Mere use of word ‘Arbitration’ does not mean that arbitration agreement exists, affirms Delhi High Court

Read Order: FOOMILL PVT. LTD vs. AFFLE (INDIA) LTD

Pankaj Bajpai

New Delhi, March 28, 2022: The Delhi High Court has referred to the decision in Avant Garde Clean Room & Engg. Solutions Pvt. Ltd. Vs. Ind Swift Limited , (2014) 210 DLT 714, and affirmed that the use of word ‘Arbitration’ in the heading of an Agreement would not entail existence of an arbitration agreement.

The Single Judge Mukta Gupta observed that that mere use of the word ‘Arbitration’ in the heading in the Clause 11 of the Agreement between the parties in the present proceedings would not lead to the inference that there exists an agreement between the parties seeking resolution of disputes through arbitration. 

The observation came pursuant to a petition seeking appointment of an Arbitrator for resolving the disputes in relation to the software development arising out of the agreement between the parties and costs.

Going by the background of the case, Foomill Pvt. Ltd. (petitioner) and Affle (India) Ltd. (respondent) entered into a Master Service Agreement. After the start of the project, the petitioner raised concerns due to the delay on the part of the respondent, and later, wrote an email to the respondent to resolve all differences amicably by dialogue. The respondent informed the petitioner that there is an ‘expectation mismatch’ and therefore, the ‘project is put on hold’. The respondent introduced a new person for communication with the petitioner and showed no intent of resolving the issues flagged by the petitioner. Hence, the petitioner sent a legal notice to the respondent invoking arbitration, which was replied stating that there was no arbitration agreement between the parties. 

After considering the submissions, Justice Gupta found that the clauses of the Agreement do not provide that the parties agreed to refer their disputes for resolution through arbitration though the heading of Clause mentions the words ‘Arbitration & Dispute Resolution’.

Hence, the High Court dismissed the petition finding no ground to appoint an Arbitrator to adjudicate the disputes between parties.