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Arbitration clause: IT’S Applicability and Validity


What is Arbitration?

The official process of settling an argument or disagreement by an Arbitrator who is not involved in the matter is known as Arbitration as defined in the Oxford Dictionary.

The Cambridge dictionary defines the term Arbitration as the process of solving an argument between people by helping them to agree to an acceptable solution.

Meaning of Arbitration Agreement:

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.

How is the Arbitration Agreement formed?

  1. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

  2. An arbitration agreement shall be in writing.

  3. An arbitration agreement is in writing if it is contained in

    1. a document signed by the parties; though as held by the Hon’ble Supreme Court of India in “Jugal Kishore Rameshwardas vs Mrs. Goolbai Hormusji on 4th October, 1955” thatit is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and that it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. And reiterated in “M/S. Caravel Shipping Services vs M/S. Premier Sea Foods Exim Pvt..

    2. an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or

    3. an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other.

Which matters can be referred to Arbitration?

Generally and traditionally all dispute relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not, however, a rigid or inflexible rule.

Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable.

The Arbitration and Conciliation Act, 1996 does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the act, however, make it clear that an arbitral award will be set aside if the court finds that “the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force”.

Which matters cannot be referred to Arbitration?

The well-recognized examples of non-arbitrable disputes as held by the Hon’ble Supreme Court in Booz-Allen & Hamilton Inc Vs. SBI Home Finances Ltd. & Ors. are:

  1. Criminal Offences

  2. Matrimonial Disputes (Divorce, Judicial Separation, Restitution of conjugal rights, Child Custody, etc.)

  3. Guardianship Matters

  4. Insolvency Petitions

  5. Matters pertaining to Landlord and Tenant as held by the Hon’ble Supreme Court of India in “Himangni Enterprises Vs. Kamaljeet Singh Ahluwalia

  6. Disputes relating to the specific performance of contracts w.r.t. immovable property: In Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others.

  7. Testamentary matters, Ex. questions about the validity of a Will/Grant of Probate: In Chiranjilal Shrilal Goenka Vs. Jasjit Singh and Ors. the Hon’ble Supreme Court held that Grant of Probate is a Judgment in rem and is conclusive and binding not only the parties but also the entire world and therefore courts alone will have exclusive jurisdiction to grant of probate.

  8. Dissolution or Winding up of company: In Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd. the Hon’ble Supreme Court held that the power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company.

    Disclaimer: The list is not exhaustive one and the same is subject to change as the law of land is dynamic,

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Arbitration clause: IT’S Applicability and Validity


What is Arbitration?

The official process of settling an argument or disagreement by an Arbitrator who is not involved in the matter is known as Arbitration as defined in the Oxford Dictionary.

The Cambridge dictionary defines the term Arbitration as the process of solving an argument between people by helping them to agree to an acceptable solution.

Meaning of Arbitration Agreement:

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.

How is the Arbitration Agreement formed?

  1. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

  2. An arbitration agreement shall be in writing.

  3. An arbitration agreement is in writing if it is contained in

    1. a document signed by the parties; though as held by the Hon’ble Supreme Court of India in “Jugal Kishore Rameshwardas vs Mrs. Goolbai Hormusji on 4th October, 1955” thatit is settled law that to constitute an arbitration agreement in writing it is not necessary that it should be signed by the parties, and that it is sufficient if the terms are reduced to writing and the agreement of the parties thereto is established. And reiterated in “M/S. Caravel Shipping Services vs M/S. Premier Sea Foods Exim Pvt..

    2. an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means] which provide a record of the agreement; or

    3. an exchange of statements of claim and defense in which the existence of the agreement is alleged by one party and not denied by the other.

Which matters can be referred to Arbitration?

Generally and traditionally all dispute relating to rights in personam are considered to be amenable to arbitration; and all disputes relating to rights in rem are required to be adjudicated by courts and public tribunals, being unsuited for private arbitration. This is not, however, a rigid or inflexible rule.

Disputes relating to sub-ordinate rights in personam arising from rights in rem have always been considered to be arbitrable.

The Arbitration and Conciliation Act, 1996 does not specifically exclude any category of disputes as being not arbitrable. Sections 34(2)(b) and 48(2) of the act, however, make it clear that an arbitral award will be set aside if the court finds that “the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force”.

Which matters cannot be referred to Arbitration?

The well-recognized examples of non-arbitrable disputes as held by the Hon’ble Supreme Court in Booz-Allen & Hamilton Inc Vs. SBI Home Finances Ltd. & Ors. are:

  1. Criminal Offences

  2. Matrimonial Disputes (Divorce, Judicial Separation, Restitution of conjugal rights, Child Custody, etc.)

  3. Guardianship Matters

  4. Insolvency Petitions

  5. Matters pertaining to Landlord and Tenant as held by the Hon’ble Supreme Court of India in “Himangni Enterprises Vs. Kamaljeet Singh Ahluwalia

  6. Disputes relating to the specific performance of contracts w.r.t. immovable property: In Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others.

  7. Testamentary matters, Ex. questions about the validity of a Will/Grant of Probate: In Chiranjilal Shrilal Goenka Vs. Jasjit Singh and Ors. the Hon’ble Supreme Court held that Grant of Probate is a Judgment in rem and is conclusive and binding not only the parties but also the entire world and therefore courts alone will have exclusive jurisdiction to grant of probate.

  8. Dissolution or Winding up of company: In Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd. the Hon’ble Supreme Court held that the power to order winding up of a company is contained under the Companies Act and is conferred on the court. An arbitrator, notwithstanding any agreement between the parties, would have no jurisdiction to order winding up of a company.

    Disclaimer: The list is not exhaustive one and the same is subject to change as the law of land is dynamic,

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