Court Appoints Arbitrator in Dispute Between JVS Foods Pvt. Ltd. and M.P. State Agro Industries, Affirms Intention Over Language in Arbitration Agreement
In a significant ruling, the Madhya Pradesh High Court has ordered the appointment of an arbitrator to resolve the dispute between M/s JVS Foods Pvt. Ltd. and M.P. State Agro Industries Development Corporation Ltd., despite the arbitration clause in their agreement using the word 'may'. The decision, delivered by Justice Deepak Khot, underscores the importance of the parties' intention over the literal wording in arbitration agreements.
The dispute arose from a shareholder agreement dated November 27, 2012, where M.P. State Agro Industries sought to exit its shareholding, leading to disagreements over share valuation. JVS Foods sought arbitration based on the agreement's clause, which suggested disputes "may" be referred to arbitration. The non-applicant, M.P. State Agro Industries, contended that the use of 'may' indicated arbitration was optional, not obligatory.
Justice Khot, however, highlighted that the intention of the parties is paramount and if the overall clause indicates a binding obligation to arbitrate, it should be enforced. He referenced previous judgments, including a Supreme Court ruling in Tarun Dhameja vs. Sunil Dhameja, which supported arbitration even when terms appear discretionary.
The court noted that the non-applicant had previously conceded to arbitration in similar disputes, indicating an inconsistent stance. As a result, the court appointed Shri Alok Verma, a former High Court judge, as the arbitrator. This decision reinforces the judiciary's inclination to honor the spirit and intent of arbitration clauses, thereby promoting alternative dispute resolution mechanisms.
Bottom line:-
Arbitration clause containing the word 'may' does not necessarily make arbitration optional if the intent of the parties indicates a binding obligation to resolve disputes through arbitration.
Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 11(6)
