Khushi Bajpai
Published on: October 13, 2022 at 21:54 IST
According to the Delhi High Court, the mere use of the word “can” in an arbitration clause does not render it ineffectual, and the parties’ desire to submit the dispute to arbitration must be ascertained after carefully reading the language and any other terms.
Justice Prateek Jalan’s bench reaffirmed that an exclusive jurisdiction clause would supersede a venue clause, so any arbitrations arising out of the contract will be decided by the court to which exclusive jurisdiction has been granted.
Facts:
In a dealership agreement signed by the parties on September 5, 2016, the respondent Shah Aircon was designated as Panasonic’s authorized dealer (Petitioner).
The respondent’s unpaid invoices and the petitioner’s provision of products to a third party in violation of the contract gave rise to a disagreement between the parties.
On August 20, 2020, the respondent served a legal notice on the petitioner, alleging that the petitioner had broken the terms of the agreement by selling products to an unapproved third party and raising the bills in the respondent’s name.
After that, the parties only spoke sporadically, which ultimately resulted in the issuing of the notice of arbitration. In response to the notice of arbitration, the respondent expressed a few concerns about the arbitral proceeding’s maintainability.
As a result, the petitioner published an arbitration notice.
Grounds of Objections:
The petition was challenged by the respondent on the grounds that the court lacked jurisdiction because Gurugram was designated as the location of the arbitration in the invoices from which the dispute arose.
The usage of the term “can” in the clause, which simply allows for the option of arbitration, prevents there from being a legally binding arbitration agreement between the parties.
The petitioner’s claims are time-barred because they surfaced in 2017, and the arbitration notification was sent on September 29, 2021.
Analysis by the Court:
The Court determined that the parties’ agreement granted the Courts in New Delhi exclusive jurisdiction and, more specifically, authorized the parties to apply to this Court for the appointment of an arbitrator. Contrarily, the arbitration clause in the invoices merely specifies the arbitration’s location.
According to the Court, the venue specified in the invoices would be superseded by the exclusive jurisdiction clause, making the respondent’s argument unjustified.
The Court then made a decision about the arbitration clause’s usage of the word “can.”
The Court determined that the arbitration clause would not be rendered ineffectual by the simple insertion of the word can. It was decided that an arbitration clause must be read in its whole, along with any other pertinent clauses.
The Court determined that the arbitration clause would not be rendered ineffectual by the simple insertion of the word can.
It was decided that an arbitration clause must be read in its whole, along with any other pertinent clauses.
The Court determined that the remaining portions of the clause were valid insofar as they dealt with the location of the arbitration, the language of the arbitration, the applicability of the Act, the need to provide justification, and the process for designating an arbitrator through arbitration.
The argument on the limitation element was then dismissed by the Court.
According to the court, if there is disagreement between the parties on the limitation issue, the arbitrator alone should resolve the disputed facts.
In light of this, the Court approved the petition and chose the arbitrator.