MP High Court: Arbitration Clause Remains Valid Even If Agreement Says Parties “May” Refer Disputes to Arbitration

The Madhya Pradesh High Court has ruled that a party cannot avoid arbitration merely because an arbitration clause uses the word “may” instead of “shall.” The Court held that the intention of the parties must be gathered from the agreement as a whole and not from a single word in isolation.

Justice Deepak Khot passed the order while deciding an application filed by M/s JVS Foods Pvt. Ltd. seeking appointment of an arbitrator in a dispute with M.P. State Agro Industries Development Corporation Ltd. over valuation of shares under a shareholders’ agreement executed in 2012.

The dispute arose after one party sought to exit the shareholding arrangement. Differences emerged regarding the price at which the exiting party’s shares were to be purchased. After negotiations failed, JVS Foods invoked the arbitration clause and approached the High Court for appointment of an arbitrator.

The respondent opposed the request, arguing that the agreement stated either party “may” refer disputes to arbitration, making arbitration optional rather than mandatory.

Rejecting this contention, the Court observed that the agreement specifically provided for arbitration, identified Bhopal as the seat of arbitration and prescribed the applicable legal framework. These provisions showed a clear intention to resolve disputes through arbitration.

The Court also noted that the respondent had supported arbitration in similar disputes in the past and could not take a contradictory stand when faced with the present claim.

Accordingly, the Court appointed former High Court judge Alok Verma as the sole arbitrator to resolve the dispute.