Supreme Court flags misuse of arbitration clauses drafting

New Delhi

The Supreme Court on Thursday raised serious concerns about poorly written arbitration clauses in commercial contracts, saying they are often misused to delay dispute resolution. A bench of Justices Surya Kant and N Kotiswar Singh said arbitration, meant to be a faster and more effective method, is sometimes used to complicate matters. The court criticized the vague and confusing language found in many agreements and urged courts to reject such clauses early in legal proceedings.

The bench emphasised that legal professionals must take responsibility for drafting clear, precise arbitration clauses. Poor drafting, whether due to oversight or weak legal advice, wastes valuable judicial time and undermines the arbitration process. The court warned lawyers against using tricky language and said such practices damage professional credibility.

The court made these observations while hearing petitions against Delhi High Court rulings related to agreements between the Municipal Corporation of Delhi and private contractors. It said cases based on suspicious agreements should be dismissed outright. Courts should also consider taking action against legal professionals who knowingly draft misleading clauses. The bench suggested that in the future, personal liability and strict penalties may be imposed on those involved in such malpractice.

The Supreme Court concluded that improving the clarity of arbitration clauses is essential to ensure fairness and maintain trust in India’s arbitration system.