BGM and M-RPL-JMCT (JV) v. Eastern Coalfields Limited

Laksha

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Appellant: BGM AND M-RPL-JMCT (JV)
Respondents: Eastern Coalfields Limited
Court: The Supreme Court of India
Date: 18.07.2025
Coram: Hon’ble Justice Pamidighantam Sri Narasimha & Hon’ble Justice Manoj Misra
Citation: 2025 INSC 874

Facts of the Case

A dispute arose between the appellant and the respondent during the subsistence of a contract relating to transportation/handling of goods.
Clause 13 was the main point of contention. “In case of parties other than Govt. Agencies, the redressal of the dispute may be sought through ARBITRATION AND CONCILIATION ACT, 1996 as amended by AMENDMENT ACT OF 2015”.
The appellant filed an application under Section 11(6) of the 1996 Act for appointment of an Arbitrator for settlement of the disputes.
The respondent argued that Clause 13 does not amount to an arbitration agreement, as it lacks the essential elements showing a clear intention to arbitrate.
On the basis of decisions in Jagdish Chander v. Ramesh Chander (2007) and Mahanadi Coalfields Ltd. v. IVRCL AMR Joint Venture (2022), the High Court dismissed the petition.
The court stated that use of the word ‘may’ before ‘be sought’ amounts to no clear intention between parties to arbitrate.

Issues

Whether the question of existence of an arbitration agreement should be left for the arbitral tribunal to decide?
Whether Clause 13 would constitute an arbitration agreement between the parties as contemplated under Section 7 of the 1996 Act?
Whether Clause 32 of Instructions to Bidders negates the existence of an arbitration agreement?

Judgment & Analysis

The Court relied on the seven-Judge Constitution Bench decision in Interplay Between Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899, In re (2024) 6 SCC 1 where the scope of Referral Court’s power under Section 11 of the Arbitration Act was examined.
The scope of power is limited to a prima facie determination due to the use of the term “examination”. The Courts are to determine whether the underlying contract contains an arbitration agreement which allows for arbitration in case of disputes between the parties.
The mere use of the word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement. The referral court is not to hold a mini trial by allowing the parties to adduce evidence. The burden lies on the party invoking arbitration to show prima facie proof of its existence. Under Section 16, the arbitral tribunal is to rule over the existence and validity of an arbitration agreement based on the evidence.
The Court held that the appellant is relying on just a single clause, hence, a prima facie inquiry can be made without having to hold a mini trial or adducing evidence, rejecting the appellant’s arguments.
Relying on Bihar State Mineral Development Corporation v. Encon Builders, the Court laid down four essential ingredients of an arbitration agreement: (a) there must be a present or future difference in connection with some contemplated affair; (b) the parties must intend to settle such difference by a private tribunal; (c) the parties must agree in writing to be bound by the decision of such tribunal; and (d) the parties must be ad idem.
The Court, following Jagdish Chander (supra), held that there is no binding agreement where the mere possibility of parties agreeing to arbitration in future is different from an obligation to refer disputes to arbitration. Anything in the agreement requiring or contemplating further consent before a reference to arbitration is not an arbitration agreement.
The Court upheld the decision of the High Court that Clause 13 does not constitute an arbitration agreement. The phraseology of Clause 13 is not indicative of a binding agreement. The phrase “may be sought” clearly states that there is no subsisting agreement between the parties as to seeking redressal through arbitration.
Since the Court held that there is no arbitration agreement between the parties, the decision on Issue 3 was of no consequence. However, even if it were to exist, Clause 32 would only determine jurisdiction or seat, not exclude arbitration if it otherwise existed.

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