Attributes of Arbitration Agreements

P. Dasaratharama Reddy Complex(2014) 2 SCC 201 referred to a large number of decisions of the SC in order to distinguish between clauses that were Arbitration Clauses and clauses that either led to Expert Determinations or were otherwise not Arbitration Clauses. For example, Tipper Chand, (1980) 2 SCC 341 was referred to; equally, the Court relied extensively on K.K. Modi, (2014) 2 SCC 201.

In times past, attributes of an Arbitration Agreement have been identified: i) The Arbitration Agreement must contemplate that the decision of the Tribunal will be binding on the parties to the agreement, ii) The jurisdiction of the Tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an Arbitration, iii) The agreement must contemplate that substantive rights of parties will be determined by the agreed Tribunal; iv) The agreement must contemplate further that the Tribunal will receive evidence from both sides and will hear their contentions or will at least give the parties an opportunity to put them forward.

A clause simply inserted in an agreement for the purpose of prevention of a dispute will therefore not be an Arbitration Agreement. In Shyam Sunder Agarwal v. P. Narotham Rao, [Civil Appeal No. 6872 of 2018], decided recently, Clause 8 of the MOU made it clear that the idea was to prevent disputes from occurring and to ensure smooth implementation of the relevant agreement, thereby making it clear that the object was not to adjudicate disputes but to prevent them. Hon’ble Justice R.F. Nariman and Hon’ble Justice Indu Malhotra have held it was not an Arbitration Agreement.