MP High Court Appoints Arbitrator, Says Party Cannot Oppose Arbitration After Conceding To It In Similar Disputes

The Madhya Pradesh High Court has held that a party cannot "blow hot and cold" on arbitration by opposing arbitral reference after having accepted or relied on arbitration in similar disputes arising from the same agreement.

The court consequently appointed a sole arbitrator to resolve a dispute over the valuation of shares following a proposed exit from a shareholders' agreement.

Justice Deepak Khot passed the order in a dispute between JVS Foods Pvt. Ltd. and M.P. State Agro Industries Development Corporation Ltd. The court appointed former High Court judge Justice Alok Verma as the sole arbitrator and directed that the proceedings be conducted at Bhopal.

“Therefore, in the considered opinion of this Court, the non-applicant cannot blow hot and cold according to their whims and wishes when it comes to the appointment of the arbitrator to resolve the dispute between the parties. As in the present case the dispute is admitted, the non-applicant themselves have categorically replied the notice of arbitration by saying that still there are negotiations going on, therefore, it is appropriate that the parties should be relegated to the arbitration to resolve their dispute.”

The dispute arose out of a shareholders' agreement dated November 27, 2012. Under the arrangement, the equity shareholding of a party exiting the agreement was to be purchased by the remaining parties. A disagreement later emerged over the valuation of shares after the Corporation sought to exit.

JVS initially tried to resolve the issue and later invoked the arbitration clause in May 2024.

The Corporation, however, objected, stating that the clause used "may" and therefore was optional. Subsequently, JVS approached court.

It argued that the same arbitration clause had previously been considered by the High Court in a dispute involving the Corporation, where an arbitrator was appointed. It also pointed out that the Corporation had taken the position in another proceeding that parties should avail the remedy of arbitration.

The Corporation opposed the request and argued that the use of the word "may" showed that arbitration was optional.

The court noted that the existence of disputes between the parties, the arbitration clause and limitation were not in dispute.

The court found it significant that the Corporation had earlier conceded to arbitration in similar matters and had also objected to a writ petition on the ground that arbitration was the appropriate remedy.

It observed, “From perusal of both the orders wherein non-applicants are party, it is found that the non-applicant in other cases have fairly conceded to the prayer of arbitration and in fact taken objection in the writ petition to avail the remedy of arbitration.”

Rejecting the Corporation's reliance on the words "may refer," the court held that the arbitration clause, read as a whole, reflected the parties' intention to resolve disputes through arbitration.

“From bare perusal of the arbitration clause in the agreement, it is found that in all the other lines of the paragraph the word 'shall' has been used, which gives an impression to the parties that if the parties opt for an arbitration then the Act of 1996 shall be applicable as well as the territorial jurisdiction of the Bhopal Court or the seat of the arbitration shall be at Bhopal that goes to show that in entirety the non-applicants had intended to write the said clause in the agreement to resolve their dispute through arbitration in case dispute arises.”

Holding that the dispute was arbitrable, the court allowed the application and appointed Justice Alok Verma as the sole arbitrator. It also directed the parties to deposit fees and charges in accordance with the M.P. Arbitration Centre Rules, 2019.

For Petitioner (M/s JVS Foods Pvt. Ltd.): Advocate Astha Nagori (through VC).

For Respondent (M.P. State Agro Industries Development Corporation Ltd.): Advocate Shri Arjun Bajpai.