Word 'Arbitration' In Brief Clause Can Be Sufficient To Show Intention To Arbitrate: Bombay High Court

The Bombay High Court has held that a brief arbitration clause can constitute a valid and binding arbitration agreement even when it does not use words such as “shall” or “will” to expressly require disputes to be referred to arbitration.

Justice Amit Borkar observed, “The Court is not adding the word 'shall' to the contract as a new term. The Court is trying to understand the words already written in the Purchase Order in their ordinary commercial setting. The word 'Arbitration', along with the fact that there is no condition requiring fresh consent, is sufficient to show the intention to use arbitration for disputes arising from the Purchase Order."

The court was considering a plea by Lion Rubber Industries Private Limited and another for appointment of an arbitrator in a dispute arising from a Purchase Order for a Hydraulic Press.

The dispute concerned Clause 9 of the Purchase Order, which read: “9. Arbitration ~ Subject to Mumbai Jurisdiction.” The respondents argued that the clause did not constitute an arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996.

They pointed out that Clause 9 did not state that disputes “shall” or “will” be referred to arbitration. It also did not provide for the appointment of an arbitrator, the conduct of arbitration, or state that an arbitral award would be final and binding.

The respondents relied on Supreme Court decisions, including Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture, (2022) and BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Ltd (2025)

Justice Borkar distinguished BGM, where the Supreme Court had considered a clause stating that disputes “may be sought” through arbitration. The Supreme Court held that the wording indicated that there was no subsisting agreement requiring the parties to arbitrate and that arbitration would require further agreement between them.

In the present case, Clause 9 contained no words suggesting that fresh consent was required before arbitration could take place.

The Purchase Order was a commercial document containing various technical and commercial terms. The word “Arbitration” appeared as one of its numbered terms.

“Section 7 of the Act does not require that any particular fixed words must be used for making an arbitration agreement. What is required is to see what the parties have agreed,” the court observed.

It held that an arbitration clause need not be drafted in elaborate legal language. The question was whether the words used, read with the contract as a whole, showed an intention to have disputes decided through arbitration.

The court also rejected the argument that the absence of a procedure for appointing an arbitrator made the clause invalid. Where parties have agreed to arbitration but have not provided complete appointment machinery, the law can provide the necessary mechanism, it observed.

Referring to the Supreme Court's decision in Babanrao Rajaram Pund v. Samarth Builders & Developers, (2022), the court observed that the absence of words such as “final and binding” does not by itself invalidate an arbitration agreement. The parties' intention to arbitrate can be gathered from the agreement as a whole.

The court also rejected the respondents' argument that “Arbitration” was merely a heading. It held that “Arbitration” and “Subject to Mumbai Jurisdiction” had to be read together.

If the parties had intended only to confer jurisdiction on Mumbai civil courts, there would be no clear reason for placing the word “Arbitration” immediately before “Subject to Mumbai Jurisdiction”, Justice Borkar observed. Such an interpretation would leave the word “Arbitration” without real meaning.

The court held that “Subject to Mumbai Jurisdiction” could reasonably be understood as qualifying the arbitration arrangement with reference to Mumbai jurisdiction. The words did not make arbitration optional.

Justice Borkar held that the clause did not become invalid merely because it was brief or imperfectly drafted.

“The words may not have been drafted perfectly, but imperfect drafting is not same as no agreement. The commercial meaning can still be understood when Clause 9 is read as a whole and along with the Purchase Order,” the court observed.

The court found that a written arbitration agreement existed and held that the disputes arising from or connected with the Purchase Order were referable to arbitration. It appointed Advocate Shadab Jan as the Sole Arbitrator to adjudicate the disputes.