Parties to dispute cannot be compelled to approach an arbitrator: Bombay High Court

Parties to dispute cannot be compelled to approach an arbitrator: Bombay High Court

Bombay High Court (HC) said that a writ cannot be issued for compelling the parties to refer the dispute to an arbitrator; doing so, will contradict the provisions of the Indian Contract Act as free consent of the parties is mandatory for a valid contract

MEP RSGL Toll Bridge Pvt. Ltd. (Petitioner No. 1) and Raima Toll and Infrastructure Pvt. Ltd. (Petitioner No. 2) had approached the HC through writ petitions under Article 226 of the Constitution of India. Petitions were filed after Maharashtra State Road Development Corporation (MSRDC) [respondent] had rejected the proposal of Petitioner No. 2 for referring a dispute to the arbitration for demanding additional revenue from toll tax collection.

Parties approached the HC relying on the clause in the toll collection contract with the respondent containing an arbitration clause. Parties contented that in case of a dispute the arbitration clause should be applied for dispute resolution.

The Bench of HC comprising Chief Justice Dipankar Datta and Justice Girish Kulkarni dismissed the separate writ petitions filed for seeking directions to MSRDC for referring the matter to the arbitration for demanding Rs. 107.84 crores as its additional revenue share.

HC stated that parties to a dispute cannot be forced to arbitration as it would violate the provisions of Arbitration and Conciliation Act, as well as the Indian Contract Act.Free consent is a mandate for entering to a valid contract.

The Bench further said, "It cannot be overlooked that lack of valid arbitration agreement is one of the basic grounds for setting aside an arbitral award… Thus, to foist arbitration agreement on a party is nothing short of imposing an illegality."

HC stated, "The Court cannot force a party to the proceedings to compulsory take recourse to alternative dispute redressal mechanism. It is however always open to the contracting parties to agree and take recourse to the alternative modes of dispute redressal, as it cannot be overlooked that speedy resolution of commercial disputes is the need in present times. However, it is certainly not open to the contracting parties to approach the writ court in matters of commercial contracts and pray that an arbitration agreement be created between the parties and they be referred to arbitration. This would be against the fundamental principle and ethos on which an arbitration law is founded namely a clear agreement between the parties in writing that the parties agree to refer disputes under the contract for arbitration."

HC concluded that a forced arbitration is not an adequate way of resolving the disputes. Forcing the parties to arbitration would not only violate the provisions of the Arbitration and Conciliation Act but also it would violate the provisions of the Indian Contract Act. According to the Act, free consent is a must for a valid contract.