The case between BGM and M-RPL-JMCT (JV) vs Eastern Coalfields Ltd represents the complexities of contractual obligations and dispute resolution between the parties in a contract which arises due to an arbitration clause present in the contract. The main issue in this matter was whether the agreement qualifies as an arbitration agreement.
The facts of the case reveal a disagreement between the appellant and the respondent regarding the interpretation and validity of Clause 13 of the General Terms and Conditions.
- The respondent argues that the use of the word “may” in Clause 13, which mentions redressal of disputes under the Arbitration and Conciliation Act, 2015, does not amount to a valid arbitration agreement.
- According to the respondent, the clause lacks the necessary intention to arbitrate and is therefore not enforceable as an arbitration agreement.
- The appellant relies on this single clause and asserts that it is sufficient to constitute a valid arbitration agreement.
- The core issue is whether Clause 13 creates a binding obligation to refer disputes to arbitration or not.
The Hon’ble Supreme Court of India clarifies that the clause addressing “may” on the agreement of contract can not solely make it binding arbitration agreement and is only enabling an option for arbitration and if parties do not mutually agree to arbitrate after dispute arises then the application will be rejected.
The judgement signifies the importance of forming a valid agreement in contract which provides a clarity and transparency between both the parties and the importance of mutual acceptability among the parties with the clause of the agreement and it provides an outlook of importance of words in a contract.