[Cites 33, Cited by 0]
Delhi High Court
Lifewell Diagnostics Private Limited vs Micron Laboratory on 10 April, 2026
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 01st April, 2026
Pronounced on: 10th April, 2026
+ ARB.P. 36/2026
LIFEWELL DIAGNOSTICS PRIVATE LIMITED .....Petitioner
Through: Mr. Nawaz Sherif, Mr. Rishabh, Mr.
Arun Prakash, Advs.
Email:
[email protected]
versus
MICRON LABORATORY .....Respondent
Through: Mr. Akshay Makhija, Sr. Adv. with
Mr. Aayushman Shukla, Adv.
Mob: 8860555644
Email: [email protected]
CORAM:
HON'BLE MS. JUSTICE MINI PUSHKARNA
JUDGMENT
MINI PUSHKARNA, J.
1. The present petition has been filed seeking appointment of a sole
arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996
("Arbitration Act"), on the basis of disputes having arisen between the
parties pertaining to a Revenue Sharing Agreement ("Agreement") dated
01st September, 2023, whereby, the petitioner was granted the right to
operate the pathology lab of the respondent situated at D-10, LGF, Green
Park, New Delhi, in the name and style of „Micron Laboratory‟.
2. As per the petitioner, issues have arisen between the parties on
account of various defaults by the respondent in payment obligations under
the Agreement, with an outstanding of Rs. 23,93,916/- (Rupees Twenty
Three Lacs Ninety Three Thousand Nine Hundred Sixteen) being due to the
petitioner.
3. The petitioner relies upon Clause 29 of the Agreement, which
contains the provision for dispute resolution, for seeking appointment of an
arbitrator. The said Clause 29 of the Agreement reads in the following
manner:
"xxx xxx xxx
xxx xxx xxx"
4. On the other hand, the respondent has resisted appointment of an
arbitrator in the present case by pleading that it is not liable to make any
payments to the petitioner as both the parties had mutually terminated the
Agreement on 03rd May, 2024. It was further mutually decided between the
parties that the account of both the parties will be treated to be settled, and
accordingly, no party will raise any claim against the other in the future. As
per the respondent, in terms of the said mutual understanding, no dispute
survives between the parties.
5. Further, the respondent has also disputed the Arbitration Clause relied
upon by the petitioner, on the ground that the same does not constitute a
binding Arbitration Agreement between the petitioner and the respondent. It
is the case of the respondent that Clause 29 of the Agreement between the
parties does not make the recourse to arbitration mandatory, as the use
of/reference to the phrase „may be referred to the arbitration‟, clearly shows
that there is no binding Arbitration Agreement between the parties.
Moreover, in view of the use of the word „may‟, there is no clear intention of
the parties to submit the disputes between them to arbitration.
6. Having heard learned counsels for the parties, this Court notes that it
is a settled legal position that existence of a valid, written Arbitration
Agreement, which shows the ad idem intention of the parties to submit to
arbitration as the dispute resolution mechanism, is a sine qua non for
referring the parties to arbitration.
7. Section 2(b) of the Arbitration Act defines an Arbitration Agreement
to mean an Agreement referred to in Section 7 of the Arbitration Act. In
terms of Section 7 of the Arbitration Act, an Arbitration Agreement is an
agreement by and between the parties to submit to arbitration, all or certain
disputes which have arisen or which may arise between them. Further, while
Section 7(2) of the Arbitration Act stipulates that an Arbitration Agreement
may be in the form of Arbitration Clause in a contract or in the form of a
separate agreement, Section 7(3) of the Arbitration Act clearly states that an
Arbitration Agreement between the parties shall be in writing.
8. For the sake of convenience, Section 7 of the Arbitration Act is
reproduced as under:
"xxx xxx xxx
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.
(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 [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.
xxx xxx xxx"
(Emphasis Supplied)
9. Outlining the essential elements of an Arbitration Agreement,
Supreme Court in the case of Bihar State Mineral Development
Corporation and Another Versus ENCON Builders (I) (P) Ltd., (2003) 7
SCC 418, has held as follows:
"xxx xxx xxx
13. The essential elements of an arbitration agreement are as
follows:
(1) There must be a present or a future difference in
connection with some contemplated affair.
(2) There must be the intention of the parties to settle such
difference by a private tribunal.
(3) The parties must agree in writing to be bound by the
decision of such tribunal.
(4) The parties must be ad idem.
xxx xxx xxx"
(Emphasis Supplied)
10. Underscoring that an Arbitration Agreement must necessarily include
a clear intent to arbitrate and a binding adjudicatory process, Supreme Court
in the case of South Delhi Municipal Corporation of Delhi Versus SMS
Limited, (2026) 1 SCC 545, has held as follows:
"xxx xxx xxx
46. 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 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.
xxx xxx xxx"
(Emphasis Supplied)
11. Likewise, laying down the pre-requisites of a valid and binding
Arbitration Agreement, Supreme Court in the case of Powertech World
Wide Limited Versus Delvin International General Trading LLC, (2012) 1
SCC 361, has held as follows:
"xxx xxx xxx
16. Now, I may refer to the prerequisites of a valid and binding
arbitration agreement leading to an appropriate reference under the
Act. Section 2(1)(b) defines "arbitration agreement" to be an
agreement referred to in Section 7. Section 7 of the Act states that an
"arbitration agreement" is 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. The arbitration agreement may be in the
form of an arbitration clause in a contract or in the form of a
separate agreement and shall be an agreement in writing. An
arbitration agreement is in writing if it is contained in any of the
clauses i.e. clauses (a) to (c) of sub-section (4) of Section 7 of the
Act. Once these ingredients are satisfied, there would be a binding
arbitration agreement between the parties and the aggrieved party
would be in a capacity to invoke the jurisdiction of this Court under
Section 11(6) of the Act.
17. In K.K. Modi v. K.N. Modi [(1998) 3 SCC 573] this Court, while
differentiating an "arbitration agreement" from a "reference to an
expert" for decision, contained in an MoU recording a family
settlement, enumerated the essential attributes of a valid arbitration
agreement: (SCC p. 584, para 17)
"(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
the parties must be derived 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;
(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."
18. Also in Smita Conductors Ltd. v. Euro Alloys Ltd. [(2001) 7 SCC
728] where no contract, letter or telegram confirming the contract
containing the arbitration clause as such was there, but certain
correspondences which indicated a reference to the contract
containing arbitration clause for opening the letter of credit addressed
to the bank, were there. There was also no correspondence between
the parties disagreeing either with the terms of the contract or the
arbitration clause. The two contracts also stood affirmed by reason of
their conduct as indicated in the letters exchanged between the
parties. This Court construed it to be an arbitration agreement in
writing between the parties and referred to Article II Para 2 of the
New York Convention, which is in pari materia with Section 7 of the
Act and observed as under: (Smita Conductors Ltd. case [(2001) 7
SCC 728], SCC pp. 734-35, para 6)
"6. What needs to be understood in this context is that
the agreement to submit to arbitration must be in writing.
What is an agreement in writing is explained by Para 2 of
Article II. If we break down Para 2 into elementary parts, it
consists of four aspects. It includes an arbitral clause (1) in a
contract containing an arbitration clause signed by the parties,
(2) an arbitration agreement signed by the parties, (3) an
arbitral clause in a contract contained in exchange of letters
or telegrams, and (4) an arbitral agreement contained in
exchange of letters or telegrams. If an arbitration clause falls
in any one of these four categories, it must be treated as an
agreement in writing."
19. This Court, in Bihar State Mineral Development Corpn. v. Encon
Builders (I) (P) Ltd. [(2003) 7 SCC 418] has also taken the view that
the parties must agree in writing to be bound by the decision of such
tribunal and they must be ad idem.
xxx xxx xxx"
(Emphasis Supplied)
12. Emphasizing that the deficiency of words in an agreement, which
otherwise fortifies the intention of the parties to arbitrate their disputes,
cannot legitimize the annulment of an Arbitration Clause, Supreme Court in
the case of Babanrao Rajaram Pund Versus Samarth Builders and
Developers and Another, (2022) 9 SCC 691, has held as follows:
"xxx xxx xxx
15. It may be seen that Section 7 of the Act does not mandate any
particular form for the arbitration clause. This proposition was settled
by this Court way back in Rukmanibai Gupta v. Collector
[Rukmanibai Gupta v. Collector, (1980) 4 SCC 556], while viewing
erstwhile Section 2(a) of the Arbitration Act, 1940 which contained
the definition of "arbitration agreement". It was held that: (SCC p.
560, para 6)
"6. ... Arbitration agreement is not required to be in any
particular form. What is required to be ascertained is whether
the parties have agreed that if disputes arise between them in
respect of the subject-matter of contract such dispute shall be
referred to arbitration, then such an arrangement would spell
out an arbitration agreement. A passage from Russell on
Arbitration, 19th Edn., p. 59, may be referred to with
advantage:
If it appears from the terms of the agreement by which a
matter is submitted to a person's decision that the intention of
the parties was that he should hold an inquiry in the nature of a
judicial inquiry and hear the respective cases of the parties and
decide upon evidence laid before him, then the case is one of an
arbitration."
xxx xxx xxx
18. Encon Builders [Bihar State Mineral Development Corpn. v.
Encon Builders (I) (P) Ltd., (2003) 7 SCC 418] placed reliance on
K.K. Modi case [K.K. Modi v. K.N. Modi, (1998) 3 SCC 573] and
further condensed the essential features of an arbitration agreement
into four elements i.e. : (Encon Builders case [Bihar State Mineral
Development Corpn. v. Encon Builders (I) (P) Ltd., (2003) 7 SCC
418] , SCC p. 423, para 13)
"13. The essential elements of an arbitration agreement are as
follows:
(1) There must be a present or a future difference in
connection with some contemplated affair.
(2) There must be the intention of the parties to settle such
difference by a private tribunal.
(3) The parties must agree in writing to be bound by the
decision of such tribunal.
(4) The parties must be ad idem."
xxx xxx xxx
23. Adverting to the case in hand, it may be seen that the contents and
the nature of Clause 18 are substantially different from the dispute
resolution pacts in K.K. Modi [K.K. Modi v. K.N. Modi, (1998) 3 SCC
573] , Jagdish Chander [Jagdish Chander v. Ramesh Chander, (2007)
5 SCC 719] , or Encon Builders [Bihar State Mineral Development
Corpn. v. Encon Builders (I) (P) Ltd., (2003) 7 SCC 418] . We say so
for three reasons. Firstly, apart from the fact that Clause 18 of the
development agreement uses the terms "arbitration" and
"arbitrator(s)", it has clearly enunciated the mandatory nature of
reference to arbitration by using the term "shall be referred to
arbitration of a sole arbitrator mutually appointed, failing which,
two arbitrators, one to be appointed by each party to dispute or
difference". Secondly, the method of appointing the third arbitrator
has also been clearly mentioned wherein the two selected arbitrators
are to appoint a third arbitrator. Finally, even the governing law was
chosen by the parties to be "the Arbitration and Conciliation Act,
1996 or any re-enactment thereof." These three recitals, strongly
point towards an unambiguous intention of the parties at the time of
formation of the contract to refer their dispute(s) to arbitration.
24. We are, therefore, of the firm opinion that the High Court fell in
error in holding that the appellant's application under Section 11 was
not maintainable for want of a valid arbitration clause. We find that
Clause 18 luminously discloses the intention and obligation of the
parties to be bound by the decision of the tribunal, even though the
words "final and binding" are not expressly incorporated therein. It
can be gleaned from other parts of the arbitration agreement that
the intention of the parties was surely to refer the disputes to
arbitration. In the absence of specific exclusion of any of the
attributes of an arbitration agreement, the respondents‟ plea of non-
existence of a valid arbitration clause, is seemingly an afterthought.
25. Even if we were to assume that the subject clause lacks certain
essential characteristics of arbitration like "final and binding" nature
of the award, the parties have evinced clear intention to refer the
dispute to arbitration and abide by the decision of the tribunal. The
party autonomy to this effect, therefore, deserves to be protected.
26. The deficiency of words in agreement which otherwise fortifies
the intention of the parties to arbitrate their disputes, cannot
legitimise the annulment of arbitration clause. A three-Judge Bench
of this Court in Enercon (India) Ltd. v. Enercon GmbH [Enercon
(India) Ltd. v. Enercon GmbH, (2014) 5 SCC 1: (2014) 3 SCC (Civ)
59] dealt with an arbitration clause that did not provide for a method
of electing the third arbitrator. The Court held that "the omission is
so obvious that the court can legitimately supply the missing line."
The line "the two arbitrators appointed by the parties shall appoint
the third arbitrator" was read into the clause so as to give effect to it.
It was further held that: (SCC p. 39, para 88)
"88. In our opinion, the courts have to adopt a
pragmatic approach and not a pedantic or technical approach
while interpreting or construing an arbitration agreement or
arbitration clause. Therefore, when faced with a seemingly
unworkable arbitration clause, it would be the duty of the
court to make the same workable within the permissible limits
of the law, without stretching it beyond the boundaries of
recognition. In other words, a common sense approach has to
be adopted to give effect to the intention of the parties to
arbitrate. In such a case, the court ought to adopt the attitude
of a reasonable business person, having business common
sense as well as being equipped with the knowledge that may
be peculiar to the business venture. The arbitration clause
cannot be construed with a purely legalistic mindset, as if one
is construing a provision in a statute."
xxx xxx xxx"
(Emphasis Supplied)
13. Applying the settled principles of law, as noted hereinabove, it has to
be construed whether the Clause in the present case constitutes a valid and
binding Arbitration Agreement between the parties. Clause 29, containing
the dispute resolution clause in the present case, firstly, mandates resolution
of disputes through amicable discussion. In the event the parties are unable
to resolve their disputes by amicable discussion, the parties will be free to
avail their legal remedies. The said Clause further proceeds to record that in
the event of the parties being unable to resolve the disputes by amicable
discussion, the disputes may be referred to arbitration, in terms as elucidated
in sub-clause (d) of the said Clause.
14. It is further to be seen that the dispute resolution clause in the present
case, after recording that the disputes may be referred to arbitration, has
detailed the procedure for conduct of the arbitration in sub-clause (d), which
clearly stipulates that the arbitration award shall be final and binding on the
parties. Further, the said sub-clause also lays down the venue and seat of the
arbitral tribunal.
15. Therefore, it is apparent that in the present case, there is a clear intent
of the parties to resolve the disputes through arbitration. The dispute
resolution clause is also in compliance with the norms of arbitration and
contemplates a binding adjudicatory mechanism.
16. Such intent of the parties is manifest from a holistic reading of the
dispute resolution clause (Clause 29), which elucidates the specific and
elaborate terms and procedure agreed upon between the parties for conduct
of arbitration. At the cost of repetition, it is noted that the parties have
agreed that they shall be bound by the arbitral award and shall act in
accordance with the same. The parties have further agreed upon the
language of the proceedings, as well as the liability of the party to pay cost
and expenses of the proceedings to be undertaken.
17. The dispute resolution clause, by elucidating the detailed procedure
for conduct of arbitration and using the terminology that, „arbitration shall
be conducted as follows‟, as also by stipulating the governing law and
making the arbitration award final and binding on the parties, strongly points
towards the unambiguous intention of the parties to refer the disputes to
arbitration.
18. Mere use of the prefix „may‟, which is followed by a detailed binding
adjudicatory mechanism, shall not make the dispute resolution clause in the
present case as a non-binding Arbitration Clause. Thus, a comprehensive,
harmonious and wholesome construction of Clause 29 makes clear the intent
of the parties to refer the disputes to arbitration, in the eventuality the same
are not resolved amicably.
19. Accordingly, prima facie, all the pre-requisites of a valid and binding
Arbitration Agreement are fulfilled in the present case and it is manifest that
the dispute resolution clause contemplates settlement of the disputes
between the parties through the process of arbitration.
20. In this regard, reference may be made to the judgment in the case of
Mahanagar Telephone Nigam Limited Versus Canara Bank and Others,
(2020) 12 SCC 767, wherein, the Supreme Court laid down that an
Arbitration Agreement between the parties must be understood and
interpreted in terms of the intention between the parties. Furthermore, in
interpreting or construing an Arbitration Agreement, it would be the duty of
the Court to make the same workable within the permissible limits of the
law. Thus, it was held as follows:
"xxx xxx xxx
9. A valid arbitration agreement constitutes the heart of an
arbitration. An arbitration agreement is the written agreement
between the parties, to submit their existing, or future disputes or
differences, to arbitration. A valid arbitration agreement is the
foundation stone on which the entire edifice of the arbitral process
is structured. A binding agreement for disputes to be resolved
through arbitration is a sine qua non for referring the parties to
arbitration.
xxx xxx xxx
9.2. The arbitration agreement need not be in any particular form.
What is required to be ascertained is the intention of the parties to
settle their disputes through arbitration. The essential elements or
attributes of an arbitration agreement is the agreement to refer their
disputes or differences to arbitration, which is expressly or impliedly
spelt out from a clause in an agreement, separate agreement, or
documents/correspondence exchanged between the parties.
9.3. Section 7(4)(b) of the 1996 Act, states that an arbitration
agreement can be derived from exchange of letters, telex, telegram or
other means of communication, including through electronic means.
The 2015 Amendment Act inserted the words "including
communication through electronic means" in Section 7(4)(b). If it can
prima facie be shown that parties are ad idem, even though the other
party may not have signed a formal contract, it cannot absolve him
from the liability under the agreement [Govind Rubber Ltd. v. Louis
Dreyfus Commodities Asia (P) Ltd., (2015) 13 SCC 477 : (2016) 1
SCC (Civ) 733] .
9.4. Arbitration agreements are to be construed according to the
general principles of construction of statutes, statutory instruments,
and other contractual documents. The intention of the parties must
be inferred from the terms of the contract, conduct of the parties,
and correspondence exchanged, to ascertain the existence of a
binding contract between the parties. If the documents on record
show that the parties were ad idem, and had actually reached an
agreement upon all material terms, then it would be construed to be
a binding contract. The meaning of a contract must be gathered by
adopting a common sense approach, and must not be allowed to be
thwarted by a pedantic and legalistic interpretation. [Union of India
v. D.N. Revri & Co., (1976) 4 SCC 147]
9.5. A commercial document has to be interpreted in such a manner
so as to give effect to the agreement, rather than to invalidate it. An
"arbitration agreement" is a commercial document inter partes, and
must be interpreted so as to give effect to the intention of the parties,
rather than to invalidate it on technicalities.
9.6. In Khardah Co. Ltd. v. Raymon & Co. (India) (P) Ltd. [Khardah
Co. Ltd. v. Raymon & Co. (India) (P) Ltd., (1963) 3 SCR 183 : AIR
1962 SC 1810] , this Court while ascertaining the terms of an
arbitration agreement between the parties, held that: (AIR p. 1820,
para 30)
"30. ... If on a reading of the document as a whole, it can
fairly be deduced from the words actually used therein, that the
parties had agreed on a particular term, there is nothing in law
which prevents them from setting up that term. The terms of a
contract can be express or implied from what has been expressed. It
is in the ultimate analysis a question of construction of the
contract."
(emphasis supplied)
9.7. In interpreting or construing an arbitration agreement or
arbitration clause, it would be the duty of the court to make the same
workable within the permissible limits of the law. This Court in
Enercon (India) Ltd. v. Enercon GmbH [Enercon (India) Ltd. v.
Enercon GmbH, (2014) 5 SCC 1 : (2014) 3 SCC (Civ) 59] , held that
a common sense approach has to be adopted to give effect to the
intention of the parties to arbitrate the disputes between them. Being
a commercial contract, the arbitration clause cannot be construed
with a purely legalistic mindset, as in the case of a statute.
xxx xxx xxx"
(Emphasis Supplied)
21. Similarly, holding that Courts must adopt a pragmatic and
commercially efficacious approach to uphold and operationalise Arbitration
Clauses, ensuring that intention to arbitrate is not defeated merely due to
inartistic drafting or apparent un-workability, Supreme Court in the case of
Enercon (India) Limited and Others Versus Enercon GMBH and
Another, (2014) 5 SCC 1, has held as follows:
"xxx xxx xxx
88. In our opinion, the courts have to adopt a pragmatic approach
and not a pedantic or technical approach while interpreting or
construing an arbitration agreement or arbitration clause.
Therefore, when faced with a seemingly unworkable arbitration
clause, it would be the duty of the court to make the same workable
within the permissible limits of the law, without stretching it beyond
the boundaries of recognition. In other words, a common sense
approach has to be adopted to give effect to the intention of the
parties to arbitrate. In such a case, the court ought to adopt the
attitude of a reasonable business person, having business common
sense as well as being equipped with the knowledge that may be
peculiar to the business venture. The arbitration clause cannot be
construed with a purely legalistic mindset, as if one is construing a
provision in a statute. We may just add here the words of Lord
Diplock in Antaios Compania Naviera S.A. v. Salen Rederierna A.B.
[1985 AC 191 : (1984) 3 WLR 592 : (1984) 3 All ER 229 (HL)] ,
which are as follows: (AC p. 201 E)
"... if detailed semantic and syntactical analysis of words
in a commercial contract is going to lead to a conclusion that
flouts business commonsense, it must be made to yield to
business commonsense."
We entirely agree with the aforesaid observation.
89. This view of ours is also supported by the following judgments
which were relied upon by Dr Singhvi:
89.1. In Visa International Ltd. [Visa International Ltd. v. Continental
Resources (USA) Ltd., (2009) 2 SCC 55 : (2009) 1 SCC (Civ) 379], it
was inter alia held that: (SCC pp. 64-65, paras 25-26)
"25. ... No party can be allowed to take advantage of
inartistic drafting of arbitration clause in any agreement as
long as clear intention of parties to go for arbitration in case
of any future disputes is evident from the agreement and
material on record including surrounding circumstances.
26. What is required to be gathered is the intention of the
parties from the surrounding circumstances including the
conduct of the parties and the evidence such as exchange of
correspondence between the parties."
89.2. Similar position of law was reiterated in Nandan Biomatrix Ltd.
[Nandan Biomatrix Ltd. v. D1 Oils Ltd., (2009) 4 SCC 495: (2009) 2
SCC (Civ) 227], wherein this Court observed inter alia as under:
(SCC pp. 501-02, paras 28-30)
"28. This Court in Rukmanibai Gupta v. Collector [(1980)
4 SCC 556] has held (at SCC p. 560, para 6) that what is
required to be ascertained while construing a clause is
„whether the parties have agreed that if disputes arise
between them in respect of the subject-matter of contract such
dispute shall be referred to arbitration, then such an
arrangement would spell out an arbitration agreement‟.
29. In M. Dayanand Reddy v. A.P. Industrial
Infrastructure Corpn. Ltd. [(1993) 3 SCC 137] this Court has
held that: (SCC p. 142, para 8)
„8. ... an arbitration clause is not required to be stated in
any particular form. If the intention of the parties to refer the
dispute to arbitration can be clearly ascertained from the terms
of the agreement, it is immaterial whether or not the
expression arbitration or "arbitrator" or "arbitrators" has
been used in the agreement.‟
30. The Court is required, therefore, to decide whether the
existence of an agreement to refer the dispute to arbitration can
be clearly ascertained in the facts and circumstances of the
case. This, in turn, may depend upon the intention of the parties
to be gathered from the correspondence exchanged between the
parties, the agreement in question and the surrounding
circumstances. What is required is to gather the intention of the
parties as to whether they have agreed for resolution of the
disputes through arbitration. What is required to be decided in
an application under Section 11 of the 1996 Act is: whether
there is an arbitration agreement as defined in the said Act."
(emphasis in original)
90. It is a well-recognised principle of arbitration jurisprudence in
almost all the jurisdictions, especially those following the
UNCITRAL Model Law, that the courts play a supportive role in
encouraging the arbitration to proceed rather than letting it come to
a grinding halt. Another equally important principle recognised in
almost all jurisdictions is the least intervention by the courts. Under
the Indian Arbitration Act, 1996, Section 5 specifically lays down that:
"5.Extent of judicial intervention.--Notwithstanding anything
contained in any other law for the time being in force, in matters
governed by this Part, no judicial authority shall intervene except
where so provided in this Part."
Keeping in view the aforesaid, we find force in the submission of
Dr Singhvi that the arbitration clause as it stands cannot be frustrated
on the ground that it is unworkable.
xxx xxx xxx
96. Similarly, other provisions contained in Sections 8, 11 and 45 of
the Indian Arbitration Act, 1996 are machinery provisions to ensure
that parties can proceed to arbitration provided they have expressed
the intention to arbitrate. This intention can be expressed by the
parties, as specifically provided under Section 7 of the Indian
Arbitration Act, 1996 by an exchange of letters, telex, telegrams or
other means of telecommunication which provide a record of the
agreement. Such intention can even be expressed in the pleadings of
the parties such as statements of claim and defence, in which the
existence of the agreement is alleged by one party and not denied by
the other. In view of the above, we are of the opinion that the parties
can be permitted to proceed to arbitration.
xxx xxx xxx"
(Emphasis Supplied)
22. In regard to interpretation of contracts/clauses, this Court also notes
the judgment in the case of Infrastructure Leasing and Financial Services
Ltd. Versus HDFC Bank Ltd. and Another, 2023 SCC OnLine SC 1371,
wherein, the Supreme Court has succinctly recapitulated the principles of
interpretation of contract, and held that it is the effect of all the terms of the
document, which brings out the true purport and intention of the parties. The
relevant portion of the aforesaid judgment, is extracted as follows:
"xxx xxx xxx
29. The effect of these documents is what the court is concerned
with. It is a known principle of contract interpretation, that the
substance of a document, is discernible from its terms, rather than
the label or its nomenclature. In Yellapu Uma Maheswari v. Buddha
Jagadheeswararao [(2015) 11 SCR 849], the court held:
"It is well settled that the nomenclature given to the
document is not decisive factor but the nature and substance
of the transaction has to be determined with reference to the
terms of the documents and that the admissibility of a
document is entirely dependent upon the recitals contained in
that document but not on the basis of the pleadings set up by
the party who seeks to introduce the document in question."
30. In Assam Small Scale Ind. Dev. Corp. Ltd. v. J.D.
Pharmaceuticals [2005 Supp (4) SCR 232] the court stated as follows:
"The nature of transaction is required to be determined
on the basis of the substance there and not by the
nomenclature used. Documents are to be construed having
regard to the contexts thereof wherefor „labels‟ may not be of
much relevance."
31. This was also stated in V. Lakshmanan v. B.R. Mangalagiri [1994
Supp (6) SCR 561] (that the "nomenclature or label given in the
agreement as advance is not either decisive or immutable."). This
principle of substance, over the form, was followed in Super Poly
Fabriks Ltd. v. Commissioner of Central Excise, Punjab [(2008) 6
SCR 1076].
32. That one document is styled or described in a certain manner, or
that it uses a certain expression, or term is not conclusive; it is the
effect of all the terms, of the documents, which bring out the true
purport and intention of the parties. Likewise, another allied
principle of contract interpretation, is that where the transaction is
not the subject of one document, but several, which refer to each
other, or a reading of all, describe the entire contract, then, it is open
to the court to consider all of them together. This principle was stated
in S. Chattanatha Karayalar v. The Central Bank of India wherein this
court held that:
"The principle is well-established that if the transaction is
contained in more than one document between the same parties
they must be read and interpreted together and they have the
same legal effect for all purposes as if they are one document. In
Manks v. Whiteley, [1912] 1 Ch. 735 Moulton, L.J. stated:
"Where several deeds form part of one transaction and
are contemporaneously executed they have the same effect for
all purposes such as are relevant to this case as if they were one
deed. Each is executed on the faith of all the others being
executed also and is intended to speak only as part of the one
transaction, and if one is seeking to make equities apply to the
parties they must be equities arising out of the transaction as a
whole."
xxx xxx xxx"
(Emphasis Supplied)
23. In the light of the above discussion, this Court is of a prima facie view
that the intention of the parties to resolve their disputes by way of arbitration
is palpable from a bare reading of the dispute resolution clause governing
the parties. Consequently, Clause 29 of the Agreement between the parties is
held to be a valid Arbitration Clause, which is binding on the parties before
this Court.
24. The judgments relied upon by the respondent are clearly
distinguishable, as the dispute resolution clause contained in the said
judgments are distinct and entirely different from the dispute resolution
clause existing in the present case. Besides, in the present case, the parties
have already agreed upon the terms of arbitration at length, unlike in the
cases as relied upon by the respondent, wherein the terms of conduct of
arbitration had been left to be determined at a later stage.
25. Though the dispute resolution clause in the present case envisages
amicable discussion between the parties, however, it is a settled legal
position that any pre-arbitral mechanism making it obligatory to seek
resolution of disputes through mediation, conciliation or the like, is directory
and not mandatory. (See: Hindustan Unilever Limited Versus Jagdeesh
Kumar Sole Proprietor of Hari Ram Dharam Pal, 2024 SCC OnLine Del
7522)
26. Accordingly, there is no impediment before this Court in appointing
an arbitrator. Since the petitioner herein has already invoked the Arbitration
Clause, this Court proceeds to appoint an arbitrator in terms of the Clause 29
between the parties.
27. Considering the submissions made before this Court, following
directions are issued:
i. Mr. Amrit Pal Gambhir, Advocate, (Mobile No.: +91-9810082347
and +91-9999983935) is appointed as a Sole Arbitrator to adjudicate
the disputes between the parties.
ii. The remuneration of the Arbitrator shall be in terms of Schedule IV of
the Arbitration Act.
iii. The Arbitrator is requested to furnish a declaration in terms of Section
12 of the Arbitration Act prior to entering into the reference. In the
event, there is any impediment to the Arbitrator‟s appointment on that
count, the parties are given liberty to file an appropriate application
before this Court.
iv. It shall be open to the respondent to raise counter-claims, if any, in the
arbitration proceedings.
v. It is made clear that all the rights and contentions of the parties,
including, the arbitrability of any of the claims and/or counter-claims,
any other preliminary objection, as well as claims on merits of the
dispute of either of the parties, are left open for adjudication by the
learned Arbitrator.
vi. The parties shall approach the Arbitrator within two (2) weeks, from
today.
28. It is made clear that this Court has not expressed any opinion on the
merits of the case.
29. The petition is disposed of in the aforesaid terms.
30. The Registry is directed to send a copy of this order to the learned
Sole Arbitrator, for information and compliance.
MINI PUSHKARNA
(JUDGE)
APRIL 10, 2026
Kr/Au/Ak/Sk
