Mere Use Of Word 'Arbitration' In Agreement Clause Heading Would Not Infer Existence Of Agreement Between Parties To Resolve Disputes Through Arbitration: Delhi HC

The Delhi High Court has observed that the mere use of word 'Arbitration' in the heading in the Clause of Agreement would not lead to the inference that there exists an agreement between such parties seeking resolution of disputes through arbitration.

Justice Mukta Gupta referred to a 2014 decision of the Delhi High Court in Avant Garde Clean Room & Engg. Solutions Pvt. Ltd. v. Ind Swift Limited wherein the Court had dealt with the issue as to whether the use of word 'Arbitration' in the heading of an Agreement would entail existence of an arbitration agreement.

The Court was dealing with a plea seeking appointment of an Arbitrator for resolving the disputes in relation to the software development arising out of the agreement dated 29th July 2021 between the parties and costs.

According to the petitioner, the petitioner and the respondent entered into a Master Service Agreement on 29th July 2021. After the start of the project, the petitioner raised concerns due to the delay on the part of the respondent.

Thereafter, on 3rd December 2021, the petitioner wrote an email to the respondent to resolve all differences amicably by dialogue. On 6th December 2021, the respondent informed the petitioner that there is an 'expectation mismatch' and therefore, the 'project is put on hold'. The respondent introduced a new person for communication with the petitioner and showed no intent of resolving the issues flagged by the petitioner.

On 8 February 2022, the petitioner sent a legal notice to the respondent invoking arbitration. The respondent replied to the legal notice of the petitioner on 13th February 2022 stating that there was no arbitration agreement between the parties.

Clause 11 of the Master Service Agreement dated 29th July 2021 between the parties reads as "Jurisdiction, Arbitration & Dispute Resolution". It stated that the said agreement or any dispute or claim relating to it, its enforceability or its termination shall be governed and interpreted according to the laws of India subject to Clause 11 and that the Courts at Delhi shall have exclusive jurisdiction over any disputes under the Agreement.

On the basis of the heading of the Clause 11 noting the word 'Arbitration', the petitioner claimed resolution of disputes arising between the parties through arbitration.

Accordingly, referring to the said decision mentioned above, the Court observed thus:

"…it is clear that mere use of the word 'Arbitration' in the heading in the Clause 11 of the Agreement between the parties in the present proceedings would not lead to the inference that there exists an agreement between the parties seeking resolution of disputes through arbitration."

Therefore, finding no ground to appoint an Arbitrator to adjudicate the disputes between parties, the Court dismissed the plea.

Title: FOOMILL PVT. LTD. v. AFFLE (INDIA) LTD.

Citation: 2022 LiveLaw (Del) 239

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