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Arbitrtion clause is binding only for the parties contracting

Raj Kumar Makkad ,
  17 May 2010       Share Bookmark

Court :
Supreme Court of India
Brief :
Binding effect of Arbitration clause present in the Agreement - Whether an arbitration clause found in an agreement between two parties, could be considered as binding on a person who is not a signatory to the agreement?
Citation :
Indowind Energy Ltd. v. Wescare (I) Ltd. and Anr. (Decided on 27.04.2010) MANU/SC/0300/2010

Held, a provision for arbitration to constitute an arbitration agreement for the purpose of Section 7 should satisfy two conditions (i) it should be between the parties to the dispute; and (ii) it should relate to or be applicable to the dispute. In the present case, the impugned agreement containing an arbitration agreement was signed by Respondent No. 1 and Respondent No. 2 and not by Appellant. No Agreement entered by Respondent No. 1 with Appellant. In the absence of any document signed by the parties as contemplated under Section 7(4) (a), and in the absence of existence of an arbitration agreement as contemplated in Section 7(4) (b) and Section 7(4)(c) and in the absence of a contract which incorporates the arbitration agreement by reference as contemplated Section 7(5), the inescapable conclusion is that the Appellant in the present case was not a party to the arbitration agreement. In the present case, as per Section 7 of the Act, in the absence of an arbitration agreement between Respondent No. 1 and Appellant, no claim against Appellant or no dispute with Appellant can be the subject matter of reference to an Arbitrator. Appeal allowed.

 

 
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Published in Corporate Law
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