The Bombay High Court has held that a clause which contains the words "may be referred to arbitration" takes away from the mandatory and binding nature of an arbitration agreement.
Facts
GTL and Vodafone entered into a Master Services Agreement (MSA) on 15 November 2007. Disputes arose between them in relation to contractual dues under the MSA. GTL invoked arbitration against Vodafone and approached the Bombay High Court for interim relief and for the appointment of an arbitrator.
Bombay High Court
The Court relied on precedent1 to hold that, as the arbitration clause contained words such as "may" and "if mutually agreed upon by the parties", it indicated that the parties did not intend a binding arbitration agreement. Such language contemplated future consent between the parties prior to a dispute being referred to arbitration and offered an option to a party not to arbitrate.
The Court went on to say that correspondence exchanged between the parties or argument raised before the Court after the dispute had arisen is of no consequence if the arbitration clause does not make arbitration mandatory.
Conclusion
An arbitration agreement can be considered valid and binding only if there is a specific and direct expression of intent to have disputes settled by arbitration.
Footnote
1. Babanrao Rajaram Pund v Samarth Builders and Developers & Anr (2022) 9 SCC 691; Jagdish Chander v Ramesh Chander & Ors (2007) 5 SCC 719; Wellington Associates Ltd v Kirit Mehta (2000) 4 SCC 272; Quick Heal Technologies Ltd. v NCS Computech Pvt.Ltd & Anr, 2020 SCC Online Bom 687
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