http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 19  

CASE NO.: Arbitration Petition 9  of  1999

PETITIONER: WELLINGTON ASSOCIATES LTD.  ....

       Vs.

RESPONDENT: MR.  KIRIT MEHTA

DATE OF JUDGMENT:       04/04/2000

BENCH: M.J.Rao

JUDGMENT:

M.  JAGANNADHA RAO, J.

L.....I.........T.......T.......T.......T.......T.......T..J

     This is an application filed under sub-clauses

     (2),  (6),  (10)  and  (12)  of  Section  11  of   the Arbitration

     and Conciliation Act, 1996 ( hereinafter called the

     Act).  The application is made to the Chief Justice of

     India and after due nomination, has been placed before

     me.

     The brief facts as set out in the petition, to the

     extent necessary for the purpose of this application,

     are as follows.  The petitioner is a company with its

     registered  office at Les Cascades, Port Luis Republic of

     Mauritius.   The  respondent  is   the  promoter   and Managing

     Director of M/s C.M.M.  Ltd., Mumbai.  The petitioner

     entered into two agreements both dated 15.8.1995 with

     the respondent under which it was stated that the

     petitioner had agreed to subscribe to a private

     placement of two lots of 85,000 equity shares ( each

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 19  

     agreement comprising one lot of 85,000 equity shares,

     thereby  aggregating  to  1,70,000 shares)  of  C.M.M. Ltd.

     The  shares  were  having face value  of  Rs.10/-  per share.

     They  were agreed to be acquired by the petitioners at a

     premium of Rs.20/- per share.  The cumulative value

     amounted  to  Rs.51  lakhs ( 1.70 lakhs  x  Rs.30  per share).

     The shares were to be held by the petitioners for a

     period  of one year from the date of subscription.  It was

     stated that the respondent agreed and undertook to

     compulsorily  purchase  back from the petitioners  the said

     shares after the expiry of the said period in the

     following manner.(i) under the Ist agreement, 85,000

     with  an  assured return at the rate of 35% p.a.   and (ii)

     under the 2nd agreement, 85,000 with an assured return

     at the rate of 29% p.a.  It was stated that the

     respondent agreed that upon default by the respondent,

     the  respondent would be liable to pay penal  interest at

     3%  p.a.   from the date of subscription  till  actual date

     of payment.  Pursuant to the above agreements, a

     "subscription agreement" was later entered into on

     25.9.95 between the petitioner (the subscriber), the

     respondent-promoter and the C.M.M.  company.

     On 26.9.95, Sigma Credit and Capital Services Pvt.

     Ltd.,  wrote  to  the petitioner stating that  it  had taken

     up  the deal of C.M.M.  Ltd.  and that it would ensure the

     petitioner that the terms of the agreement between the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 19  

     prospective  investor  (  petitioner)  and  C.M.M.Ltd. -for

     the subscription and assured buy back, especially

     regarding  the  assured  return   and  the   confirmed buy-back

     -  would  be complied with by both the  parties.   The said

     company further undertook to buy-back the 85,000 NRI

     shares of CMM Ltd., at the end of 12 months from the

     date  of investment, at the rate of 25% p.a.  in  case the

     respondent failed to meet the commitment of buy-back.

     The petitioner paid Rs.51 lakhs to the respondent on

     9.10.95 pursuant to the above agreements and 1,70,000

     shares  were allotted to the petitioner.  By  8.10.96, the

     respondent did not buy back the shares.  Nor did Sigma

     buy back the shares.

     On 11.7.1997, the petitioner’s lawyer issued a

     registered notice to the respondent complaining that

     after the lapse of one year from the date of

     subscription, neither the respondent nor Sigma Credit

     and Capital Services (P)Ltd.  had honoured their

     commitments as per agreements dated 15.8.95 and letter

     dated  26.9.95.  There was no response to this  notice by

     the  respondent  or  by Sigma.  A further  notice  was issued

     by the petitioner on 19.4.99 stating that there was no

     response   to  the  earlier   notice,  that  the   two agreements

     dated  15.8.95  contained an "arbitration clause"  and that

     the petitioner desired that the disputes and

     differences be referred to arbitration.  It was also

     intimated that the petitioners had appointed Justice

     M.L.   Pendse,  Retired Chief Justice, Karnataka  High

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 19  

Court

     as their Arbitrator and that the respondent was being

     called upon to appoint his Arbitrator within 30 days

     from the date of receipt of the letter or else the

     respondent  should  confirm  the  appointment  of  Sri Justice

     M.L.   Pendse.   In  default,  the  petitioners  would proceed

     under the Arbitration and Conciliation Act, 1996.  The

     respondent sent a reply on 28.5.1999 raising various

     contentions.  One of the contentions was that the

     arbitration clause, namely, clause 5 in the agreements

     dated 15.8.95 used the words "may" and that the said

     clause was not mandatory but was an enabling provision

     and,   therefore,  fresh  consent   of   parties   for arbitration

     was necessary.  On 16.6.99, the petitioner’s lawyers

     wrote back to the respondent stating that the

     interpretation   put   by  the   respondent   on   the arbitration

     clause was not correct.  The respondent sent a further

     reply  on  21.6.99.   Petitioner’s   lawyers  sent   a rejoinder

     on 2.7.99.  Thereafter, the present petition was filed

     under section 11 of the Act seeking the appointment of

     arbitrator/arbitrators.

     In this petition before me, the respondent filed a

     reply and the petitioner thereafter filed a rejoinder.

     Learned counsel for the petitioner Sri U.A.  Rana

     submitted that the word ’may’ used in clause 5 of the

     agreement was to be read, in the context , as ’shall’

     and that, in any event, in view of section 16 of the

     Act,   the   question  of   the  "existence"  of   the arbitration

     agreement was a matter to be decided by the arbitral

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 19  

     tribunal and not by me.  A point was raised by the

     petitioner  in the rejoinder based on Ador Samia  Ltd. Vs.

     Peekay  Holdings  Ltd.  ( 19998(8) SCC 572)  that  the action

     of the Chief Justice of India or his designate under

     Section 11(6) was an administrative act and did not

     amount to the exercise of any judicial function.  Nor

     would the Chief Justice of India or his designate have

     any trappings of a judicial authority, while acting

     under  section  11.   Counsel also submitted  that  in Bombay,

     a civil suit would take more than 20 years for

     adjudication, and therefore such a situation should be

     avoided and the matter should be referred to

     arbitration.

     On the other hand, learned counsel for the

     respondent  Sri  P.H.   Parekh   submitted  that   the relevant

     clause, viz., clause 5 was not mandatory in its

     language  and that in a similar case in P.  Gopal  Das Vs.

     Kota  Styraw Board ( AIR 1971 Raj.  258), it was  held by

     the  Rajasthan  High  Court that the use of  the  word ’may’

     indicated that a fresh consent of both parties for

     arbitration was necessary.  Counsel submitted that

     section 16 of the Act would not apply to the situation

     on hand and that it was permissible for me to decide

     whether clause 5 was an arbitration clause or not.

     On the above submissions, the following points

     arise for consideration:

     (1) Whether clause 5 amounted to an arbitration clause

     at  all  and  whether such a question  amounted  to  a dispute

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 19  

     relating to the ’existence’ of the arbitration clause?

     Whether such a question should be decided only by the

     arbitral tribunal under section 16 and could not be

     decided by the Chief Justice of India or his designate

     while dealing with an application under section 11?

     (2) If the Chief Justice or his designate could decide

     the said question, then whether clause 5 of the

     agreements dated 15.8.95 which used the words "may be

     referred"  required  fresh  ’consent’ of  the  parties before

     a reference was made for arbitration?

     (3) To what relief.

     Point 1:

     This point raises a question as to the scope of

     section  16  on  the one hand and section  11  on  the other.

     Before referring the said section, I shall refer

     to the relevant clauses 4 and 5 in the two agreements

     dated 15.8.95.  They read as follows:

     "Clause  4:  It is hereby agreed that, if any  dispute arises  in  connection with these presents, only  courts  in Bombay would have jurisdiction to try and determine the suit and  the  parties hereto submit themselves to the  exclusive jurisdiction of the courts in Bombay."

     Clause  5:   It  is  also agreed by  and  between  the parties   that  any  dispute  or  differences   arising   in connection   with   these  presents   may  be  referred   to arbitration  in  pursuance of the Arbitration Act, 1947,  by each  party appointing one arbitrator and the arbitrators so appointed  selecting  an umpire.  The venue  of  arbitration shall be at Bombay."

     The petitioner’s counsel submits that the question

     whether clause 5 extracted above tantamounts to a

     dispute as to ’existence" of the arbitration agreement -

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 19  

     is  a  question  which  can be  decided  only  by  the arbitral

     tribunal in view of section 16 of the Act and that it

     cannot  be  decided  by  me.  That  section  reads  as follows:

     "Section  16:  Competence of arbitral tribunal to rule on its jurisdiction.-

     (1)  The  arbitral  tribunal  may   rule  on  its  own jurisdiction,  including  ruling  on   any  objections  with respect  to  the  existence or validity of  the  arbitration agreement, and for that purpose, -

     (a)  an  arbitration  clause  which forms  part  of  a contract shall be treated as an agreement independent of the other terms of the contract;  and

     (b)  a  decision  by the arbitral  tribunal  that  the contract  is  null and void shall not entail ipso  jure  the invalidity of the arbitration clause.

     (2)   A  plea  that  the   tribunal  does   not   have jurisdiction  shall be raised not later than the  submission of  the statement of defence;  however, a party shall not be precluded  from  raising such a plea merely because that  he has  appointed,  or participated in the appointment  of,  an arbitrator.

     (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged  to  be beyond the scope of its authority is  raised during the arbitral proceedings.

     (4)  The arbitral tribunal may, in either of the cases referred  to in sub- section (2) or sub-section (3), admit a later plea if its considers the delay justified.

     (5)  The  arbitral  tribunal shall decide  on  a  plea referred to in sub-section (2) or sub-section (3) and, where the  arbitral tribunal takes a decision rejecting the  plea, continue  with the arbitral proceedings and make an arbitral award.

     (6)  A  party aggrieved by such an arbitral award  may make an application for setting aside such an arbitral award in accordance with section 34.

     For appreciating the scope of section 16 of the

     new  Act, it is necessary to go back to section 33  of the

     Indian Arbitration Act, 1940.  That section vested

     jurisdiction  in the court to decide whether there was in

     ’existence’ an arbitration clause or not, whenever the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 19  

     ’existence’  of the arbitration clause was  challenged by

     any of the parties.  That section read as follows:

     "Section  33:   Arbitration agreement or award  to  be contested by application -

     Any  party  to an arbitration agreement or any  person claiming  under  him desiring to challenge the existence  or validity  of an arbitration agreement or an award or to have the  effect  of either determined, shall apply to the  Court and  the  Court  shall decide the  question  on  affidavits, ........"

     In M/s.  D.  Gobindram Vs.  M/s Shamji Kalidas Co.

     [AIR 1961 SC 1285 (at 1293)(para 25)] it was held that

     the question as to the existence of arbitration clause

     was for the Court to decide under section 33 and not

     for  the arbitrators.  In Khardah Co.Ltd.  Vs.  Raymon &

     Co.(India) Pvt.Ltd.  (AIR 1962 SC 1810) and In Waverly

     Jute  Mills  Co.Ltd.  Vs.  Raymon & Co.  (India)  Pvt. Ltd.

     (AIR 1963 SC 90, at 96 para 17), it was held that the

     question  as to the validity of the contract was  also for

     the Court to decide under section 33 and not for the

     arbitrator.  If there was no arbitration clause at the

     time of entry of the arbitrators on their duties, the

     whole proceedings would be without jurisdiction.  In

     Renusagar  Power Co.  Ltd.  Vs.  General Electric  Co. (AIR

     1985 SC 1156 = 1985(1) SCR 432) (at p.1170) it was

     stated that ordinarily,.  as a rule, an arbitrator had no

     authority to clothe himself with power to decide the

     question of his own jurisdiction unless parties

     expressly conferred such a power on him.

     Thus, it is clear from section 33 of the old

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 19  

     Act of 1940 that any question as to the "existence" of

     the arbitration agreement was to be decided only by

     application  to  the Court and not by the  arbitrator. This

     disability on the part of the arbitrator has now been

     removed  by section 16 of the new Act.  Now section 16 has

     conferred power on the arbitral tribunal to decide

     whether there is in ’existence’ an arbitration clause.

     But, it must be noted that the language employed

     by section 16 of the new Act shows that the said

     provision  is  only  an enabling  one  which,-  unlike section

     33 in the old Act of 1940,- now permits the arbitral

     tribunal to decide a question relating to the

     ’existence’, of the arbitration clause.  This section

     corresponds  to  Article 16 of the UNCITRAL Model  Law and

     Article 21 of the UNCITRAL Arbitration Rules.  While

     Article 16 of the Model Law says that the arbitral

     tribunal  may rule on its own jurisdiction, Article 21 of

     the  Rules  states that the ’arbitral  tribunal  shall have

     power  to rule’ on these questions.  Such power  given to

     the   arbitral  tribunal  is   also  referred  to   as ’Kompetenz

     - kompetenz".

     The more important question however is whether

     section 16 excludes the jurisdiction of the Chief

     Justice of India or his designate in this behalf if a

     question as to the existence of the arbitration clause

     is  raised  by  the  respondent in his  reply  to  the petition

     filed under section 11.  (I am not concerned with the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 19  

     question of the validity or effect of the arbitration

     clause, in the present case).  In my view, section 16

     does  not  take  away the jurisdiction  of  the  Chief Justice

     of India or his designate, if need be, to decide the

     question of the ’existence’ of the arbitration

     agreement.   Section  16 does not declare that  except the

     arbitral tribunal, none else can determine such a

     question.  Merely because the new Act permits the

     Arbitrator to decide this question, it does not

     necessarily follow that at the stage of section 11 the

     Chief  Justice of India or his designate cannot decide a

     question  as  to  the  existence  of  the  arbitration clause.

     The interpretation put on section 16 by the

     petitioner’s  counsel that only the arbitral  tribunal can

     decide about the "existence" of the arbitration clause

     is  not  acceptable for other reasons also apart  from the

     result  flowing  from  the use of the  word  ’may’  in section

     16.  The acceptance of the said contention will, as I

     shall presently show, create serious problems in

     practice.   As  Saville  L.J.  stated in a  speech  at Middle

     Temple Hall on July 8, 1996:  "Question of the

     jurisdiction  of  the tribunal cannot be left  (unless the

     parties agreed) to the tribunal itself, for that would

     be a classic case of pulling oneself up by one’s own

     bootstraps".   (  A practical approach to  Arbitration Law,

     Keren Tweeddale & Andrew Tweeddale, (1999) Blackstone

     Press Ltd.)(P.75).  Let us take this very case.  If

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 19  

     indeed clause 5 does not amount to an ’arbitration

     agreement’,  it will, in my view, be anomalous to  ask the

     arbitrator to decide the question whether clause 5 is

     at  all an arbitration clause.  It is well settled and has

     been repeatedly held that the source of the

     jurisdiction of the arbitrator is the arbitration

     clause.  [see Waverly Jute Mills case (AIR 1963 SC 90)

     above referred to ) When that is the position, the

     arbitrator cannot, in all situations, be the sole

     authority to decide upon the "existence" of the

     arbitration clause.  Supposing again, the contract

     between the parties which contained the arbitration

     clause remained at the stage of negotiation and there

     was no concluded contract at all.  Then in such a case

     also,  there  is no point in appointing an  arbitrator and

     asking  him to decide the question as to the existence of

     the  arbitration  clause.  But, I may point  out  that there

     can be some other situations where the question as to

     the  "existence"  of  an  arbitration  clause  can  be decided

     by  the arbitrator.  Take a case where the matter  has gone

     to the arbitrator without the intervention of an

     application  under  section  11.   Obviously,  if  the question

     as  to  the  existence of the  arbitration  clause  is raised

     before  the arbitral tribunal, it has power to  decide the

     question.  Again in a case where the initial existence of

     the arbitration clause is not in issue at the time of

     section  11  application but a point is raised  before

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 19  

the

     arbitral tribunal that the said clause or the contract

     in  which  it is contained has ceased to be in  force, then

     in such a case, the arbitrator can decide whether the

     arbitration  clause  has  ceased to be  in  force.   A question

     may be raised before the arbitrator that the whole

     contract  including  the arbitration clause  is  void. Now

     Section  16  of  the  new  Act  permits  the  arbitral tribunal

     to  treat  the  arbitration clause as  an  independent clause

     and  section 16 says that the arbitration clause  does not

     perish  even  if the main contract is declared  to  be null

     and void.  Keeping these latter and other similar

     situations apart, I am of the view that in cases where -

     to start with - there is a dispute raised at the stage

     of the application under section 11 that there is no

     arbitration clause at all, then it will be absurd to

     refer the very issue to an arbitrator without deciding

     whether there is an arbitration clause at all between

     the parties to start with.  In my view, in the present

     situation, the jurisdiction of the Chief Justice of

     India  or  his designate to decide the question as  to the

     ’existence’  of  the  arbitration   clause  cannot  be doubted

     and cannot be said to be excluded by section 16.

     Further, a reading of sub-clauses (4),(5) and (6)

     of section 11 shows that they enable the Chief Justice

     or his designate to appoint arbitrator or arbitrators,

     and likewise section 11(12) enables the Chief Justice

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 19  

     of India or his designate to appoint arbitrator or

     arbitrators;  under Rule 2 of the scheme framed by the

     Chief Justice of India, a request is to be made to the

     Chief Justice of India alongwith with a duly certified

     copy of the ’original arbitration agreement’.  Section

     2(b) of the Act defines ‘arbitration agreement’ as an

     agreement referred to in section 7.  section 7 defines

     ’arbitration agreement’ as follows:

     "S.7.   Arbitration  agreement  (1)   In  this   Part, "arbitration agreement" means an agreement by the parties to submit  to  arbitration all or certain disputes  which  have arisen  or  which  may arise between them in  respect  of  a defined legal relationship, whether contractual or not.

     (2)  An arbitration agreement may be in the form of an arbitration  clause  in  a  contract or in  the  form  of  a separate agreement.

     (3) An arbitration agreement shall be in writing.

     (4)  An  arbitration agreement is in writing if it  is contained in --

     (a) a document signed by the parties;

     (b)  an exchange of letters, telex, telegrams or other means  of  telecommunication which provide a record  of  the agreement;  or

     (c)  an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

     (5)   The  reference  in  a  contract  to  a  document containing  an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such  as  to  make  that  arbitration  clause  part  of  the contract.

     The words in sub-clause (1) of section 7, "means an

     agreement by the parties to submit to arbitration", in

     my  opinion, postulate an agreement which  necessarily or

     rather mandatorily requires the appointment of an

     arbitrator/arbitrators.   Section  7 does not cover  a case

     where  the parties agree that they "may" go to a  suit or

     that they ’may’ also go to arbitration.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 19  

     Thus, unless the document filed by the party

     before  the Chief Justice of India or his designate is an

     ‘arbitration agreement’ as defined in section 7 as

     explained above, requiring a reference in a mandatory

     sense, no reference, in my view, can be made to the

     arbitral tribunal.  It is, as already stated, indeed

     implicit - if an objection is raised by the respondent

     before  the  Chief Justice of India or  his  designate that

     the so called arbitration clause is not an arbitration

     clause at all falling within section 7 - that such a

     question will have to be decided in the proceedings

     under section 11 of the Act.  Therefore the contention

     raised by the learned counsel for the petitioner that

     the  question  -  whether clause 5  of  the  agreement amounts

     to  an  arbitration clause - is to be decided only  by the

     arbitral tribunal is liable to be rejected.

     It is true that in Ador Samia Pvt.  Ltd.  vs.  Peekay

     Holdings  Ltd.   & Others [1999 (8) SCC 572],  it  has been

     held that the Chief Justice or his designate under

     section  11(6) acts in an administrative capacity  and he

     does  not  exercise any judicial function and that  he has

     no  trappings  of  a  judicial  authority.   But  this decision,

     in my view, cannot support the plea raised by the

     petitioner  in  his  rejoinder.   Even  if  the  Chief Justice

     of  India or his designate under section 11(12) is  to be

     treated  as an administrative authority, the  position is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 19  

     that when the said authority is approached seeking

     appointment of an arbitrator/arbitrator tribunal under

     section 11 and a question is raised that there is, to

     start with, no arbitration clause at all between the

     parties, the Chief Justice of India or his designate

     has to decide the said question.

     For the aforesaid reasons, this objection raised

     by the learned counsel for the petitioner is rejected.

     Point 1 is decided accordingly.

     Point 2:

     Does clause 5 amount to an arbitration clause as

     defined  in  section 2(b) read with section 7?  I  may here

     state that in most arbitration clauses, the words

     normally used are that "disputes shall be referred to

     arbitration".   But  in the case before me, the  words used

     are ‘may be referred’.

     It is contended for the petitioner that the word

     ’may’ in clause 5 has to be construed as ‘shall’.

     According  to  the petitioner’s counsel, that  is  the true

     intention of the parties.  The question then is as to

     what is the intention of the parties?  The parties, in

     my view, used the words ‘may’ not without reason.  If

     one looks at the fact that clause 4 precedes clause 5,

     one  can see that under clause 4 parties desired  that in

     case of disputes, the Civil Courts at Bombay are to be

     approached  by  way of a suit.  Then follows clause  5 with

     the  words ‘it is also agreed’ that the dispute  ’may’ be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 19  

     referred to arbitration implying that parties need not

     necessarily  go to the Civil Court by way of suit  but can

     also  go  before  an arbitrator.  Thus,  clause  5  is merely

     an enabling provision as contended by the respondents. I

     may also state that in cases where there is a sole

     arbitration  clause couched in mandatory language,  it is

     not preceded by a clause like clause 4 which discloses

     a  general  intention  of the parties to go  before  a Civil

     Court  by  way  of suit.  Thus, reading clause  4  and clause

     5 together, I am of the view that it is not the

     intention of the parties that arbitration is to be the

     sole remedy.  It appears that the parties agreed that

     they can "also" go to arbitration also in case the

     aggrieved  party does not wish to go to a Civil  Court by

     way of a suit.  But in that event, obviously, fresh

     consent  to go to arbitration is necessary.   Further, in

     the  present  case, the same clause 5, so far  as  the Venue

     of arbitration is concerned, uses word ’shall’.  The

     parties, in my view, must be deemed to have used the

     words ‘may’ and ‘shall’ at different places, after due

     deliberation.

     A somewhat similar situation arose in B.Gopal Das

     vs.   Kota Straw Board [AIR 1971 Raj.  258].  In  that case

     the clause read as follows:

     "That  in case of any dispute arising between us,  the matter  may  be referred to arbitrator mutually agreed  upon and acceptable to you and us."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 19  

     It was held that fresh consent for arbitration was

     necessary.  No doubt, the above clause was a little

     clearer  there  than  in the case before me.   In  the above

     case too, the clause used the word ‘may’ as in the

     present  case.   The  above   decision  is   therefore directly

     in point.

     Before leaving the above case decided by the from

     Rajasthan High Court, one other aspect has to be

     referred to.  In the above case, the decision of the

     Calcutta High Court in Jyoti Brothers vs.  Shree Durga

     Mining  Co.   [AIR  1956  Cal.   280]  has  also  been referred

     to.  In the Calcutta case, the clause used the words

     "can" be settled by arbitration and it was held that

     fresh  consent  of  parties was necessary.   Here  one other

     class of cases was differentiated by the Calcutta High

     Court.   It  was pointed out that in some  cases,  the word

     ‘may’  was used in the context of giving choice to one of

     the  parties  to go to arbitration.  But, at the  same time,

     the clause would require that once the option was so

     exercised by the specific party, the matter was to be

     mandatorily referred to arbitration.  Those cases were

     distinguished in the Calcutta case on the ground that

     such cases where option was given to one particular

     party, the mandatory part of the clause stated as to

     what should be done after one party exercised the

     option.  Reference to arbitration was mandatory, once

     option was exercised.  In England too such a view was

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 19  

     expressed in Pittalis and Sheriffenttin [1986 (1) QB

     868].   In the present case, we are not concerned with a

     clause  which used the word ‘may’ while giving  option to

     one party to go to arbitration.  Therefore, I am not

     concerned  with  a situation where option is given  to one

     party to seek arbitration.  I am, therefore, not to be

     understood as deciding any principle in regard to such

     cases.

     Suffice it to say, that the words ’may be

     referred’  used in clause 5, read with clause 4,  lead me

     to the conclusion that clause 5 is not a firm or

     mandatory arbitration clause and in my view, it

     postulates a fresh agreement between the parties that

     they will to go to arbitration.  Point 2 is decided

     accordingly against the petitioner.

     Point 3:

     In the light of the finding on Point 2, it is

     obvious  that I have to dismiss this petition.  It may be

     that  if the petitioner files a suit in Bombay,  there can

     be  considerable  delay.   But that is  no  ground  to construe

     the clause differently.  I may state however, that in

     case a Civil suit is filed, it will be for the

     petitioner to seek an early disposal of the case and I

     have  no  reason  to doubt that the civil  court  will treat

     the request of the petitioner for early disposal with

     due consideration.

     With the above observations, this petition is

     dismissed but in the circumstances without costs.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 19