The Arbitration and Conciliation Act 1996 - What is an Arbitration Agreement

It’s the intent that matters!

The Supreme Court in a recent case clarified that an arbitration agreement is not required to be in any particular form as per the Arbitration and Conciliation Act 1996. The intention of the parties is to be gathered from the correspondence exchanged between them and the surrounding circumstances. Such correspondence can be used to determine the existence, validity and enforceability of an arbitration agreement.

The Court further held that when an application is filed to refer disputes to arbitration, the court has to decide the following:

•  Its own jurisdiction, in the sense whether the party making the motion has approached the right Court. 
•  Whether there is an arbitration agreement, as defined in the Act and
•  Whether the person who has made the request before him, is a party to such an agreement.

The Court observed that it can further look into:

• whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection. 
• Whether the applicant has satisfied the conditions for appointing an arbitrator under the Act and can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary.

However, the decision whether a live claim made, is one which comes within the purview of the arbitration clause has to be left to be decided by the Arbitral Tribunal.