Validity Of Arbitration Agreement In India

Although, in the end, the MoU was not fructify, the dispute settlement clauses on the basis of the specific provisions it contains, functioned as a stand-alone arbitration agreement in reference to the provisions of the MoU. On the other hand, the respondent submitted that, because of the total lack of consensus between the parties, including with respect to the MOU, there was no room for manoeuvre to refer to an arbitration procedure, in accordance with certain clauses. On the facts, the Tribunal was satisfied that a prima facie case had been established on the existence of the arbitration agreement. The application for a stay of proceedings was therefore rejected and the question of jurisdiction was left to the Tribunal. The starting point of Indian law is that there must be reciprocity in an arbitration agreement. The Delhi Supreme Court has held that an asymmetric compromise clause is not valid (or even an arbitration agreement) until the party exercises its ability to settle – before that, there is a lack of reciprocity (Union of India vs Bharat Engineering Corporation ILR 1977 Delhi 57). However, the Calcutta Supreme Court subsequently upheld the validity of an asymmetric arbitration clause (New India Assurance Co Ltd/Central Bank of India – Ors AIR 1985 Cal 76). The Calcutta Supreme Court expressly refused to accept the argument of the Delhi Supreme Court and found that an asymmetric arbitration clause constitutes a valid arbitration agreement from the outset, even if it is enforceable only by the party with the possibility of conciliation. It is also likely that Indian courts will take into account the balance of comfort, the interests of justice and other similar considerations when deciding whether Indian courts have jurisdiction under a contractual choice of jurisdiction or a judicial clause. Indeed, such considerations may be “essential, in the interest of international trade and trade, to improving relations between countries and the inhabitants of the world” (see The Black Sea Ship U.L. Lastochkina ODESSA USSR/Union of India AIR 1976 ANDH PRA 103).

2. The 2015 amendment to the Indian Arbitration and Conciliation Act, 1996, and its pro-arbitration tone could also have implications for the Supreme Court`s approach to unilateral option clauses. In particular, the scope of “public policies” was explicitly defined as a reason for price challenge and was listed comprehensively as part of the 2015 amendment. The decisions of the Delhi HC, which invalidated unilateral option clauses for public policy reasons, were issued prior to the amendment. It will therefore be necessary to reassess the question of whether such clauses are contrary to the recently revised Aumère of Public Order. In addition, the increasing commercial acceptance of unilateral clauses could also be a consideration in the context of a public challenge in this new regime. 1. In Bhartia Cutler Hammer v. AVN Tubes (1995 (33 DRJ 672), the Delhi HC found that a party could not have the exclusive right to initiate arbitration proceedings, since the Indian Arbitration and Conciliation Act of 1996 assumed that there was a mutual arbitration agreement between the parties and a possibility of bilateral appeal. Notwithstanding the explicit consent of the parties to such a clause, it would not be considered a valid arbitration agreement.