Nature of arbitration agreement

Author: Pankaj Sevta, Research Associate

In the present commercial regime, due to the complex and time consuming procedure of courts in tradition dispute settlement, Arbitration with its arbitration clause or agreement can be witnessed as one of the effective way of ADR. It aids the respective parties to protect their existing as well as future probabilities of disputes. An arbitration agreement basically is an agreement by the parties to submit to arbitrator all or certain disputes which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not1. An arbitration agreement must necessarily be in writing2which may in the form of a signed document, exchange of letter3and telegrams, or an exchange of settlements of claim and defense or any other means of communication4. There cannot be any doubt whatsoever that an arbitration agreement must contain the broad consensus between the parties that the disputes and differences should be referred to a domestic tribunal. The said domestic tribunal must be an impartial one5. The concerned agreement is based on two principles, Firstly it is a well-settled principle of law that a person cannot be a judge of his own cause. Secondly that justice should not only be done but manifestly seen to be done6. In Bihar State Mineral Dev. Corpn. v.  Encon Builders Pvt. Ltd.7, Supreme Court had laid down the essentials of arbitration agreement as follows:

  1. Arbitration And Conciliation Act, 1996, § 7(1). []
  2. Arbitration And Conciliation Act, 1996, § 7(3) See Also O.P. Malhotra & Indu Malhotra, The Law And Practice Arbitration And Conciliation 243 (2nd Ed., 2006). []
  3. Impex Corporation And Ors. V Elenjikal Aquamarine Exports, AIR 2008 Ker 119 []
  4. Arbitration And Conciliation Act, 1996, § 7(4). []
  5. Dr. N.V. Pranjape, Arbitration And Concilliation Act, 41 (2nd  Ed., 2002). []
  6. Bihar State Mineral Dev. Corpn. V.  Encon Builders Pvt. Ltd., AIR 2003 SC 3688. []
  7. Ibid []
  8. Rajendra Barot And Sahil Kanuga, An Arbitration Agreement Demystified Available At http://www.lexology.com/library/detail.aspx?g=ffdf7296-d3be-433e-bb7d-475398236924  (Last Accessed On 13/07/2013). []
  9. Union of India V. Mcdonnell Douglas Corporation, (1993) 2 Lloyd’s Rep. See Also S.K. Chawala, Law of Arbitration and Conciliation 225 (3rd Ed.). []
  10. Justice R.S. Bachawat’s Law of Arbitration & Conciliation 239 (4th Ed., 2005). []
  11. Food Corpn of India V. Surendra, Deuendra; Mahendra, AIR 1988 SC 734: (1988) 1 SCC 547. See Also 2 Gary B Born, International Commercial Arbitration 198 (3rd Ed., 2009). []
  12. Gaya Electric Supply V, State Of Bihar, AIR 1953 SC 182; See Also Gousiajaved  V. Jagdish Pd. Associates, AIR 1992 AP 12 At 15 : (1992) 1 Arb LR 178. See Also Julian Dm Lew, Loukas A Mistelis & Stefan Mkroll, Comparative International Commercial Arbitration; 129 (1st Ed., 2007). []
  13. Heyman V. Darwins Ltd., (1942) AC 356 At P. 177 Per LORDWRIGIIT: (1942) 1 All ER337. []
  14. Supra Note 10, P. 190. See Also Shankar Lal Lachmi Narain V. Jainey Bros., AIR 1931 All 13 []
  15. Ganpatrai Gupta V. Moody Bros., (1950) 85 CLJ 136 At P. 143; Tarachand  V. Paras Ram, AIR 1930 Sind 202; Sri Krishna Khanna & Bros., Re AIR 1934 Sind 29; Hormusji & Daruwala V. District Loca Board, AIR 1934 Sind 200. []
  16. Ashoka Construction V. Union Of India, AIR 1969 Tri 19; Narshing Narain Singh V. Ajoydhya Prasad Singh, 16 CWN 256 : 15 Elj 110 []
  17. G.K. Kwatra, Arbitration And Conciliation Law Of India (7th Ed., 2008)   See Also Universal Marine Ins. Co. V. Beacon Ins. Co., (1984, WD NC) 588 F Supp 735 []
  18. UP Rajkiya Nirman Nigam Ltd. V. Indure P Ltd., AIR 1996 SC 1373; (1996) 1 Arb LR 236 At 240 []
  19. Justice R.S. Bachawat’s Law Of Arbitration & Conciliation 158 (4th Ed., 2005). []
  20. The Indian Contract Act 1872, § 10 []
  21. Ibid, § 13 []
  22. Ibid, § 19 []
  23. Ibid, § 15 []
  24. Ibid, § 16 []
  25. Ibid, § 17.  See Also Vinod  Shantilal Gosalia V. Anil Vassudev Salgaocar (1996) Supp Arb LR 380 []
  26. The Indian Contract Act 1872, §18. See Also H C Johari, Commentary on Arbitration And Conciliation Act, 1996 159 (1997). []
  27. Supra Note 20, § 20, 21, 22. See Also Stavros L Brekoulakis, Third Parties in International Commercial Arbitration 12.03 (2009). []
  28. Rajktya Nigam Ltd. V. Indure P. Ltd., AIR 1996 SC 1373 : (1996) 1 Arb LR 236: (1996) 2 SCC 667 []
  29. Wellington Associates Ltd. V. Kirti Mehta, AIR 2000 SC 1379 : 2000 CLC 1003 : (2000) 1 RAJ 433. See Also B.B. Verma V. CMD, South. Eastern Coalfields Ltd., (2001) 4-RAJ 97: (2001) 4-Arb LR 135 (MP). []
  30. State Of UP. V. Padam Singh Rana, AIR 1971 All 270; Chhabil Das & Co. V. State Of UP., AIR 1977 All 143, 144 []
  31. Justice R.S. Bachawat’s Law of Arbitration & Conciliation (4th Ed., 2005). []
  32. Austbulk Shipping SDN BHD V. P.E.G. Ltd., 2005 (1) RAJ 597, 606 (Del); Smita Conductors Ltd. V. Euro Alloys Ltd., AIR 2001 SC 3730 : 2001 (3) RAJ 188 (SC). See Also Justice Dr. B.P. Saraf & Justice S.M. Jhunjhunuwala, Law On Arbitration & Conciliation 122 (5th Ed., 2009). []
  33. Justice R.S. Bachawat’s Law Of Arbitration & Conciliation 171(4th Ed., 2005). []
  34. Hairtha Finance Ltd. V. ATV Projects India Ltd., (2003) 2 RAJ 582 : (2003) 2 Arb LR 376 []
  35. Ranjeet Combine V. B.N. Khanna. (2000) 3 RAJ 551 : (2000) 86 DLT 687 : (2000) 3 Arb LR 348 (Del). []
  36. Indian Contract Act 1872, §29.  See Also In Re, Srikrishna Khanna & Bros, AIR 1931 Sind 29; Union Of India V. Ram Iron Foundry, (1987) 2 Arb LR 250 (Del). []
  37. Seammel (G.) And Nephew Ltd. V. Ouston, (1941) AC 251; Keshaolal Lallabhai Patel V. Lalbhai Trikumbal Mills Ltd., AIR 1958 SC 512 At P. 517 : 1959 SCR 213. See Also Adv. R.P.Kaushik, The Arbitration & Conciliation Act 1996 (2003). []
  38. Lovelock Ltd. V. Exportles, (1968) 1 Lloyd’s Rep 163. []
  39. Laxmichnnd Baijnath V. Kishanlal, 58 CWN 743: AIR 1955 Cal 588; Delhi & Finance House & Construction Ltd. V. Brij Mohan Sha, AIR 1956 Punj 205. See Also Justice S.B. Malik, Commentary on Arbitration & Conciliation Act 1996 151 (5th Ed.). []