The Supreme Court on Thursday urged courts to exercise their suo motu powers in cases where legal professionals are found deliberately drafting misleading arbitration clauses in contracts..A Bench of Justices Surya Kant and NK Singh observed that courts must, as a matter of sound judicial policy, firmly reject shoddily drafted clauses at the very threshold, adding,"Such cases, which prima facie disclose mala fides woven into the very Agreement they seek adjudication over, must be thrown out of the Court, as they have been indulged for far too long. We would complementarily urge the Courts to invoke their suo moto powers in appropriate cases wherein legal firms or counsel are found designing ‘arbitration clauses’ which deliberately mislead and misguide...Needless to say, to uphold the integrity of the arbitral process, the sanctity of such agreements must be preserved.".Calling for professionalism in Indian arbitration, the Court warned,"The time is not far when personal liability must be assigned for such unscrupulous acts, along with the sanctioning of the harshest punitive measures against the actors.".The Court was hearing a batch of appeals arising from three separate judgments of the Delhi High Court. The question before the Court in all these cases was whether the dispute resolution clauses constitute a valid arbitration agreement between the parties..The judgment observed that the facts of these appeals clearly illustrate a troubling trend - that the drafting of arbitration clauses in commercial agreements in India leaves much to be desired.It noted that although arbitration was conceived as a mechanism to ensure speedy and effective dispute resolution, it is both evident and ironic that in certain instances, the process has been misused to further complicate and prolong the resolution of disputes.The Court expressed concern over the manner in which ambiguity is embedded into such agreements, observing that this raises serious issues about the integrity and efficacy of dispute resolution mechanisms."What is most shocking to our judicial conscience is the incontrovertible reality that the parties in the present cases have spent nigh a decade acrimoniously litigating over the method of dispute resolution itself, while their actual qualms against each other remain deeply buried under the surface—effectively stuck in limbo. A legal dispute that lingers for years over the mere mode of adjudication, before even touching the merits, is akin to a traveller stranded at a crossroads, endlessly debating which path to take while the journey itself remains unbegun," it stated..It went on to hold that the foremost requirement of a valid arbitration agreement, when reduced to writing, is that the parties must have consciously and unambiguously agreed to refer their disputes to arbitration. This intention, the Court observed, must be clearly discernible from the language of the contract itself, as well as the surrounding contractual framework..In the present case, it found that there was no express intent on the part of the parties to submit disputes to arbitration..While acknowledging that an arbitration clause must indeed culminate in a conclusive determination, the Court clarified that finality alone does not equate to arbitration."It may be clarified here that there is no straitjacket formula for listing arbitral norms exhaustively, as these norms may vary from time to time. While we cannot delineate arbitral norms from stem to stern, we have short-listed some of these norms for the purposes of these appeals, which unfortunately do not find any explicit or implicit mention in the subject-dispute resolution clauses.".Senior Advocate Nakul Dewan and Advocates Deepak Khurana, Abhishek Bansal, Umesh Kumar Khaitan, Praveen Swarup, Pragyan Mishra, Devesh Maurya and Pareena Swarup appeared for the petitioners.Advocates Sandeep Devashish Das, Praveen Swarup and Farrukh Rasheed appeared for the respondents..[Read Judgment]
