Mere use of the word ‘Arbitration’ in the heading of an Agreement would mean existence of an arbitration agreement? Del HC elaborates

Delhi High Court: Mukta Gupta, J., decided that mere use of word ‘Arbitration’ in the heading of an Agreement would not mean the existence of an arbitration agreement.

Petitioner sought appointment of an Arbitrator for solving the disputes in relation to the software development arising out of the agreement between the parties and costs.

As per the petitioner, petitioner and respondent had entered into a Master Service Agreement and after the start of the project, the petitioner raised concerns due to the delay on part of the respondent.

Respondent introduced a new person for communication with the petitioner and showed no intention of resolving the issues flagged by the petitioner. Hence, the petitioner sent a legal notice to the respondent invoking arbitration.

The response by the respondent to the legal notice was that, there was no arbitration agreement between the parties.

Clause 11 of the Master Service Agreement dated 29th July 2021 between the parties reads as under:-

“11. Jurisdiction, Arbitration & Dispute Resolution

This Agreement and any dispute or claim relating to it, its enforceability or its termination shall be governed and interpreted according to the laws of India Subject to this Clause 11, the Courts at Delhi, shall have exclusive jurisdiction over any disputes under this Agreement”.

 It was submitted that the above-said clause did not provide that the parties agreed to refer their disputes for resolution through arbitration, just on the basis of noting the word ‘Arbitration’ the petitioner claimed resolution of disputes arising between the parties through arbitration.

Issue for Consideration

Whether the use of the word ‘Arbitration’ in the heading of an Agreement would entail existence of an arbitration agreement?

The said issue was dealt with by this Court in Avant Garde Clean Room & Engg. Solutions (P) Ltd. v. Ind Swift Ltd., (2014) 210 DLT 714.

High Court, in view of the above decision, held that,

Mere use of the word ‘Arbitration’ in the heading in Clause 11 of the Agreement between the parties would not lead to inference that there exists an agreement between the parties seeking resolution of disputes through arbitration.”

Therefore, in view of the above, no ground to appoint an arbitrator was found. The petition was dismissed. [Foomill (P) Ltd. v. Affle (India) Ltd., 2022 SCC OnLine Del 843, decided on 25-3-2022]


Advocates before the Court:

For the Petitioner: Mr. Rajiv Kr.Choudhary, Advocate with Mr.Manash Barman, Advocate.

For the Respondent: Mr .Kapil Madan, Advocate with Ms. Ramya Verma, Advocate.

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