A three-judge bench of the Hon’ble Supreme Court consisting of Hon’ble Chief Justice Dipak Misra, Justice A. M. Khanwilkar, Justice D. Y. Chandrachud held that in order to ascertain the dispute resolution mechanism of a contract, the intention of the parties has to be taken into consideration and consequently the choice of the parties is to be respected.

In the matter of M/s. Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. v. M/s. Jade Elevator Components the factual matrix pertaining to the dispute resolution clause is that the contract between both the parties had a clause as follows-

“Dispute Handling: Common processing contract disputes, the parties should be settled through consultation; consultation fails by treatment of to the arbitration body for arbitration or the court.”

After a consideration of this clause, as well as the precedent set by the Apex Court in the matter of INDTEL Technical Services Private Limited v. W.S. Atkins Rail Limited, and the arguments posed by petitioner that the dispute resolution clause of this contract gives an option to the parties either to go for arbitration or to litigate in front of the court of law and as the petitioner chose arbitration leading to a conclusion that the dispute will be resolved via arbitration, whereas the arguments of behalf of the respondent was that the above-mentioned dispute resolution clause is not an arbitration clause all together, the bench concluded that when there is choice available to the Parties then it has to be respected if they choose to abide by Arbitration laws for dealing with settlement of their dispute.

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Judgment: M/s. Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. v. M/s. Jade Elevator Components