The Calcutta High Court has dismissed an arbitration petition filed by Sunil Kumar Samanta against Smt. Sikha Mondal, holding that the clause in their lease deed referring to arbitration was not a binding arbitration agreement under law.
Case Background
The petitioner, Sunil Kumar Samanta, claimed to be a lessee under a registered deed of lease dated August 16, 2001, for a two-storeyed property located at Mouza Mahal, district Nadia. The lease, originally executed with the respondent’s husband Jiten Mondal (now deceased), was for a term of 21 years and included a clause providing for renewal upon the lessee’s option.
With the lease ending on August 15, 2022, the petitioner alleged that the respondent had refused to renew it, despite his exercise of the renewal option via letter dated August 21, 2021. This led to a dispute which the petitioner sought to refer to arbitration, relying on an arbitration clause in the lease deed.
The Arbitration Clause
The clause stated:
“The Lessor shall be bound to renew the lease for subsequent periods of same tenure if such option is exercised by the Lessee. The rent and other terms and conditions shall be mutually agreed and if not agreed upon the same may be decided by an Arbitrator to be appointed by the parties.”
The petitioner argued that this clause constituted a binding arbitration agreement and requested the court to refer the dispute to arbitration.
Court’s Analysis
Justice Shampa Sarkar, presiding over the matter, examined the language of the arbitration clause, particularly the use of the word “may.” Citing authoritative judgments, including Wellington Associates Ltd. v. Kirit Mehta [(2000) 4 SCC 272], Jagdish Chander v. Ramesh Chander [AIR 2007 SC 107], and GTL Infrastructure Ltd. v. Vodafone India Ltd. [Commercial Arbitration Petition No. 323 of 2021], the court noted:
“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 Court emphasized that for an arbitration agreement to be valid under Section 7 of the Arbitration and Conciliation Act, 1996, it must reflect a clear and binding intent of the parties to refer disputes to arbitration. Mere use of optional language such as “may” denotes discretion and does not indicate a meeting of minds.
Justice Sarkar also referred to the Delhi High Court’s ruling in M/S Linde Heavy Truck Division Ltd. v. Container Corporation of India Ltd. [CS(OS) 23/2012], where it was held that a clause merely providing an option to refer disputes to arbitration does not constitute a valid arbitration agreement.
In this case, the court found that:
“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.”
Conclusion
Finding that the arbitration clause was not binding, the Court held that there was no enforceable arbitration agreement between the parties. Consequently, the application under Section 11 of the Arbitration and Conciliation Act was dismissed.
Case Title: Sunil Kumar Samanta v. Smt. Sikha Mondal
Case No.: AP/15/2022
Bench: Justice Shampa Sarkar
