Rail Manufacture Co.
Ltd. (supra), the Supreme Court was considering the following clause:
"15. Dispute handling.--Common processing contract
disputes, the parties should be settled through
consultation; consultation fails by treatment of to the
arbitration body for arbitration or the court."
13. The Supreme Court has held as under:
"10. In the case at hand, as we find, Clause 15 refers to
arbitration or court. Thus, there is an option and the
petitioner has invoked the arbitration clause and,
therefore, we have no hesitation, in the obtaining
factual matrix of the case, for appointment of an
arbitrator ......"
Arb.P.380/2018 Page 6
14. A reading of the above would show that the Supreme Court held
that where the Agreement gives an option to the parties to either have
the dispute resolved through arbitration or Court, there can be no
further embargo placed on such discretion of the parties. The parties
have discretion to chose to have their disputes resolved either through
arbitration or Court and having such option, the same has to be given
effect to. The said judgment, would therefore have no application to
the facts of the present case where the Arbitration Agreement relied
upon by the petitioner is very distinct.
15. In view of the above, I find no merit in the present petition and
same is dismissed, leaving it open to the petitioner to agitate its claim
by way of an appropriate legal remedy. There shall be no order as to
cost.
NAVIN CHAWLA, J
FEBRUARY 15, 2019/Arya
Arb.P.380/2018 Page 7
