Panasonic India Pvt. Ltd. v. Shah Aircon ARB. P.

621/2021 {Delhi High Court}

Facts: Petitioner has filed a petition under Section 11 of the Arbitration and Conciliation Act,
1996 [hereinafter referred to as “the Act”], for appointment of an arbitrator to adjudicate disputes
which have arisen between the parties under an Agreement dated 05.09.2016, entitled
“Distribution Agreement” [hereinafter referred to as “the Agreement”].

Background- Panasonic invoked the arbitration clause by a letter dated 29.01.2021. Shah Aircon
responded by a letter dated 26.02.2021 stating that he has filed a civil suit is pending before the
Court of learned Civil Judge (Junior Division), Gurugram, Haryana. It is in these circumstances
that Panasonic filed the present petition.

Arbitration clause in the agreement {Clause XXV}- “…The arbitration proceedings shall be
held in New Delhi, conducted in English, and shall be subject to the provisions of the
Arbitration and Conciliation Act 1996. The Arbitrator shall give a reasoned award. In the event
the Appoint Authority fails to act or appoint a sole arbitrator, then either Party can have the
sole arbitrator appointed under the provisions of the Arbitration and Conciliation Act, 1996…”

Governing law {Clause XXIV} – “…All issues relating to appointment of arbitrator or any
petition or application to be made to the Court under the applicable arbitration law or any
Arbitration Award or any issue arising out of such arbitration proceedings shall be subject to
the exclusive jurisdiction of Courts at New Delhi only.”

Arguments from Respondent’s side:

 Arbitration clause is not valid: The clause uses the word “can”, as opposed to “shall”,
which, signifies an option in the hands of a party as to whether to refer a dispute to
arbitration or not. {relied on Jagdish Chander vs. Ramesh Chander and Ors1}
 Claims barred by limitation.
 Court does not have jurisdiction: As per the invoices the appropriate Court having
jurisdiction is Gurugram, Haryana.

Arguments from Petitioner’s side:

1
(2007) 5 SCC 719.
  Arbitration clause is valid: It fulfills the criteria laid down in Section 7 of the Act.
Further, upon a combined reading of Clauses XXIV and XXV of the Agreement, it is
clear that the parties intended a mandatory reference to arbitration, and that such intention
cannot be eclipsed by mere use of the word “can.”
 The contention on limitation may be referred for adjudication by the arbitral tribunal.
 Jurisdiction: Exclusive jurisdiction clause contained in a contract having an arbitration
clause would prevail over designation of a particular venue and hence, hon’ble court will
have jurisdiction in the present matter. {relied upon Cravants Media Pvt. Ltd vs.
Jharkhand State Co-Operative Milk Producers Federation Ltd. and Anr2 etc.}.

Court’s take:

A. Jurisdiction:
 The Agreement provides for exclusive jurisdiction of the Courts in New Delhi,
and specifically for the parties to have recourse to the present Court, for
appointment of an arbitrator. Further, the arbitration clause in invoice merely
provides for “venue.”
 The Court stated that even in the invoices, exclusive jurisdiction is vested in
courts in Delhi. {relied on Cravants Media Pvt. Ltd supra}.
B. Interpretation of Arbitration Clause:
 As with all contractual terms, the interpretation of an arbitration provision must
be based on the construction of the entire agreement; no single word or phrase
should be given an unfair advantage or stressed to take away from the clause's
intended meaning.
 The word "can," which often denotes an alternative to the word "shall," which is
mandatory in nature, is not relevant to the current situation. This is due to the
juxtaposition of the terms "can" and "either party," which denotes the option for
either Panasonic or Shah Aircon to refer their disputes to arbitration. If any party
chooses to use this option by submitting any disputes arising under the Agreement
to arbitration, it effectively binds the other party as well. Further, the remainder

2
Judgement dated 06.12.2021 in ARB.P. 915/2021.
 portion of the clause which indicates language, procedure, venue etc. indicates
that parties intended a mandatory reference to arbitration.
 Reliance on Jagdish Chander supra by the Defendant’s is misplaced as the
arbitration clause in the agreement that was discussed in that case provided that
the disputes “shall be mutually decided by the parties or shall be referred to
arbitration if the parties so determine.” It is on the interpretation of the phrase “if
the parties so determine” that the Court came to the conclusion that the
arbitration agreement lacked consensus ad idem to refer the parties to arbitration,
and required fresh agreement for this purpose.
C. Limitation:
 Limitation is in general “a mixed question of fact and law”, which is in the realm
of the arbitrator to resolve. It is only in an exceptional case, where the claims are
ex facie time barred, that the Court would decline reference to arbitration under
Section 11 of the Act. {relied on Bharat Sanchar Nigam Ltd and Anr. vs. Nortel
Networks India Pvt Ltd.3 etc.}.

Key Takeaways:

 The interpretation of an arbitration provision must be based on the construction of

the entire agreement; no single word or phrase should be given an unfair
advantage or stressed to take away from the clause's intended meaning.
 Issue of limitation will not be decided under Section 11 application unless claims
are ex facie time barred.
 Exclusive jurisdiction clause contained in a contract having an arbitration clause
would prevail over designation of a particular venue.

3
(2021) 5 SCC 738.