Possibility Of Future Arbitration Agreement And Mere Mentioning Of “arbitration” And “Arbitrator” Not Enough To Create Mandatory Arbitration “Arbitration”

  1. Home
  2. »
  3. Arbitration Times
  4. »
  5. Possibility Of Future Arbitration Agreement And Mere Mentioning Of “arbitration” And “Arbitrator” Not Enough To…

The High Court, Calcutta, in Blue Star Limited Versus (1) Rahul Saraf, (2)  Multiplex Equipments and Services Private Limited (3) Forum Projects Holdings Private Limited has recently encountered a captivating legal issue involving three petitions (A.P. 854 of 2022, A.P. 853 of 2022, and A.P. 852 of 2022) under Section 11 of the Arbitration and Conciliation Act, 1996. At the heart of the matter lies the question of whether the agreements in question contain binding arbitration clauses that satisfy the necessary requirements.

In the case of A.P. 852 of 2022, a Memorandum of Understanding (MoU) was executed between Blue Star Limited and Rahul Saraf, wherein Blue Star was contracted to provide operation and maintenance services from January 1, 2019, to December 31, 2021. Disputes subsequently arose regarding non-payment of certain invoices. Blue Star invoked an alleged arbitration clause and nominated an arbitrator, but Rahul Saraf refused the appointment and challenged the existence of a valid arbitration clause. Consequently, Blue Star filed an application seeking the appointment of an arbitrator.

Blue Star contended that the dispute falls within the realm of arbitrability and pointed to clauses 7 and 13 of the MoU as indicative of the parties’ intention to resort to arbitration for resolving disputes. Conversely, the respondents argued that the clauses failed to meet the requirements of a valid arbitration agreement as stipulated in Section 2(b) and Section 7 of the Arbitration and Conciliation Act. They emphasized that the mere use of terms like “arbitration” or “arbitrator” does not automatically confer the status of an arbitration agreement.

The court concluded that the clauses in question failed to meet the requirements of a binding arbitration agreement. The mere mention of terms like “arbitration” or “arbitrator” and the possibility of a future agreement to arbitrate did not demonstrate a clear intent to mandatorily refer disputes to arbitration.