Summary
The Supreme Court held that a share-sale MoU did not contain an arbitration agreement merely because it called two custodians mediators/arbitrators and made their transactional decisions binding. Read as a whole, it appointed escrow agents to secure implementation and prevent disputes, not a tribunal to adjudicate substantive rights judicially. The appellant’s delayed and inconsistent pursuit of remedies also weighed against discretionary interference.
Issues
- Whether the MoU’s implementation and escrow provisions constituted an arbitration agreement.
Provisions considered
- Section 7: arbitration agreement, Arbitration and Conciliation Act, 1996Applied the requirement of an intended adjudicatory reference of disputes, considering the MoU as a whole rather than labels and finality language in isolation. (¶¶ 8, 9, 10, 11, 12)
- Article 136, Constitution of IndiaThe appellant’s prolonged delay and parallel or successive recourse to company proceedings furnished an additional reason against discretionary intervention. (¶ 13)
Held
- Clauses 6, 8 and 11 entrusted cheques, share certificates and transfer documents to named persons until satisfactory completion. Clause 12’s decisions concerned implementing the transaction during its subsistence; their authority ended on completion. The labels mediators/arbitrators were used loosely and did not create arbitral jurisdiction. (¶¶ 8, 9, 10)
- An arbitration agreement must contemplate binding adjudication of substantive rights by an impartial tribunal acting judicially on formulated disputes, with a fair opportunity for both sides. The MoU instead sought smooth completion and prevention of disputes. Finality language alone did not make it an arbitration agreement. (¶¶ 10, 11, 12)
- The other purchasers’ recourse to civil suit supported the parties’ non-arbitral understanding. Independently, the appellant’s two-and-a-half-year delay after notice, pursuit of company remedies and delayed special-leave challenge made discretionary interference inappropriate. (¶¶ 11, 13)
Result
Appeal disposed of without disturbing rejection of the Section 11 request; the MoU was held not to contain an arbitration clause.