2025 INSC 693

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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No. ____/2025

(Arising out of SLP (C) No. 16913/2017)

South Delhi Municipal Corporation of Delhi …Appellant

versus

SMS Limited …Respondent

WITH

Civil Appeal No. ____/2025

(Arising out of SLP (C) No. 21437/2022)

M/s DSC Limited …Appellant

versus

Municipal Corporation of Delhi …Respondent

WITH

Civil Appeal No. ____/2025

(Arising out of SLP (C) No. 17510/2023)

Municipal Corporation of Delhi …Appellant

versus

M/s Consolidated Construction Consortium Limited …Respondent

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J U D G E M E N T

SURYA KANT, J.

Leave granted.

2. The captioned appeals challenge the judgments dated 09.03.2017,

29.07.2022, and 02.11.2022 all delivered by the High Court of Delhi

(High Court), in three separate proceedings pertaining to multiple

Concession Agreements executed between the Municipal Corporation(s)

of Delhi and certain private contractors for the development of parking

and commercial complexes. At the heart of each dissension is the

interpretation of the dispute resolution clauses contained therein—

specifically, whether they constitute an arbitration clause, thus making

the disputes arbitrable. This alleged ambiguity has led to protracted

litigation before multiple fora.

3. To further contextualise, the private contractors assert that these

dispute resolution clauses necessarily mandate arbitration; whereas

the Municipal Corporations contend that they be construed as those

prescribing mediation.

A. FACTS

4. We deem it necessary, at this juncture, to delve into the facts giving rise

to this controversy. While the factual matrices differ in detail, they

converge on a common interpretative dissonance concerning the

dispute resolution clauses. Consequently, although the distinct

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contextual backgrounds of these three legal proceedings may not be

directly determinative of the ultimate adjudication, we have nonetheless

set them out briefly, in seriatim, for clarity and completeness.

5. South Delhi Municipal Corporation v. SMS Limited [SLP (C) No.

16913/2017] (SMS Ltd. Case)

5.1. The Municipal Corporation of Delhi (MCD) executed a Concession

Agreement with the Respondent, SMS Ltd. on 24.04.2012, for the

construction of a multi-storeyed parking facility at Defence Colony, New

Delhi, on a Design, Build, Finance, Operate, and Transfer (DBFOT)

basis. Subsequently, the MCD was trifurcated into the New Delhi

Municipal Corporation (NDMC), the East Delhi Municipal Corporation

(EDMC), and the South Delhi Municipal Corporation (SDMC) in 2012,

with the subject-Concession Agreement falling under the jurisdiction of

the SDMC.

5.2. Shortly thereafter, the SDMC executed a lease deed for the project site,

transferring all rights and interests therein to SMS Ltd. Disputes

quickly arose between the parties, with SMS Ltd. alleging that SDMC’s

failure to grant timely approvals for its architectural drawings resulted

in it incurring substantial losses and additional expenditure.

5.3. During this time, while construction at the project site had commenced

in earnest, the Defence Colony Welfare Association (DCWA) filed W.P.

(C) No. 1076/2013 before the High Court, inter alia seeking the

quashing of the subject-Concession Agreement and an injunction

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restraining SMS Ltd. from proceeding with the construction. The DCWA

alleged that SDMC did not own the very land on which it sought to

construct, and that the planned project would only worsen the existing

traffic in the area. The High Court by way of a status quo order dated

20.02.2013 halted further progress on the project. This impediment

ultimately led SMS Ltd. to seek termination of the Concession

Agreement.

5.4. SMS Ltd., by letter dated 15.01.2014, formally sought termination of

the subject-Concession Agreement, along with a refund of its deposited

amounts, reimbursement of incurred expenditure, and the return of its

Bank Guarantee as stipulated in the Concession Agreement. Following

a meeting with the SDMC Commissioner on 18.02.2014, an initial

understanding was reached between the parties, regarding partial

refunds. However, SMS Ltd. subsequently raised additional claims,

seeking interest on the refunded amounts as well as compensation for

loss of profits. Upon receiving no response to these demands, SMS Ltd.

vide letter dated 07.12.2015, invoked Article 20 of the Concession

Agreement calling upon SDMC to refer the disputes to ‘mediation.’

Notably, in the same letter, SMS Ltd. also acknowledged the absence of

an ‘express arbitration clause’ in the Concession Agreement but

nonetheless expressed its willingness to submit its claims before an

arbitrator.

5.5. It is a matter of record that SMS Ltd. later modified its stance as to the

arbitrability of the subsisting dispute, stating that its initial position

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was based on erroneous legal advice. Its novel position was that Article

20 of the Concession Agreement indubitably constituted an arbitration

clause. On this basis, SMS Ltd. made further representations, seeking

additional refunds and the appointment of an arbitrator. In response,

SDMC, by its letter dated 23.09.2016, rejected SMS Ltd.'s request for

arbitration as untenable. SDMC maintained that the meeting on

18.02.2014 had been convened by the Commissioner in pursuance of

the mandate laid down by Article 20, which they understood to be as a

clause prescribing mediation. It added that since the two parties had

already concluded a negotiation session chaired by the Commissioner,

any further claims for interest or damages were strictly precluded.

5.6. SMS Ltd. then approached the High Court by way of Arbitration

Petition No. 793/2016 under Section 11(6)(a) read with Section

11(12)(b) of the Arbitration & Conciliation Act, 1996 (Arbitration Act)

seeking appointment of an arbitrator. By way of the impugned

judgment dated 09.03.2017, a learned Single Judge of the High Court

overruled SDMC’s objections, conclusively holding that Article 20 of the

Concession Agreement constituted an arbitration cl ause and

accordingly proposed the appointment of a sole arbitrator.

5.7. Aggrieved by the High Court’s decision, SDMC has preferred the instant

appeal, in which while issuing notice this Court vide an interim order

dated 07.07.2017, had directed that status quo shall be maintained

between the parties.

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6. M/s DSC Limited v. Municipal Corporation of Delhi [SLP (C) No.

21437/2022] (DSC Ltd. Case)

6.1. Similar to the previous appeal, the dispute was borne out of the

issuance of a Notice Inviting Tender (NIT) by the MCD on 02.01.2009

for the development of an integrated multilevel automatic car parking

facility at M-Block, Greater Kailash I, New Delhi, on DBFOT basis.

6.2. M/s DSC Ltd. (DSC Ltd.) entered into a consortium with SIMMATEC

Parking Technologies Ltd. under a Memorandum of Understanding

(MoU), and jointly submitted a bid for the project. The MCD accepted

their bid on 09.11.2010, culminating in the execution of the subject-

Concession Agreement on 11.08.2011. In accordance with the terms of

the said Agreement, DSC Ltd., as the lead member of the consortium,

submitted a concession fee of INR 16,65,00,000 to the MCD.

6.3. However, as in the preceding appeal’s factual matrix, differences arose

between the parties. DSC Ltd. alleged that the MCD failed to fulfil its

obligations under the Concession Agreement, particularly in respect of

the condition requiring the delivery of an encumbrance-free project site

and execution of the requisite lease deeds. It moreover stated that it

could not begin its work in earnest until it was delivered the project site

as stipulated under the subject-Concession Agreement. On the other

hand, the MCD being faced with prolonged delays issued a termination

notice on 13.06.2017 unilaterally closing the Concession Agreement.

MCD retained INR 14,93,40,000, submitted by DSC Ltd. as the

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performance guarantee, treating it as forfeited and refunded the

concession fee without interest.

6.4. In contrast, DSC Ltd. maintained that the breaches leading to the

impracticability of the project were attributable solely to the MCD and

sought compensation amounting to approximately INR 406 crores, in

addition to a full refund. It thus, much like SMS Ltd., invoked Article

20 of the Concession Agreement, construing it as an ‘arbitration

clause’. The MCD, however, reiterated that the subject-Concession

Agreement was already closed, apart from categorically denying the

existence of any arbitration clause in the same.

6.5. Aggrieved by the MCD’s refusal to accede to the arbitral process, DSC

Ltd. approached the High Court by filing Arbitration Petition No.

234/2018, seeking the appointment of an arbitrator. However, vide the

impugned judgment dated 29.07.2022, a learned Single Judge of the

High Court dismissed DSC Ltd.’s petition, holding that Article 20 of the

Concession Agreement provided for mediation, not arbitration.

Furthermore, the High Court declined to follow the Co-ordinate Bench’s

stance in SMS Ltd.’s case, noting that it had been effectively stayed by

this Court (vide order dated 07.07.2017 noted hereinabove).

6.6. The aggrieved DSC Ltd. has preferred this appeal, wherein notice was

issued by this Court vide order dated 07.12.2022.

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7. Municipal Corporation of Delhi v. M /s Consolidated Construction

Consortium Limited [SLP (C) No. 17510/2023] (CCC Ltd. Case)

7.1. As in the previous instances, here too the MCD awarded a Concession

Agreement on 30.07.2010 to M/s Consolidated Construction

Consortium Limited (CCC Ltd.) pursuant to a tender issued for the

development of a multi -level automated parking-cum-commercial

complex at South Extension Parts I & II, New Delhi.

7.2. Analogously, disputes arose between the parties herein, prompting CCC

Ltd. to issue a legal notice to MCD on 01.07.2016, demanding payment

of INR 41,88,50,435 as compensation/damages with interest, or the

appointment of an arbitrator as an alternative. The MCD, however,

categorically denied the existence of any arbitration clause in the

Concession Agreement, specifically rejecting CCC Ltd.’s reliance on

Article 20.

7.3. Consequently, CCC Ltd. approached the High Court by filing

Arbitration Petition No. 319/2017 under the Arbitration Act. By its

order dated 02.11.2022, a learned Single Judge of the High Court,

while noting that an identical question of law was pending adjudication

before this Court in the SMS Ltd. case, nonetheless construed Article

20 as an arbitration clause and directed that arbitration will proceed

under the aegis of the Delhi International Arbitration Centre (DIAC).

7.4. The aggrieved MCD has preferred the instant appeal wherein notice was

issued on 24.07.2023.

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8. It, thus, becomes evident that the focal issue in all three cases before

us is whether Article 20 of the respective Concession Agreements

constitutes an ‘arbitration clause’ or merely prescribes ‘mediation’.

Given the commonality of the interpretative challenge, a uniform

determination by this Court is necessary to ensure clarity and

consistency in the underlying disputes.

9. Before we proceed further, it would be apposite to reproduce the

dispute resolution clauses across all three appeals (contained in Article

20), whose interpretation forms the bone of contention in these appeals.

9.1. Firstly, the Concession Agreement in the SMS Ltd. Case provided the

following dispute resolution clause:

“ARTICLE 20: DISPUTES

In the event that any dispute, controversy or claim arises

among the Parties in connection with or under this Agreement

or the interpretation of any of its provisions or upon the

occurrence of an event of Default any party shall refer the

dispute, controversy or claim to the Commissioner, MCD.

Section 20.1 Mediation by Commissioner

The Party that initially issue the notice of intention to refer

the matter to the MCD and MCD in Consultation with

Consultant will appoint a officer from within or outside MCD

who will look into the written documents; (i) a description of

dispute; ii) a statement of that party's position; and (iii) copies

of relevant documentary evidence in support of such position.

Section 20.2 Performance during Dispute Resolution

Pending the submission of a dispute, controversy or claim to

the officer appointed by the MCD and thereafter until the

final decision of the officer appointed by the MCD, as the

case may be, the parties shall continue to perform all of their

obligations under this Agreement, without prejudice to a final

adjustment in accordance with such decision.

Section 20.3 Survival

The provisions relating to indemnification contained in

Section 15.2, intellectual property contained in Section 18,

confidentiality contained in Section 19.1 and the dispute

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resolution provisions contained in this Article 20 shall survive

the termination of this Agreement.”

9.2. Secondly, in the DSC Ltd. Case, Article 20 provides as follows:

“ARTICLE 20: DISPUTES

In the event that any dispute, controversy or claim arises

among the Parties in connection with or under this Agreement

or the interpretation of any of its provisions or upon the

occurrence of an event of Default any party shall refer the

dispute, controversy or claim to the Commissioner, MCD.

Section 20.1 Mediation by Commissioner

The Party that initially issued the notice of intention to refer

the matter to the MCD and MCD in Consultation with

Consultant will appoint a officer who will look into the written

documents; (i) a description of dispute; (ii) a statement of that

party's position; and iii) copies of relevant documentary

evidence in support of such position.

(a) Within 10 days of receipt of the above documents, the other

parties shall submit; (i) a description of dispute; (ii) a

statement of that party's position; and iii) copies of relevant

documentary evidence in support of such position.

(b) The officer appointed by MCD may call for such further

documentary evidence and/or interview such persons, as it

may deem necessary in order to reach a decision.

(c) The officer appointed by MCD shall give notice to the parties

of its decision within 20 days of receipt of the documents

provided by the parties pursuant to subsection (b) and (c)

above. The decision of the officer appointed by MCD shall be

binding.

(d) The officer appointed by the MCD should give decision in

writing. The decision of the MCD shall be final and binding

on party…”

9.3. Lastly, the CCC Ltd. Case lays down the following dispute resolution

clause:

“ARTICLE 20: DISPUTES

In the event that any dispute, controversy or claim arises

among the Parties in connection with or under this Agreement

or the interpretation of any of its provisions or upon the

occurrence of an event of Default any party shall refer the

dispute, controversy or claim to the Commissioner, MCD.

Section 20.1 Mediation by Commissioner

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The Party that initially issued the notice of intention to refer

the matter to the MCD and MCD in Consultation with

Consultant will appoint a officer who will look into the written

documents; (i) a description of dispute; (ii) a statement of that

party's position; and iii) copies of relevant documentary

evidence in support of such position.

(e) Within 10 days of receipt of the above documents, the other

parties shall submit; (i) a description of dispute; (ii) a

statement of that party's position; and iii) copies of relevant

documentary evidence in support of such position.

(f) The officer appointed by MCD may call for such further

documentary evidence and/or interview such persons, as it

may deem necessary in order to reach a decision.

(g) The officer appointed by MCD shall give notice to the parties

of its decision within 20 days of receipt of the documents

provided by the parties pursuant to subsection (b) and (c)

above. The decision of the officer appointed by MCD shall be

binding.

(h) The officer appointed by the MCD should give decision in

writing. The decision of the MCD shall be final and binding

on party…”

B. CONTENTIONS

10. It is necessary for us at this juncture to delineate the contentions

advanced by the rival parties. For the sake of clarity and coherence, we

have categorized the submissions into two groups—(i) those made on

behalf of SDMC/MCD, and ( ii) those advanced by the private

contractors (SMS Ltd., DSC Ltd., and CCC Ltd.). This classification

reflects the evident similarities in their respective arguments, as well as

the reliefs sought.

11. Mr. Sanjiv Sen, learned Senior Counsel appearing on behalf of

SDMC/MCD, s ought to assail the High Court’s interpretation of the

disputed clauses contained in Article 20 of the respective Concession

Agreements as one mandating arbitration (SMS Ltd. and CCC Ltd.

Cases). In the same vein, he urged in favour of upholding the impugned

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decision in the case of DSC Ltd., wherein the High Court refused to

read arbitration into the Concession Agreement . To that end, he

submitted the following:

a) The issue for adjudication in the present appeals is no longer res

integra, in light of this Court’s decision in South Delhi Municipal

Corporation v. SMS AAMW Tollways (P) Ltd.

1

In that case, this

Court set aside the High Court’s erroneous interpretation of a

similarly worded dispute resolution clause as an ‘arbitration

agreement’. Given the substantial similarity between the impugned

clauses in the cases in hand and the clause considered in

Tollways (supra), they must meet the same fate.

b) The private contractors cannot successfully distinguish the ruling

in Tollways (supra) on the sole ground that, while in that case

only the contractor could make a reference to the Commissioner,

the impugned clauses in these appeals allow either party to do so.

The ability of both parties to initiate the reference does not, in

itself, transform the clause into an arbitration agreement. As

reaffirmed by this Court in Food Corporation of India v.

National Collateral Management Services Limited ,

2

a reference

to an officer of the authority, even if made by both parties, does

not meet the essential attributes of an arbitration clause.

1

(2019) 11 SCC 776.

2

2020 (19) SCC 464.

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c) The impugned clauses fail to satisfy the fundamental ingredients

of an arbitration agreement, as laid down by this Court in Bihar

State Mineral Development Corp v. Encon Builders (I) (P) Ltd.

3

Unlike a valid arbitration clause, Article 20 does not provide for

reference to a private tribunal or an independent adjudicator.

Instead, it envisages a process controlled by the MCD

Commissioner or his appointee, an arrangement that lacks the

neutrality and party autonomy inherent in arbitration. Further,

the private contractors are not devoid of any remedy as they can

always approach the civil court for the dispute resolution.

d) The conduct of the private contractors further reveals that

resorting to arbitration was a mere afterthought, seemingly

intended to prolong and complicate the dispute resolution process.

In the case of SMS Ltd., the legal notice issued by the contractor

expressly sought the initiation of mediation and, significantly,

acknowledged that no arbitration agreement subsisted between the

parties. Similarly, CCC Ltd. initially issued a notice under Section

80 of the Code of Civil Procedure, 1908, which is a procedural

requirement before instituting a civil suit, thereby contradicting its

later assertion that an arbitration agreement existed. DSC Ltd.

similarly misconstrued Article 20 to claim existence of an

arbitration agreement, where none existed.

3

(2003) 7 SCC 418.

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e) The High Court’s decision in CCC Ltd., rendered after this Court’s

unequivocal ruling in Tollways (supra), is clearly per incuriam, as

it failed to consider that a similar dispute resolution clause had

already been held to not constitute arbitration. Furthermore, the

High Court’s ruling in CCC Ltd. stands in stark contrast to its own

decision in DSC Ltd., wherein the learned Single Judge correctly

applied the principles laid down in Tollways (supra) and refused

to read an arbitration agreement into the Concession Agreement.

f) The private contractor, at all relevant times, had access to non-

exclusive remedies, as expressly contemplated under Article 21 of

the Concession Agreements, which recognizes the availability of

remedies under applicable law (Section 21.3 of Article 21) and lays

down the governing legal framework (Section 21.7 of Article 21).

Given that Section 42 of the Arbitration Act mandates that all

arbitral proceedings be filed before a designated court, the

inclusion of provisions preserving recourse to other legal remedies

further demonstrates that the Concession Agreements did not

envisage an arbitration framework.

g) This Court has consistently emphasized that contractual terms

must be given their due meaning and cannot be rendered

redundant or superfluous. In Ramana Dayaram Shetty v.

International Airport Authority of India ,

4

it was held that

words used in formal documents must be accorded their full

4

(1979) 3 SCC 489.

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significance. Applying this principle, the explicit reference to

‘mediation’ in the Concession Agreements, coupled with the

existence of other provisions allowing for civil remedies, must be

interpreted in a manner that preserves their intended effect. Any

attempt to dilute the plain meaning of these provisions would

result in an impermissible rewriting of the contract, which is

contrary to settled legal principles.

12. On the other hand, the private contractors, represented by learned

Senior Counsel Mr. Ritin Rai and Mr. Nakul Diwan, ardently urged that

Article 20 across all three Concession Agreements clearly represents

the form of an arbitration clause. In this regard, they canvassed the

following submissions:

a) A conjoint reading of Article 20 establishes a clear intent by the

parties to refer disputes to arbitration. The principles laid down in

K.K. Modi v. K.N. Modi,

5

wherein this Court outlined the essential

attributes of an arbitration agreement, are fully satisfied. Firstly,

either party is entitled to invoke the process, ensuring mutual

recourse. Secondly, the adjudicator is independent and impartial,

as they may be appointed from ‘within or outside’ the MCD (in the

case of SMS Ltd., at least). Thirdly, the process is structured and

adjudicatory, closely resembling arbitral proceedings, as it involves

the submission of written arguments, tendering of documentary

evidence, and a binding decision. Additionally, Section 20.2 of

5

(1998) 3 SCC 573.

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Article 20 explicitly provides that the decision of the appointed

authority shall be final, further strengthening the claim that the

clause creates an arbitration framework.

b) It is a settled principle that an arbitration agreement need not be

in any specific form; what is determinative is the parties' intent.

6

Even in the absence of the explicit use of the words ‘arbitration’ or

‘arbitrator’, the substance of the clause determines its true

character.

7

The intent to submit disputes to arbitration must be

ascertained from a holistic reading of the contract rather than an

isolated textual analysis of Article 20.

8

c) The conduct of the MCD in similar contractual arrangements

contradicts its present stance. In a comparable dispute,

9

the MCD

had previously admitted that an analogous clause amounted to an

arbitration agreement and even participated in arbitral

proceedings, resulting in an arbitral award in its favour. The MCD

cannot now be permitted to approbate and reprobate, adopting

contradictory positions at its convenience. Such an inconsistent

stance is legally impermissible and renders MCD's present

objection untenable.

d) The cases in hand are factually distinguishable from Tollways

(supra) since the dispute resolution framework under Article 20 of

6

Rukmanibai Gupta v. Collector, Jabalpur, (1989) 4 SCC 556; Punjab State v. Dina Nath,

(2007) 5 SCC 28.

7

Jagdish Chander v. Ramesh Chander and ors., 2007 (5) SCC 719.

8

MTNL v. Canara Bank, 2020 (12) SCC 767.

9

SMS Parking Solutions Private Limited v. North Delhi Municipal Corporation, Arb. P.

166/2017.

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the Concession Agreements allows either party to initiate the

process, demonstrating a bilateral mechanism rather than an

authority-driven process. The decision in Tollways (supra) dealt

with a two-tiered internal review process, which involved an initial

resolution by a ‘Competent Officer’ followed by an appellate review,

resembling a departmental appeal rather than arbitration. By

contrast, Article 20 does not contemplate such an internal review

process but instead provides for final dispute resolution by an

independent adjudicator. In recognition of these key factual

distinctions, this Court had de-tagged the present matters from

Tollways (supra) by its order dated 26.09.2018, thereby implicitly

acknowledging that the two sets of cases are not identical in

nature.

e) In SMS Ltd.’s case, SDMC has suppressed material facts before

this Court, raising serious doubts regarding its bona fides in the

appeal. After the High Court’s order, a learned arbitrator was

appointed, and arbitration proceedings had commenced. The

SDMC did not object to the jurisdiction of the Arbitrator at that

stage; rather, it actively filed its Statement of Claim (SOC), thereby

accepting and participating in the arbitral process. By failing to

object to jurisdiction at the appropriate stage, SDMC waived its

right to seek invalidation of the arbitral process.

f) Governmental agencies must ensure that arbitration procedures

comply with principles of equality and non-arbitrariness in public-

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private contracts so that the rights of private parties are

adequately safeguarded. The MCD cannot rely on ambiguous or

cleverly drafted provisions to evade its contractual commitments.

10

As a State entity, the MCD is bound by principles of fairness,

transparency, and reasonableness and cannot be allowed to take

advantage of obscure textual clues at the expense of private

parties’ rights.

C. ISSUES

13. After considering the rival contentions, the voluminous record, the

statutory framework, as well as the factual circumstances colouring

these appeals, we find that the singular issue that falls for our

consideration is:

i. Whether the dispute resolution clauses viz. Article 20 in the

subject-Concession Agreements, constitute a valid arbitration

agreement between the parties?

D. ANALYSIS

14. While considering the singular issue as formulated above, we find that

its analysis necessitates a two-pronged inquiry: (i) what are the

necessary ingredients of an enforceable arbitration agreement; and (ii)

whether Article 20 of the subject-Concession Agreements contain those

ingredients.

10

Central Organisation for Railway Electrification v. ECI SPIC SMO MCML (JV) A Joint

Venture Company, 2024 SCC OnLine SC 3219.

Page 19 of 37

D.1 What are the ingredients of an arbitration agreement?

15. We must first explicate what a valid arbitration agreement contains

under Indian law, as we are sufficiently cognizant of the factum that an

agreement for arbitration is the sine qua non for invocation of the

arbitral process—as is prayed for by the private contractors in the

instant appeals.

D.1.1. The Indian Position

16. The Indian statutory framework governing arbitration gains primacy in

our quest to untie the knot projected by the parties before us. The

Arbitration Act serves as the principal legislation which forms a holistic

code on the subject. Since its enactment back in 1996, it has been

supplemented by several key Amendments, in the years 2015, 2019,

and 2021. These changes have been a consistent endeavour to grant

greater autonomy to arbitral tribunals by restricting judicial

intervention and expanding their powers and privileges.

17. In the context of the current controversy, we may firstly pivot our

attention to Section 7 of the Arbitration Act, which defines an

arbitration agreement as follows:

“7. Arbitration agreement. — (1) In this Part, “arbitration

agreement” means an agreement by the parties to submit to

arbitration all or certain disputes which have arisen or which

may arise between them in respect of a defined legal

relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an

arbitration clause in a contract or in the form of a separate

agreement.

(3) An arbitration agreement shall be in writing.

Page 20 of 37

(4) An arbitration agreement is in writing if it is contained

in—

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of

telecommunication 1 [including communication through

electronic means] which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which

the existence of the agreement is alleged by one party and

not denied by the other.

(5) The reference in a contract to a document containing an

arbitration clause constitutes an arbitration agreement if the

contract is in writing and the reference is such as to make

that arbitration clause part of the contract.”

18. It may be seen that the above-reproduced provision succinctly

summarises the basic building blocks of a valid arbitration agreement,

including its genesis and structure. The emphasis laid on the existence

of a defined legal relationship, whether contractual or not, underscores

the breadth of applicability of arbitration law. Furthermore, Section 7

places significant weight on the form and record of the agreement, with

a view to ensure clarity and certainty in arbitral arrangements.

19. The statutory requirement that the agreement be in writing—whether

through a formally signed document, an exchange of communications,

or even unchallenged pleadings—reflects the Legislature’s intent to

liberally accommodate the realities of modern commercial

communication, including electronic correspondence.

20. Another notable feature is found in sub-section (5), which serves to

widen the expression ‘arbitration clause’ by expressly providing for

incorporation by reference. Overall, this statutory approach is one

which prioritises substance over form in the case of valid arbitration

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agreements, which ultimately culminate in an arbitral award,

enforceable under Section 36 of the Arbitration Act.

21. In the decisions cited by the parties before us, it is evident that this

Court has consistently attempted to de-fog the surroundings of a

proper arbitration clause, to make its precise form and substance more

discernible. For instance, in Encon Builders (supra), this Court held

that the essential elements of an arbitration agreement comprise the

parties’ consensual intent to settle a present or future difference

through a private tribunal, and that such a decision would be binding

upon them. In other words, consensus and intent of both parties is

given elaborate weightage in the determination of an arbitration

agreement.

22. K. K. Modi (supra) adroitly consolidated and reiterated the law relating

to arbitration agreements, and held as follows:

“17. Among the attributes which must be present for an

agreement to be considered as an arbitration agreement are:

(1) The arbitration agreement must contemplate that the

decision of the tribunal will be binding on the parties

to the agreement,

(2) that the jurisdiction of the tribunal to decide the

rights of parties must derive either from the consent of

the parties or from an order of the court or from a statute,

the terms of which make it clear that the process is to be an

arbitration,

(3) the agreement must contemplate that substantive rights of

parties will be determined by the agreed tribunal,

(4) that the tribunal will determine the rights of the parties in

an impartial and judicial manner with the tribunal

owing an equal obligation of fairness towards both

sides,

Page 22 of 37

(5) that the agreement of the parties to refer their disputes to

the decision of the tribunal must be intended to be

enforceable in law and lastly,

(6) the agreement must contemplate that the tribunal will

make a decision upon a dispute which is already formulated

at the time when a reference is made to the tribunal.

18. The other factors which are relevant include, whether the

agreement contemplates that the tribunal will receive

evidence from both sides and hear their contentions or at

least give the parties an opportunity to put them forward;

whether the wording of the agreement is consistent or

inconsistent with the view that the process was intended to

be an arbitration, and whether the agreement requires the

tribunal to decide the dispute according to law.”

[Emphasis supplied]

23. K. K. Modi (supra) thus afforded importance to the elements of finality,

consent, and impartiality in a valid arbitration clause. In the Tollways

(supra) case, which has been studiously relied upon by the parties

before us, this Court precisely explained that, “Arbitration has always

been understood to mean the process by which a dispute is resolved

by an arbitrator chosen or acceptable to both sides under an

arbitration agreement between the two parties …”

D.1.2. The Consonance between Indian Law & Foreign Jurisdictions

24. The structure of valid arbitration agreements across jurisdictions

reveals a broadly consistent understanding of arbitration, with Indian

law largely aligning with international norms derived from the United

Nations Commission on International Trade Law ( UNCITRAL) Model

Law on International Commercial Arbitration, 1985, which has

significantly influenced arbitral legislation worldwide.

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25. For example, in the United Kingdom, the Arbitration Act, 1996 governs

both domestic and international arbitrations. Section 5 thereof

stipulates that an arbitration agreement must be in writing, while

Section 6(1) defines such an agreement as one under which parties

agree to submit present or future disputes to arbitration. This Act does

not expressly require that the legal relationship be contractual;

however, the context of a defined relationship is presumed.

26. In the United States of America, the Federal Arbitration Act, 9 U.S.C.

§ 2, provides that an arbitration clause must be in writing and

contained within a contract involving commerce. The provision must

also evince the parties’ agreement to submit future disputes to

arbitration. While the Federal Arbitration Act applies primarily to inter-

state commerce, in purely domestic contexts, several States within the

United States have enacted complementary statutes mirroring its core

requirement of a written agreement to arbitrate disputes arising from a

contractual relationship.

27. The Arbitration Act (Cap. 10) in Singapore governs domestic

arbitrations and requires an arbitration agreement to firstly be in

writing. The agreement must pertain to disputes arising from a defined

legal relationship, contractual or otherwise, and must reflect the

parties’ intention to submit those disputes to arbitration, either

generally or in respect of particular disputes.

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28. In France, the Code of Civil Procedure, Book IV, pertains to domestic

arbitration. Article 1442 thereof mandates that the arbitration

agreement be in writing and relate to existing or future disputes. While

the Code does not require an express reference to a legal relationship,

the statutory and commercial context implies such a connection. Article

1443, moreover, mandates that a valid arbitration clause must itself

appoint the arbitrator, or provide for the method of such an

appointment.

29. What we discern from the limited comparative analysis above is that

legislative frameworks around the world have common elements

governing their arbitration agreements inter alia including a written

agreement, a defined legal relationship, and a clear agreement to

submit present or future disputes to arbitration.

D.1.3. The Necessary Ingredients of a Valid Arbitration Agreement

30. Considering the global position on the validity of arbitration agreements

in tandem with the settled law that holds the field in India, we find that

the existence of an arbitration agreement necessarily postulates the

presence of the following ingredients:

i. Clear Intent to Arbitrate

The agreement must reflect a definitive and mutual intention to

refer disputes to arbitration, excluding the jurisdiction of civil

courts in respect of such matters. Consensus ad-idem or ‘meeting

of the minds’ of the respective parties towards settling any

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disputes that may arise between them through the process of

arbitration must be made out from the form and substance of the

legal agreement or contract. This ideally entails the parties

reducing their intention of entering into an arbitration agreement

into some tangible medium.

ii. Binding Adjudicatory Process

The arbitration agreement must contemplate a binding and

enforceable resolution of disputes. The process must culminate in

a final and conclusive award, not a non-binding recommendation

or mediation outcome. In essence, the result of the arbitral process

should be final and binding on both the parties.

iii. Compliance with Arbitration Norms

While the statutory minimums do not universally require

specification of seat, venue, or applicable procedural rules, best

practices and several foreign jurisdictions encourage clarity in

these respects to ensure legal certainty. The agreement should

allow for party autonomy in the appointment of arbitrators and

procedural conduct, subject to statutory safeguards. The

adversarial process, which inheres in the institution of arbitration,

must also be given due credence via provision for an impartial

adjudicatory body, whose decisions involve deference to the

principles of natural justice.

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31. We may, however, hasten to add that the aforementioned elemental test

is a conjunctive one, and not a disjunctive one. In other words, all the

elements identified hereinabove must co-exist, apart from being duly

proven by the party which seeks to assert that an arbitration agreement

subsists.

32. Consequently, it stands clarified that a dispute resolution clause may

only rise to the level of a valid arbitration clause or agreement when it

signifies a clear intent to arbitrate, entails a binding adjudicatory

process, and contemplates compliance with general arbitral norms.

D.2. Does Article 20 of the subject-Concession Agreements constitute

an arbitration agreement?

33. The second limb of this issue, concerns the consideration of the facts

and circumstances of these appeals amidst the legal backdrop we have

previously set out. We may, at this stage, revert back to paragraph 9

where the dispute resolution clauses contained in all the three

Concession Agreements are extracted and reproduced.

34. At the very outset, it may be seen that Articles 20 in the cases of DSC

Ltd. and CCC Ltd. are identical for all intents and purposes while the

same clause in the case of SMS Ltd. is faintly different. For the sake of

completeness, we may note these minute differences before proceeding

with the analysis.

35. Firstly, the cases of DSC Ltd. and CCC Ltd. add certain specific sub-

provisions regarding the ‘mediation’ process itself, while only summary

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procedure is prescribed in the case of SMS Ltd. Secondly, the

stipulation that an officer may be appointed ‘from within or without

MCD’ features solely in the SMS Ltd. agreement, and is conspicuously

absent in the clauses pertaining to DSC Ltd. and CCC Ltd. Thirdly, the

latter two agreements introduce an express declaration that the officer’s

decision shall be ‘final and binding’, a formulation that is absent in the

SMS Ltd. version.

36. Having equipped ourselves with the requisite recitals, we now turn to

appraising the same on the anvil of the law elucidated hereinabove

pertaining to valid arbitration agreements.

D.2.1. Intent to Arbitrate

37. The first and foremost requirement of an arbitration agreement, when it

is in writing, is that the parties must have consciously and

unambiguously agreed to submit their disputes to arbitration. This

intent must be evident from the language of the contract and the

surrounding contractual framework.

38. A plain reading of Article 20 across all three Concession Agreements

does not reveal any express intent to arbitrate. We say so for the

following reasons:

(a) It may be noted that the subject-clause itself is titled as ‘Mediation

by Commissioner’, which immediately raises a conundrum as to

the mode of dispute resolution. We are well aware of the judicial

precedents that waive the need for express reference to arbitration

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or an excessive focus on nomenclature.

11

However, such principles

cannot be stretched so far so as to make them wholly unworkable.

It is inconceivable to us as to why two parties, who are ad idem in

wanting to settle their disputes through arbitration, would label

the dispute resolution clause in such a befuddling manner. The

title of the clause (Section 20.1 of Article 20) unequivocally

indicates a non-adjudicatory and conciliatory process rather than

an arbitration mechanism.

(b) What adds fuel to the fire is the conspicuous absence of the words

‘arbitration’ or ‘arbitrator’ from the dispute resolution clauses.

Even the expression `Arbitration Act’ is itself entirely missing.

These terms are generally included in arbitration agreements to

reflect the parties’ true intention.

(c) Moreover, the reference is to the ‘Commissioner, MCD,’ rather than

to an arbitral tribunal or an independent third-party adjudicator.

This suggests an internal dispute resolution mechanism rather

than an external arbitration forum.

(d) The DSC Ltd. and CCC Ltd. agreements introduce further

procedural details, such as the officer calling for additional

documents and conducting interviews. However, none of these

procedural steps alter the fundamental nature of the process,

11

Infrastructure Leasing & Financial Services Ltd. v. HDFC Bank Ltd., 2023 SCC OnLine

SC 1371; Yellapu Uma Maheswari v. Buddha Jagadheeswararao, (2015) 16 SCC 787;

Assam Small Scale Ind. Dev. Corp. Ltd. & Ors. v. J.D. Pharmaceuticals & Anr, 2005 Supp

(4) SCR 232.

Page 29 of 37

which at best is an elaborate administrative fact-finding exercise,

rather than an arbitral adjudication.

(e) Additionally, the appointment of the decision-maker is entirely

within the control of MCD, with no role for the other contracting

party in selecting or influencing the selection of the officer. This

further undermines the claim that the clause was intended to

establish an arbitration framework.

D.2.2. Final and Binding Nature

39. A key argument advanced by the private contractors is that the

decision rendered under Article 20 is ‘final and binding’, thereby

making it akin to an arbitral award. While it is true that an arbitration

clause must result in a conclusive determination, finality alone does

not equate it to arbitration.

40. We may note at the outset that in SMS Ltd. the phrase used is ‘final’,

not ‘final and binding’ which instead finds mention in the cases of DSC

Ltd. and CCC Ltd. On a textual and surface-level analysis, Article 20

across all cases thus prima facie seems to satisfy the subject-

ingredient; however, it does not impact the outcome of these cases.

41. We say so because other forms of decision-making—such as expert

determinations, departmental adjudications, and administrative

reviews—even when found to be final and binding, do not ipso facto

constitute arbitration. The arduous task of ascertaining and identifying

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the category to which these cases fall is beyond the scope of these

appeals.

D.2.3. Compliance with Arbitral Norms

42. Finally, we turn to analyzing Article 20 under the lens of its alliance

with the norms of arbitration. This particular characteristic is quite

important for a valid arbitration agreement. If a clause does not

sufficiently align with the accepted best practices of contemporary

arbitration, it will generally be unworkable and essentially dead letter.

What is also envisaged under this element is the compliance with the

Arbitration Act and its subsequent Amendments.

43. It may be clarified here that there is no straitjacket formula for listing

arbitral norms exhaustively, as these norms may vary from time to

time. While we cannot delineate arbitral norms from stem to stern, we

have short-listed some of these norms for the purposes of these

appeals, which unfortunately do not find any explicit or implicit

mention in the subject-dispute resolution clauses.

D.2.3.1. Party Autonomy in Arbitrator Appointment

44. Clearly, in the facts of the instant appeals, the officer who decides the

dispute(s) is appointed exclusively by MCD/SDMC, with no input from

the other contracting party, i.e. the private contractors. In contrast,

valid arbitration agreements invariably provide for a mutually agreed-

upon arbitrator or an independent appointing authority, such as a

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Court or an arbitral institution lest they run afoul of the settled

principles of bi-partisanship and equality.

D.2.3.2. Adversarial Process

45. In Encon Builders (supra), this Court held that arbitration must be a

structured adjudicatory process, where parties are afforded the

opportunity to argue their case before a neutral and independent

decision-maker. In our considered opinion, Article 20 lacks such an

inquiry. It is admitted that there are no provisions for (i) oral hearings;

(ii) examination and cross -examination of witnesses; and ( iii)

application of formal rules of evidence or procedure in the impugned

clauses. The appointed officer merely reviews written submissions and,

at most, may seek additional documents or conduct interviews.

46. We have thus no hesitation in holding that Article 20 lacks the judicial

element that lends arbitration its unique credibility as an adjudicatory

mechanism, distinct from other forms of dispute resolution. By omitting

the essential procedural safeguards of adversarial proceedings and

impartial adjudication, the clause fails to meet the threshold

requirements of arbitration and cannot be sustained as such.

D.2.3.3. Neutrality and Independence of the Arbitrator

47. The principles of natural justice, of course, must inhere in any judicial

process, even if that process is pseudo-judicial. That is precisely why it

is necessary for the Arbitrator to be an impartial functionary in any

supposed arbitration agreement. When such a requirement is unmet,

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that mode of dispute resolution may not have the benefit of being

termed as ‘arbitration’. In Tollways (supra), this Court expressly held

that a dispute resolution mechanism controlled by one party lacks the

independence required for arbitration.

48. Under Article 20, the decision-maker is an officer of MCD, making the

process inherently biased in favour of the Municipal Corporation(s). It

does not even provide for the officer to be a legally qualified adjudicator,

further calling into question the nature of the decision-making process.

Moreover, while Article 20 in the case of SMS Ltd. at the very least

specifies that the appointed officer may be from ‘within or without

MCD’, the latter two cases—DSC Ltd. and CCC Ltd. —completely

dispense with even this limited semblance of impartiality. The absence

of any requirement for an external appointee in these cases further

entrenches the one-sided nature of the appointment process, allowing

MCD to unilaterally select a decision-maker from within its own ranks,

thereby compromising the neutrality essential to any adjudicatory

mechanism.

49. In conclusion, a holistic analysis of Article 20 across the subject

Concession Agreements leads us to the inescapable conclusion that it

does not satisfy the requirements of an arbitration agreement under

Section 7 of the Arbitration Act. While certain textual elements—such

as the use of the phrase ‘final and binding’ in the cases of DSC Ltd. and

CCC Ltd.—may superficially resemble arbitration, a deeper examination

reveals that the clause is procedurally and structurally deficient in

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ways that render it incapable of operating as an arbitration clause in

law.

50. Article 20 lacks the judicial element that lends arbitration its distinct

credibility as an adjudicatory mechanism. It is not an arbitration clause

either in letter, or in spirit and effect. Its ambiguity and lack of

procedural integrity have, if anything, resulted in greater litigation

rather than expeditious resolution, thereby undermining the very

purpose of arbitration.

51. Accordingly, we hold that Article 20 does not constitute an arbitration

agreement under the Arbitration Act. The impugned judgments of the

High Court in the cases SMS Ltd. and CCC Ltd., dated 09.03.2017 and

02.11.2022 respectively, which construed it as such, are set aside. The

view taken in DSC Ltd. vide judgment dated 29.07.2022, which

correctly rejected arbitration, is affirmed.

52. We may also clarify that the controversy this Court was faced with in

Tollways (supra) was broadly similar to the instant appeals. The

dispute resolution clauses in Tollways (supra) and the present cases

both evidently lack the ingredients that we have comprehensively set

out hereinabove. Consequently, we see no reason to take a different

view than the one taken by a Co -ordinate Bench of this Court in

Tollways (supra), which is hereby reiterated.

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E. EPILOGUE

53. Having already reached a conclusion vis-à-vis the core contentious

issue in these set of appeals, we would nonetheless like to make certain

observations regarding arbitration agreements in the Indian legal milieu

before parting with these appeals.

54. It is doubtless laudable how rapidly the Indian legal ecosystem has

evolved to accommodate arbitration. The Indian Legislature and

Judiciary have clearly worked in lockstep to ensure that the arbitral

process is regulated efficiently, and suffers from minimal judicial

intervention. That being said, we are constrained to observe that much

and more remains to be done.

55. As the facts of these appeals clearly illustrate, the drafting of

arbitration clauses in commercial agreements in India leaves much to

be desired. Despite arbitration being introduced as a means of ensuring

speedy and effective dispute resolution, it is evident and ironic that, in

certain cases, the process has been misused to further complicate and

prolong the resolution of disputes. The manner in which ambiguity is

embedded into such agreements raises serious concerns. Whether this

stems from administrative oversight or deficient legal advice is a matter

best left for separate consideration.

56. However, it is evident that the rival parties in these appeals are neither

paupers nor indigent individuals who may have been disadvantaged by

inadequate legal representation, thereby prolonging the litigation. On

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the contrary, one party is a statutory civil body in the National Capital

Region, ostensibly operating with its own legal department, while the

other comprises prominent and affluent contractor-builders with ample

resources to retain the finest legal counsel available in the country.

57. What is most shocking to our judicial conscience is the incontrovertible

reality that the parties in the present cases have spent nigh a decade

acrimoniously litigating over the method of dispute resolution itself,

while their actual qualms against each other remain deeply buried

under the surface—effectively stuck in limbo. A legal dispute that

lingers for years over the mere mode of adjudication, before even

touching the merits, is akin to a traveller stranded at a crossroads,

endlessly debating which path to take while the journey itself remains

unbegun. Justice, like the destination, recedes further into the horizon,

not for lack of resolution but for want of a decision on how to resolve.

58. This willful and wanton wastage of judicial time is similarly a practice

that is highly deplorable, to say the least. It is high time that arbitration

clauses are worded with piercing precision and clarity, and that they

are not couched in ambiguous phraseology. This is a responsibility and

onus that every legal counsel, advisor, and practitioner must shoulder

most dutifully. We would, in fact, take this opportunity to advise, if not

caution and warn, the legal fraternity against engaging in such

practices which result in a criminal wastage of precious judicial time.

Indeed, their professional credentials will not earn any stripes if they

indulge in such juggling of words.

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59. Equally, the Courts or judicial fora of our country—as a matter of

judicial best policy—must show an unwavering tendency towards

rejecting shoddily drafted clauses at the very threshold. Such cases,

which prima facie disclose mala fides woven into the very Agreement

they seek adjudication over, must be thrown out of the Court, as they

have been indulged for far too long. We would complementarily urge the

Courts to invoke their suo moto powers in appropriate cases wherein

legal firms or counsel are found designing ‘arbitration clauses’ which

deliberately mislead and misguide. The time is not far when personal

liability must be assigned for such unscrupulous acts, along with the

sanctioning of the harshest punitive measures against the actors. We

are confident that these steps are vital to infuse probity, transparency,

and professionalism into Indian arbitration. Needless to say, to uphold

the integrity of the arbitral process, the sanctity of such agreements

must be preserved.

F. CONCLUSION AND DIRECTIONS

60. In light of the foregoing analysis, and in continuation of the conclusions

arrived at hereinabove we seek it fit to dispose of these appeals with the

following directions:

i. Article 20 of the Concession Agreements executed in all the three

appeals before does not form an arbitration agreement, and thus

cannot be brought under the purview of the Arbitration Act.

ii. The impugned judgments of the High Court in the cases of SMS

Ltd. and CCC Ltd. are hereby set aside.

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iii. The impugned judgment of the High Court in the case of DSC Ltd.

is hereby upheld.

iv. It is, however, clarified that the parties across all three appeals are

at liberty to pursue their alternative remedies in accordance with

law.

61. The instant appeals stand disposed of in the above terms.

62. Consequently, pending interlocutory applications, if any, are also

disposed of.

63. Ordered accordingly.

…………………….J.

(SURYA KANT)

..…………… ………………………………… ..J.

(NONGMEIKAPAM KOTISWAR SINGH)

NEW DELHI

DATED: 15.05.2025