You are on page 1of 22

Table of cases

Asadullah Vs Lassa Baba Chhoba Lal Vs Kallu Mal Ganesh Ram Tulja Ram Gopal Chand Vs Madan Lal Hyderabad Industries Ltd. Vs Nuclear Power Corp Of India Ltd Jagannath Vs Mannulal K.K Modi Vs K.N. Modi Kohinoor Creations Vs Syndicate Bank Kohli Bros. Vs Atlantic Multiplex Pvt. Ltd

Manish Mittal Vs Manesh Chand National Almunium Co. Ltd Vs Geralds Metals Sa Ashok Chawla Vs Rakesh Gupta Nimet Resources Inc. And Another Vs Essar Steel Ltd Operative Group Housing Society Vs H.S Nag And Associates Ltd Orissa State Co-Operative Marketing Federation Ltd Vs Associated Marketing Co. Ram Labhayya Vs Panna Lal Sundarv Lal Vs Bhagwati Devi

Sr No
1) 2) 3) 4)

Introduction Arbitration-meaning Scope Essentials of Arbitration Agreement

Page No
5-6 7-8 8-9 9-14


5) 6)

Drafting of arb. Agreement Arb. AgreementWho can enter into

14-16 16-17


Arbitration agreement by exchang of letters



Section -8 Court obliged to refer parties to arbitration Suits barred Writs whether barred Suits not barred Section 8(3)


9) 10) 11) 12) 13)

Section -9 Interim measure Jurisdiction of court No stay of arb. Proceedings Absence of Substantive relief Bibliography

21 22 22 23 24

Introduction Section 7, 8, 9
7Arbitration 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) (4) An arbitration agreement shall be in writing. An arbitration agreement is in writing if it is contained in (a) (b) a document signed by the parties; an exchange of letters, telex, telegrams or other means of telecommunication 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. 8Power 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 so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration. (2) The application referred to in subsection (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. (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. 9Interim measures etc. by Court. 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 3


for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or


for an interim measure of protection in respect of any of die following matters, namely (a) the preservation, interim custody or sale of any goods which are the subjectmatter 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 die subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any part) or authorising 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.


Arbitration Agreement Meaning of :- the section refers to the dispute which have
arisen or which may arise between the parties in respect of a certain legal relationship, whether contractual or not. While an arbitration clause creates a collateral agreement, it is just one clause in an agreement containing many other clauses relating chiefly to commercial terms and performance obligations. The reference of a particular existing dispute or disputes is usually achieved by an entirely separate agreement dealing only with the setting up of machinery to resolve the dispute(s) which have arisen between the same parties, either in tort or contract. The reference of an existing dispute can also form part of an agreement dealing with other matters. For instance, the parties to a contract might bring that contract, by agreement, to an end and at the same time, enter into a fresh contract, by agreement. Under the fresh agreement they might agree on a number of commercial terms about their future dealings , as well as an agreement to refer to arbitration an existing dispute arising from the original contract. The basis of agreement under the act is a written submission by the parties. No particular form is necessary but the words used for the purpose must be words of choice and determination to go to arbitration and not problematic words of mere possibility. It is not even necessary that a formal words such as arbitration is used but what is essential is that the parties should intend to make a reference or submission and should be ad idem in this respect. RUSSELL states: An arbitration agreement is an agreement to submit present or future disputes (whether they are contractual or not). An arbitration agreement is therefore a contractual undertaking by two or more parties to resolve disputes by the process of arbitration even if the disputes themselves are not based on contractual obligations. The word party for the purpose of Part 1 of the Act connotes party to the agreement as distinguished from party to the suit. Both the claimant who has brought legal action and the respondent who has brought legal action and the respondent who applies for reference of the dispute to arbitration must be parties to the arbitration agreement. Basically a dispute means Assertion of claim by one party and its repudiation by the other party. Thus a dispute implies some kind of disagreement between parties concerning some legal claim or liability. It may be distinguished from the term difference which means

having different opinion as to the exact meaning of a particular tern in the contract. The difference or dispute must relate to some civil claim.

Scope of Arbitration Agreement

the provisions of section 7 and section 2(1)(a) of the 1996 Act are so related to each other that they have to be read conjointly. These provisions are analogous to section 2(a) of the old act of 1940 and article 7 of UNCITRAL Modal Law. Such provisions are also contained in section 5 and 6 of English Arbitration Act, 1996. The Supreme Court has laid down following principles as to the scope of the arbitration clause:1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms, but nonetheless it is an integral part of it; 2) However, comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation , or perishes with the contract; 3) The contract may be nin est in the sense that it never came legally into existence or it was void ab initio; 4) Though the contract was validly executed, the parties may put end to it as if it had never existed and substitute a new contract for it solely governing their rights and liabilities thereunder; 5) In the former case, if the original contract has no legal existence, the arbitration clause also cannot operate, for along with the original contract, it is also void; in the latter case, as the original contract is extinguished by the substituted one, the arbitration clause of the original contract perishes with it; and 6) Between the two falls, many categories of disputes in connection with a contract, such as the question of repudiation, frustration, breach etc. In those cases, it is the performance of the contract that has come to an end, but the contract is still in existence for certain purpose in respect of disputes arising under it or inconnection with it. as the contract subsists for certain purposes, the arbitration clause operates in respect of these purposes. Article 7 of UNCITRAL Modal Law defines the arbitration agreement as under:(1) Arbitration agreement is 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 6

legal relationship, whether contractual or not. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (2) The arbitration agreement shall be in writing. (3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means. (4) The requirement that an arbitration agreement be in writing is met byan electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; electronic communication means any communication that the parties make by means of data messages; data message means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy. (5) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other. (6) The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause.

Essentials of Arbitration Agreement 1) Competency of parties 2) There must be a present or future difference in connection with some contemplated

3) There must be the intention of the parties to settle such differences by a private

4) Agreement must be in writing 5) The parties must be ad idem

1) Competency of parties :- Parties to the arbitration have reference to persons who under the law are competent to contract. Section 11 of the Contract Act provides that every person is competent.

a) Minor under section 3 of the Indian Majority Act, 1875 a person domiciled in
India is deemed to be a minor till he completes the age of 18 years. This section, however, provides the age of 21 years as the age of minority in a case where a Court Guardian is appointed for the person of a minor and his property. It has been held that when the age of majority has been provided by the law to be 18 years, any person less than that age, even by a day, would be a minor in law AIR 1961 Patna 21. A contract entered into by a minor is void and not merely voidable because he is a person who is not competent to contract. In matter of arbitration the rights of the parties are to be determined during the arbitration which ultimately may entail consequences adverse to the interests of the minor. Even the natural guardian of the minor much less a court guardian, cannot bind the minor to an arbitration agreement. In Chhoba Lal Vs Kallu Mal1 the Privy Council held that a guardian ad litem or a next to friend of a minor has the authority to refer to arbitration on behalf of the minor after obtaining a valid permission of the court in terms of order XXXII Rule 7 of the CPC to refer the dispute and in the absence of such permission the reference is invalid. A contract by a minor cannot be ratified by him after attaining age of majority.

b) Lunatic A lunatic cannot enter into a valid contract and any contract executed on
his behalf including a contract for arbitration is void. Lunatic is insane, mad, outrageously foolish, fanatic and eccentric. There is no definition of lunacy in this act but section 3(5) of Indian Lunacy Act, 1912, defines lunatic to mean a person who is an idiot or of unsound mind.

c) Manager of Hindu Family A manager of hindu family can refer a dispute to

the arbitration where the dispute is amongst the members of the family themselves and bind the members to the decision of the arbitration. In Jagannath Vs Mannulal2, the court held that the position of karta of the family is sui generis; the relation between him and the other members of the family is not that of a principal and agent, or of partners. A reference made by the manager or the karta of the joint family will bind all the members of the family including minors, provided the reference be made by the manager was for the benefit of the family. However where a guardian for the minor who is a member of the joint family is appointed by the
1 2

AIR 1946 PC 272 (1894) 16 All. 231

court the manager or the karta of the family cannot make the reference to bind the minor with the award unless he has sought permission of the court for making the reference. (Ganesh Ram Tulja Ram3)

d) Partner A partner of a partnership concern has a right to enter into an

agreement on behalf of the concern and thus bind the other partners of the consequences. Section 19 of the Indian Partnership Act, 1932, confers imlied authority on him to act on behalf of the firm as its agent. It provides that subject to the provisions of section 22, the act of a partner which is done to carry on in the usual way, business of the kind carried on by the firm, binds the firm. a partner has no authority to compromise or relinquish any portion of the claim made by the firm in the arbitration proceedings. In a case where a partnership deed provides for the reference of dispute among partners inter se and provides for the dispute being referred to arbitration, a partner is entitled to make reference to arbitration ( Sundarv Lal Vs Bhagwati Devi)4.

e) Trustee a trustee gets the power to refer the disputes pertaining to the trust to
arbitration only if the provisions of the instrument of trust authorize him to make the reference. A trust is created under the Indian Trust Act, 1882. The deed of trust and the provisions of the statute regulate the rights and duties of the trustee. In a case where more than one trustee is provided, no reference can be made only by one trustee. The reference of dispute in such a case has to be made collectively by all the trustees or by one of the trustees with specific authority from other trustees in that behalf.

f) Executor or administrator :- the rights of the executor or the administrator of

a will are governed by the provisions in the Indian Succession Act, 1925, who is entitled to do all acts necessary to manage and administer the estate of the deceased. For the proper management of the estate and in case of disputes relating to it, the executor or the administrator has the power to make a reference for arbitration . under Section 302 of the said act the High Court can, on application made to it, give to the executor or administrator any general or special directions in regard to the estate or in regard to the administration thereof. In an appropriate case such direction may include for making the reference of the dispute pertaining to the estate. Where

3 4

19 Ind. Cas 515 AIR 19657 All. 400

there are several executors or administrator, the power of all may in the absence of any direction to the contrary, be exercise by one of them who has proved the will or taken out administration as is the mandate of section 311 of the Indian succession act, 1925.

g) Legatee legatee is a person for whose benefit an amount of property or money is

left in a will. He is someone who is left a legatee by the terms of a will. Section 102 of the Indian succession act, 1925 refers to residuary legatee and provides that such a legatee may be constituted by any words in a will which would show an intention on the part of the testator that the person designated shall take the surplus or residue of his property. In such a case the legatee is entitled to all property belonging to the testator at the time of his death, of which he has not made any other testamentary disposition and is capable to taking effect. In a case Ram Labhayya Vs Panna Lal5 it was held that the legatee may refer disputes relating to the division of the estate to the arbitrator. Such a reference and consequent award would bind the legatee in so far as his interest is concerned.

h) Legal representatives section 40 of this act provides that the arbitration

agreement shall not be discharged or come to an end by the death of a party thereto. The agreement , despite the death of one of the parties is enforceable by or against the legal representatives of the deceased parties provided the right to sue or be sued survives (Asadullah Vs Lassa Baba6). The arbitration agreement thus means an agreement by the parties executing it including their legal representatives, for adjudication of dispute by the arbitrator which arise out of the contract or in relation to as a consequence of the contract provided the right to sue subsists and is referable to the contract.

2) Intention of the parties there must be the intention of the parties to seetle their
dispute from arbitral tribunal. The intention of the parties to enter into an arbitration agreement have to be gathered from the terms of the agreement. If the terms of agreement clearly indicate an indicate an intention on part of the parties to the agreement to refer their dispute to arbitral tribunal for adjudication and willingness to be bound by the decision of such arbitral agreement, the words used should disclose a determination and obligation to go to arbitration and not merely contemplate the

5 6

AIR 1937 Lah. 342 AIR 1966 j&K 1


possibility of going for arbitration. When there is merely a possibility of the parties agreeing to arbitration in future, as contrasted from an obligation to refer disputes to arbitration in future, there is no valid and binding arbitration.

3) Present or Future Difference/dispute the essential elements of an arbitration

agreement have been admired to be that there must be present or future difference in connection with some contemplated affair. Dispute is thus an essential feature of arbitration agreement. The existence of a dispute is an essential condition and a prerequisite for assumption of jurisdiction by an arbitrator. The objection that there existed no arbitrable dispute and hence there could be no reference on that matter to the arbitrator, although not taken in objections filed under ss. 30 and 33 of the arbitration and conciliation act 1940, was allowed to be taken in appeal on special leave before the supreme court, and sustaining this objection a part of the award on a matter not in dispute, was set aside by the supreme court. The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute. A dispute arises when an assertion of a right is made by one party and there is repudiation thereof by the other on whatever grounds. A repudiation may be either express or implied and may be by words or by conduct.

4) Arbitration agreement to be in writing :- sub-section (3) and (4) of section 7

provide that an arbitration agreement shall be in writing. No particular form has, however, been prescribed for an arbitration agreement nor it is necessary that the words such as arbitration, arbitrator etc. must appear in the text of the agreement. What the law requires is that the intention of the parties to make reference or submission to arbitration should be clearly discernible from the agreement of arbitration. Such agreement may also be found to exist in form of correspondence by way of exchange of letters between the parties.The Arbitration Act. 1940 did not recognise oral agreements or awards. The new Act of 1996, however, makes it mandatory that all arbitration agreements must necessarily be in writing. Thus the court in Gopal Chand Vs Madan Lal,7 refused to recognise oral agreement and held that, oral submission cannot be the basis of a suit.The Supreme Court in Nimet Resources Inc. And Another Vs Essar Steel Ltd8 reiterated that section 7 of the act

7 8

1990 2000


sets out what an arbitration agreement id. It could be in different forms by way of an arbitration clause in a contract.

5) The parties must be ad idem - to constitute an arbitration agreement, there

must be an agreement, that is to say the must agree to same thing in the same sense.

IN Supreme Co.- operative group housing society Vs H.S Nag and Associates Ltd9 Facts A Managing Director of appellant company signed a contract with the
respondent, a Yugoslavian based company, at Belgrade, which contained an arbitration clause that disputes shall be referred to arbitration of international chamber of commerce in Paris. On that very day, the managing director sent a letter from Belgrade itself to the respondent at Belgrade stating that he had objected to the arbitration clause contained in the agreement and that in fact in the draft of the agreement, which he had sent in advance to the respondent company, the said clause was deleted. The managing director immediately on landing in Bombay sent a cable to the respondent company again objecting to the arbitration clause in the agreement. The respondent company gave no reply either to the letter or cable sent by the managing director.

Held there was no concluded agreement as there was no consensus ad idem with
regard to the arbitration clause, which was a severable part of the contract. Where terms of letter of credit to be furnished by one party and performance guarantee to be furnished by the other party, as mutually acceptable both, had not till then been accepted, it was held that the parties had not reached an agreement upon all material terms of the contract and were as such not ad idem. No concluded and binding contract had come into existence between the parties. Hence, the arbitration clause contained in the contract had also not come into existence in the eye of law. Reference of dispute to arbitration invoking such non-existent arbitration clause was invalid.

Drafting of arbitration agreementWhen drafting arbitration agreement care needs to be taken to ensure that it is appropriate for the particular circumstances of the case. The following is the checklist of the matters which need to be considered when drafting an arbitration agreement:-

AIR 1996 SC 2443


1) Have the parties been properly identified? 2) Is there a clear reference to arbitration? 3) Where is the seat of arbitration to be? 4) Is there the choice of proper law of contract? 5) Is the law of arbitration agreement to follow the proper law of the contract? 6) Is there a choice of procedural law? 7) How will the tribunal be appointed? 8) Is there an appointing authority? 9) Is the tribunal be required to have any particular attributes or qualification? 10) How many members of tribunal will there be? 11) Are there to be procedural and/or evidential rules, and if so, which ones? 12) What will be the language of arbitration? 13) Should the tribunal be given power to order provisional relief under section 39 of the Arbitration and Conciliation Act, 1996? 14) Is specific provision for confidentiality required? 15) Should applications and appeals to court be excluded? 16) Is a waiver of sovereign immunity required? 17) Are provisions for multi-party arbitration consideration and concurrent hearings required?

K.K Modi Vs K.N. Modi10

This case discussed the attributes which are necessary for considering an agreement as an arbitration agreement. It was held that among the attributes which must be present are: 1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement. 2.) The jurisdiction of the tribunal to decide the rights of the parties must derive from their consent, or from an order of the Court or from a statute, the terms of which make it clear that the process is to be arbitration. 3.) The agreement must contemplate that substantive rights of the parties will be determined by the agreed tribunal.


1998(1) Arb LR 296


4.) The tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal being fair and equal to both sides. 5. The agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law 6.) The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal. Other important factors include whether the agreement contemplates that that tribunal will receive evidence from both sides and give the parties opportunity to put forth their issues and hear their contentions; whether the wording of the agreement is consistent with the view that the process was intended to be an arbitration; and whether the agreement requires the tribunal to decide the dispute according to law11. The courts have laid emphasis on (i) (ii) existence of disputes as against intention to avoid future disputes; the tribunal or forum so chosen is intended to act judicially after taking into account relevant evidence and submissions made by parties before it; (iii) (iii) (iv) the decision is intended to bind parties; Nomenclature used by parties need not be conclusive12.

Arbitration agreement: who can enter into?

An artificial or a natural person has the capacity enter into an arbitration agreement Where the agreement stated that federation was to be represented by its Secretary as required by bye-laws of federation, but instead the managing director entered into agreement which was subsequently ratified before being annulled subsequently, the agreement was held to be binding on federation.13 A company can enter into an arbitration agreement. However, where the terms of the arbitration clause provides for disputes between the partners inter se and the company, it cannot be said that the company was made a party to the agreement.
11 12 Saraf, B.P (J), LAW OF ARBITRATION AND CONCILIATION, 4th Ed. Snow White Publications, Mumbai, 2006, pg 193 13 Orissa State Co-Operative Marketing Federation Ltd Vs Associated Marketing Co. AIR 1982 Ori 1


Arbitration agreement by exchange of letters etc.

The agreement to submit to arbitration must be in writing. Where a party sent the contract to the other for signing the same but the other party did not sign it or confirm the contract but opened letters of credit pursuant thereto, it can be said that the contract stood confirmed and the arbitration clause contained therein was binding on both the parties. The agreement can be in any particular form. What is required is to be ascertained whether parties have agreed to refer the dispute to arbitration. Where disputes arose between the parties in respect of business transactions between them and the documents showed that the respondent had consented to resolution of disputes through arbitration on the proposal of the petitioner, it cannot be said that there was no arbitration agreement by exchange of letters. An arbitration can come into existence by means of correspondence exchanged between the parties. Where two contracts for different periods were awarded to a party and disputes arose for the period intervening between the said two contracts, it was held that the correspondence between the parties established that the arbitration clause relating to the first contract would govern the parties. Thus law has been very liberal on this very aspect14.

Court Obliged to Refer Parties to Arbitration Section 8

This section is peremptory in nature. Where an arbitration agreement exists, the court is under an obligation to refer the parties to arbitration in terms thereof. Section 8 of the 1996 Act prevails over section 9 of Civil Procedure Code. If the dispute is referable under section 8 of the act, the judicial authority has no option but to refer the parties to arbitration. There is no discretion with the court under the act to grant stay. The only power vested in the court is to refer the dispute to arbitration. Courts cannot refuse to refer the disputes to arbitration merely on the ground that there are sufficient triable issues based on facts and law and as such suit was maintainable. Absence of an arbitration clause in the performance guarantee does not matter as the said guarantee arose out of land was related to the dealership agreement and was not an independent contract. A combined effect of section 8 and 16 reveals that when an action is brought in a matter before a judicial authority, which is found to be the subject to arbitration agreement, it is obligatory on the part of the judicial authority to refer the parties to arbitration provided that

Paranjape Dr N.V., Arbitration and Conciliation in India , 4th ed, Central Law Agency, Allahabad, pg 89


before filing its written statement, the party applying for referring the dispute to arbitration has so applied. When a civil court does not have jurisdiction to entertain a suit after an application has been filed under this section, it follows as a corollary that the court which refuses to refer the parties to arbitration has failed to exercise jurisdiction. This section vests authority in the judicial authority to refer parties to arbitration where there is an arbitration agreement, and also if the parties apply for it. it is no more res integra that the provisions of this section are mandatory in nature. But they by itself should not be taken to mean that it authorizes an automatic or mechanical reference to arbitration. On the contrary, the reference is dependent on the requirement of the section being satisfied by the parties15. Once arbitration proceedings are pending and there is no dispute between as to the existence and validity of the arbitration agreement, there would be no justification for the courts to entertain the petition and refer the matter to arbitration. There is no legal ground for not referring the dispute to the arbitrator as there are no limitations to the pecuniary jurisdiction of an arbitrator16.

Suits barred :- if the following suits are brought by a party to the arbitration agreement,
they would clearly be barred by the provisions of this section and relief, if any, on these has to be by way of provisions of the act itself: suit to challenge agreement or award. Suit to affirm agreement or award. Suit inspite of arbitration agreement.17

Writs whether barred :- in respect of private arbitrations, the high court cannot issue
any prerogative writs to interfere with such arbitrations or awards made in pursuance of such agreements. An arbitrator appointed under the act is not amenable to writ jurisdiction. Merely because the courts have been given powers under the act to deal with the arbitrator or his award does not mean that the arbitrator is a statutory arbitrator in the sense of being a public body, to whom either the arbitration has necessarily to be referred to or in the sense that his award by itself has been given a finality and recognition by the statute. A writ however can

15 16

Kohinoor creations Vs Syndicate Bank, 2005 (2) Raj 622(DB) delhi Manish Mittal Vs Manesh Chand, 2005 (2) Raj 454 17 Sethi, R.P, Law Of Arbitration And Conciliation, Vol.1; Ashoka Law House, New Delhi, 2007


be issued to an arbitrator appointed under the industrial disputes act because he is a statutory arbitration. The fact that the arbitrator is a an employ of the government does not make him liable to the writ jurisdiction of the court, as he is not exercising a public function.

Suits which are not barred :- suits regarding the effect, validity and existence of the
award or arbitration agreement are barred, but suits on the following ground are not barred:- Stranger to a contract :- where by some award, a relief is sought against another party who is not a party to the agreement, the same can be challenged. Suit to enforce agreement based on award:- a suit that is not filed to enforce or challenge award but to enforce an agreement is maintainable and not barred. It also includes an agreement based on award. Fraud :- where the award and the decree were bogus and sham and had been bought into existence for a fraudulent purpose, and were never intended to be created upon, the challenge to the decree and the award is independent of the contents of the award and decree. Thus a separate suit is maintainable to enforce substantive rights. Where the decree is challenged on the grounds of fraud in the proceedings the suit is maintainable. Award accepted :- where after the award was made and acted upon, all the party filing suit sought to do was to divide the property with the consent of the parties. A suit on such an action is not barred. Subject-matter not the same :- a party has a right to sue for reliefs arising from the title of the property, independent of any right from the agreement, as the suit is not to enforce an arbitration agreement. Further relief :- where the award is mere declaratory award declaring rights of parties in certain contingencies, on the happening of those contingencies, a suit for further relief is not barred. The case would be the same when certain claims arise subsequent to the rights so declared an award. Suit by minor:- a minor can sue to set aside a decree against him based on an award on the ground that the reference to arbitration was made without leave of the court as required by Order 32 Rule 7. CPC. Criminal prosecution :- merely because there is an arbitration clause in the agreement , that cannot prevent criminal prosecution against the accused if an act constituting a criminal offence made out even prima facie.


Long pendency of disputes :- to avoid long pendency of cases which leads to late redressal, the plaintiff has been equipped with such right and any suit for this cause is not barred and maintainable18. Suits under special enactments :- provisions of 1996 act does not override the provisions of public premises act 1971 and consumer protection act which created an additional remedy in favour of the consumers by raising consumer disputes.

Refusal of the stay due to arbitration clause:The court can refuse to refer the matter in the following circumstances:a) Where the defendant did not file the arbitration agreement and also contested the suit. b) The defendant who denies the validity of the deed of dissolution of partnership upon which the suit was based, is not entitled to apply under this section. c) Where the arbitration clause was limited only to the interpretation of clauses, it could not be used to stay a suit based on the monetary claims of a party. However, the Delhi High Court holds a contrary view. d) Where the arbitration clause only vested the Superintending Engineer with supervisory and administrative control, it did not amount to an arbitration clause and stay ought to be refused. e) Where suit is based not upon the partnership deed but upon the right of co-ownership, suit cannot be referred. f) Where contract was oral and arbitration clause in the consignment note was not brought to the notice of the other party, suit cannot be referred. Section 8 (3) :- this is a new sub-section. By this section a machinery is provided under the act to stop the arbitration proceeding, not simpliciter by the filing of legal proceedings, but upon fulfilment of certain conditions. To render the arbitration invalid, the legal proceedings must be commenced upon the whole of the subject-matter of the reference; it must be between all the parties to the reference; and a notice thereof has to be given to the arbitrators. If all these conditions are satisfied, further arbitration proceedings from the time of service of notice upon the arbitrators in the pendimg reference becomes invalid. Thus no reference or award can be rendered by reasonably of


Basu, N.D, LAW OF ARBITRATION AND CONCILIATION, 10th Ed. Orient Publishing Com., Allahbad, 2005, pg 177


the commencement of legal proceedings upon the subject-matter of the reference. Basically the burden of proof lies upon the plaintiff.

Section 9 :- Interim Measures

The purpose of enacting this section in the light of the modal law an UNCITRAL Rules is to provide interim measure of protection. The order passed by the court should fall within the meaning of the expression an interim measure of protection as distinguish from an all-time or permanent protection. The court under this section only formulates interim measures so as to protect the right under adjudication before the arbitral tribunal. This section contemplates issuance of interim measures by court only at the instance of a party to an arbitration agreement with regard to the subject matter of the arbitration agreement. This can only be as against any person claiming under him. This section sets out an extensor nature of interim measures of protection, which the court can order. In fact, it gives power to the court to grant relief which it shall have for the purpose of, and in relation to, any proceeding before it. These orders are aimed at preserving the assets, protecting the position of the parties, maintaining status quo and procuring evidence. An application for interim measure can be made either before or during arbitral proceedings or at the time after making arbitral award. In Kohli Bros. Vs Atlantic Multiplex Pvt.19 ltd it was held that when at the post reference stage an application for interim measure can be entertained by the court keeping the question of jurisdiction or validity of the arbitration agreement open for the arbitral tribunal then the same can also be made at a pre-reference stage ion a prima facie view. Pending disposal of disputes by the arbitrators the respondent moved an application under section 9(d) of the act praying for the grant of ad-interim injunction restraining the appellant from transferring or alienating the enmarked alumina lying in the appellant silos. It was held that in order to protect the interests of the parties on the ground of equity and balance of convenience, the respondent were allowed to take the goods while the appellant would be paid, as an interim measure, the value of goods.20 Provisions of this section do not cover do not cover the arrest of a ship. What is providedby this section is securing the amount in dispute in the arbitration by way of an interim measure. The section is not attracted for the arrest of a ship for obtaining security of an award that may be made in the arbitration proceedings.

Jurisdiction of Court
The right conferred by this section cannot be said to be one arising out of a contract. It is a right conferred on a party to an arbitration agreement. Thus only a person who is a party to an arbitration agreement can invoke the jurisdiction of the court under this section. However a
19 20

AIR 2008 All 43 National almunium co. Ltd Vs geralds metals SA, AIR 2004


person nor a party to the arbitration agreement cannot enter the court for protection under this section because a party means a party to arbitration agreement. An application for interim measure can be made to a court in India even though the arbitration proceedings are being held abroad. Section 2(2) provides that Part-I would apply where the place of arbitration is in India. It does not provide courts would have jurisdiction to grant an interim measure even though the venue of arbitration is not in India. Thus Indian courts would have jurisdiction to grant an interim measure even though the venue of arbitration is not in India. However the where the parties specifically agree that the agreement is to be governed by German laws, then the disputes shall be resolved by arbitration in accordance with the law prevailing in Germany which also includes German Code of Civil Procedure. A court cannot grant injunction to restrain the defendant form disposing of certain properties belonging to him because such an order would be an order in nature of attachment before judgment21. No Stay Of Arbitration Proceedings Section 9 does not permit any or all applications for interim measure in clauses (i) and (ii) thereof. Thus there cannot be any application for stay of arbitral proceedings or to challenge the existence or validity of the arbitration agreements or the jurisdiction of the arbitral tribunals. All such challenges would have to be made before the arbitral tribunal under 1996 Act. There is no provision in the act which enable the court to remove an arbitrator during the course of arbitration proceedings. But at the same time the party having grievance against an arbitrator cannot be said to be without remedy and the said remedy becomes available as soon as the arbitral award is made by the arbitrator. Court interference on basis of petitions challenging arbitral tribunal during the pendency of the arbitration proceedings would be clearly against the very spirit with which the 1996 act has been enacted. The mischief which existed in the earlier enactment and is sought to be removed by the present enactment cannot be allowed to be removed by entertaining writ petitions in the absence of any provision in the new act in this respect. A statute is an edict of the legislature and the conventional way of interpreting or construing a statute is to seek the intention of the matter. Grant of stay in matter of discretion of the court and if the trial court on consideration passes an order of stay the appellate court should be slow to interfere with the same. But that does not mean that if the order of stay passed by the trial court is based on non- judicial consideration such order is not liable to be interfered with the appellate court22.

21 22 Bachawats, R.S (J), LAW OF ARBITRATION & CONCILIATION, VOL.1 . 5th Ed., Lexis Nexis Butterworth Wadhwa, Nagpur, 2010, pg 127


In the absence of substantive relief interim measure not admissible In the absence of any substantive relief, the prayer for issuing any directions by way of interim measure cannot be entertained. The relief claimed by the petitioner for restraining the respondent from increasing the share capital of the company cannot be granted in such proceedings23. Courts cannot grant injunction to prevent such breach of contract, the performance of which cannot be specifically enforced. Where an application had been filed seeking interim relief, it was held that relief sought can only be in aid of the claim for specific performance and if no clear cut and undisputed case on merits is made out by the petitioner, the courts shall refuse the application24.

23 24

Ashok Chawla Vs Rakesh Gupta 1996 (2) Arb LR(Del) Hyderabad Industries Ltd. Vs Nuclear Power Corp Of India Ltd.,2005 (1) Arb LR 352


Bachawats, R.S (J), LAW OF ARBITRATION & CONCILIATION, VOL.1. 5 th Ed., Lexis Nexis Butterworth Wadhwa, Nagpur, 2010. Basu, N.D, LAW OF ARBITRATION AND CONCILIATION, 10th Ed. Orient Publishing Com., Allahbad, 2005. Chawla, S.K(J), 11YEARS DIGEST OF ARBITRATION & WORKS CONTARCT CASES 1992-2002, Vol.1 Suvidha Law House , Bhopal , 2009. Kwatra, G.K, ARBITRATION AND CONCILIATION LAW OF INDIA, 7TH Ed. Universal Law Publications, 2008 Malik, Surendra, SUPREME COURT ON ARBITRATION, Eastern Book Company, Lucknow , 2003 Saraf, B.P (J), LAW OF ARBITRATION AND CONCILIATION, 4th Ed. Snow White Publications, Mumbai, 2006. Sethi, R.P, LAW OF ARBITRATION AND CONCILIATION, Vol.1 Ashoka Law House, New Delhi, 2007. Paranjape Dr N.V., Arbitration and Conciliation in India, 4th ed, Central Law Agency, Allahabad