Mere use of 'can' in an arbitration clause does not render it ineffective: Delhi High Court

Mere use of 'can' in an arbitration clause does not render it ineffective: Delhi High Court

In a recent judgement, the Delhi High Court has held that mere use of the word 'can' in an arbitration clause does not render it ineffective and the intention of the parties to go for arbitration is to be determined on a complete reading of the clause and relevant clauses.

The court reiterated that exclusive jurisdiction clause would override a venue clause, therefore, the court which has been conferred the exclusive jurisdiction will decide all arbitration applications arising out of the contract.

A dealership agreement dated 05.09.2016 was entered between the parties whereby Shah Aircon (Respondent) was to act as the authorised dealer for Panasonic (Petitioner). A dispute arose between the parties related to certain unpaid invoices by the respondent and supply of goods by the petitioner to a third party in contravention of the agreement.

On 20.08.2020, the respondent issued a legal notice to the petitioner alleging breach of the contract by the petitioner by selling goods to an unauthorized third party and the bills were raised in the name of respondent. Thereafter, the parties exchanged few communications which ultimately led to issuance of notice of arbitration. The respondent replied to the notice of arbitration and raised certain objections regarding the maintainability of arbitration. Consequently, the petitioner issued a notice of arbitration.

The Court decided upon the issue of the use of word "can" in the arbitration clause. The Court held that mere use of the word "can" would not render the arbitration clause ineffective. It held that an arbitration clause is to be interpreted as a whole along with the other relevant clauses.

Justice Prateek Jalan held that exclusive jurisdiction clause would override the venue given under the invoices, therefore, the objection raised by the respondent is unmerited.

The Court held that the remainder of the clause, insofar as it refers to the venue of arbitration, the language of arbitration, the applicability of the Act, the requirement to give reasons, and the procedure for appointment of an arbitrator by reference to Court, also supports the view that the parties intended a mandatory reference to arbitration.

Accordingly, the Court allowed the petition and appointed the arbitrator.