Sunday, 16 September 2018

How to ascertain when dispute can be referred to arbitration?

 The aforesaid passage makes it clear as crystal that emphasis
has been laid on the intention of the parties to have their disputes
resolved by arbitration.


11. 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
REPORTABLE 
IN THE SUPREME COURT OF INDIA
 CIVIL ORIGINAL JURISDICTION
 ARBITRATION PETITION (CIVIL) NO. 22 OF 2018 

M/s. Zhejiang Bonly Elevator Guide  Vs M/s. Jade Elevator Components.
Coram:
 Dipak Misra, CJI

A. M. Khanwilkar J

Dr. D.Y. Chandrachud J.
Date: September 14, 2018


 In the instant arbitration petition, preferred under Section 11(5) of the Arbitration and Conciliation Act, 1996 (for brevity, „the Act‟), the petitioner seeks for constitution of an arbitral tribunal with a sole arbitrator to adjudicate the claims of the petitioner under the Commission Processing Contract dated 11.09.2014 and to pass such further order as may be deemed fit and proper in the facts and circumstances of the case.
2. The petitioner, company incorporated under the laws of People‟s Republic of China having its office at Sanquiao Village, Fuchun Street, Fuyang, China, is engaged in the business of, inter alia, exporting and
supplying high quality elevator guiderails, fish-plates, accessories and
allied goods. The respondent, a partnership firm based in India having
its office at Plot No.455, Road No.11, “A” Cross Road, GIDC,
Kathwada, Ahmedabad – 382430, Gujarat, is engaged in the business
of supplying elevator components for use in the modernization of
existing lifts and the new design of the elevator.
3. The contract, namely, Commission Processing Contract
(hereinafter referred to as „the Contract‟) was entered into between the
parties on 11.09.2014 in respect of supply of certain products under
the Contract. In the course of performance of the Contract, as certain
differences had arisen and the parties were unable to amicably settle
the disputes which fell within the scope of the arbitration clause, the
petitioner appointed Justice V.S. Agarwal, former Judge, High Court of
Judicature at New Delhi as the sole arbitrator. On 30.03,2018, the
petitioner called upon the respondent to consent to the appointment of
the sole arbitrator within a period of thirty days from the receipt of the
notice. The respondent received the said notice on 31.03.2018 and
the respondent in its reply dated 05.04.2018 refused to concur and
consent to the appointment of the sole arbitrator. Because of the
aforesaid situation, the petitioner has been compelled to move this
Court for appointment of the sole arbitrator. When the matter was

listed before this Court after service of notice, the learned counsel for
the respondent has placed reliance on the reply dated 05.04.2018
given by the counsel for the respondent. In the said reply, the facts
asserted by the petitioner have been disputed. That apart, it has been
stated that the claims put forth are beyond the provisions of the
Contract.
4. To appreciate the controversy, it is required to be seen whether
there is an arbitration clause for resolution of the disputes. Clause 15
of the agreement as translated in English reads as follows:-
“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.”
5. It is submitted by learned counsel for the petitioner that if the
clause of „dispute handling‟ is scrutinized appropriately, the disputes
are to be settled through consultation and, if the consultation fails by
treatment of to the arbitration body for arbitration or Court and,
therefore, the matter has to be referred to arbitration. It is canvassed
by him that the clause is not categorically specific that it has to be
adjudicated in a court of law. It leads to choices and the choice
expressed by the petitioner is arbitration.

6. Learned counsel for the respondent, in his turn, would urge that
when it is stated arbitration or Court, the petitioner should knock at the
doors of the competent court but not resort to arbitration, for the
clause cannot be regarded as an arbitration clause which stipulates
that the disputes shall be referred to arbitration.
7. To appreciate the clause in question, it is necessary to appositely
understand the anatomy of the clause. It stipulates the caption given
to the clause „dispute handling‟. It states that the disputes should be
settled through consultation and if the consultation fails by treatment of
to the arbitration body for arbitration or the court. On a query being
made, learned counsel for the parties very fairly stated that though the
translation is not happily worded, yet it postulates that the words
“arbitration or the court” are undisputable as far as the adjudication of
the disputes is concerned. There is assertion that disputes have
arisen between the parties. The intention of the parties, as it flows
from the clause, is that efforts have to be made to settle the disputes
in an amicable manner and, therefore, two options are available, either
to go for arbitration or for litigation in a court of law.
8. This Court had the occasion to deal with such a clause in the
agreement in INDTEL Technical Services Private Limited vs. W.S.

Atkins Rail Limited1. In the said agreement, clause No.13 dealt with
the settlement of disputes. Clauses 13.2 and 13.3 that throw light on
the present case were couched in the following language:-
“13.2. Subject to Clause 13.3 all disputes or
differences arising out of, or in connection with, this
agreement which cannot be settled amicably by the
parties shall be referred to adjudication;
13.3. If any dispute or difference under this
agreement touches or concerns any dispute or
difference under either of the sub-contract
agreements, then the parties agree that such
dispute or difference hereunder will be referred to
the adjudicator or the courts as the case may be
appointed to decide the dispute or difference under
the relevant sub-contract agreement and the parties
hereto agree to abide by such decision as if it were
a decision under this agreement.”
9. Interpreting the aforesaid clauses, the Judge designated by the
learned Chief Justice of India held thus:-
“Furthermore, from the wording of Clause 13.2 and
Clause 13.3, I am convinced, for the purpose of this
application, that the parties to the memorandum
intended to have their disputes resolved by
arbitration and in the facts of this case the petition
has to be allowed.”
10. The aforesaid passage makes it clear as crystal that emphasis
has been laid on the intention of the parties to have their disputes
resolved by arbitration.
1 (2008) 10 SCC 308

11. 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
and, accordingly, Justice Prakash Prabhakar Naolekar, formerly a
Judge of this Court, is appointed as sole Arbitrator to arbitrate upon
the disputes which have arisen between the parties. The learned
Arbitrator shall be guided by the Arbitration & Conciliation
(Amendment) Act, 2015. The learned Arbitrator shall make positive
efforts to complete the arbitration proceedings as per the Act of 2015.
12. The Registry is directed to send a copy of this order to the sole
Arbitrator. Learned counsels for the parties are also at liberty to bring
it to the notice of the Arbitrator.
13. The arbitration petition is, accordingly, allowed. There shall be
no order as to costs.
..………………………….CJI.
(Dipak Misra)
..…………………………….J.
(A. M. Khanwilkar)
..…..……………….………..J.
(Dr. D.Y. Chandrachud)
New Delhi;
September 14, 2018
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