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Informist, Friday, Jul. 18, 2025

 

NEW DELHI – The Supreme Court Friday said any dispute on the existence of an arbitration agreement between two parties cannot be left solely to the arbitration tribunal to decide. The argument that the referring court, whether a high court or a district court, should simply refer the matter to the arbitral tribunal and leave it to decide whether the agreement exists is not acceptable, it said.

 

The apex court was deciding whether an arbitral tribunal has sole power to rule on disputes regarding the existence of an arbitration agreement between parties. The court clarified that these tribunals are not the sole authority to make this judgment and high courts and lower courts need not simply refer the dispute to an arbitral tribunal when there is a dispute about the very existence of an arbitration pact.

 

The top court's ruling came in a case that has its genesis from Bgm And M-Rpl-Jmct, a joint venture, entering into a contract with Eastern Coalfields Ltd. for transportation of goods. Disputes arose between the parties during the subsistence of the contract. Thereafter, the petitioner moved the Calcutta High Court to seek appointment of an arbitrator under clause 13 of their contract.

 

Contesting the appointment of the arbitrator, Eastern Coalfields argued that clause 13 of the contract was bereft of the essential ingredients to constitute an arbitration agreement and so the application seeking appointment of an arbitrator deserved to be rejected. Clause 13 of the contract asked the parties to solve their disputes through settlement and said that if the problem persists, they could seek arbitration.

 

In 2024, the high court rejected the petitioner's plea to appoint an arbitrator and held that the use of the word "may" in clause 13 showed there was no clear intention to refer any dispute between the parties to arbitration. The top court said clause 13 does not bind the parties to use arbitration for settlement of their disputes. The use of the words "may be sought" implies there was no subsisting agreement between the parties that they, or any one of them, would seek settlement of a dispute through arbitration, it said. Consequently, the court rejected the petitioner’s plea to appoint an arbitrator.  End

 

Reported by Surya Tripathi

Edited by Rajeev Pai

 

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