Arbitration Agreement — Section 7
Landmark Case: Jagdish Chander v. Ramesh Chander (2007) 5 SCC 719 — Mere use of the word “arbitration” is not enough; the intention to refer to arbitration must be clear and unambiguous.
Statutory Definition — Section 7
Section 7(1), Arbitration and Conciliation Act, 1996: “‘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.”
Section 7(3): An arbitration agreement shall be in writing.
Essential Ingredients
- Written form (Section 7(3)) — oral agreements are not arbitration agreements.
- Intention to arbitrate — must be clear.
- Dispute — present (existing) or future (anticipated).
- Defined legal relationship — commercial, contractual, tortious, etc.
- Parties’ consent — free and voluntary (Section 10, ICA).
- Lawful object (Section 23, ICA) — cannot arbitrate illegal matters.
What Counts as “In Writing”?
- A signed written document.
- Exchange of letters, telex, telegrams, or emails.
- Reference in a contract to a document containing an arbitration clause (Section 7(5)).
Arbitration Clause vs Arbitration Agreement
| Point | Arbitration Agreement | Arbitration Clause |
|---|---|---|
| Form | Separate written document | A clause embedded in the main contract |
| When made | Before or after dispute | Always before dispute (at contract stage) |
| Independence | Stands alone | Survives even if main contract is invalid — Doctrine of Separability (Section 16) |
| Coverage | Specific dispute | All disputes arising from the contract |
Doctrine of Separability — Section 16
Even if the main contract is found void or voidable, the arbitration clause within it survives independently and can still be invoked.
Court’s Power to Refer — Section 8
If a party brings a dispute to court that is covered by an arbitration agreement, the other party can apply under Section 8 to have the court refer the parties to arbitration. The court must refer if:
- There is a valid arbitration agreement.
- The dispute falls within its scope.
- The applicant raised the objection no later than the first statement on the substance of the dispute.
Key Exam Points
- Arbitration agreement of a minor is void (minor cannot contract — Section 11, ICA). (Dec 2013, June 2015 KSLU problem)
- A contract obtained by fraud = voidable; the arbitration clause still survives to decide whether there was fraud.
- A stamp-duty deficiency in the underlying contract does not invalidate the arbitration clause.
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