The court upholds the arbitration clause in Lifewell Diagnostics vs. Micron Laboratory, emphasizing intent over wording.
In a significant ruling on April 10, 2026, the Delhi High Court, presided over by Justice Mini Pushkarna, confirmed the validity of an arbitration clause contained within a Revenue Sharing Agreement between Lifewell Diagnostics Private Limited and Micron Laboratory. This decision comes despite the ambiguous use of the word "may" in the clause, which the respondent argued rendered the clause non-binding.
The dispute arose from Lifewell Diagnostics' claim that Micron Laboratory defaulted on payment obligations under the agreement, resulting in an outstanding amount of Rs. 23,93,916. In response, Micron Laboratory contended that the agreement had been mutually terminated in May 2024, with all accounts settled, leaving no disputes to arbitrate.
The petitioner sought the appointment of a sole arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996, citing Clause 29 of the agreement. This clause outlined a detailed adjudicatory mechanism, including provisions for final and binding arbitral awards.
Justice Pushkarna emphasized that the mere use of "may" does not negate the binding nature of an arbitration clause if the parties' intent to arbitrate is clear. The court referenced several Supreme Court judgments underscoring that an arbitration agreement does not require specific wording but should reflect the parties' intent to resolve disputes through arbitration.
The judgment highlighted the importance of a holistic reading of the clause, considering the detailed procedure for arbitration included in the agreement. The court noted that the arbitration award was intended to be final and binding, demonstrating the parties' clear intention to arbitrate unresolved disputes.
In light of this, the court appointed Mr. Amrit Pal Gambhir as the sole arbitrator to adjudicate the disputes, allowing the respondent to raise any counter-claims during the arbitration proceedings. The court's decision reinforces the principle that arbitration clauses should be interpreted to uphold the parties' intent to arbitrate, rather than being invalidated by technicalities or inartistic drafting.
Bottom Line:
An arbitration clause using the term "may" does not negate its binding nature if the clause provides a detailed adjudicatory mechanism and reflects the clear intention of the parties to arbitrate disputes.
Statutory provision(s): Arbitration and Conciliation Act, 1996 Sections 11, 7, 12
Lifewell Diagnostics Private Limited v. Micron Laboratory, (Delhi) : Law Finder Doc id # 2880863
