Arbitration Agreement : Examination of Appointment

“Whether an agreement is an arbitration agreement or not” is crucial point in any contractual matter. Now-a-days it is a common practice in contract drafting to put arbitration clause in almost all the commercial contract and refer the disputes to arbitration. If both the parties are agree for arbitration then there is not difficulty but when a parties denies the appointment of agreement then a larger litigation starts. Here, we are examining the legal point where on party to a contract denies the agreement and resist the arbitration.

Section 7 of the Arbitration & Conciliation Act, 1996 lays down the provision for an arbitration agreement. Few points to keep in mind for an arbitration agreement.

·  It can be a separate agreement or a clause in a Contract but there must be clear intention to refer the disputes to arbitration.

·  The agreement must be in writing.

·  The arbitration agreement can be in document signed by parties, letters, telex, telegrams,

·  It can be a part of a complete full length agreement having arbitration clause.  

Now, Supreme Court has said in case of Jagdish Chander v. Ramesh Chander, (2007) 5 SCC 719 that even it there is any agreement or clause in an agreement requiring further consent or consensus before a reference to arbitration, is not an arbitration agreement.

The legislature has entrusted the power of appointment of arbitration to the holders of High Judicial Officers like the chief justice and judge of supreme court/ High Court to give a strong reasoning for appointment of arbitrator.

Section 11 of the Arbitration & Conciliation Act, 1996 lays down the provision for appointment of the arbitrator. Following are the basic condition for appointment of an arbitrator.

·  Arbitrator can be of any nationality.

·  Parties must agree for his appointment.

·  On disagreement on one name , parties can appoint one arbitrator from each side and both the arbitrator will appoint the presiding  arbitrator.

·  When parties fails to appoint an arbitration within 30 days then the dispute would be refer to Chief Justice of Concern High court.

·  The decision of the Chief Justice would be final for appointment of arbitrator.

·  If the request of appointment of arbitrator made to different Highcourt then the Chief Justice where the application made first would take the decision.

·  If the name of the arbitrator is given in the agreement the court does not normally interfere with dispute of appointment. 

In case there are two agreement between the parties namely agreement A and agreement B and agreement A have arbitration clause and agreement B does not have arbitration clause then the dispute arising from agreement A can only be referred to arbitration and not the dispute relating to agreement

Two cases are of very high importance which gives clarity on appointment of arbitrator.

S.B.P. & Co.  vs. Patel Engineering Ltd. [2005 (8) SCC 618] and National Insurance Co.  Ltd. vs. Boghara Polyfab Pvt. Ltd. [2009 (1) SCC 267]

Supreme Court has laid down following principle in these cases :

·  Chief Justice or his designate to decide whether there is an arbitration agreement, as defined in the Act

·  Request   before  High Court  is made by such a  party   to   an arbitration agreement?

·  High Court have jurisdiction to entertain the application section 11.

·  Whether the claim is a dead (long barred) claim or a live claim.

·  Whether   the   parties   have   concluded   the   contract/   transaction   by  recording   satisfaction   of  their   mutual   rights   and   obligation   or  by receiving the final payment without objection.

·  Merits or any claim involved in the arbitration

This may be disputed that if the agreement itself is disputed a party to the contract says that agreement is forged then what will be the situation whether an arbitrator can be appointed on the basis of an agreement where it is claimed to be forged?. 

This situation is being dealt by Supreme Court in case of Bharat Rasiklal Ashra Vs.Gautam Rasiklal Ashra & Anr where High Court had appointed an arbitrator in a matter where one party was claiming the arbitration agreement is forged and fabricated and delegated the duty to examine the objection of ‘forged contract’ by arbitrator himself.  Supreme Court has set aside the order of High Court for appointment of arbitration and remitted back the matter for  Chief Justice for deciding the correctness of the agreement in dispute and also order that if the agreement found to be forged and fabricated then heavy cost should be imposed.

Regard

Ambrish