Arbitration Clause Need Not Use Technical Terms If There Is Intention To Arbitrate: Bombay High Court

On September 7, the Bombay High Court held that an arbitration agreement cannot be created where parties never intended to arbitrate but a clause cannot be rejected merely because it does not use technical arbitration terminology if its substance demonstrates the necessary intention.

Justice Amit Borkar held that Clause 8 of the contract constituted an arbitration agreement and appointed Justice Avinash Gharote, former Judge of the Bombay High Court as the Sole Arbitrator to adjudicate disputes arising out of the contract. The Court also held Mumbai to be the seat of arbitration. 

"The Court cannot create an arbitration agreement where there was no intention to arbitrate. But equally, a clause cannot be rejected only because it is not drafted in technical arbitration language, if its substance shows the necessary intention."

The dispute arose from delays in execution of the project under the August 26, 2014 Contract Agreement between R.A. Ghule and Sinnar Municipal Council. The work was initially to be completed by August 25, 2016 but the applicant alleged delays in handing over the site attributable to the respondents, resulting in extensions up to March 31, 2021. After a Final Work Completion Certificate was issued on March 8, 2021, the applicant raised a ₹53.35 crore claim on March 15, 2021 for delay compensation and other contractual dues.

The Council denied the claims and raised a ₹164.30 crore counterclaim on September 20, 2021. After the claims remained unresolved, the applicant invoked the arbitration clause on December 18, 2025 but the respondents did not appoint an arbitrator.

The Court noted that Clause 8 of the contract required disputes to be referred to the Principal Secretary, Urban Development Department, Maharashtra, Mumbai whose decision would be final and binding, provided an appellate mechanism and barred recourse to courts.

It distinguished the Supreme Court's South Delhi Municipal Corporation decision, noting that the present clause involved compulsory reference, adjudication, appeal and finality, rather than merely mediation or administrative fact-finding. 

The Court further held that the possible ineligibility of the named government authority did not destroy the underlying arbitration agreement. An independent arbitrator could instead be appointed.  The Court also rejected the argument that Sinnar was the seat merely because the contract was executed and the work performed there, holding that the dispute-resolution clause connected the arbitration with Mumbai.

"The place of execution of a contract and the place selected as the seat of arbitration are different matters. The contract may be signed at one place and arbitration may have its seat at another place. Therefore, the mere fact that the Agreement was executed at Sinnar is not sufficient to hold that Sinnar is the seat. The place where the contractual work was to be performed does not by determine the seat."

The Court ultimately appointed Justice Avinash Gharote, former Judge of the Bombay High Court, as the Sole Arbitrator to adjudicate the disputes arising from the contract with Mumbai as the seat of arbitration.

For Applicant: Advocates Manoj Harit with Saloni Bafna, Dhrishti Ostwal, and Niket Harit i/by Manoj Harit & Co

For Respondent: Mohit Jadhav, AGP