M/s Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. v. M/s Jade Elevator Components
Background
A Chinese elevator-parts manufacturer and an Indian elevator-components supplier entered into a "Commission Processing Contract" in 2014. When a dispute arose under the contract, the Chinese company nominated a retired High Court judge as sole arbitrator, but the Indian respondent refused to consent, disputing both the facts and whether the dispute fell within the contract's scope. The petitioner then approached the Supreme Court under Section 11(5) of the Arbitration Act to have an arbitrator appointed, since the parties could not agree.
Decision Breakdown
The core question was whether Clause 15 of the contract, an ambiguously translated "dispute handling" clause saying failed consultation should go "to the arbitration body for arbitration or the court", amounted to a valid arbitration agreement. The Supreme Court held that the clause gave the parties a choice between arbitration and litigation, and since the petitioner had clearly opted for arbitration, that choice had to be honoured, relying on its earlier reasoning in INDTEL Technical Services v. W.S. Atkins Rail Ltd. that emphasis should be placed on the parties' intention to resolve disputes by arbitration. The Court accordingly allowed the petition and appointed Justice Prakash Prabhakar Naolekar, a former Supreme Court judge, as the sole arbitrator to decide the dispute.
Lesson Learnt
A contract clause offering "arbitration or the court" as alternative dispute-resolution routes is treated as a valid arbitration clause once either party elects arbitration: the other side cannot block that choice by insisting on litigation instead.