A bench comprising of Justice A.M. Khanwilkar and Justice Dinesh Maheshwari in the Supreme Court has held that when a clause in an agreement merely provides for settlement of disputes between the parties to the Chairman and Managing Director, it cannot be construed as an Arbitration clause.
The case is titled as Food Corporation of India v. National Collateral Management Services Limited, dated 4.11.2019.
Apex Court Bench stated that,“Any dispute between the parties arising out of this agreement or pertaining to any matter which is subject matter of this Agency Agreement shall be referred to the Chairman and Managing Director of F.C.I./Principal for settlement and whose decision shall be final and binding on the both FCI/Principal and Agent”
Supreme court overruled the High Court order which held that by drafting above clause parties had intended to resort to arbitration in case of any dispute or disagreement regarding the claims arising from the respective agreement.
Supreme Court opined that bare reading of above clause predicate that that the dispute shall be referred to Chairman and Managing Director of F.C.I./Principal for “settlement” whose decision shall be final and binding on both F.C.I./Principal and the Agent; thus, above agreement cannot be construed as an arbitration agreement and petition of initiating arbitration was dismissed.
Apex Court Bench made it clear that dismissal of arbitration petition in terms of the order shall not come in the way of the parties to pursue their claims by way of other appropriate remedies and the time spent by the respondent in pursuing arbitration petition shall not be reckoned whilst computing Limitation in terms of Section 21 of the Arbitration Act read with Section 14 of the Limitation Act.
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