Luxury Clauses In The Arbitration Agreement Are Generating Litigation In The Country: Chief Justice Surya Kant

(MENAFN- KNN India) ** New Delhi, Feb 23 (KNN)** On February 20, the Supreme Court criticised law firms for framing ‘confusing’ arbitration clauses that trigger unnecessary litigation, observing that such drafting could amount to professional misconduct.

A bench of Chief Justice Surya Kant, Justices Joymala Bagchi and Vipul Pancholi made the observation while hearing a petition pointing towards a conflict between the jurisdiction and arbitration clauses in the same agreement.

** Court Criticises Drafting Practices**

Justice Kant said the clauses appeared deliberately designed to create confusion and litigation, questioning why they could not be drafted more simply.

Calling the practice ‘absurd,’ he warned that generating avoidable disputes could amount to serious professional misconduct, and criticised ‘luxury clauses’ that blur the distinction between seat and venue and burden courts unnecessarily.

** The Dispute**

The agreement provided for arbitration with New Delhi as the venue, while granting exclusive jurisdiction to courts at Jajpur under Indian law. The Delhi High Court held it had jurisdiction based on the venue clause and appointed Senior Advocate V. Mohana as sole arbitrator under the Delhi International Arbitration Centre.

** Supreme Court’s View**

Chief Justice Kant noted that while academic debates may exist, the immediate issue was the appointment of an arbitrator, which had already been completed, and questioned delaying arbitration on ‘hyper-technical’ grounds.

Justice Bagchi added that seat-versus-venue disputes are more significant in international commercial arbitration, whereas in domestic cases the priority should be to expedite proceedings.

** Final Outcome**

The Supreme Court dismissed the plea, observing that although arguable issues were raised that could merit examination in a suitable case, it would not interfere here as an arbitrator had already been appointed and the parties were ready to proceed.

The ruling sends a clear signal to law firms and drafters to ensure precision in arbitration clauses, particularly on the distinction between seat, venue and jurisdiction, failing which such drafting may be seen as fuelling avoidable litigation.

** Impact on MSMEs**

The Supreme Court’s remarks are significant for MSMEs, which often rely on standard-form contracts drafted by larger entities. Clearer arbitration clauses can reduce jurisdictional disputes, costs and delays, making dispute resolution faster and more affordable while discouraging technical litigation over seat and venue.

** (KNN Bureau)**

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