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Report No. 176

2.3.1 Arbitration agreement:

Section 7 Sec.7 defines 'arbitration agreement' and is almost a verbatim reproduction of Art.7 of the Model Law except that a single paragraph in the Model Law is split up into different clauses. It has been suggested that the definition of 'arbitration agreement' in sec.5 of the English Act of 1996 is wider than sec. 7 of the Indian Act of 1996 and can be adopted under sub-section (4) of Section 7 of our Act because the term includes, under sub-section (4) of section 5 that "an agreement which is endorsed in writing if an agreement made otherwise than in writing is recorded by one of parties or by a third party, with the authority of the parties to the agreement."

The Commission is of the view that it is not necessary to amend sec.7 of the Act by bringing into it the provision of sec.5(4) of the English Act, 1996 in as much it is likely to result in unnecessary litigation if the clause is to be based only on a record of one of the parties or of a third party. It has been suggested that sec.5(2)(a) of the English Act says in brackets "whether or not it is signed by the parties" and those words should be introduced in section 7 of 1996 Act.

Now sec.7(3) says that an arbitration agreement shall be in writing. Sec.7(4)(a) suggests that an arbitration agreement is in writing if it is contained in a document signed by the parties. In as much as sec.7(4)(a) does not use the word 'only', it does not appear that it is a mandatory requirement that the agreement must be signed. In fact, the Supreme Court has held under the 1940 Act in Jugal Kishore Rameshwardes vs. Mrs. Gorbbi AIR 1955 SC, Banardas vs. Carve Commission AIR 1963 SC 1417 (1425) and Satish Chandra vs. State of UP AIR 1983 SC 347: 1983(2)SCC 141 that a submission must no doubt be made in writing but need not be signed.

All that is necessary is that there should be a formal written agreement and the parties should agree to submit present and future disputes to arbitration. This legal position was declared under sec.2(a) of the 1940 Act which used the words 'written agreement' and did not refer to any requirement of signature of the parties. In view of the law declared by the Supreme Court, and the specific language of section 7(4) it is considered not necessary to use the words "whether signed or not" as used in sec.5 of the English Act.

2.3.2 It has been suggested that "share brokers" use certain documents which contain an arbitration clause and these documents are received by other parties without demur, that is to say, accepting the clause by conduct. In the Bombay seminar, it was suggested that this contingency is to be provided for in section 7(4)(b). This suggestion is accepted. Hence certain other words are required to be added in sec. 7(4)(b).

It is, therefore, proposed to substitute following words for the words 'an exchange of letters' in section 7 (4) (b) "any written communication by one party to another and accepted expressly or by implication by the other party, an exchange of letters."

The Arbitration and Conciliation (Amendment) Bill, 2001 Back

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