Introduction:

In a significant ruling, the Calcutta High Court, through Justice Shampa Sarkar, reinforced the principle that an arbitration agreement remains valid even if it does not explicitly mention the governing law, seat, or venue of arbitration. The court emphasized that what matters is the clear intent of the parties to refer their disputes to a private tribunal for adjudication. The case arose from a dispute between ILEAD Foundation and the State of West Bengal concerning an MoU executed for a project under the Ministry of Rural Development. The petitioner sought the appointment of an arbitrator after the respondent refused to make payments for the second phase of the project, citing non-compliance with the MoU. The petitioner’s previous attempt to resolve the matter through a writ petition was dismissed, with the court directing the parties to seek arbitration. However, the respondent opposed arbitration, contending that the dispute resolution clause in the MoU did not constitute an arbitration agreement.

Arguments of Both Sides:

The petitioner contended that Clause 9.1 of the MoU contained an arbitration agreement, as it expressly provided that any unresolved dispute should be referred to the Vice Chairman of PBSSD & Principal Secretary, TET & SD Department, Government of West Bengal, who would act as an arbitrator. The petitioner relied on Supreme Court precedents affirming that an arbitration clause need not follow a rigid format. The key consideration is the parties’ intent to refer disputes to a private adjudicatory forum. The petitioner cited Jagdish Chander vs. Ramesh Chander & Ors (2007), which held that if an agreement reflects the parties’ intent to refer disputes to a private tribunal and to abide by its decision, it constitutes an arbitration agreement. The petitioner also referred to Solaris Chem Tech Industries Ltd. vs. Assistant Executive Engineer Karnataka Urban Water Supply and Drainage Board & Anr. (2023), where the court ruled that the absence of the term ‘arbitration’ does not invalidate a clause if the parties’ intent is clear. The petitioner thus sought the appointment of an arbitrator in light of the respondent’s refusal to comply with Clause 9.1.

The respondent opposed the petition, arguing that Clause 9.1 could not be deemed an arbitration clause as it did not specify the governing law, seat, or venue. It further contended that merely using the word ‘Arbitrator’ was insufficient to establish an arbitration agreement. The respondent relied on a notification issued by the Project Director, PBSSD, clarifying that the term ‘Arbitrator’ in the agreement should be interpreted as ‘Adjudicator,’ meaning it did not fall within the ambit of the Arbitration and Conciliation Act, 1996. The respondent also argued that the Vice Chairman of PBSSD, being a government official, was an interested party and thus ineligible to act as an arbitrator under Section 12(5) of the Act, as interpreted in Perkins Eastman Architects DPC and Another vs. HSCC (India) Ltd. and Central Organisation for Railway Electrification vs. ECI SPIC SMO MCML (JV) A Joint Venture Company.

Court’s Observations and Judgment:

Justice Shampa Sarkar ruled in favor of the petitioner, holding that an arbitration agreement does not require explicit mention of the governing law, seat, or venue, as long as the clause indicates the parties’ intent to refer disputes to a private adjudicatory forum. The court emphasized that Clause 9.1 satisfied this criterion, as it expressly provided for dispute resolution through an arbitrator. The court also rejected the respondent’s argument that the term ‘Arbitrator’ should be read as ‘Adjudicator,’ emphasizing that contractual interpretation should be guided by the text of the agreement and the parties’ intent, rather than subsequent administrative clarifications. The court acknowledged that the named arbitrator—the Vice Chairman of PBSSD—was disqualified from acting due to conflict of interest. Citing Supreme Court precedents, the court reiterated that unilateral appointment of an interested party as arbitrator is impermissible. However, the invalidity of the named arbitrator did not render the arbitration clause itself unenforceable. Accordingly, the court exercised its power under Section 11 of the Arbitration and Conciliation Act, 1996, and appointed an independent arbitrator to adjudicate the dispute.

Conclusion:

The Calcutta High Court’s ruling reinforces the principle that an arbitration agreement is primarily defined by the intent of the parties, rather than rigid formal requirements. Even in the absence of a specified governing law, seat, or venue, an arbitration clause remains valid if it reflects a clear intent to resolve disputes through private adjudication. The decision also reaffirms the Supreme Court’s stance that unilateral appointment of an arbitrator by an interested party is not permissible. By appointing an independent arbitrator, the court upheld the fundamental objective of arbitration—ensuring a neutral and impartial forum for dispute resolution. This judgment is significant as it strengthens arbitration jurisprudence in India, particularly in cases where the arbitration clause lacks specific procedural details. The ruling aligns with the principles laid down in Jagdish Chander and Solaris Chem Tech Industries Ltd., where the Supreme Court emphasized that arbitration agreements should be interpreted based on the parties’ intent rather than rigid technicalities. By dismissing the respondent’s argument that the lack of a designated seat or governing law invalidated the arbitration clause, the court ensured that arbitration remains a viable dispute resolution mechanism even when contractual language is not meticulouslymeticulously crafted.