03 October 2021, Sunday

7 months ago

Appointing court refuses to enforce a pathological arbitration clause that used the expression “arbitration” but did not manifest any intent to arbitrate: Delhi High Court

03 October 2021 | Universal Design Build v. Dealskart Online Services Private Limited and Others | ARB.P. 558 of 2020 | Delhi High Court | Sanjeev Narula J | 2021 SCC OnLine Del 4567

The following clause does not constitute an arbitration agreement:

Clause 19 “This Agreement and all rights, duties and obligations arising hereunder shall be governed in accordance with the laws of India. Subject to Section 20 sub-section (b) (Arbitration), any dispute, disagreement or proceeding arising under or related to this Agreement shall be subject to the exclusive jurisdiction of the courts at New Delhi, India.”

The court reasoned that:

  1. Although the word ‘Arbitration’ is mentioned, the clause lacks the ingredients to constitute a valid arbitration agreement under Section 7 ACA. The intention to arbitrate must be manifest from the arbitration agreement itself, which is not so in this case.
  2. The word ‘arbitration’ is preceded with a reference to “Section 20 sub-section (b)”. There is no such Section 20 subsection (b) in the ACA. One could postulate that, due to an inadvertent typographical error, the reference is to subsection 2 of Section 20 ACA, which deals with the place of arbitration, or
  3. The reference could also perhaps be to Section 20(b) CPC which deals with court’s jurisdiction. If read in that light, clause 19 would make more logical sense as it seeks to confer exclusive jurisdiction on the courts in Delhi.
  4. Even if we were to ignore the phrase “Section 20 sub-section (b)’ and assume that ‘subject to …(Arbitration)” refers to the entire ACA, it would merely mean that the agreement is governed, controlled, effected by, or subservient to the ACA. Still, that is not an intention to arbitrate.
  5. Further, even in its entirety, the clause confers exclusive jurisdiction to the courts of New Delhi. This is an intent to refer the dispute to court.

Read the judgment here.

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