Term "Can" Not Be Used As An Escape Route From Arbitration

• Published date: 08 December 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: S&A Law Offices
• Author: Shilpi

Recently, in the case of Panasonic India Pvt. Ltd. vs. Shah Aircon Through Its Proprietor Shadab Raza,¹ the Single Bench of Hon'ble Delhi High Court held that mere use of the term "can" in an Arbitration Clause, cannot render the intention of the parties to refer the dispute to arbitration, ineffective. The intention of the parties should be determined after reading the contract wholistically.

I. FACTS

Panasonic India Pvt. Ltd. (hereinafter referred to as " t he Petitioner ") and Shah Aircon (hereinafter referred to as "the Respondent") entered into a Distribution Agreement for the sale of electronic goods. The claim of the Petitioner arose out of alleged unpaid invoices which were raised to the Respondent towards the sold goods.

The disputes between the parties remained unresolved which led to the invocation of the Arbitration Clause by the Petitioner. In response, the Respondent stated that it did not sign the agreement with Petitioner and that the disputes were to be referred to the court of competent jurisdiction in Gurugram, Haryana.

Hence, the Respondent filed a Civil Suit before the Court of Learned Civil Judge, Gurugram, Haryana (hereinafter referred to as "the Civil Court") inter alia seeking rendition of accounts and permanent injunction which was still pending at the time of passing of judgment.

While the suit was pending, the Petitioner filed an application under Section 8 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") before the Civil Court to refer the suit for arbitration. Additionally, the Petitioner filed a petition under Section 11 of the Act, before the Hon'ble High Court of Delhi, for appointing an arbitrator.

II. RELEVANT CLAUSES OF THE DISTRIBUTION AGREEMENT

"XXIV. GOVERNING LAW:

This Agreement and all PO under this Agreement shall be exclusively governed by and construed in accordance with the laws of India, without regard to choice of law principles. All issues relating to appointment of arbitrator or any petition or application to be made to the Court under the applicable arbitration law or any Arbitration Award or any issue arising out of such arbitration proceedings shall be subject to the exclusive jurisdiction of Courts at New Delhi only.

XXV ARBITRATION:

The parties will attempt to settle any dispute, claim or controversy arising out of this Agreement through consultation and negotiation in good faith and in a spirit of mutual co-operation. If those attempts fail, then either Party can...