Use Of Expression ‘May’ In Contract A Possibility To Refer Dispute To Arbitration, Not A Binding Agreement: Calcutta High Court
The Calcutta High Court dismissed an application seeking arbitration in a lease dispute, explaining that the relevant clause in the lease deed did not constitute a binding arbitration agreement.
The Calcutta High Court has explained that the use of the expression ‘may’ in a contract is a possibility to refer the dispute to arbitration, not a binding agreement.
The Court dismissed an application seeking arbitration in a lease dispute, explaining that the relevant clause in the lease deed did not constitute a binding arbitration agreement. The Petitioner had invoked arbitration, arguing that the clause mandated arbitration.
A Single Bench of Justice Shampa Sarkar xplained, “The use of the expression ‘may’ indicates that the parties had agreed that, in future the parties may approach the arbitrator for settlement of disputes. The use of the expression ‘may’ is a possibility and not a binding agreement. The meeting of minds of the parties to refer such dispute to arbitration is not available from the clause itself. Not only must an arbitration clause indicate that the parties had agreed that they ‘shall’ refer the disputes to arbitration, but the clause should also indicate that the parties agreed to refer the dispute to a private tribunal and would be bound by the decision of the said Tribunal.”
Advocate Mayuri Ghosh appeared for the Petitioner.
Brief Facts
The Petitioner claimed to be a lessee of a property based on a registered lease deed entered into by the Respondent's predecessor. The lease was for twenty-one years. The predecessor passed away in 2013.
The Petitioner alleged that after the lease ended in 2022, the Respondent began to disturb his possession and sought his eviction. The lease deed contained a renewal clause, and the Petitioner exercised this option via a letter in 2021. The Respondent, however, denied the right of renewal.
The lease deed's arbitration clause stated that the lessor would renew the lease if the lessee exercised the option, with mutually agreed rent and terms, or failing agreement, decision by an appointed arbitrator.
Court’s Reasoning
The High Court noted, “This Court finds that the arbitration clause provides that the lessor will be bound to renew the lease for subsequent periods of the same tenure, if such option is exercised by the lessee, and the rent and terms otherwise shall be mutually agreed upon. In case of failure to agree upon the same, it may be decided by an arbitrator to be appointed by the parties.”
“Accordingly, the use of the expression “may” in the clause clearly indicates that the parties had not decided to refer their disputes to arbitration, but had kept an option open that in case of disputes not being settled, the parties would have an opportunity to approach an arbitrator for adjudication of the disputes. This is not a binding arbitration clause. The use of word ‘may’ denotes a discretion and is typically non-binding,” the Bench held.
Consequently, the Court ordered, “The petitioner may have exercised such right by issuing a notice, but the respondent did not accept such suggestion, which itself shows that the parties did not agree to go to arbitration.”
Accordingly, the High Court dismissed the Application.
Cause Title: Sunil Kumar Samanta v. Sikha Mondal (AP/15/2022)
Appearance:
Petitioner: Advocates Mayuri Ghosh, Somali Bhattacharya and Megha Das