Summary
A dispute clause headed 'Arbitration' that sent disputes to the two parties' Chairmen as 'arbitrators' and allowed the complaining party to go to court if the dispute was not resolved within 15 days was held not to be an arbitration agreement under Section 7 of the Arbitration and Conciliation Act, 1996, because it lacked any intention of a final and binding adjudication. Dismissal of the Section 11(6) application was upheld.
Issues
- Whether Clause 8.28 of the Software Implementation Agreement, which used the word 'arbitration' but provided for resolution by the parties' Chairmen with recourse to courts if unresolved, is a valid arbitration agreement under Section 7 of the 1996 Act.
- Whether the respondent's failure to deny the existence of an arbitration agreement in correspondence after the arbitration notice could establish one.
Provisions considered
- Section 7, Arbitration and Conciliation Act, 1996Requires an agreement to refer disputes to arbitration, relating to a defined legal relationship, in writing; only the first element was in dispute, and the Court found no intention to refer disputes to a binding arbitral adjudication. (¶¶ 9, 10, 11, 12, 13, 17, 31)
- Section 11(6), Arbitration and Conciliation Act, 1996The appellant's application for appointment of a sole arbitrator under this provision was rightly dismissed as there was no arbitration agreement. (¶¶ 2, 6, 32)
- Section 12(5), proviso, and Seventh Schedule, Arbitration and Conciliation Act, 1996Naming the parties' own Chairmen as 'arbitrators' does not by itself defeat an arbitration clause, since ineligibility can be waived under the proviso, but it was a significant indicator that an internal settlement process was intended. (¶ 26)
- Section 14, Limitation Act, 1963The appellant was left free to sue in a civil court; any claim to exclude time under Section 14 is to be decided by that court. (¶ 33)
Held
- An arbitration agreement needs no particular form, but the words must disclose a determination and obligation to refer disputes to a private tribunal and to be bound by its decision; the mere use of the word 'arbitration' is not decisive, though it is a clue to intention. Substance prevails over form. (¶¶ 13, 14, 15, 17)
- A clause under which the decision is not final and binding, or under which a dissatisfied party may go to court, is not an arbitration agreement. (¶¶ 15, 23, 24)
- Clause 8.28 did not make the Chairmen's process final or binding; providing that the complaining party would seek remedies in court if the dispute was not resolved within 15 days showed an attempt at amicable settlement rather than a submission to arbitration. (¶¶ 19, 25, 27)
- Designating the parties' own Chairmen as 'arbitrators' pointed to an internal settlement mechanism rather than reference to a neutral third party, and supported the conclusion that no arbitration was intended. (¶¶ 26, 27)
- Post-notice correspondence can show consensus to arbitrate where it unequivocally refers disputes to arbitration, as in Powertech and Visa International; mere non-denial of an arbitration agreement in replies cannot create one where none existed in the contract. (¶¶ 29, 30, 31)
Result
Appeal dismissed; the High Court's dismissal of the Section 11(6) application was affirmed. The appellant is free to seek remedies before the competent civil court, which may decide any claim to the benefit of Section 14 of the Limitation Act, 1963. Parties to bear their own costs.