Chapter II

Arbitration Agreement
Dr. Madhuri Irene
 CHAPTER II- Arbitration agreement
7. Arbitration agreement.
8. Power to refer parties to arbitration where
there is an arbitration agreement.
9. Interim measures, etc., by Court
 7. Arbitration agreement.—
 1) In this Part, “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.
 (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in
the form of a separate agreement.
 (3) An arbitration agreement shall be in writing.
 (4) An arbitration agreement is in writing if it is contained in
 (a) a document signed by the parties;
 (b) an exchange of letters, telex, telegrams or other means of telecommunication
[including communication through electronic means] which provide a record of the
agreement; or
 (c) an exchange of statements of claim and defence in which the existence of the
agreement is alleged by one party and not denied by the other.
 (5) The reference in a contract to a document containing an arbitration clause constitutes
an arbitration agreement if the contract is in writing and the reference is such as to make
that arbitration clause part of the contract.
 Arbitration Agreement

may be a clause in a contract or a separate

agreement
to arbitrate all or certain disputes
which have arisen or may arise
in respect of a defined legal relationship or
contractual or not
 VALID ARBITRATION AGREEMENT
▪ An arbitration agreement must be in writing.
▪It will be considered to be in writing, if
contained in: a)Document signed by parties;
b)Exchangeof letter, telex, telegrams or other means
of
telecommunication recording the arbitration agreement
c)Non-denial of the existence of the arbitration
agreement in the statement of defence.
 An arbitration agreement is a written contract between two or more parties that
agrees to resolve any disputes arising out of their relationship through arbitration.
The arbitration agreement can be included in a larger contract, such as an
employment contract or a commercial contract, or it can be a separate agreement.
 An arbitration agreement must be in writing and signed by all parties to be valid. The
agreement must also specify the following:
• The disputes that are subject to arbitration
• The rules that will govern the arbitration
• The location of the arbitration
• The number of arbitrators
• The method for selecting the arbitrators
• The procedures for conducting the arbitration
 K.K. Modi v. K.N. Modi (1998) 5 SCC 533.
 The case involved two groups of the Modi family, Group A and Group B.
 Group A was led by Kedar Nath Modi and his sons, while Group B was led by KK
Modi and his sons.
 The dispute arose over the ownership of certain assets, including shares in a
number of companies.
 The two groups had entered into a memorandum of understanding (MoU) in an
attempt to resolve the dispute, but the MoU was unsuccessful.
 The dispute was eventually referred to arbitration by the Chairman of the Industrial
Finance Corporation of India (IFCI).
 The arbitrator issued an award in favor of Group A, but Group B challenged the
award in court.
 The Supreme Court of India upheld the award and dismissed the challenge by
Group B.
 BIHAR STATE MINERAL DEVELOPMENT CORP V. ENCON BUILDERS (2003) 7 SCC 390
▪ The Bihar State Mineral Corporation (BSMC) invited tenders for the removal of
soil, sandstone, shale, conglomerates/coal etc. and stacking it up to a distance of
1. k.m.
▪ Encon Builders submitted the lowest tender and was awarded the contract.
▪ However, Encon Builders failed to produce 10,000 M.T. of coal per month and
stack the same in the dump yard.
▪ BSMC terminated the contract and appointed another agency to complete the
work.
▪ Encon Builders challenged the termination of the contract in court, claiming that it
was not entitled to terminate the contract without giving Encon Builders an
opportunity to cure its breach.
▪ BSMC argued that the contract contained an arbitration clause, which meant that
the dispute should be resolved through arbitration.
▪ The court agreed with BSMC and held that the dispute should be resolved through
arbitration.
 NN Global Mercantile Private Limited v. Indo Unique Flame Limited & Ors (2023) SCC OnLine SC 641:
The Supreme Court held that an arbitration agreement which is insufficiently stamped/unstamped is
an enforceable document at a pre-referral stage for an appointment of an Arbitrator by the Court
under Section 11 (6) (A) of the Arbitration and Conciliation Act, 1996. However, the Court also held
that the validity of the arbitration agreement can be challenged at the final stage of the arbitration
proceedings.
 Tomorrow Sales Agency Ltd v SBS Holdings Inc (2023) SCC OnLine Del 472: The Delhi High Court held
that a third party funder which was not a party to an arbitration agreement, or the arbitral
proceedings, or a party to the resultant arbitral award, could not be “mulcted with liability, which
they have neither undertaken nor are aware of“.
 Hindustan Construction Company Limited v. National Highways Authority of India (2022) SCC OnLine
SC 122: The Supreme Court held that an arbitration agreement can be enforced even if it is contained
in a document that is not stamped. The Court also held that the stamp duty requirement is not a
condition precedent to the enforcement of an arbitration agreement.
 Bharat Heavy Electricals Limited v. Lanco Kondapalli Power (I) Limited (2022) SCC OnLine SC 92: The
Supreme Court held that an arbitration agreement can be enforced even if it is not signed by all
parties to the dispute. The Court also held that the non-signatory party can be bound by the
arbitration agreement if it has received the benefit of the contract containing the arbitration clause.
 Reliance Industries Limited v. Essar Oil Limited (2021) SCC OnLine SC 118: The Supreme Court held that
an arbitration agreement can be enforced even if it is ambiguous. The Court also held that the
ambiguity can be resolved by the arbitrator.
 Sec. 8: Power to refer parties to Arbitration where there is an Arbitration Agreement.
(1) A judicial authority, before which an action is brought in a matter which is the subject of an
arbitration agreement shall, if a party to the arbitration agreement or any person claiming
through or under him, so applies not later than the date of submitting his first statement on the
substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme
Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid
arbitration agreement exists.]
(2) The application referred to in sub-section
 (1) shall not be entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof:
 2 [Provided that where the original arbitration agreement or a certified copy thereof is not
available with the party applying for reference to arbitration under sub-section (1), and
the said agreement or certified copy is retained by the other party to that agreement,
then, the party so applying shall file such application along with a copy of the arbitration
agreement and a petition praying the Court to call upon the other party to produce the
original arbitration agreement or its duly certified copy before that Court.]
(3) Notwithstanding that an application has been made under sub-section (1) and that the
issue is pending before the judicial authority, an arbitration may be commenced or
continued and an arbitral award made
The essentials of Section 8 are as follows:
 Judicial authority: The judicial authority is a court of law that has the jurisdiction
to hear the dispute.
 Arbitration agreement: An arbitration agreement is a written agreement
between the parties to a dispute that they agree to resolve their dispute through
arbitration.
 Matter which is the subject of an arbitration agreement: The matter which is the
subject of an arbitration agreement is the dispute that the parties have agreed
to resolve through arbitration.
 Application: The application for reference to arbitration must be made by a
party to the arbitration agreement or any person claiming through or under him.
 Time limit: The application for reference to arbitration must be made not later
than the date of submitting his first statement on the substance of the dispute.
 Finding of no valid arbitration agreement: If the judicial authority finds that prima
facie no valid arbitration agreement exists, it shall not refer the parties to
arbitration.
 Hindustan Petroleum Corporation Ltd. v. Pink City Midway Petroleums Ltd., (2003) 4 SCC
340: In this case, the Supreme Court held that the judicial authority must refer the parties to
arbitration even if there is a challenge to the validity of the arbitration agreement. The
Court held that the challenge to the validity of the arbitration agreement can be raised in
the arbitration proceeding itself.
 Vidya Drolia v. Durga Trading Corporation, (2011) 1 SCC 341: In this case, the Supreme
Court held that the judicial authority must conduct a prima facie examination of the
existence of an arbitration agreement before referring the parties to arbitration. The Court
held that the judicial authority cannot simply refer the parties to arbitration without
examining the existence of the arbitration agreement.
 Reliance Infrastructure Ltd. v. Delhi Metro Rail Corporation Ltd., 2017 SCC Online Del 1566:
In this case, the Delhi High Court held that the judicial authority cannot refer the parties to
arbitration if the dispute is not arbitrable. The Court held that the judicial authority must
determine whether the dispute is arbitrable before referring the parties to arbitration.
 Larsen & Toubro Ltd. v. Lanco Infratech Ltd. (2021) 8 SCC 68: In this case, the Supreme
Court held that the judicial authority cannot refer the parties to arbitration if the arbitration
agreement is ambiguous or uncertain. The Court held that the judicial authority must
ensure that the arbitration agreement is clear and unambiguous before referring the
parties to arbitration.
 9.Interim measures, etc., by Court.—
 [(1)]A party may, before or during arbitral proceedings or at any time after the making of the arbitral
award but before it is enforced in accordance with section 36, apply to a court—
 (i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of
arbitral proceedings; or
 (ii) for an interim measure of protection in respect of any of the following matters, namely:—
 (a) the preservation, interim custody or sale of any goods which are the subject-matter of the
arbitration agreement;
 (b) securing the amount in dispute in the arbitration;
 (c) the detention, preservation or inspection of any property or thing which is the subject matter of
the dispute in arbitration, or as to which any question may arise therein and authorizing for any of
the aforesaid purposes any person to enter upon any land or building in the possession of any party,
or authorizing any samples to be taken or any observation to be made, or experiment to be tried,
which may be necessary or expedient for the purpose of obtaining full information or evidence;
 (d) interim injunction or the appointment of a receiver;
 (e) such other interim measure of protection as may appear to the Court to be just and convenient,
and the Court shall have the same power for making orders as it has for the purpose of, and in
relation to, any proceedings before it
 (2) Where, before the commencement of the arbitral proceedings,
a Court passes an order for any interim measure of protection
under sub-section (1), the arbitral proceedings shall be
commenced within a period of ninety days from the date of such
order or within such further time as the Court may determine.

 (3) Once the arbitral tribunal has been constituted, the Court shall
not entertain an application under sub-section (1), unless the Court
finds that circumstances exist which may not render the remedy
provided under section 17 efficacious.
 Sec. 17 Interim measures ordered by arbitral tribunal
 Sec 9 Interim measures by the Court
▪ The essentials of Section 9 are as follows:
▪ The court can grant interim measures before or during the arbitral proceedings or
after the arbitral award has been made but before it has been enforced.
▪ The court can grant interim measures on the application of a party to the
arbitration agreement or any person claiming through or under him.
▪ The court can grant interim measures that are necessary to protect the rights of the
parties or to preserve the assets that are the subject of the dispute.
▪ The court can grant interim measures that are similar to those that can be granted
by the arbitral tribunal under Section 17 of the Act.
▪ The court can grant interim measures even after the arbitral tribunal has been
constituted, but only if the court finds that circumstances exist which may render
the remedy provided under Section 17 of the Act inefficacious.
 Arcelor Mittal Nippon Steel India Ltd. v. Essar Bulk Terminal Ltd., (2021) 11 SCC 241: In this
case, the Supreme Court held that the court can grant interim measures under Section 9
even after the arbitral tribunal has been constituted. The Court held that the court can do so
if it finds that circumstances exist which may render the remedy provided under Section 17
of the Act inefficacious.
 Essar House Pvt. Ltd. v. Kal Airways (P) Ltd., (2019) 3 SCC 423: In this case, the Supreme
Court held that the court can grant interim measures under Section 9 even if the dispute is
not arbitrable. The Court held that the court can do so if it is satisfied that the interim
measures are necessary to protect the rights of the parties or to prevent irreparable harm.
 Sanghi Industries Ltd. v. Ravin Cables Ltd., (2022) 13 SCC 187: In this case, the Supreme
Court held that the court can grant interim measures under Section 9 even if the application
is made ex parte. The Court held that the court can do so if it is satisfied that the applicant
has made out a prima facie case and that there is a real danger of irreparable harm if the
interim measures are not granted.
 Reliance Infrastructure Ltd. v. Delhi Metro Rail Corporation Ltd., 2017 SCC Online Del 1566: In
this case, the Delhi High Court held that the court can grant interim measures under Section
9 even if the application is made after the expiry of the time limit for making the
application. The Court held that the court can do so if it is satisfied that there are good
reasons for the delay.
Afcons Infrastructure Ltd. & Anr. v. Cherian Varkey
Construction Co. (P) Ltd. & Ors., (2010) 8 SCC 24.
 The facts of the case are as follows:
 The Cochin Port Trust (the 2nd respondent) contracted the construction of a number of
bridges to Afcons Infrastructure Ltd. (the appellant) under an agreement dated April 20,
2001.
 Afcons Infrastructure Ltd. sub-contracted some of the work to Cherian Varkey Construction
Co. (P) Ltd. (the respondent) under an agreement dated August 1, 2001.
 The agreement between the two construction companies did not contain an arbitration
clause.
 A dispute arose between the two companies and the respondent filed a suit for recovery
of around Rs. 2 crores in the High Court of Kerala.
 The appellant filed a petition under Section 89 of the Code of Civil Procedure (CPC) for
referring the dispute to arbitration.
 Section 89 of the CPC allows the court to refer a dispute to arbitration even if there is no
arbitration clause in the contract, if it is satisfied that the dispute is one that is suitable for
arbitration.
 The High Court dismissed the petition, holding that the dispute was not one
that was suitable for arbitration. The High Court reasoned that the dispute
involved questions of law, which are not generally considered to be
suitable for arbitration.
 The appellant appealed the High Court's decision to the Supreme Court.
 main issues discussed in the case:
1. Whether the court can refer a dispute to arbitration
even if there is no arbitration clause in the contract.
2. Whether the dispute is one that is suitable for
arbitration.
3. Whether the consent of both parties is necessary for
reference to arbitration under Section 89 of the CPC.
 Whether the court can refer a dispute to arbitration even if there is no arbitration clause in
the contract.: The Supreme Court held that the court can refer a dispute to arbitration
even if there is no arbitration clause in the contract, if it is satisfied that the dispute is one
that is suitable for arbitration. The Court reasoned that the purpose of Section 89 is to
promote the use of ADR in India, and that this purpose would be defeated if the court
could not refer a dispute to arbitration without the consent of both parties. The Court also
noted that the parties had already agreed to submit their disputes to arbitration in the
event of a dispute, and that it would be unfair to allow one party to unilaterally withdraw
from this agreement.
 Whether the dispute is one that is suitable for arbitration.: The Supreme Court held that the
dispute in the Afcons Infrastructure case was one that was suitable for arbitration. The
Court reasoned that the dispute arose out of a contract for construction work, which is a
complex matter that is often best resolved through arbitration. The Court also noted that
the parties had already agreed to submit their disputes to arbitration in the event of a
dispute.
 Whether the consent of both parties is necessary for reference to arbitration under Section
89 of the CPC:, the Supreme Court held that the consent of both parties is necessary for
reference to arbitration under Section 89 of the CPC. This means that the court cannot
refer a dispute to arbitration if one of the parties does not consent to it.
The SC added the following to category of non-arbitrable
disputes:
a. Representative suits under Order 1 Rule 8 CPC which involve public interest or
interest of numerous persons who are not parties before the court.
b. Disputes relating to election to public offices
c. Cases involving grant of authority by the court after enquiry, as for example, suits
for grant of probate or letters of administration.
d. Cases involving serious and specific allegations of fraud, fabrication of
documents, forgery, impersonation,coercion etc.
e. Cases requiring protection of courts, as for example, claims against minors,
deities and mentally challenged and suits for declaration of title against
government.
f. Cases involving prosecution for criminal offences.
 Then the court enlists following matters as arbitrable:
 a. All cases relating to trade, commerce and contracts,including
 disputes arising out of contracts (including all money claims);
 disputes relating to specific performance;
 disputes between suppliers and customers;
 disputes between bankers and customers;
 disputes between developers/builders and customers;
 disputes between landlords and tenants/licensor and licensees;
 disputes between insurer and insured;
 b. All cases arising from strained or soured relationships
 All cases where there is a need for continuation of the pre-existing relationship in spite of the disputes,
including - disputes between neighbours (relating to easementary rights, encroachments,
nuisance etc.);
 disputes between employers and employees;
 disputes among members of societies/associations/Apartment owners Associations
 c. All cases relating to tortious liability including claims for compensation in
motor accidents/other accidents; and
d. All consumer disputes including disputes where a
trader/supplier/manufacturer/service provider is keen to maintain his
business/professional reputation and credibility or 'product popularity.

 General rule: Rights in rem, (i.e. those rights which are exercisable against
the world at large) are non-arbitrable. Rights in personam, (i.e. rights against
specific individuals ) can be resolved by arbitration. However, this is not a
rigidrule.
 Ss. 34 (2)(b) and 48 (2) provide that the Court may set aside the award if it
finds that the subject matter is incapable of settlement by arbitration.