M/S Tusker Workspace Pvt. Ltd. Vs M/D D Vois Communications Pvt. Ltd.

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Reserved on : 27.06.2025 Pronounced on : 08.07.2025

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 08^TH DAY OF JULY, 2025 BEFORE

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THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.3430 OF 2025 (GM - CPC)

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BETWEEN:

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M/S. TUSKER WORKSPACE PVT. LTD., CIN: U74900KA2014PTCO77803 HAVING ITS REGISTERED OFFICE AT NO.L-148 BBMP NO.170/148, 5^TH MAIN ROAD SECTOR-6, HSR LAYOUT, BENGALURU KARNATAKA – 560 102 INDIA, REPRESENTED BY SRI SIDDARTH B.BHAVIKATTI SENIOR EXECUTIVE OFFICER AND AUTHORIZED REPRESENTATIVE REGISTERED UNDER INDIAN COMPANIES ACT.

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... PETITIONER

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(BY SRI SKANDAN P.JAIN, ADVOCATE)

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AND:

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M/S D-VOIS COMMUNICATIONS PVT. LTD., CIN: U32204KA2006PTCO40000 THROUGH ITS DIRECTOR (S) HAVING ITS REGISTERED OFFICE AT NO.11/1 KHR HOUSE, PALACE ROAD

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VASANT NAGAR, BENGALURU – 560 052 REGISTER UNDER INDIAN COMPANIES ACT.

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... RESPONDENT

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(BY SRI ANIKETH B. C., ADVOCATE FOR C/R)

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THIS WRIT PETITION IS FILED UNDER ARTICL 227 OF THE CONSTITUTION OF INDIA R/W SECTION 16 OF THE COMMERCIAL COURT ACT, 2015 AND SECTION 151 OF THE CODE OF CIVIL PROCEDURE, 1908 PRAYING TO SET ASIDE THE IMPUGNED ORDER DATED 16/10/2024 PASSED BY THE LEARNED LXXXVI ADDL. CITY CIVIL AND SESSIONS JUDGE, (COMMERCIAL COURT) BENGALURU ON THE APPLICATION FILED BY THE RESPONDENT U/S 8 OF THE ARBITRATION AND CONCILIATION ACT 1996 R/W SECTION 16 OF THE COMMERCIAL COURT ACT 2015 AND SECTION 151 OF THE CODE OF CIVIL PROCEDURE, 1908 VIDE ANNX-A IN COM. OS 207/2024 AND CONSEQUENTLY RESTORE THE SUIT INSTITUTED BY THE PETITIONER.

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THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 27.06.2025, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING:-

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CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA

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CAV ORDER

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The petitioner/plaintiff is at the doors of this Court, calling in question an order dated 16-10-2024 passed by the LXXXVI Additional City Civil and Sessions Judge, Bengaluru in Commercial O.S.No.207 of 2024, by which the application filed by the defendant seeking reference of the matter to Arbitration comes to be allowed

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and consequently seeks restoration of the suit filed by the petitioner/plaintiff.

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Heard Sri Skandan P. Jain, learned counsel appearing for the petitioner and Sri Aniketh B.C., learned counsel appearing for the caveator/respondent.

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Facts, in brief, germane are as follows: -

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The petitioner inter alia engages in the business of operating and managing a chain of business centers/co-working space under the name of “Bhive Workspace”, which provides office space to individuals and other entities for carrying out their business activities. The respondent/defendant which is a Company incorporated under the Companies Act, 2013 is said to have approached the petitioner for availing its facilities and services. The petitioner then agrees to provide its co-working infrastructure facilities through an electronic agreement dated 25-07-2019 with a monthly fee of ₹6,41,100/- plus taxes. The commercial relationship

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between the two is said to have blossomed in terms of the aforesaid

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agreement.

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Dispute arose between the two subsequently. The dispute leads to issue of termination of notice by the petitioner to the respondent and lands up in the Commercial Court in Commercial O.S.No.207 of 2024. Before the Commercial Court, the respondent/defendant files an application seeking reference of the matter to arbitration, owing to the fact that the agreement between the two was to be resolved by way of arbitration. The concerned Court, by its order dated 16-10-2024, allows the application filed by the defendant and in terms of Section 8 of the Arbitration and Conciliation Act, 1996 (‘the Act’ for short) refers the matter for arbitration. It this order that has driven the petitioner/plaintiff to this Court in the subject petition.

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The learned counsel appearing for the petitioner would vehemently contend that there is no explicit arbitrable agreement between the two. Therefore, the Court will have to try it as a

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commercial suit and not refer the matter for arbitration. It is his contention that unless the parties explicitly agree without any ambiguity the solution for the dispute is only through arbitration, the application filed under Section 8 of the Act r/w Section 16 of the Commercial Courts Act could not have been allowed.

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Per contra, the learned counsel representing the respondent would vehemently refute the submissions in contending that if a perusal at the clause of agreement is had, it is unequivocally clear that the dispute was resolvable only by way of arbitration. This is what the Court has done. The Commercial original suit in fact was not entertainable, without at the outset parties resolving the dispute by way of arbitration. He would submit that there is no fault in the order and does not warrant any interference with the disposal of the suit.

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I have given my anxious consideration to the submissions

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made by the respective learned counsel and have perused the material on record.

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The afore-narrated facts are not in dispute. What is germane to be considered is, whether the order of the concerned Court answering the application filed by the defendant under Section 8 of the Act is sustainable? The entire fulcrum of the subject lis revolves round the agreement between the parties. The agreement between the parties reads as follows:

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“This Rental Agreement (“Agreement”) is entered on 25-07-2019 BY AND BETWEEN:

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TUSKER WORKSPACE PRIVATE LIMITED , a company registered under the Companies Act, 2013, having its registered office at No.148, BBMP No.170/148, 5^th Main Road, Sector-6, HSR Layout, Bangalore - 560 102 represented herein by its authorized signatory, Mr. Sheshagiri Rao Paplikar (hereinafter referred to as “ BHIVE Workspace ”, which expression shall, where the context admits, include its subsidiaries, affiliates, successors and assigns), of the ONE PART;

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AND

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D-Vois Communications Private Limited incorporated under the Companies Act, 1956, with its registered office at Company #11/1, KHR House, Palace Road, Vasanth Nagar, Bangalore – 560 001 India and duly represented by Mr. Ganesh Prasad (hereinafter referred to as “ Authorised Signatory ” and/or “ Member ”, which expression shall, unless repugnant to the context, mean and include its successors and permitted assigns), of the OTHER PART.

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(BHIVE Workspace and the Member shall hereinafter be collectively referred to as “ Parties ” and individually, as a “ Party ”).

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WHEREAS:

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1. BHIVE Workspace is in the business of operating and managing a chain of business centers/coworking under the name “BHIVE WORKSPACE(R)”, which provide offence space to individuals and entities for carrying out their respective professional and business activities.

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2. The Member is an internet service provider into business of Internet and allied services having presence in PAN India basis.

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3. The Member is desirous of availing the facilities and services offered at BHIVE Workspace; and

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4. After mutual discussions, BHIVE Workspace has agreed to provide the Member the facilities and services available at BHIVE Workspace upon certain terms and conditions, which the parties seek to record in writing.

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7.12 GOVERNING LAW AND ARBITRATION: Where any dispute arises between the Parties concerning or in any way arising out of this Agreement or the performance by either Party of the terms of this Agreement, the Parties will attempt in good faith to resolve the dispute through consultation at the senior management levels. The disputing Party shall give the other Party written notice of the dispute. If the Parties fail to resolve such dispute within sixty (60) days of the disputing Party’s notice, either Party may seek arbitration as set forth below. The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996. The reference shall be to a single arbitrator if the Parties agree upon one failing which the reference shall be to three arbitrators, each party appointing one arbitrator and both such arbitrators appointing the third presiding arbitrator . The venue of the Arbitration shall be Bangalore in case and the language of the Arbitration proceeding shall be English. Any dispute arising out of or

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in connection with this Agreement shall be governed by the laws of India and the Courts in Bangalore shall have exclusive jurisdiction over the matters relating to or arising from this Agreement. The Parties shall continue in providing their services in good faith till completion of arbitration process”.

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(Emphasis added)

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The parties agree upon resolution of a dispute. The resolution is, where any dispute arises between the parties concerned or in any way arising out of the agreement or the performance of either parties, the parties will attempt in good faith to resolve the dispute through consultation at senior management levels and if they fail in such attempt, then within 60 days either party may seek arbitration as set forth, for which the provisions of the Act would be applicable. The manner of arbitrator being appointed is also agreed to between the parties.

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The dispute arose. A suit for recovery borne out of alleged contractual breaches was instituted before the Commercial Court. Before the Commercial Court, the defendant files an application seeking reference of the matter, to arbitration owing to the aforesaid clause. The application is objected to, contending that

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there is no unequivocal acceptance of arbitration to be the dispute resolution mechanism. It is only the parties may enter into arbitration for resolution of the dispute. On consideration of the objections and the application, the concerned Court, by the impugned order, refers the matter for arbitration. The order reads as follows:

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“ORDER ON I.A. No.1

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The defendant filed this I.A. under Section 8 of the Arbitration and Conciliation Act requesting the court to refer the parties to the suit to Arbitration for resolution of the subject matter of the dispute in view of the valid and subsisting arbitration clause under Article 7.12 of the agreement dated 25.07.2019 and consequentially reject the plaint.

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Plaintiff filed his detailed objections and requested the court to reject the application filed by the defendant.

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3.Heard both sides.

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The following points arise for court’s consideration;

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i. Whether the dispute between the parties is the subject matter of arbitration ?

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ii. What Order

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REASONS

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The plaintiff on the basis of electronic agreement dated 25.07.2019 filed this suit for recovery of Rs.49,37,000/- along with interest at the rate of 18% per annum from the defendant. According to the plaintiff, the defendant has breached the contractual terms and liable to pay rental dues as narrated in para-16 of the plaint.

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The plaintiff however has not furnished the agreement. Upon the insistence of the court, on 25.09.2024, the defendant has produced rental agreement dated 25.07.2019 along with certificate under Section 65-B(4) of the Indian Evidence Act. Clause 7.12 of the agreement dated 25.07.2019 reads as follows;

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“GOVERNING LAW AND ARBITRATION: Where any dispute arises between the Parties concerning or in any way arising out of this Agreement or the performance by either Party of the terms of this Agreement, the Parties will attempt in good faith to resolve the dispute through consultation at the senior management levels. The disputing Party shall give the other Party written notice of the dispute. If the Parties fail to resolve such dispute within sixty (60) days of the disputing Party’s notice, either Party may seek arbitration as set forth below. The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act 1996. The reference shall be to a single arbitrator if the Parties agree upon one failing which the reference shall be to three arbitrators, each party appointing one arbitrator and both such arbitrators appointing the third presiding arbitrator. The venue of the Arbitration shall be Bangalore in case and the language of the Arbitration proceeding shall be English. Any dispute arising out of or in connection with this Agreement shall be governed by the laws of India and the Courts in Bangalore shall have exclusive jurisdiction over the matters relating to or arising from this Agreement. The Parties shall continue in providing their services in good faith till completion of arbitration process.”

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Clause 7.12 of the agreement apparently plain and free from ambiguities. The plaintiff in his objections quoted decision of Foomill Pvt. Ltd. Vs. Affle (India) Ltd . reported in 2022 SCC OnLine Del 843 and other decision in the same line. In the said decisions, it is held that mere use of the word ‘arbitration’ or ‘arbitrator’ in a heading or clause would not aggregate to an arbitration agreement. Similarly, the mere possibility of parties agreeing to arbitrate in the future, as contrasted from an obligation to refer disputes to arbitration, would not surmount to an arbitration agreement. In terms should be univocal in displaying an intention on the part of the

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parties to mandatorily refer their disputes to arbitration and a willingness to be bound by the decision of such tribunal.

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8. In the present case, as observed earlier, the arbitration clause in the agreement is a plain and free from ambiguities. The dispute between the parties is arbitrable one. The defendant has produced electronically signed arbitration agreement and certificate under Section 65-B(4) of the Indian Evidence Act. On 20.03.2024, the defendant appeared before the court and the matter was adjourned to 25.04.2024 for filing of written statement. On 25.04.2024, the defendant has filed the present application under Section 8 of the Arbitration and Conciliation Act. Meaning thereby the defendant applied not later than the date of submitting his first statement of substance of that dispute. Therefore, the court has to follow the mandate of Section 8 of the Arbitration and Conciliation Act . Therefore, the court proceed to pass the following;

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O R D E R

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The application is hereby allowed. It is hereby referred the parties to the arbitration.

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Suit disposed off in terms of the above order .”

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(Emphasis added)

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Section 8 confers power to refer the parties to arbitration where there is an arbitration agreement. The defendant’s application is thus answered under Section 8 of the Act.

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The issue now would be, can the linguistic latitude of usage of the words ‘may’, be deemed to be a binding and

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solemn attribute or does it merely enshrine an option, a tentative pathway contingent upon further consensus . Thus, the fulcrum of the legal debate revolves round a single word – ‘may’ in the agreement. The judicial landscape is well adorned with precedents that shed light on this question. Therefore, this Court need not delve deep into the matter.

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JUDICIAL LANDSCAPE:

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The High Court of Calcutta in the case of BGM AND M- RPL-JMCT(JV) v. EASTERN COALFIELDS LIMITED¹ , and the High Court of Bombay in the case of GTL INFRASTRUCTURE LIMITED v. VODAFONE INDIA LIMITED (VIL)² among others, have authoritatively pronounced that the word ‘may’ unless envelope in clear and unequivocal terms, denoting compulsion, does not metamorphose into a binding arbitration agreement. The distinction between ‘may’ and ‘shall’ is not mere semantics – it is jurisdictional. In the case of BGM AND M-RPL-JMCT(JV), the High Court of Calcutta, has held as follows:

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1 2024 SCC OnLine Cal 486

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2 2022 SCC OnLine Bom 7717

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“….

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10. Presence of the word “may” in the arbitration clause in the matter at hand is required to be tested against mindset of the parties to the agreement. Parties consenting to arbitration including to the mode and mechanism of the procedure forms the mainstay of the 1996 Act.

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Does “may” negate the existence of an arbitration agreement?

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11. In Jagdish Chander v. Ramesh Chander , (2007) 5 SCC 719, the Supreme Court set out 4 broad principles on what would constitute an arbitration agreement. These are:

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i) The intent of the parties to enter into an arbitration agreement as discernible from the terms of the agreement;

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ii) Absence of the words “arbitration”/“arbitral tribunal” would not be fatal to the existence of an arbitration clause if the clause has the attributes or the elements of an arbitration agreement;

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iii) The clause must provide that the disputes shall be referred to arbitration in the event of disputes arising between the parties;

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iv) Mere use of the words “arbitration”/“arbitrator” in a clause will not make it an arbitration agreement if the clause requires further consent of the parties for reference to arbitration.

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12. Jagdish Chander masterfuly encapsulates the parameters of what constitutes an arbitration agreement and more important, the parties intention to arbitrate. The will to arbitrate must clearly be articulated in the arbitration clause. There is no room for any doubt or second-guessing. Parties must be clear in their minds that they wish to subject themselves to arbitration as the chosen mechanism of dispute resolution and ensure that the intention is expressed in writing in the form of the arbitration agreement.

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13. The clarity of intention should hence be expressed through clear-cut words. Therefore, words such as

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“the parties wish …..”, or “the parties will consider …..”, or “the parties will thereafter decide ….” and “the parties may …..”

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will be counter-productive to the unequivocality of the intention to arbitrate. The above instances are not exhaustive and may include other words which give a sense of indecision, lack of purpose, prevarification or even saving the option for arbitration to a later date or as a last resort.

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14. An arbitration agreement also does not sit comfortably with conditions attached for the parties to go to arbitration. The clause should not be subject to or conditional upon further or future events which may or may not occur.

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15. In essence, there cannot be any ifs and buts or an undecided mumble; the parties must give a resounding “Yes” to arbitration. For a movement analogy; the arbitration agreement is not about a hesitant 1 step ahead - 2 steps backward/backtracking but a confident 1-way stride forward to arbitration.

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16. Section 11 of the 1996 Act is one of the earlier interventions by a Court on the presumption of the existence of an arbitration clause. The Court must hence ensure the existence of an arbitration agreement before flagging of the road to the award and beyond. The parties cannot set forth on the procedural journey if there is no arbitration agreement.

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17. In the present case, the arbitration agreement muddies the waters with regard to the immediate and unequivocal reference of the dispute to arbitration. The word “may” in the relevant part of the clause gives an option to the parties to either refer the dispute to arbitration or hold back on the arbitration. The word “may” makes the clause conditional on a future event/s or to the other parts of the clause and gives the parties the option to resile from the clause. In other words, the clause creates a Hamlet-esque hand-on-the-chin indecision

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and the Court is also left wondering as to what the parties actually intended in clause 13 of the agreement.

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18. Besides, the absence of an arbitration agreement was urged by the respondent both before the Commercial Court at Asansol as well as before the Division Bench of this Court. In any event, absence of an arbitration clause is a fundamental threshold argument and should be made at the section 11 stage.

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19. The Dispute Resolution Clause also makes it clear that the Clause is divided in 2 parts - The first part and the tiers thereof are relevant for government agencies and in any event does not refer to arbitration or have the trappings thereof. The second part applies to the petitioner as a non-government entity.

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20. Although arbitration clauses differ in every case, the Supreme Court has clarified certain uniform trappings of a valid arbitration agreement. In Food Corporation of India v. National Collateral Management Services Limited (NCMSL) , (2020) 19 SCC 464, the Supreme Court found a lack of finality in the arbitration clauses which envisaged reference of the dispute to the CMD of Food Corporation of India for “settlement”. The concerned clauses also specifically mentioned that the parties understood the clause not to be an arbitration clause. In Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture , 2022 SCC OnLine SC 960, the Supreme Court relied on Jagdish Chander and construed the relevant clause in the agreement not to be an arbitration agreement. The concerned clause before the Supreme Court also contained the word “may” . A learned Single Judge of the Bombay High Court in Quick Heal Technologies Limited v. NCS Computech Private Limited , 2020 SCC OnLine Bom 693 noted the difference between the words “shall” and “may” and concluded that there was no clear intention of the parties to refer the dispute between them to arbitration. The Court, in fact, construed the words “shall” and “may” in the same clause and came to the aforesaid view. Another learned Single Judge of the Bombay High Court in GTL Infrastructure Limited v. Vodafone Idea Limited (VIL) , (2023) 1 HCC (Bom) 1 construed the word “may”

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to contemplate a future possibility which would also involve discretion on the part of the parties whether to refer dispute the arbitration or not.

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21. On the other hand, the decisions shown by counsel for the petitioner are not on the point of negation or dilution of the arbitration agreement by use of the word “may”. Enercon (India) Limited v. Enercon GMBH , (2014) 5 SCC 1 was on the unworkability of the arbitration clause which is different from the absence/non-existence of an arbitration clause. Powertech World Wide Limited v. Delvin International General Trading LLC , (2012) 1 SCC 361 involved ambiguity in the language of the arbitration clause. The Supreme Court considered the decision in Jagdish Chander and referred to the correspondence between the parties and the intention emanating therefrom to refer the dispute to arbitration. In Babanrao Rajaram Pund v. Samarth Builders and Developers , (2022) 9 SCC 691, a Single Bench of the Supreme Court also referred to Jagdish Chander and opined that the arbitration clause before the Court was substantially different from the arbitration clause in Jagdish Chander . The Court noted use of the words “shall be referred to arbitration …” and relied on the recitals to the agreement to conclude that there was an unambiguous intention of the parties at the time of the formation of the contract to refer the disputes to arbitration. Visa International Limited v. Continental Resources (USA) Limited , (2009) 2 SCC 55, was on the point of existence of a live issue which was capable of being referred to arbitration under section 11 of the 1996 Act. The Court was also of the view that the attending facts and circumstances were conducive to the existence of a valid arbitration agreement.

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22. None of these decisions assist the petitioner. Unlike the present case, the arbitration clauses in the cases were not diluted by use of the word “may”. There are also no attending circumstances in the present case by way of correspondence or otherwise which would show that the parties intended to refer the dispute to arbitration even if the clause says otherwise.

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23. Despite the Court's finding on the absence of an arbitration agreement between the parties, it is important to record that clause 32 of the Instructions to Bidders which forms part of the e-tender document gives the option to an aggrieved party to approach the jurisdictional Court. Hence, the petitioner

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will not be rendered remedy-less. It is also important that contractors/parties engaging with public sector undertakings/Government Companies be made aware of the words used in the arbitration clause which have the effect of negating the arbitration agreement altogether. In many cases, the contractor does not have a say in the drafting of these clauses and it is hence all the more necessary for the parties to be put on notice and guard themselves against vague or uncertain dispute resolution clauses.

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24. In view of the above finding - that Clause 13 under the General Terms and Conditions of the e-tender document does not constitute or contain an arbitration agreement - AP 745 of 2023 is dismissed on the ground of maintainability. There shall be no orders as to costs.”

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(Emphasis supplied)

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The High Court of Bombay in the case of GTL INFRASTRUCTURE LIMITED , has held as follows:

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40. I need not multiply the authorities wherein the intention of the parties have clearly guided the Courts to construe a particular clause in an agreement to be not an imperative mandate, if it do not conform the essential attributes of an Arbitration Agreement under Section 2(b) and Section 7 of the Act. Ultimately, the position of law which could be discerned from the authoritative pronouncements, is that the word ‘may’ however conclusive and mandatory affirmation between the parties to be certain, to refer to disputes to arbitration and the very use of the word ‘may’ by the parties does not bring about an arbitration agreement, but it contemplate a future possibility, which would encompass a choice or discretion available to the parties. It thus provides an option whether to agree for resolution of dispute through arbitration or not, removing the element of compulsion for being referred for arbitration. This would necessarily contemplate future consent, for being referred for arbitration. Since the

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intention of the parties to enter into an arbitration agreement has to be gathered from the terms of the agreement and though Mr. Kamath has submitted that by the reply to the notice of invocation of arbitration by the respondent, they have indicated that the parties are referrable for arbitration, I am unable to pursuade myself to accept the said argument. If the terms of the agreement clearly indicate an intention on part of the parties, the material in form of the correspondence exchanged, shall not overrule or surpass the intention. Where there is a possibility of the parties agreeing to arbitration in future as contrasting from an application to refer disputes to arbitration, there can be no valid and binding arbitration agreement. It is only when there is a specific and direct expression of intent to have the disputes settled by arbitration, it may not be necessary to set out the atributes of an arbitration agreement to make it so, but where the clause relating to settlement of disputes, contain words which specifically exclude any of the attributes of an arbitration agreement, it will not be amounting so. The correspondence exchanged between the parties or any contention raised before the Court of Law, after the dispute has arisen is of no consequence if the clause in the agreement entered between the parties indicate otherwise.

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41. Though Mr. Kamath has also made a feeble attempt to distinguish the judgment in case of Quick Heal Technologies Ltd , by submitting that at the relevant point of time, the decision in case of Vidya Drolia v. Durga Trading Corporation , (Supra), was not available, which has propounded a principle, “when in doubt, do refer”. I do not think that the principle laid down by the learned Single Judge in Quick Heal Technologies (supra) is in any way impacted. Apart from this, merely because there was no correspondence between the parties, is also not a ground to distinguish the said judgment, as ultimately what is to be looked into, is the wording of a clause in an agreement, though it is permissible to look into the correspondence exchanged between the parties, to ascertain whether there exists an arbitration agreement.

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42. Reading of the clauses in the two agreements which are subject matter of consideration before me, the use of the word “may be referred”, perforce me to arrive

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at a conclusion that the relevant clause for dispute resolution is not a firm or mandatory arbitration clause and in fact, it postulates a fresh consensus between the parties, when an option become available to them, to be referred for arbitration. The mandatory nature of it gets ripped off, once the option is available to one particular party, and consciously not to be referred for arbitration. The parties have carefully used the term “Shall” and “May”, which indicate their clear intentions and I must honour it.

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43. Since I am convinced that the relevant clause in the master Service Agreement in the two applications, do not amount to an “arbitration clause”, I need not go into the further objections raised by Mr. Andhyarujina, as regards whether the invocation of arbitration is properly done, by a composite reference and whether it was necessary for the parties to mandatorily resort themselves to the alternative mechanism of mediation or being referred to the Coordination Committee, as a precondition before they invoke arbitration. I do not deem it necessary to deal with the submissions advanced by the parties on the said aspect.”

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(Emphasis supplied)

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The petition was answering the issue whether the matter should be referred to arbitration or otherwise. The High Court of Bombay holds that “may be referred” perforce the Court to arrive at a conclusion that the dispute resolution is not a firm or a mandatory arbitration clause. Clauses in the case at hand are also identical and

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interpretation would cover the case at hand on all its fours.

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The High Court of Calcutta earlier to the afore-quoted judgment in the case of BGM AND M-RPL-JMCT(JV), holds that mere use of the word arbitration or arbitrator in a heading or a clause would not aggregate it to do an arbitration agreement in the case of BLUE STAR LIMITED v. RAHUL SARAF³ , wherein it is held as follows:

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“….

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Analysis

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6. The Apex Court in NTPC Limited v. SPML Infra Limited reported in 2023 SCC OnLine SC 389 had elaborated on the jurisdiction of the pre-referral court under Section 11 of the Act. The relevant extracts are produced below:—

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‘25. Eye of the Needle : The above-referred precedents crystallise the position of law that the prereferral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant's privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the nonarbitrability of the dispute.’

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Emphasis Added

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7. Therefore, the instant petitions require me to determine if there exists a valid arbitration agreement.

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8. In Jagdish Chander (supra), the Apex Court went into great detail to examine and deliberate upon the various kinds of clauses that may or may not surmount to being an arbitration

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3 2023 SCC OnLine Cal 1406

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agreement and expounded upon the ingredients of the same. The relevant portion is extracted below:—

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‘8. This Court had occasion to refer to the attributes or essential elements of an arbitration agreement in K.K. Modi v. K.N. Modi [(1998) 3 SCC 573] , Bharat Bhushan Bansal v. U.P. Small Industries Corpn. Ltd. [(1999) 2 SCC 166] and Bihar State Mineral Development Corpn. v. Encon Builders (I) (P) Ltd. [(2003) 7 SCC 418] In State of Orissa v. Damodar Das [(1996) 2 SCC 216] this Court held that a clause in a contract can be construed as an “arbitration agreement” only if an agreement to refer disputes or differences to arbitration is expressly or impliedly spelt out from the clause. We may at this juncture set out the well-settled principles in regard to what constitutes an arbitration agreement:

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(i) The intention of the parties to enter into an arbitration agreement shall have to be gathered from the terms of the agreement. If the terms of the agreement clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes, it is arbitration agreement. While there is no specific form of an arbitration agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the possibility of going for arbitration. Where there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration, there is no valid and binding arbitration agreement.

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(ii) Even if the words “arbitration” and “Arbitral Tribunal (or arbitrator)” are not used with reference to the process of settlement or with reference to the private tribunal which has to adjudicate upon the disputes, in a clause relating to settlement of disputes, it does not detract from the clause being an arbitration agreement if it has the attributes or elements of an arbitration agreement. They are : (a) The agreement should be in writing. (b) The parties should have agreed to refer any disputes (present or future) between them to the decision of a private tribunal. (c) The private tribunal should be empowered to

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adjudicate upon the disputes in an impartial manner, giving due opportunity to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the private tribunal in respect of the disputes will be binding on them.

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(iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically exclude any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the authority, he may file a civil suit seeking relief, it cannot be termed as an arbitration agreement.

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(iv) But mere use of the word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as “parties can, if they so desire, refer their disputes to arbitration” or “in the event of any dispute, the parties may also agree to refer the same to arbitration” or “if any disputes arise between the parties, they should consider settlement by arbitration” in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that “if the parties so decide, the disputes shall be referred to arbitration” or “any disputes between parties, if they so agree, shall be referred to arbitration” is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled

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by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.’

¶151

Emphasis Added

¶152

9. In Niwas Enterprise (supra), the Bombay High Court was deciding whether a particular clause can be legitimately considered as an arbitration agreement. The relevant portion is extracted below:—

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‘11. It has been held by the Supreme Court in Jagdish Chander (supra), that where there is a mere possibility of the parties agreeing to arbitration in future, there is no valid and binding arbitration agreement. The terms of the agreement should clearly indicate an intention on the part of the parties to the agreement to refer their disputes to a private arbitral tribunal for adjudication and a willingness to be bound by the decision of such tribunal on such disputes. It is only in that case that there is an Arbitration Agreement. Clauses such as these which require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise, is not an Arbitration Agreement. It is only an agreement to enter into an Arbitration Agreement in future.’

¶154

Emphasis Added

¶155

10. Similarly, the Bombay High Court in NagreekaIndcon Products Pvt. Ltd. (supra) was also dealing with whether the concerned clauses therein could be reckoned as an arbitration agreement. The relevant extracts of the judgment are reproduced below:—

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‘25. The choice being left open to the parties to have the disputes settled through arbitration is not equivalent to the parties mutually agreeing that they “shall” refer themselves to arbitration. The mere caption of a particular clause “Arbitration” do not conclusively

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imply the mandatory nature of arbitration when the option is left to the parties to settle their disputes through arbitration. The definite and explicit intention of the parties unmistakenly and unequivocally agreeing that if the dispute arise between the parties, it shall be settled by arbitration, is not discerned from the concerned clause.’

¶159

Emphasis Added

¶160

11. All the other judgments cited are repetitive in their pronouncement of the law. While they have been considered, they are not being reproduced in this judgment as the law can be encapsulated without such repetition. Such encapsulation expounds that an arbitration agreement can be couched in various modes and forms. However, mere mentioning of the terms ‘arbitration’ or ‘arbitrator’ in a heading or existence of these terms in a scattered manner in clauses of agreements between parties do not aggregate to being an arbitration agreement. There must exist a clear intention of the parties and a meeting of their minds to mandatorily submit any future dispute, that may arise, to arbitration. Such an intention should illuminate itself in the form of an explicit obligation that is binding between the parties and not merely a possibility that may materialise if the parties so decide after a fresh application of mind, post-facto occurrence of disputes.

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Conclusion

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12. It is imperative now to quote the concerned clauses, which have been stressed upon by the counsel appearing for the petitioner to qualify as an arbitration agreement. They are produced herein below:—

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‘Clause 7 : That in case of any dispute or differences or tendency of any Litigation or Arbitration Proceedings between the parties to this agreement relating to the terms and conditions of this agreement, the execution of the Maintenance & Operation Services shall not be stopped/prevented/obstruction in any manner, whatsoever, by the Second Party. In case of refusal by the Second Party to execute the Maintenance & Operation Services or failure to complete the tenure of this agreement due to any

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reasons whatsoever the Second Part will be liable to accept a penalty of 15% of the total value of the remaining contract period of the year. Second party shall continue to provide the services during the period of dispute or difference or tendency of any litigation or Arbitration proceedings between the parties. However periodical payment should not be held in any circumstances by the 1^st Party as timely payment is essential requirement for the successful operation of the contract. Incase of any commercial imposition arises out of the disputes the same can be settled from the current or future bills of the second party.

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Clause 13 : That no party to this agreement shall be entitled to claim any kind/type of interest from the other party on any sum(s) or amount due and payable or on any claim or demand arising out of and/or in connection with this agreement. The Arbitrator shall also not entertain or award any claim of interest made by any party to this agreement in view of this specific provision/clause in this agreement.’

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13. It appears that Clause 7 makes a reference to ‘Arbitration Proceedings’ and Clause 13 clarifies what the arbitrator shall not do. On an examination of Clause 7, no intention or understanding between the parties can be gleaned which specifically and mandatorily requires a reference of future disputes to arbitration. While there is a mention of ‘Arbitration Proceedings’, merely such mentioning does not sanctify the clause with the status of an arbitration agreement. Clause 7 indicates that the second party shall continue to provide services during the period of any litigation or arbitration proceedings. The plausible understanding is that a possibility of there being a reference to arbitration is left open, if the parties, in the future, opt for it. As seen in the law discussed before, such a possibility is not enough to consolidate an arbitration agreement.

¶168

14. In line with this understanding, in case the parties choose to go down the path of arbitration, a negative covenant in the form of Clause 13, proscribes the arbitrator from awarding interest. However, this also does not amount to an arbitration agreement, even if read with Clause 7. In-fact, the

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understanding that emerges on reading of Clause 7 and 13 is that, if the parties opt for arbitration, then in that limited scenario, the arbitrator is precluded from granting interest. But, arbitration is a possibility which may unravel itself, if and only if the parties choose to opt for it, post occurrence of disputes. It is conditional, not a mandatory obligation between the parties to refer the dispute to arbitration.”

¶171

(Emphasis supplied)

¶172

The High Court of Calcutta holds that mere reference to the word ‘arbitration’ or the title of the clause will not make it an arbitrable dispute. There should be unequivocal meeting of minds for the said purpose. The High Court of Calcutta, again, in the case of SUNIL KUMAR SAMANTA v. SMT. SIKHA MONDAL⁴ has held as follows:

¶173

“…. …. ….

¶174

8. Accordingly, the use of the expression “may” in the clause clearly indicates that the parties had not decided to refer their disputes to arbitration, but had kept an option open that in case of disputes not being settled, the parties would have an opportunity to approach an arbitrator for adjudication of the disputes. This is not a binding arbitration clause. The use of word ‘may’ denotes a discretion and is typically non-binding”

¶175

(Emphasis supplied)

¶176

The Calcutta High Court again holds that the expression ‘may’ in the clause clearly indicates that the parties had not decided to refer

¶177

4 AP/15/2022 decided on 7-04-2025

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their disputes to arbitration, but had kept an option open for the disputes being settled or to approach the appropriate fora .

¶180

In the light of the judgments so rendered by the constitutional Courts and the clause being identical, what would unmistakably emerge is, that the parties did not agree unequivocally to get the dispute arbitrated, as the usage of the word is ‘may’ and not ‘shall’. The respondent has placed reliance upon the judgment of the coordinate Bench and a judgment of the Apex Court. There can no qualm about the principles so laid down by the coordinate Bench in the case of M/s AVESTHAGEN LIMITED v. YASMIN SHAH reported in 2015 SCC OnLine KAR 8019 and the Apex Court in the case of VIDYA DROLIA v. DURGA TRADING CORPORATION reported in (2021)2 SCC 1 . The same would not be applicable to the facts of the case at hand.

¶181

14. In the present case, the architecture of arbitration clause is not rigidly unambiguous. It offers arbitration as an eventual recourse, contingent upon a failed managerial dialogue and is couched in language that permits discretion.

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This flexibility, judicially interpreted in the judgments quoted supra , disqualifies the clause from attaining the stature of a definitive arbitration agreement. Therefore, the impugned order, which refers the matter for arbitration thus falters, as the threshold requirement of an unequivocal agreement was unmet. The impugned order, therefore, stands on infirm legal footing. The petition should thus succeed.

¶184

15. For the aforesaid reasons, the following:

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O R D E R

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