The SC in South Delhi Municipal Corporation v. SMS Ltd.1, held that a valid and enforceable arbitration agreement must:
- reflect the parties' intent to refer their disputes to arbitration that is binding in nature; and
- comply with basic arbitral norms, such as party autonomy, subject to statutory safeguards.
The SC cautioned against the use of ambiguous dispute resolution clauses in contracts, emphasising that such ambiguity leads to unnecessary and prolonged litigation. The SC further observed that Courts may invoke their suo moto powers in appropriate cases where arbitration clauses have been deliberately drafted in an ambiguous manner to mislead and misguide.
Footnote
1. South Delhi Municipal Corporation v. SMS Ltd., 2025 SCC OnLine SC 1138.
Originally published 29 July 2025.
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