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Report No. 199

A recent judgment of the Supreme Court requires mention in this context:

In Shiv Satellite Public Co. v. M/s Jain Studios Ltd., 2006(2) Scale p.53, the arbitration clause stated that the Arbitrator's determinations will be 'final and binding between the parties' and it declared that the parties have waived the right of appeal or objection 'in any Jurisdiction'. It was argued that this objectionable clause was not severable from the clause which enables disputes to be referred to arbitration and that the entire clause was void. The Supreme Court held that that part of the arbitration clause which speaks of reference of disputes to arbitration is severable and was not void.

The Court noticed the concern of the opposite party that the portion of the arbitration clause which stated that the 'arbitration decision shall be final and binding between the parties and the parties waive all rights of appeal or objection in any Jurisdiction' was unenforceable because of section 28 of the Act. It was argued to the respondent that the ensuing part of the clause which requires disputes to be referred to arbitration was valid and this contention was accepted.

The Court, however, referred to Coring Oil Co. v. Koegles (1870) ILR 1 Cal 466 where a clause giving finality to an arbitration award was held not enforceable but the rest of the clause was held valid. The position in Union Contribution Co. (P) Ltd. v. Chief Engineer, Eastern Command, Lucknow & Anr., AIR 1960 All 72 was the same when it was held that the clause giving finality to the award was held to be unenforceable but separable from the arbitration clause.

Unfair (Procedural and Substantive) Terms in Contract Back

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