This case is a part of our Annual Arbitration Review 2020.
Name: Quick Heal Technologies Limited v. M/S. NCS Computech Private Limited and Anr.
Citation: 2020 SCC OnLine Bom 693
Court: Bombay High Court
Coram: S.J. Kathawalla, J.
Date: 5th June 2020
Keywords: Quick Heal Technologies, Computech Private Limited.
The current case revolved around the construction of the word ‘may’ in clause 17 of the agreement which was used in the context of the parties going to arbitration.
The Respondents (sister – companies) in the current case entered into a Software Distribution Agreement (hereinafter ‘SDA’) to sell and distribute their ‘Quick Heal Range of Products’. Clause 17 (a) of the Agreement provided that all disputes under said agreement ‘shall’ be resolved by the designated personnel within 30 days. If this failed, it was stated that dispute ‘may’ be referred to the arbitration. On failing to make the payment within the given time, the dispute resolution clauses were triggered.
Whether the arbitration clause in the current SDA agreement was directory or optional?
Whether the arbitration clause was triggered prematurely?
The Court cited the judgment of Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. v. Jade Elevator Components. Here the bench interpreted the shift from ‘should’ to ‘will’ in an arbitration clause to indicate a mandatory consent to arbitration after a failed round of settlement talks. The wording indicated that there was consensus ad idem between both parties to take recourse to arbitration.
With respect to the second issue, the Court cited the cases of Tulip Hotel versus Trade Wings Ltd. [i] and the case of Visa International Ltd. v. Continental Resources (USA) Ltd. where it was held that if it is clear that the parties do not intend to settle, there will be no hindrance to the next stage of dispute resolution. In the current case, detailed exchanges through emails were shown between the parties to indicate that despite one party making repeated requests to have the meeting as per clause 17(a), the other party did not want to take part in said meeting. Thus, the next part of the clause with respect to dispute resolution was triggered.
Finally, the Court held that the current case, unlike Zheijang or Indel Technical Services (P) Ltd. v. W.S. Atkins Rail Ltd. (cited within Zheijang) makes the shift from ‘shall’ to ‘may’ instead of ‘shall or ‘will’ which indicates no intention to submit themselves to arbitration. The case of Wellington Associates v. Kirit Mehta was also cited to state that the language in the arbitral clause must indicate an unequivocal intention to settle the dispute through arbitration. That being the case, it was completely optional on both parties with respect to submitting themselves to either the judicial system or arbitration.
Thus the Court in this case declined to allow mandatory arbitration due to the use of the word ‘may’ in the arbitration clause citing leading precedent such as Zheijang, Indel and Tulip Hotel.
[i] Tulip Hotels Pvt. Ltd. v. Trade Wings Ltd., 2009 SCC OnLine Bom 1222.